Keysight Technologies Inc.
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PART I
Item 1. Business
Overview
Keysight Technologies, Inc. (“we,” “us,” “our,” “Keysight” or “the company”), incorporated in Delaware on December 6, 2013, is a global innovator in the computing, communications and electronics markets, committed to advancing our customers’ business success by helping them solve critical challenges in the development and commercialization of their products and services. Our mission, “accelerating innovation to connect and secure the world,” speaks to the value we provide our customers in a world of ever-increasing technological complexity. We deliver this value through a broad range of design and test solutions that enable our customers to bring their innovations to market on ever-shorter schedules.
Keysight’s portfolio of hardware, software, and services enables our customers’ workflows as they design, validate, manufacture, deploy, and optimize their products and solutions. Our revenue is derived primarily from solutions addressing research and development (“R&D”) applications, and to a lesser degree, applications in manufacturing and operations. The accelerating pace of technological innovation and engineering intensity are long-term secular drivers of demand for Keysight’s solutions and services. We serve a global set of customers in over 100 countries across a wide range of industry segments, including communications, aerospace, defense, and government, automotive, energy, industrial, general electronics, and semiconductor.
We generated $5.4 billion, $5.0 billion, and $5.5 billion of revenue in 2025, 2024, and 2023, respectively. Revenue, income from operations, and assets by business segment as of and for the fiscal years ended October 31, 2025, 2024, and 2023, are provided in Note 16, “Segment Information,” to our consolidated financial statements.
Keysight Leadership Model
We trace our heritage back over 80 years to the beginning of Silicon Valley. The fundamental elements of our culture are represented in our Keysight Leadership Model (“KLM”), which provides a framework for sustained value creation for customers, shareholders, and employees. The KLM centers on delivering customer success via a continuous activity system and core values that guide and drive our actions as a company and as individuals. The activities are summarized as an ongoing cycle
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of market insight that drives capital allocation and yields timely solutions that are optimized via operational excellence. More information on the KLM can be found at https://about.keysight.com/en/companyinfo/leadership.shtml.
Competitive Advantages
Keysight conducts business globally with approximately 40,000 end customers each year, including many Fortune 1000 companies that are developing new electronic technologies, networks, systems, devices, and components. The following advantages enable us to deliver on our commitment of sustained value creation for our stakeholders.
Deep, long-term, global customer relationships
Keysight’s history of collaborative innovation is demonstrated by our engagement with leading companies across the diverse markets that we address. Our customers trust Keysight to deliver the technological expertise, leading-edge capabilities, and broad solutions portfolio that they need to achieve their product development goals. Keysight employs a comprehensive global direct sales channel with experienced management and highly technical sales and application engineers, including a strong local presence in both developed and emerging markets. These sales personnel are supported by close collaboration with the engineering teams who create the solutions used by our customers so that problems can be addressed efficiently, and solutions enhanced quickly, to enable customer success.
Our legacy of over 80 years of contribution in measurement science and the resulting breadth of our products and solutions yields a large, global installed base. This base of customers complements our large and growing services portfolio, and offers additional sales opportunities as requirements evolve and customers upgrade their solutions over time.
Unique technology expertise and capabilities
Keysight is a technology-driven company, investing in R&D to align our business with available markets and position the company for growth. As our customers’ trusted test and measurement partner, we innovate at the leading edge of the technologies they deploy in their electronic systems under development. We employ a combination of strategies to lead in this area, including engagement with top standards bodies and industry consortia and close collaboration with top research programs in universities and industry. Our central R&D team, Keysight Labs, focuses on developing breakthrough hardware and software technologies that are deployed in application-specific contexts by our business engineering teams. We develop and incorporate proprietary semiconductor and packaging technologies to deliver differentiated performance within our industry.
Differentiated, first-to-market solutions portfolio
Keysight’s industry-focused organizational structure emphasizes our engagement with leading customers across our end markets. We use insights gained from these relationships, together with our technology expertise, to identify market opportunities and seek to maximize the lifecycle value, beginning in R&D. Our development teams leverage the broad array of Keysight hardware, software, and services, adding new capability as necessary, to create market-leading solutions. Providing leading-edge, application-focused solutions for our customers in sync with their project schedules is key to our differentiation and value delivery and facilitates the continuous advancement of electronics technology. With a software- and customer-centric focus, we continue to make strategic investments to expand the R&D component of our revenue mix and grow the software and services content of our business, which has the added benefit of increasing recurring revenue.
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Durable and resilient business model
Our operating model incorporates cost structure flexibility that has allowed Keysight to deliver profitability across a range of economic and market conditions. We employ variable pay mechanisms across our entire employee population and complement this with the strategic use of contingent staffing. We have a diversified go-to-market approach with indirect sales partners and electronic commerce to complement our direct sales force. This approach provides flexibility with the added benefit of expanding our reach and providing more efficient and effective transactional purchase capability. We use a centralized order fulfillment organization that supplies solutions to customers worldwide, allowing us to leverage the scale of our business to provide high-quality products while maintaining competitive margins. We complement our in-house capabilities with an extensive network of suppliers and subcontractors, which allows us to adapt to changing market conditions. The durability and resilience of our business model has provided strategic flexibility and enabled the company to continue to allocate capital and invest in growth through different market environments.
Innovative culture
Keysight's culture is built on the operating principles and values embodied in the KLM, with innovation as a key source of our strength. Our employees around the world embrace these principles and deliver industry-leading capabilities across a range of fields that are not only technical in nature but encompass a wide range of contributions to our business, customers, and shareholders. Keysight continues to be recognized as an employer of choice. We strive to enable employee growth in a diverse, inclusive, and respectful work environment that offers challenging assignments, development opportunities, competitive compensation, and a safe workplace. This environment supports our employees to achieve their full potential and enables collaboration that helps us innovate at the speed of our customers.
Strategic Priorities
Keysight’s business strategy is exemplified in four key objectives:
Invest to deliver differentiated, first-to-market solutions
This priority is central to our value contribution for our customers in their world of increasing technology complexity and decreasing time-to-market. In 2025, we invested $1,007 million in R&D. We employ vertical technology integration that leverages investments in core hardware technology, such as advanced semiconductor capability provided by our in-house fab, custom packaging from our technology centers, and other unique competencies. We integrate these hardware technologies with core software functionality enabled by our software engineering teams (representing the majority of our R&D staff). We also incorporate services to deliver differentiated solutions that meet the needs of the market. Deep relationships with market-defining customers provide detailed understanding of their needs and schedules. This enables us to work at our customers’ pace to deliver solutions that enable their development cycles with first-to-market timing.
Capture opportunities in our served addressable market and expand in attractive adjacencies
Building on our industry-leading position, we are investing to capitalize on emerging technologies, expanding our portfolio of solutions and engaging earlier in our customers’ design and innovation life cycles. This is an important aspect of our capital allocation strategy to deliver sustainable and profitable growth. We continue to work on multiple vectors for growth as we expand Keysight’s contributions across the technology stack, building on our core strength in physical layer and adding new protocol layer and system emulation capabilities, as well as new application layer solutions that address opportunities in design and data management. In October 2025, we acquired Spirent Communications plc (“Spirent”), complementing our position in communications test with additional differentiated solutions and deep customer relationships. Additionally, in October 2025, we completed the acquisition of the Optical Solutions Group (“OSG”) business from Synopsys, Inc. (“Synopsys”) and the PowerArtist RTL business (“PowerArtist”) from Ansys, Inc. (“Ansys”) to complement and expand our existing design engineering software portfolio and computer-aided engineering capabilities. In 2024, we acquired ESI Group SA (“ESI Group”), broadening our software offerings with the addition of computer-aided engineering solutions. In addition, we enhanced our security offerings with the acquisition of Riscure Holding B.V., providing testing solutions and software for semiconductor, embedded systems, and Internet of Things (“IoT”) devices, and extended our range of radio frequency (“RF”) and microwave (“uW”) instruments with the acquisition of AnaPico AG.
Grow recurring revenue
This component of our strategy benefits from the increasing software content in our solutions and emphasizes delivering continuous value to our customers throughout the solution lifecycle by delivering software enhancements. We have a dedicated global enterprise software sales force to drive this priority and maximize cross-selling opportunities across our markets.
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Additionally, we leverage our broad services portfolio to provide unique and high-value services to extend the value of our solutions.
Strategic deployment of capital
Keysight strives to be a good steward of capital. We leverage our strong portfolio, flexible operating model, and solid financial position to maintain a disciplined approach to capital allocation, balancing investment for organic growth, mergers and acquisitions, and return of capital to shareholders.
Broad Portfolio of Design and Test Solutions
Keysight delivers a portfolio of products and solutions that enable our customers to efficiently develop, deploy, and optimize their product offerings. The main components of our portfolio are hardware, software, and services that are delivered on a standalone basis or combined into application-specific solutions. We leverage the breadth of our portfolio to deliver application-specific solutions through a software-centric approach. These solutions integrate hardware, software, and services to address high-value applications and meet industry-specific requirements. This approach allows Keysight to deliver differentiated value to our customers, built from a foundation of industry-leading products and services that can be configured to meet their needs.
Hardware products include a broad range of platforms delivering precise measurement and control of numerous electrical and information properties in signals. These products consist of modular and integrated instruments in a variety of form factors. Some of the major product categories are:
•Spectrum and Signal Analyzers – a line of products providing detailed analysis of complex communications and radar signals across a wide range of frequencies, including radio frequency, microwave, and optical.
•Network Analyzers – an array of products providing detailed characterization of the behavior of electronic components and subsystems when stimulated by a range of input signals.
•Power Analyzers – a range of products to accurately measure voltage, current, and power characteristics of an electronic device or system under a range of operating conditions.
•Protocol Analyzers – a range of products allowing the debug, validation, and optimization of electronic systems employing various protocols for data transmission, usually defined by widely adopted standards, such as PCI Express (“PCIe”) or Universal Serial Bus (“USB”), as well as others.
•Oscilloscopes – a range of products offering precise visualization, debug, and characterization of time domain signals across a wide range of operating conditions.
•Digital Multimeters – a range of products in a variety of form factors delivering accurate and reliable measurement of basic electrical parameters.
•Signal Generators (Signal Sources) – a range of products offering flexibility and precise control of the generation of a broad variety of signals used to provide stimulus to electronic devices and systems under test.
•Power Supplies – a range of products used to provide precise control of power delivery to electrical and electronic systems under test.
•Network Test Products – a range of systems to debug, validate, and characterize communication networks and network components across a range of operating conditions and measurement types.
•Network Visibility Products – a portfolio of products and solutions delivering rich data insight about network traffic, applications, and users across any networking environment to ensure they remain connected and secure.
This summary is only a subset of Keysight’s industry-leading array of hardware product offerings. More details can be found on our website using the link at the end of this section.
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Software represents a crucial component of our strategy to deliver differentiated, first-to-market solutions to our customers. Our open and scalable software platform accelerates our ability to deliver application-specific measurement solutions that integrate our instruments into connected workflows with automation, data management, and analytics. Keysight’s software products are characterized in the following three categories:
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Financial statements
data from SEC XBRL filings. Values are as-reported; restatements supersede originals. Values reported in .
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Unaudited)
The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto included elsewhere in this Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended October 31, 2025. This report contains forward-looking statements which include, but are not limited to predictions, future guidance, projections, beliefs, and expectations about the company’s trends, seasonality, cyclicality and growth in, and drivers of, the markets we sell into, our strategic direction, earnings from our foreign subsidiaries, remediation activities, new solution and service introductions, the ability of our solutions to meet market needs, changes to our manufacturing processes, the use of contract manufacturers, the impact of government regulations on our ability to conduct operations, our liquidity position, our ability to generate cash from operations, growth in our businesses, our investments, the potential impact of adopting new accounting pronouncements, our financial results, our purchase commitments, our contributions to our pension plans, the selection of discount rates and recognition of any gains or losses for our benefit plans, our cost-control activities, savings and headcount reduction recognized from our restructuring programs and other cost saving initiatives, other regulatory approvals, the integration of our completed acquisitions and other transactions, and our transition to lower-cost regions. The forward-looking statements involve risks and uncertainties that could cause Keysight’s results to differ materially from management’s current expectations. Such risks and uncertainties include, but are not limited to, the impact of global economic conditions such as inflation or potential recession, the impacts of increased trade tensions such as an imposition of or increase in tariffs and tightening of export control regulations, slowing demand for products or services, volatility in financial markets, reduced access to credit, changes in interest rates or currency exchange rates, the existence of political or economic instability, impacts of geopolitical tension and conflict in regions outside of the U.S., the impact of new and ongoing litigation, impacts related to net zero emissions commitments, and the impact of volatile weather caused by environmental conditions such as climate change. Our actual results could differ materially from the results contemplated by these forward-looking statements due to various factors, including but not limited to those risks and uncertainties discussed in Part II Item 1A and elsewhere in this Form 10-Q. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law.
Basis of Presentation
The financial information presented in this Form 10-Q is not audited and is not necessarily indicative of our future consolidated financial position, results of operations, or cash flows. Our fiscal year-end is October 31, and our fiscal quarters end on January 31, April 30, and July 31. Unless otherwise stated, these dates refer to our fiscal year and fiscal quarter periods.
Overview and Executive Summary
Keysight Technologies, Inc. (“we,” “us,” “our,” “Keysight” or “the company”), incorporated in Delaware on December
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6, 2013, serves technology innovators as a mission-critical design enablement partner for the world’s most complex engineering challenges. By connecting market-leading design, emulation, and test solutions across the full lifecycle, Keysight helps engineering teams accelerate innovation, reduce risk, and bring new technologies to market on ever-shorter schedules. Customers across artificial intelligence (“AI”) infrastructure, communications, industrial automation, aerospace and defense, automotive, semiconductor, and general electronics rely on Keysight to bridge virtual design and physical reality, enabling confident decisions earlier.
We are committed to investing in research and development (“R&D”) and have focused our development efforts on strategic opportunities that align our business with available markets and position the company for growth. Our R&D investments focus on the development of first-to-market solutions with differentiated software and hardware, as well as improvements to existing software and hardware products to provide complete customer solutions addressing the evolving requirements of industries that we serve. We anticipate that we will continue to maintain R&D expenditures to deliver a continuous flow of innovative, high-quality customer solutions, products, and services.
Acquisition of Spirent Communications plc
In the fourth quarter of fiscal 2025, we acquired all of the outstanding common stock of Spirent Communications plc (“Spirent”) for $1,415 million, net of $127 million cash acquired, using existing cash. For the three and nine months ended July 31, 2026, our acquisition of Spirent resulted in incremental revenue of $61 million and $204 million, respectively. In our discussion of changes in our results of operations, we have qualitatively disclosed the impact of the Spirent acquisition.
U.S. government tariffs and IEEPA tariff refund claims and related customer surcharge refunds
Changes to U.S. tariff policy which resulted in broad-based increases in tariff rates, IEEPA tariff refund claims, and related customer surcharge refunds impacted our financial results for the three and nine months ended July 31, 2026. We continue to closely monitor and assess the potential impact of ongoing tariff actions, including the recently introduced Section 301 “forced labor” tariffs, on our results, and take steps across multiple vectors to reduce the impact. This multipronged mitigation approach spans our global manufacturing footprint and sourcing strategies, as well as pricing and cost actions.
In February 2026, the Supreme Court of the United States (“U.S. Supreme Court”) determined that certain tariffs imposed pursuant to the International Emergency Economic Powers Act (“IEEPA”) were not authorized by law. Subsequent rulings by the U.S. Court of International Trade have directed the U.S. Customs and Border Protection to establish processes to effect refunds of certain tariffs previously collected. Based on these judicial determinations, during the nine months ended July 31, 2026, we recorded a receivable of $100 million within “other current assets” in the condensed consolidated balance sheet, representing recovery of tariffs previously paid and statutory interest accrued, with corresponding offsets of $93 million to “cost of sales,” $4 million to “selling, general and administrative,” and $3 million to “interest income” in the condensed consolidated statement of operations. In addition, we recorded a $40 million liability within “other accrued liabilities” in the condensed consolidated balance sheet as a result of our decision to refund IEEPA tariff surcharges collected from our customers, with a corresponding reduction of revenue in the condensed consolidated statement of operations. During the three and nine months ended July 31, 2026, we received $37 million of refund proceeds, resulting in outstanding IEEPA tariff refund claims receivable of $64 million as of July 31, 2026. For additional information regarding the basis of accounting for tariff refund claims, see Note 1, “Overview and Summary of Significant Accounting Policies,” to the condensed consolidated financial statements. In our discussion of changes in our results of operations and segment overview, we have qualitatively disclosed the impact of the IEEPA tariff refund claims and related customer surcharge refunds.
The following table reflects the net impact of IEEPA tariff refund claims and related customer surcharge refunds on our reportable segments:
| Nine Months Ended | |||||||||||||||||||||||||||||||||
| July 31, 2026 | |||||||||||||||||||||||||||||||||
| CSG | EISG | Total | |||||||||||||||||||||||||||||||
| (in millions, except percentages) | increase / (decrease) | ||||||||||||||||||||||||||||||||
| Revenue | $ | (34) | $ | (6) | $ | (40) | |||||||||||||||||||||||||||
| Income from operations | $ | 38 | $ | 19 | $ | 57 | |||||||||||||||||||||||||||
| Gross margin impact | 1.6 ppts | 1.5 ppts | 1.5 ppts | ||||||||||||||||||||||||||||||
| Operating margin impact | 1.3 ppts | 1.4 ppts | 1.3 ppts | ||||||||||||||||||||||||||||||
For additional discussion of risks related to tariffs, trade relations, and tariff refund claims, see Part II Item 1A, Risk Factors.
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Three and nine months ended July 31, 2026 and 2025
Total orders for the three and nine months ended July 31, 2026 were $2,091 million and $5,787 million, respectively, an increase of 56 percent and 48 percent, respectively, compared to the same periods last year. Foreign currency movements had an unfavorable impact of 1 percentage point and an immaterial impact, respectively, on the year-over-year change for the three and nine months ended July 31, 2026. Acquisitions had a favorable impact of 5 percentage points and 6 percentage points, respectively, on the year-over-year change for the three and nine months ended July 31, 2026. For the three and nine months ended July 31, 2026, orders increased across all regions.
Revenue for the three and nine months ended July 31, 2026 was $1,846 million and $5,163 million, respectively, an increase of 36 percent and 31 percent, respectively, compared to the same periods last year. Foreign currency movements had an immaterial impact and a favorable impact of 1 percentage point, respectively, on the year-over-year change for the three and nine months ended July 31, 2026. Acquisitions had a favorable impact of 6 percentage points and 7 percentage points, respectively, on the year-over-year change for the three and nine months ended July 31, 2026. For both periods, revenue increased in the Communications Solutions Group (“CSG”) and the Electronic Industrial Solutions Group (“EISG”). Revenue from CSG and EISG represented 73 percent and 27 percent, respectively, of total revenue for the three months ended July 31, 2026. Revenue from CSG and EISG represented 72 percent and 28 percent, respectively, of total revenue for the nine months ended July 31, 2026.
Net income for the three and nine months ended July 31, 2026 was $397 million and $1,027 million, respectively, compared to $191 million and $617 million, respectively, for the same periods last year. The increase in net income for the three months ended July 31, 2026 was primarily driven by higher revenue and favorable mix, partially offset by incremental costs from acquired businesses, higher people-related costs, higher amortization of acquisition-related balances and higher net income tax expense. The increase in net income for the nine months ended July 31, 2026 was primarily driven by higher revenue, favorable mix, lower net income tax expense, and net IEEPA tariff refund claims, partially offset by incremental costs from acquired businesses, higher people-related costs, higher amortization of acquisition-related balances, net losses on equity investments, and the impact of ongoing tariffs.
Cash flows generated from operating activities were $1,379 million and $1,184 million, respectively, for the nine months ended July 31, 2026 and 2025. Refer to the “Financial Condition” section of Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations for additional information.
Outlook
Our first-to-market solutions strategy enables customers to develop new technologies, accelerate innovation while providing a platform for Keysight's long-term growth. Our customers are expected to continue to make R&D investments in certain next-generation technologies and applications, including advancing 5G, early 6G, quantum computing, high-speed data center networks and infrastructure, non-terrestrial networks, AI, industrial internet of things, defense modernization, next generation electric vehicles, and autonomous vehicles. We continue to engage actively with our customers and closely monitor the macroeconomic environment, including tariffs, trade restrictions and tightening of export control regulations, monetary and fiscal policies, and geopolitical tensions. We remain confident in the long-term secular growth trends of our markets and our ability to outperform in a variety of market conditions.
Critical Accounting Policies and Estimates
During the nine months ended July 31, 2026, there were no material changes to the critical accounting estimates described in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended October 31, 2025.
Adoption of New Accounting Pronouncements
See Note 1, “Overview and Summary of Significant Accounting Policies,” to the condensed consolidated financial statements for a description of new accounting pronouncements.
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Currency Exchange Rate Exposure
Our revenues, costs and expenses, and monetary assets and liabilities are exposed to changes in foreign currency exchange rates due to our global operating, investing, and financing activities. We hedge revenues, expenses, and balance sheet exposures that are not denominated in the functional currencies of our subsidiaries on a short-term and anticipated basis. The results of these hedging activities are included in the condensed consolidated balance sheet and condensed consolidated statement of operations. We may experience some fluctuations within individual lines of the condensed consolidated balance sheet and condensed consolidated statement of operations because our hedging program is not designed to offset the currency movements in each category of revenues, expenses, and monetary assets and liabilities. Our cash flow hedging program is designed to hedge short-term currency movements based on a rolling period of up to twelve months. Therefore, we are exposed to currency fluctuations over the longer term. To the extent that we are required to pay for all, or portions, of an acquisition price in foreign currencies, we may enter into foreign exchange contracts to reduce the risk that currency movements will impact the U.S. dollar cost of the transaction.
Results from Operations - Three and nine months ended July 31, 2026 and 2025
A summary of our results is as follows:
| Three Months Ended | Nine Months Ended | Year-over-Year | ||||||||||||||||||||||||||||||||
| July 31, | July 31, | Change | ||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | Three Months | Nine Months | |||||||||||||||||||||||||||||
| (in millions, except percentages) | ||||||||||||||||||||||||||||||||||
| Revenue | $ | 1,846 | $ | 1,352 | $ | 5,163 | $ | 3,956 | 36% | 31% | ||||||||||||||||||||||||
| Gross margin | 65.8 | % | 61.7 | % | 65.6 | % | 62.4 | % | 4 ppts | 3 ppts | ||||||||||||||||||||||||
| Research and development | $ | 312 | $ | 250 | $ | 935 | $ | 749 | 25% | 25% | ||||||||||||||||||||||||
Percentage of revenue | 17 | % | 19 | % | 18 | % | 19 | % | (2) ppts | (1) ppt | ||||||||||||||||||||||||
| Selling, general and administrative | $ | 446 | $ | 354 | $ | 1,349 | $ | 1,075 | 26% | 26% | ||||||||||||||||||||||||
Percentage of revenue | 24 | % | 26 | % | 26 | % | 27 | % | (2) ppts | (1) ppt | ||||||||||||||||||||||||
| Other operating expense (income), net | $ | (3) | $ | (4) | $ | (11) | $ | (15) | (10)% | (29)% | ||||||||||||||||||||||||
| Income from operations | $ | 461 | $ | 234 | $ | 1,116 | $ | 659 | 97% | 69% | ||||||||||||||||||||||||
| Operating margin | 24.9 | % | 17.3 | % | 21.6 | % | 16.7 | % | 8 ppts | 5 ppts | ||||||||||||||||||||||||
| Interest income | $ | 20 | $ | 31 | $ | 54 | $ | 71 | (36)% | (24)% | ||||||||||||||||||||||||
| Interest expense | $ | (26) | $ | (28) | $ | (80) | $ | (68) | (7)% | 18% | ||||||||||||||||||||||||
| Other income (expense), net | $ | 22 | $ | 4 | $ | 3 | $ | 98 | 416% | (96)% | ||||||||||||||||||||||||
| Income before taxes | $ | 477 | $ | 241 | $ | 1,093 | $ | 760 | 98% | 44% | ||||||||||||||||||||||||
| Provision (benefit) for income taxes | $ | 80 | $ | 50 | $ | 66 | $ | 143 | 59% | (54)% | ||||||||||||||||||||||||
| Net income | $ | 397 | $ | 191 | $ | 1,027 | $ | 617 | 108% | 66% | ||||||||||||||||||||||||
Revenue
Revenue is recognized upon transfer of control of the promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. Returns are recorded in the period received from the customer and historically have not been material.
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The following table presents the percentage change in revenue by geographic region for the three and nine months ended July 31, 2026 and the impact of foreign currency movements as compared to the same periods last year.
| Year-over-Year Change | |||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| July 31, 2026 | July 31, 2026 | ||||||||||||||||||||||
| Geographic Region | Actual | Currency Impact Favorable (Unfavorable) | Actual | Currency Impact Favorable (Unfavorable) | |||||||||||||||||||
| Americas | 29% | — | 26% | — | |||||||||||||||||||
| Europe | 41% | 3 ppts | 38% | 6 ppts | |||||||||||||||||||
| Asia Pacific | 42% | (2) ppts | 32% | (1) ppt | |||||||||||||||||||
| Total revenue | 36% | — | 31% | 1 ppt | |||||||||||||||||||
Refer to the “Segment Overview” section of Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations for additional information on changes in revenue during the three and nine months ended July 31, 2026.
Gross Margin, Operating Margin, and Income Before Taxes
Gross margin for the three months ended July 31, 2026 increased 4 percentage points compared to the same period last year, primarily driven by higher revenue volume, favorable mix, and incremental gross margin impact from acquisitions, partially offset by higher people-related costs and higher amortization of acquisition-related balances. Gross margin for the nine months ended July 31, 2026 increased 3 percentage points compared to the same period last year, primarily driven by higher revenue volume, favorable mix, net IEEPA tariff refund claims, and incremental gross margin impact from acquisitions, partially offset by higher amortization of acquisition-related balances, higher people-related costs, and the impact of ongoing tariffs.
R&D expense for both the three and nine months ended July 31, 2026 increased 25 percent compared to the same periods last year, primarily driven by incremental costs from acquired businesses, higher variable people-related costs, and continued investments in key growth opportunities in our end markets and leading-edge technologies.
Selling, general and administrative expense for both the three and nine months ended July 31, 2026 increased 26 percent compared to the same periods last year, primarily driven by incremental costs from acquired businesses, higher people-related costs, higher amortization of acquisition-related balances, and higher selling, marketing, and infrastructure costs, partially offset by lower acquisition and integration costs.
Other operating expense (income), net for the three and nine months ended July 31, 2026 was income of $3 million and $11 million, respectively, compared to income of $4 million and $15 million, respectively, for the same periods last year.
Operating margin for the three and nine months ended July 31, 2026 increased 8 percentage points and 5 percentage points, respectively, compared to the same periods last year, primarily due to gross margin gains and lower operating expenses as a percentage of sales.
Interest income for the three and nine months ended July 31, 2026 was $20 million and $54 million, respectively, compared to $31 million and $71 million, respectively, for the same periods last year and primarily relates to interest earned on our cash balances. Interest expense for the three and nine months ended July 31, 2026 was $26 million and $80 million, respectively, compared to $28 million and $68 million, respectively, for the same periods last year and primarily relates to interest on our senior notes.
Other income (expense), net for the three and nine months ended July 31, 2026 was income of $22 million and $3 million, respectively, compared to income of $4 million and $98 million, respectively, for the same periods last year. The increase in other income, net for the three months ended July 31, 2026 was primarily driven by lower net losses on derivative instruments and lower amortization of actuarial losses, partially offset by lower net gains on equity investments. The decrease in other income, net for the nine months ended July 31, 2026 was primarily driven by higher net losses on investments and higher net losses on derivative instruments, partially offset by lower amortization of actuarial losses.
As of July 31, 2026 and 2025, our headcount was approximately 16,600 and 15,500, respectively. The increase is primarily driven by acquisitions.
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Income Taxes
We calculate income taxes for interim reporting periods by applying the estimated annual effective tax rate to year-to-date results and adjusting for tax items that are discrete to each period.
The following table provides income tax details:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| July 31, | July 31, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (in millions, except percentages) | |||||||||||||||||||||||
| Income before taxes | $ | 477 | $ | 241 | $ | 1,093 | $ | 760 | |||||||||||||||
| Provision for income taxes | $ | 80 | $ | 50 | $ | 66 | $ | 143 | |||||||||||||||
| Effective tax rate | 16.7 | % | 20.8 | % | 6.0 | % | 18.8 | % | |||||||||||||||
For the three and nine months ended July 31, 2026, we recorded income tax expense of $80 million and $66 million, respectively, resulting in an effective tax rate of 16.7 percent and 6.0 percent, respectively. For the three and nine months ended July 31, 2025, we recorded income tax expense of $50 million and $143 million, respectively, resulting in an effective tax rate of 20.8 percent and 18.8 percent, respectively. The effective tax rate is generally lower than the U.S. federal statutory rate of 21 percent primarily due to favorable tax rates on certain earnings from operations in lower tax jurisdictions, partially offset by U.S. tax on Global Intangible Low-Taxed Income (“GILTI”) inclusions and other taxes on foreign income.
For the three months ended July 31, 2026, we recorded net income tax expense of $12 million from discrete items, driven primarily by a valuation allowance recorded against the deferred tax asset related to California research tax credits now limited under state tax legislation and expense from unrecognized tax benefits. For the nine months ended July 31, 2026, we recorded net income tax benefits of $74 million from discrete items, driven by a $97 million net benefit from a favorable audit settlement and a $19 million release of reserves due to the expiration of the statute of limitations, including interest and penalties. These items were partially offset by a $15 million expense related to IEEPA tariff refund claims, $21 million expense from unrecognized tax benefits, and $6 million of other immaterial discrete items recorded for the period.
As of July 31, 2026 and October 31, 2025, our long-term income tax liabilities from unrecognized tax benefits were $194 million and $241 million, respectively. The decrease primarily reflected the release of $68 million of uncertain tax positions in connection with an audit settlement in January 2026 as well as a $12 million release of reserves due to the expiration of the statute of limitations, partially offset by current year increases.
Segment Overview
We have two reportable operating segments, CSG and EISG. The profitability of each of the segments is measured after excluding share-based compensation expense, amortization of acquisition-related balances, acquisition and integration costs, restructuring costs, interest income, interest expense, and other items.
A significant portion of the segments’ expenses arise from allocated corporate charges, expenses related to our centralized sales force, and global services, marketing, and technology functions that are provided to the segments in order to realize economies of scale and to efficiently use resources. Corporate charges include legal, accounting, real estate, insurance, information technology, treasury, and other corporate infrastructure expenses. Segment allocations are determined on a basis that we consider to be a reasonable reflection of the utilization of services provided to, or benefits received by, the segments. Newly acquired businesses are not allocated these charges until integrated into our shared services and corporate infrastructure.
Communications Solutions Group
CSG serves customers spanning the global commercial communications and aerospace, defense, and government end markets. The group’s solutions consist of electronic design, emulation, and test software, instrumentation, systems, and related services. These solutions are used in the design, simulation, validation, manufacturing, installation, and optimization of communication systems in wireless, wireline (data center ecosystem), enterprise, and aerospace, defense, and government end markets. Our recent acquisition of Spirent adds wireless network test and assurance and positioning technology solutions to our portfolio, complementing our design, validation, and performance offerings to deliver end-to-end solutions to our customers.
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Revenue
| Three Months Ended | Nine Months Ended | Year-over-Year | ||||||||||||||||||||||||||||||||
| July 31, | July 31, | Change | ||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | Three Months | Nine Months | |||||||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||||
| Total CSG revenue | $ | 1,345 | $ | 940 | $ | 3,700 | $ | 2,736 | 43% | 35% | ||||||||||||||||||||||||
| Currency impact favorable (unfavorable) | — | 1 ppt | ||||||||||||||||||||||||||||||||
| Acquisition impact favorable (unfavorable) | 7 ppts | 8 ppts | ||||||||||||||||||||||||||||||||
CSG revenue for the three and nine months ended July 31, 2026 grew across all regions and in both the commercial communications and the aerospace, defense, and government end markets. The increase in revenue was primarily driven by demand in high-speed networks to support the growing need for AI capabilities and aerospace and defense solutions. Our customers continued their R&D spend in next-generation technologies and applications, including AI-driven data center expansion, ongoing 5G standards development and deployment, 400G/800G/1.6 terabit Ethernet, development of new communications technologies (e.g., 6G, Open Radio Access Networks, commercial non-terrestrial networks, quantum), high-speed networking, and major defense and government programs worldwide.
Our commercial communications end market revenue for the three and nine months ended July 31, 2026 increased 56 percent and 43 percent, respectively, compared to the same periods last year and represented 75 percent and 71 percent, respectively, of total CSG revenue. For both the three and nine months ended July 31, 2026, revenue grew across all regions. The year-over-year increase in revenue was primarily driven by our customers R&D spend in terabit solutions and expanding 400G/800G/1.6 terabit transceiver manufacturing capacity to meet rising demand for AI capabilities. We continued to see investments in high-speed networks due to increasing need for AI capabilities in the data center infrastructure ecosystem, which drove demand for our 400G/800G/1.6 terabit Ethernet solutions, both in R&D and manufacturing.
Our aerospace, defense, and government end market revenue for the three and nine months ended July 31, 2026 increased 14 percent and 19 percent, respectively, compared to the same periods last year and represented 25 percent and 29 percent, respectively, of total CSG revenue. For both the three and nine months ended July 31, 2026, revenue growth in the Americas and Europe was partially offset by a decline in Asia Pacific. The year-over-year increase in revenue was primarily driven by strong growth in radar and spectrum operations coupled with space and satellite solutions. We continue to see investments in defense modernization and emerging technologies.
Gross Margin and Operating Margin
| Three Months Ended | Nine Months Ended | Year- over-Year | ||||||||||||||||||||||||||||||||
| July 31, | July 31, | Change | ||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | Three Months | Nine Months | |||||||||||||||||||||||||||||
| (in millions, except percentages) | ||||||||||||||||||||||||||||||||||
| Gross margin | 70.8 | % | 66.7 | % | 71.2 | % | 67.2 | % | 4 ppts | 4 ppts | ||||||||||||||||||||||||
| Research and development | $ | 222 | $ | 176 | $ | 651 | $ | 519 | 26% | 26% | ||||||||||||||||||||||||
| Selling, general and administrative | $ | 275 | $ | 210 | $ | 812 | $ | 609 | 31% | 33% | ||||||||||||||||||||||||
| Other operating expense (income), net | $ | (2) | $ | (3) | $ | (7) | $ | (11) | (24)% | (32)% | ||||||||||||||||||||||||
| Income from operations | $ | 458 | $ | 246 | $ | 1,178 | $ | 722 | 87% | 63% | ||||||||||||||||||||||||
| Operating margin | 34.0 | % | 26.1 | % | 31.8 | % | 26.4 | % | 8 ppts | 5 ppts | ||||||||||||||||||||||||
Gross margin for the three months ended July 31, 2026 increased 4 percentage points compared to the same period last year, primarily driven by higher revenue volume, favorable mix, and incremental gross margin impact from acquisitions, partially offset by higher people-related costs. Gross margin for the nine months ended July 31, 2026 increased 4 percentage points compared to the same period last year, primarily driven by higher revenue volume, favorable mix, net IEEPA tariff refund claims, and incremental gross margin impact from acquisitions, partially offset by higher people-related costs and the impact of ongoing tariffs.
R&D expense for both the three and nine months ended July 31, 2026 increased 26 percent compared to the same periods last year, primarily driven by incremental costs from acquired businesses, higher variable people-related costs, and continued investments in key growth opportunities in our end markets and leading-edge technologies.
Selling, general and administrative expense for the three and nine months ended July 31, 2026 increased 31 percent and 33 percent, respectively, compared to the same periods last year, primarily driven by incremental costs from acquired businesses, higher people-related costs, and higher selling, marketing, and infrastructure costs.
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Other operating expense (income), net for the three and nine months ended July 31, 2026 was income of $2 million and $7 million, respectively, compared to income of $3 million and $11 million, respectively, for the same periods last year.
Operating margin for the three and nine months ended July 31, 2026 increased 8 percentage points and 5 percentage points, respectively, compared to the same periods last year, driven by gross margin gains and lower operating expenses as a percentage of sales.
Electronic Industrial Solutions Group
EISG serves customers across a diverse set of end markets focused on semiconductor solutions, general electronics, and automotive and energy. The group's solutions consist of electronic design, emulation, test and simulation software, instrumentation, systems, computer-aided engineering solutions, and related services. These solutions are used in the design, simulation, validation, manufacturing, installation, and optimization of electronic equipment.
Revenue
| Three Months Ended | Nine Months Ended | Year-over-Year | ||||||||||||||||||||||||||||||||
| July 31, | July 31, | Change | ||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | Three Months | Nine Months | |||||||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||||
| Total EISG revenue | $ | 501 | ||||||||||||||||||||||||||||||||
Recent insider activity
| Date | Insider | Role | Action | Shares | Price | Value |
|---|---|---|---|---|---|---|
| 2026-09-04 | Estrada Ingrid A | SVP | Sell | -2,000 | $326.10 | -$652,200 |
| 2026-08-21 | NYE JEAN MCCLUNG | Director | Sell | -3,000 | $319.22 | -$957,660 |
| 2026-08-20 | Estrada Ingrid A | SVP | Sell | -2,000 | $314.66 | -$629,320 |
| 2026-06-30 | Estrada Ingrid A | SVP | Sell | -2,000 | $340.87 | -$681,740 |
| 2026-06-25 | Dhanasekaran Satish | President and CEO | Sell | -507 | $361.32 | -$183,189 |
Source: SEC Form 4 filings.
Next expected filings
- ~2026-12-17 10-K expected by 2026-12-30 (in 95 days)
- ~2027-03-06 10-Q expected by 2027-03-14 (in 174 days)
- ~2027-06-05 10-Q expected by 2027-06-13 (in 265 days)
- ~2027-09-03 10-Q expected by 2027-09-11 (in 355 days)
Predicted from historical filing cadence; not an SEC commitment.
Recent SEC filings
- 2026-09-02 10-Q Quarterly Report
- 2026-08-26 8-K Officer/Director Change; Financial Statements and Exhibits
- 2026-08-18 8-K Earnings Release; Financial Statements and Exhibits
- 2026-06-04 10-Q Quarterly Report
- 2026-05-19 8-K Earnings Release; Financial Statements and Exhibits
- 2026-03-13 8-K Officer/Director Change
- 2026-03-05 10-Q Quarterly Report
- 2026-02-23 8-K Earnings Release; Financial Statements and Exhibits
- 2025-12-17 10-K Annual Report
- 2025-11-24 8-K Earnings Release; Financial Statements and Exhibits
- 2025-11-20 8-K Officer/Director Change; Financial Statements and Exhibits
- 2025-08-29 10-Q Quarterly Report
- 2025-08-19 8-K Earnings Release; Financial Statements and Exhibits
- 2025-06-03 10-Q Quarterly Report
- 2025-05-27 8-K Officer/Director Change