Keysight Technologies (KEYS): Exploring Valuation After Raised Outlook and Unexpected Stock Drop on Q3 Results

Keysight Technologies (NYSE:KEYS) just delivered quarterly results that topped its own guidance and, in a clear sign of confidence, raised the bar for both revenue and earnings expectations for the rest of the year. Yet, in what might leave some investors scratching their heads, the stock traded lower following the announcement. What is fueling this disconnect? Despite strong sales and an optimistic outlook from management, a drop in net income and earnings per share compared to the previous year now stands in the spotlight and raises fresh questions about how the market is weighing growth versus profitability.

This dynamic is playing out after a series of incremental gains for Keysight Technologies throughout this year. The share price has returned nearly 8% over the past year, with both sales and net income growing annually, though earnings growth has slowed. Events like the recent industry-first security certification win highlight Keysight’s ongoing push into high-value segments, but so far, market momentum lacks a clear surge. Short-term movements have been modest, which may suggest that investors are still reassessing the balance of risk and opportunity.

After a year of steady but not spectacular returns, the real puzzle is whether today’s price reflects cautious optimism or overlooks new upside. Is this the moment to buy into Keysight’s growth story, or is the market already pricing in what lies ahead?

Most Popular Narrative: 11.3% Undervalued

According to community narrative, Keysight Technologies is currently viewed as undervalued relative to its fair value estimate, with an upside potential highlighted by analysts. The consensus price target is about 11% above the current trading price, which reflects both optimism and high expectations for future growth.

Expansion of software and recurring service offerings, now comprising 36% and 28% of total revenue respectively, increases gross and net margins by enhancing revenue stability, improving product mix, and reducing cyclicality from traditional hardware segments.

Curious how Keysight could command such a premium? Analysts cite a potent mix of profit margin expansion and above-market earnings growth as factors supporting this bullish valuation. Some bold forecasts are driving the community’s expectations for the next few years, with key factors and surprising projections just below the surface.

Result: Fair Value of $188.18 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, sudden tariff changes or slower adoption of AI infrastructure could dampen growth projections and challenge Keysight’s bullish outlook in the coming years.

Find out about the key risks to this Keysight Technologies narrative.

Another View: Multiples Tell a Different Story

Looking from a different angle, the market's standard earnings measure paints Keysight as expensive compared to the industry. While one approach sees opportunity, this method suggests investors may already be paying up for future growth. Could this signal caution for buyers?

See what the numbers say about this price — find out in our valuation breakdown.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Keysight Technologies for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Keysight Technologies Narrative

If you want to dig deeper or shape your own take on Keysight Technologies, you can quickly craft your own narrative using all the available data, and do it your way.

A great starting point for your Keysight Technologies research is our analysis highlighting 1 key reward and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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