Q3 2024 Keysight Technologies Inc Earnings Call

August 20, 2024

Operator: Good day, ladies and gentlemen, and welcome to Keysight Technologies' Physical Third Quarter 2024 Earnings Conference Call.

Good day, ladies and gentlemen, and welcome to keep my technologies physical third quarter 'twenty 'twenty four earnings conference call.

Operator: Good day, ladies, and welcome to Keysight Technologies physical third quarter 2024 earnings conference.

Unknown Speaker: and welcome to Keysight Technologies physical third quarter 2024 earnings conference call.

Operator: My name is Sierra, and I'll be your lead operator for today. If at any time during the conference you need to reach an operator, please press star zero.

Sierra: My name is Sierra, and I'll be your lead operator.

Sierra: My name is Sierra and I'll be your lead operator for today.

Sierra: If at any time during the conference you need to reach an operator, please press star zero.

Sierra: If at any time during the conference, you need to reach an operator, please press star, zero.

Sierra: If at any time during the conference you need to reach an operator, Please press star zero.

Sierra: This call is being recorded today, Tuesday, August 20th, 2024 at 1.30pm Pacific time.

Operator: This call is being recorded today, Tuesday, August 20th, 2024, at 1:30 PM Pacific Time.

Sierra: This call is being recorded today, Tuesday, August 20th, 2024, at 1 30 p.m.

Sierra: The call is being recorded today Tuesday August 20th 'twenty 'twenty four at 130 P M Pacific time.

Jason Kary: I would now like to hand the call over to Jason Kary, Vice President, Treasurer, and Investor Relations. Please go ahead.

Sierra: I would now like to hand the call over to Jason Kary, Vice President, Treasurer, and Investor Relations.

Sierra: I would like to hand the call over to Jason Kary, Vice President, Treasurer and Investor

Jason Kary: I would now like to hand, the call over to Jason Kary, Vice President Treasurer, and Investor Relations. Please go ahead.

Jason Kary: Relations.

Jason Kary: Please go ahead.

Jason Kary: Thank you and welcome everyone to Keysight's third quarter earnings conference call for fiscal year 2024. Joining me are Keysight's president and CEO, Satish Dhanasekaran, and our CFO, Neil Dordy.

Sierra: Please go ahead.

Jason Kary: Thank you and welcome everyone to key sites third quarter earnings conference call for fiscal year 2020 for joining me our key sites, President and CEO of <unk>, and our CFO, Neil Dougherty and the Q&A session, we'll be joined by Chief customer Officer, Mark Wallace, The press release and information to supplement today.

Jason Kary: Thank you and welcome everyone to Keysight's third quarter earnings conference call for

Jason Kary: fiscal year 2024.

Jason Kary: Joining me are Keysight's President and CEO, Satish Dhanasekaran and our CFO, Neil Daugherty.

Jason Kary: In the Q&A session, we'll be joined by Chief Customer Officer, Mark Wallace. The press release and information to supplement today's discussions are on our website at investor.keysight.com under financial information and quarterly reports. Today's comments will refer to non-GAAP financial measures. We will also make reference to cord growth, which excludes the impact of currency movements and acquisitions or investors completed within the last 12 months. The most directly comparable GAP financial metrics and reconciliations are on our website, and all comparisons are on a year-over-year basis unless otherwise noted.

Jason Kary: In the Q&A session, we'll be joined by Chief Customer Officer, Mark Wallace.

Jason Kary: The press release and information to supplement today's discussions are on our website at, investor.keysight.com under financial information and quarterly reports.

Speaker Change: These discussions are on our website at Investor Dot <unk> Dot com under financial information and quarterly reports today's comments will refer to non-GAAP financial measures. We will also make reference to core growth, which excludes the impact of currency movements and acquisitions or divestitures completed within the last 12 months.

Jason Kary: Today's comments will refer to non-GAAP financial measures. We will also make reference to core growth, which excludes the impact of currency movements, and acquisitions or divestitures completed within the last 12 months.

Jason Kary: The most directly comparable GAAP financial metrics and reconciliations are on our website, and all comparisons are on a year-over-year basis unless otherwise noted.

Speaker Change: The most directly comparable GAAP financial metrics and reconciliations or on our website and all comparisons are on a year over year basis, unless otherwise noted.

Jason Kary: We will make forward-looking statements about the financial performance of the company on today's call. These statements are subject to risks and uncertainties and are only valid as of today. We assume no obligation to update them and encourage you to review our recent SEC filings for a more complete view of these risks and other factors.

Jason Kary: We will make forward-looking statements about the financial performance of the company on, today's call. These statements are subject to risks and uncertainties and are only valid as of today.

We will make forward looking statements about the financial performance of the company on today's call. These statements are subject to risks and uncertainties and are only valid as of today, we assume no obligation to update them and encourage you to review our recent SEC filings for a more complete view of these risks and other factors Lastly management is scheduled to participate in.

Jason Kary: We assume no obligation to update them and encourage you to review our recent SEC filings, for a more complete view of these risks and other factors.

Jason Kary: Lastly, management is scheduled to participate in upcoming investor conferences hosted by Jefferies, Deutsche Bank City, and Goldman Sachs.

Jason Kary: Lastly, management is scheduled to participate in upcoming investor conferences hosted by, Jefferies, Deutsche Bank, Citi, and Goldman Sachs.

Speaker Change: Coming Investor conferences hosted by Jefferies Deutsche Bank City, and Goldman Sachs and now I will turn the call over to <unk>.

Satish Dhanasekaran: And now I will turn the call over to Satish. Good afternoon, everyone, and thank you for joining us today. My comments will focus on three key headlines. First, key side executed well by delivering revenue and earnings above the high end of our guidance in market conditions that were stable and consistent with our expectations. Second, orders of 1.25 billion were slightly above expectations and in line with prior year and growing low single digits sequentially. In a mixed demand environment, we continue to see stability and pockets of growth, particularly in commercial communications. The funnel of opportunities supports our outlook for second half orders to be above first half orders, followed by a more gradual recovery in 2025, barring any further macroeconomic degradation.

Jason Kary: Thank you and welcome everyone to Keysight's third quarter earnings conference call for fiscal year 2020.

Jason Kary: And now I will turn the call over to Satish.

Speaker Change: Yes.

Jason Kary: Joining me are Keysight's President and CEO, Satish Dhanasekaran, and our CFO, Neil Dougherty.

Satish Dhanasekaran: Good afternoon, everyone, and thank you for joining us today.

Speaker Change: Good afternoon, everyone and thank you for joining US today My comments will focus on three key headlines first key side executed well by delivering revenue and earnings above the high end of our guidance and market conditions that were stable and consistent with our expectations.

Satish Dhanasekaran: My comments will focus on three key headlines.

Satish Dhanasekaran: First, Keysight executed well by delivering revenue and earnings above the high end of, our guidance in market conditions that were stable and consistent with our expectations.

Satish Dhanasekaran: Second, orders of $1.25 billion were slightly above expectations and in line with prior, year and growing low single digits sequentially.

Speaker Change: Second orders of $1, two 5 billion was slightly above expectations and in line with prior year and growing low single digits sequentially.

Satish Dhanasekaran: In a mixed-demand environment, we continue to see stability and pockets of growth, particularly, in commercial communications. The funnel of opportunities supports our outlook for second-half orders to be above first-half, orders, followed by a more gradual recovery in 2025, barring any further macroeconomic degradation.

Speaker Change: In a mixed demand environment, we continue to see stability and pockets of growth, particularly in commercial communications.

Speaker Change: Our funnel of opportunities supports our outlook for second half orders to be above first half orders followed by a more gradual recovery in 2020 Fi barring any further macro economic degradation.

Satish Dhanasekaran: Third, we remain confident in the strength of our business model and are intently focused, on value creation for both customers and our shareholders.

Satish Dhanasekaran: Third, we remain confident in the strength of our business model and are intently focused on value creation for both customers and our shareholders. Our capital allocation priorities have not changed. First, for strategically investing to deliver leading edge capabilities as new technologies inflect and to return the company to our long term growth trajectory. Second, for expanding our SAM and growth opportunities through disciplined M&A, and third, we are committed to return in capital through share repurchases. In fact, we returned over 715 million, or 78% of free cash flow, over the past four quarters.

Speaker Change: Third we remain confident in the strength of our business model and are intensely focused on value creation for both customers and our shareholders.

Satish Dhanasekaran: Our capital allocation priorities have not changed.

Speaker Change: Our capital allocation priorities have not changed.

Satish Dhanasekaran: First, we're strategically investing to deliver leading-edge capabilities as new technologies, inflect and to return the company to our long-term growth trajectory.

Speaker Change: First we're strategically investing to deliver leading edge capabilities as new technologies and flat and to return the company to our long term growth trajectory.

Satish Dhanasekaran: Second, we're expanding our SAM and growth opportunities through disciplined M&A.

Second, we're expanding our Sam and growth opportunities through disciplined M&A and third we are committed to returning capital through share repurchases. In fact, we returned over $715 million or 78% of free cash flow over the past four quarters.

Satish Dhanasekaran: And third, we are committed to returning capital through share repurchases.

Satish Dhanasekaran: Now, let's begin with a brief overview of Keysight's third quarter performance. Revenue of $1.2 billion and earnings per share of $1.57 were above our expectations. And for the second consecutive quarter, we saw relative stability in both orders and, revenue.

Satish Dhanasekaran: Now let's begin with a brief overview of Keysight's third quarter performance. Revenue of $1.2 billion and earnings per share of $1.57 cents were about our expectations. And for the second consecutive quarter, we saw relative stability in both orders and revenue. Turning to our business segments, CSG returned to order growth in Q3. While revenue declined eight percent year over year, we saw some modest improvement sequentially. Commercial communications orders grew low double digits. Strong growth in wireline driven by AI more than offset the year-over-year decline in a sequentially stable wireless business. Wireline orders grew for the third consecutive quarter driven by robust investment in the re-architecture of data center networks for 400 gig, 800 gig, and terabit Ethernet data rates, AI model training, and network performance.

Jason Kary: In the Q&A session, we'll be joined by Chief Customer Officer, Mark Wallace.

Speaker Change: Now, let's begin with a brief overview of key sites third quarter performance revenue of $1 2 billion and earnings per share of $1 57.

Speaker Change: A borrower expectations.

Speaker Change: And for the second consecutive quarter, we saw relative stability in both orders and revenue.

Satish Dhanasekaran: Turning to our business segments, CSG returned to order growth in Q3, while revenue declined, 8% year-over-year, we saw some modest improvement sequentially. Commercial communications orders grew low double digits.

Jason Kary: The press release and information to supplement today's discussions are on our website at investor.keysight.com under financial information and quarterly report.

Speaker Change: Turning to our business segments.

Operator: Good day ladies and gentlemen and welcome to Keysight Technologies Physical Third Quarter 2024 Earnings Conference call.

Operator: Good day ladies and gentlemen and welcome to Keysight Technologies Physical Third Quarter 2024 Earnings Conference call. My name is Sierra and I will be your lead operator for today. If at any time during the conference you need to reach an operator, please press star zero. This call is being recorded today, Tuesday, August 20th, 2024 at 1.30pm Pacific time.

Jason Kary: Today's comments will refer to non-GAAP financial measures. We will also make reference to core growth.

Speaker Change: <unk> returned to order growth in Q3.

Operator: My name is Sierra and I will be your lead operator for today.

Speaker Change: While revenue declined 8% year over year, we saw some modest improvement sequentially.

Operator: If at any time during the conference you need to reach an operator, please press star zero.

Speaker Change: Social communications orders grew low double digits strong growth in wireline driven by AI more than offset the year over year decline in our sequentially stable wireless business wireline orders grew for third consecutive quarter driven by robust investment in the re architecture of data set.

Operator: This call is being recorded today, Tuesday, August 20th, 2024 at 1.30pm Pacific time.

Satish Dhanasekaran: Strong growth in wireline driven by AI more than offset the year-over-year decline in, a sequentially stable wireless business. Wireline orders grew for third consecutive quarter driven by robust investment in the, re-architecture of data center networks for 400 gig, 800 gig, and terabit Ethernet data rates, AI model training, and network performance.

Jason Kary: I would like to hand the call over to Jason Kary, Vice President, Treasurer and Investor Relations.

Jason Kary: I would like to hand the call over to Jason Kary, Vice President, Treasurer and Investor Relations. Please go ahead. Thank you.

Operator: Please go ahead.

Jason Kary: Thank you and welcome everyone to Keysight's third quarter earnings conference call for fiscal year 2024. Joining me are Keysight's president and CEO Satish Dhanasekaran and our CFO, Neil Dordy.

Speaker Change: <unk> networks for 400 gig 800 gig and terabyte Ethernet data rates AI model training and network performance.

Operator: Thank you.

Satish Dhanasekaran: We're benefiting from the investments we've made to position Keysight ahead of this technology inflection. In R&D, we're enabling customers with our design and emulation solutions across the technology stack for key applications, including GPU servers, AI workload emulation, and performance benchmarking in manufacturing AI cluster and switching deployments drove capacity demand this quarter, and we secured key wins in GPU rack connectivity applications with market leading customers. Keysight also collaborated with Cisco and Pondute to demonstrate interconnect technologies in AI cluster networks to reduce power consumption. We're also actively engaged with customers in the Ultra Ethernet Consortium to define future network architectures for AI and high performance workloads.

Jason Kary: In the Q&A session, we'll be joined by Chief Customer Officer Mark Wallace. The press release and information to supplement today's discussions are on our website at investor.keysight.com under financial information and quarterly reports. Today's comments will refer to non-GAP financial measures. We will also make reference to cord growth, which excludes the impact of currency movements and acquisitions or investors completed within the last 12 months. The most directly comparable GAP financial metrics and reconciliation are on our website and all comparisons are on a year-over-year basis unless otherwise noted.

Satish Dhanasekaran: We're benefiting from the investments we have made to position Keysight ahead of this technology, inflection.

Speaker Change: We're benefiting from the investments we've made to position key site ahead of this technology inflection.

Satish Dhanasekaran: In R&D, we're enabling customers with our design and emulation solutions across the, technology stack for key applications, including GPU servers, AI workload emulation, and performance benchmarking.

Speaker Change: In R&D, we're enabling customers with our design and emulation solutions across the technology stack for key applications, including GPU servers.

Speaker Change: Workload emulation and performance benchmarking in manufacturing AI cluster and switching deployments drove capacity demand this quarter and we secured key wins in GPU rack connectivity applications with market leading customers.

Satish Dhanasekaran: In manufacturing, AI cluster and switching deployments drove capacity demand this quarter, and we secured key wins in GPU rack connectivity applications with market leading customers. Keysight also collaborated with Cisco and Ponduit to demonstrate interconnect technologies, in AI cluster networks to reduce power consumption.

Speaker Change: <unk> also collaborated with Cisco and pond, you to demand straight interconnect technologies in AI cluster networks to reduce power consumption.

Satish Dhanasekaran: We're also actively engaged with customers in the Ultra Ethernet Consortium to define, future network architectures for AI and high performance workloads.

We're also actively engaged with customers in the ultra Ethernet consortium to define future network architectures for AI and high performance workloads.

Jason Kary: Lastly, management is scheduled to participate in upcoming investor conferences hosted by Jeffries, Deutsche Bank City, and Goldman Sachs.

Satish Dhanasekaran: In wireless, demand has been stable for the past three quarters, albeit at a lower level on a year-or-year basis. While customers' spending remains cautious, the breadth of our solutions portfolio is enabling us to capture ongoing R&D investment in non-terrestrial networks, open radio access network deployments, and Release 18 of the 3GPP standard. Customers are also investing in scaling 5G and evaluating next generation technologies. For example, at the recent IEEE International Conference on Communications, Keysight showcased early 60 technology together with Ericsson. Government incentives, particularly in the US, Europe, and Japan, are driving development of a robust ecosystem to commercialize open radio access networks.

Satish Dhanasekaran: In wireless, demand has been stable for the past three quarters, albeit at a lower level, on a year-over-year basis. While customer spending remains cautious, the breadth of our solutions portfolio is, enabling us to capture ongoing R&D investment in non-terrestrial networks, open radio access network deployments, and release 18 of the 3GPP standard.

Speaker Change: In wireless demand has been stable for the past three quarters, albeit at a lower level on a year over year basis, while customer spending remains cautious the breadth of our solutions portfolio is enabling us to capture ongoing R&D investment in non terrestrial networks open radio access.

Satish Dhanasekaran: And now I will turn the call over to Satish. Good afternoon everyone and thank you for joining us today. My comments will focus on three key headlines.

Jason Kary: Thank you and welcome everyone to Keysight's third quarter earnings conference call for fiscal year 2024.

Satish Dhanasekaran: First, Keysight executed well by delivering revenue and earnings above the high end of our guidance in market conditions that were stable and consistent with our expectations. Second, orders of 1.25 billion for slightly above expectations and in line with prior year and growing low single digits sequentially. In a mixed demand environment, we continue to see stability and pockets of growth, particularly in commercial communications. The funnel of opportunities supports our outlook for second half orders to be above first half orders followed by a more gradual recovery in 2025, barring any further macroeconomic degradation.

Speaker Change: Network deployments and released 18 after three GPP standards.

Speaker Change: Customers are also investing in scaling <unk> and evaluating next generation technologies. For example at the recent Isuppli International Conference in Communications key sites showcased early 60 technology together with Ericsson.

Satish Dhanasekaran: Customers are also investing in scaling 5G and evaluating next generation technologies.

Satish Dhanasekaran: For example, at the recent IEEE International Conference on Communications, Keysight showcased, early 6G technology together with Ericsson.

Speaker Change: Government incentives, particularly in U S Europe, and Japan are driving development of a robust ecosystem to commercialize open radio access networks. This quarter a key sites open radio access network solutions enable state of the art open testing and integration centers across the globe from Europe.

Satish Dhanasekaran: Keysight's incentives, particularly in U.S., Europe, and Japan, are driving development, of a robust ecosystem to commercialize open radio access networks. This quarter, Keysight's open radio access network solutions enabled state-of-the-art, open testing and integration centers across the globe from Europe to North America to, Asia.

Satish Dhanasekaran: This quarter, Keysight's open radio access network solutions enable state-of-the-art, open testing and integration centers across the globe from Europe to North America to Asia.

Speaker Change: To North America to Asia, turning to aerospace defense and government revenue and orders were down year over year, but sequentially flat.

Satish Dhanasekaran: Third, we remain confident in the strength of our business model and are intently focused on value creation for both customers and our shareholders. Our capital allocation priorities have not changed. First, for strategically investing to deliver leading edge capabilities as new technologies inflect and to return the company to our long term growth trajectory. Second, we're expanding our Sam and growth opportunities through disciplined M&A and third, we are committed to return in capital through share repurchases. In fact, we returned over 715 million or 78% of free cash flow over the past four quarters.

Satish Dhanasekaran: Turning to aerospace defense and government, revenue and orders were down year-over-year, but sequentially flat.

Satish Dhanasekaran: Turning to aerospace defense and government, revenue and orders were down year over year but sequentially flat. The prolonged US budget approval process has caused delays in appropriation of funding for new projects, which we expect to filter through over the next few quarters. In the interim, spending on defense modernization remains steady with healthy demand from US primes and allied governments. Keysight recently expanded its engagement with US government through joint Cyber Defense Collaborative to enhance cybersecurity resiliency. In the quarter, we secured key wins with US and European primes for spectrum operation applications. We also expanded a quantum footprint with a multi-hundred qubit application win with a key government customer.

Satish Dhanasekaran: The prolonged U.S. budget approval process has caused delays in appropriation of funding, for new projects, which we expect to filter through over the next few quarters.

Speaker Change: Prolonged U S budget approval process has caused delays in the propagation of funding for new projects, which we expect to filter through over the next few quarters and the interim spending on defense modernization remained steady with healthy demand from U S primes and allied governments.

Satish Dhanasekaran: In the interim, spending on defense modernization remained steady with healthy demand from U.S, primes and allied governments.

Satish Dhanasekaran: Keysight recently expanded its engagement with U.S. government through joint cyber defense, collaborative to enhance cyber security resiliency.

Speaker Change: <unk> recently expanded its engagement with U S government through joined cyber defense collaborative to enhance cyber security resiliency.

Satish Dhanasekaran: In the quarter, we secured key wins with U.S. and European primes for spectrum operation, applications.

Speaker Change: In the quarter, we secured key wins with U S and European primes for spectrum operation applications.

Jason Kary: Joining me are Keysight's president and CEO Satish Dhanasekaran and our CFO, Neil Dordy.

Satish Dhanasekaran: Now let's begin with a brief overview of Keysight's third quarter performance. Revenue of 1.2 billion and earnings per share of $1.57 where above our expectations. And for the second consecutive quarter, we saw relative stability in both orders and revenue.

Satish Dhanasekaran: We also expanded our quantum footprint with a multi-hundred qubit application win with, a key government customer.

Speaker Change: We also expanded our quantum footprint with a multi hundred qubit application win with a key government customer.

Jason Kary: In the Q&A session, we'll be joined by Chief Customer Officer Mark Wallace.

Satish Dhanasekaran: Turning to Electronic Industrial Solutions Group, revenue continued to normalize from strong prior year, declining double digits as expected. Customers spending and market conditions remain muted, but we saw relative stability in orders and revenue on a sequential basis. In semiconductor, revenue was also down year over year versus an all-time high in Q3 last year. Orders increased low single digits and were up strongly on a sequential basis. While certain segments of the market continue to work through excess inventory, higher performance requirements for AI workloads drove spending in advanced nodes, hyped bandwidth memory, and silicon photonics technologies. The investments that we have made specific to these market opportunities resulted in increased demand from foundry and memory customers for a parametric wafer test solutions.

Satish Dhanasekaran: Turning to electronic industrial solutions group, revenue continued to normalize from, a strong prior year, declining double digits as expected.

Speaker Change: Turning to electronic industrial solutions group revenue continued to normalize from a strong prior year declining double digits as expected.

Jason Kary: The press release and information to supplement today's discussions are on our website at investor.keysight.com under financial information and quarterly reports.

Satish Dhanasekaran: Customer spending and market conditions remained muted, but we saw relative stability in orders, and revenue on a sequential basis.

Customer spending and market conditions remained muted, while we saw relative stability in orders and revenue on a sequential basis.

Jason Kary: Today's comments will refer to non-GAP financial measures.

Satish Dhanasekaran: Turning to our business segments, CSG returned to order growth in Q3. While revenue declined 8% year-over-year, we saw some modest improvement sequentially. Commercial communications orders grew low double digits. Strong growth in wireline driven by AI more than offset the year-over-year decline in a sequentially stable wireless business. Wireline orders grew for third consecutive quarter driven by robust investment in the re-architecture of data center networks for 800 gig and terabet Ethernet data rates, AI model training and network performance.

Jason Kary: We will also make reference to cord growth, which excludes the impact of currency movements and acquisitions or investors completed within the last 12 months.

Satish Dhanasekaran: In semiconductor, revenue was also down year-over-year versus an all-time high in Q3 last year.

Speaker Change: In semiconductor revenue was also down year over year versus an all time high in Q3 last year.

Jason Kary: The most directly comparable GAP financial metrics and reconciliation are on our website and all comparisons are on a year-over-year basis unless otherwise noted.

Satish Dhanasekaran: Orders increased low single digits and were up strongly on a sequential basis.

Speaker Change: Orders increased low single digits and were up strongly on a sequential basis, while certain segments of the market continue to work through excess inventory higher performance requirements for AI workloads drove spending in advance nodes high bandwidth memory and Silicon Photonics technologies.

Satish Dhanasekaran: While certain segments of the market continue to work through excess inventory, higher performance, requirements for AI workloads drove spending in advanced nodes, high bandwidth memory, and silicon photonics technologies.

Satish Dhanasekaran: The investments that we have made specific to these market opportunities resulted in, increased demand from foundry and memory customers for our parametric wafer test solutions.

Speaker Change: Investments that we've made specific to these market opportunities resulted in increased demand from foundry and memory customers for our parametric wafer test solutions.

Satish Dhanasekaran: We're benefiting from the investments we've made to position Keysight ahead of this technology inflection. In R&D, we're enabling customers with our design and emulation solutions across the technology stack for key applications including GPU servers, AI workload emulation and performance benchmarking. In manufacturing, AI cluster and switching deployments drove capacity demand this quarter and we secured key wins in GPU rack connectivity applications with market leading customers. Keysight also collaborated with Cisco and Pondute to demonstrate interconnect technologies in AI cluster networks to reduce power consumption. We're also actively engaged with customers in the ultra-eternet consortium to define future network architectures for AI and high performance workloads.

Satish Dhanasekaran: In automotive, orders and revenue declined double digits. Lower auto manufacturing activity remains a headwind in the near term. In new mobility, EV orders were lower as demand for some battery test and charging infrastructure investments were delayed, while AV orders grew mid-single digits on a sequential basis. The opportunities in R&D continue to grow as customer engagement in transition to software defined vehicle ramps. As an example, Riskier successfully completed the first Car Connectivity Consortium digital key certification in conjunction with an XP. This certification strengthened strut in security of next generation vehicles. It also further expands key side security evaluation offering for the automotive industry.

Satish Dhanasekaran: In automotive, orders and revenue declined double digits. Lower auto manufacturing activity remains a headwind in the near term.

Speaker Change: In automotive orders and revenues declined double digits lower auto manufacturing activity remains a headwind in the near term.

Satish Dhanasekaran: In new mobility, EV orders were lower as demand for some battery test and charging infrastructure, investments were delayed, while AV orders grew mid-single digits on a sequential basis.

Speaker Change: In new mobility, EV orders were lower as demand for some battery test and charging infrastructure investments were delayed while Avi orders grew mid single digits on a sequential basis the opportunities in R&D continue to grow as customer engagement in transition to software defined vehicles ramps.

Satish Dhanasekaran: The opportunities in R&D continue to grow as customer engagement in transition to software-defined, vehicles ramps.

Satish Dhanasekaran: As an example, RISC-V successfully completed the first car connectivity consortium digital, key certification in conjunction with NXP. This certification strengthens trust in security of next-generation vehicles.

Speaker Change: As an example, riskier successfully completed the first car connectivity consortium digital key certification in conjunction with NXP.

Speaker Change: This certification strengthens trust and security of next generation vehicles it.

Satish Dhanasekaran: It also further expands Keysight's security evaluation offering for the automotive industry.

Speaker Change: It also further expands key site security evaluation offering for the automotive industry.

Satish Dhanasekaran: In general electronics, customer spending remains constrained, particularly in manufacturing China and the distribution channel. There were pockets of growth in digital health and advanced research for orders grew low double digits. Software and services revenues are resilient and grew this quarter, while accounting for 39% of total key side revenue. Annual recurring revenue from software and services also increased year over year and in Q3 accounted for roughly 29% of overall key side. Our eggplant software test automation platform is expanding with multiple consecutive quarters of double-digit growth. We're also gaining early traction in sales channel leverage between ESI and key side to expand into select accounts and geographies.

Satish Dhanasekaran: In general electronics, customer spending remains constrained, particularly in manufacturing, China, and the distribution channel.

Speaker Change: In general electronics customer spending remains constrained, particularly in manufacturing, China and the distribution channel there were pockets of growth in digital health and advanced research, but orders grew low double digits.

Satish Dhanasekaran: In wireless demand has been stable for the past three quarters, albeit at a lower level on a year-over-year basis. While customers spending remains cautious, the breadth of our solutions portfolio is enabling us to capture ongoing R&D investment in non-terrestrial networks, open radio access network deployments and release 18 of the 3GPP standard. Customers are also investing in scaling 5G and evaluating next generation technologies. For example, at the recent IEEE International Conference on Communications, Keysight showcased early 60 technology together with Ericsson.

Satish Dhanasekaran: There were pockets of growth in digital health and advanced research, but orders grew low, double digits.

Satish Dhanasekaran: Software and services revenues are resilient and grew this quarter while accounting for, 39% of total Keysight revenue. Annual recurring revenue from software and services also increased year-over-year and, in Q3 accounted for roughly 29% of overall Keysight.

Speaker Change: Software and services revenues are resilient and grew this quarter, while accounting for 39% of total key side revenue.

Speaker Change: Annual recurring revenue from software and services also increased year over year and in Q3 accounted for roughly 29% of overall key site.

Satish Dhanasekaran: Our eggplant software test automation platform is expanding with multiple consecutive quarters, of double-digit growth.

Speaker Change: Our clients software test automation platform is expanding with multiple consecutive quarters of double digit growth.

Satish Dhanasekaran: We're also gaining early traction in sales channel leverage between ESI and Keysight, to expand into select accounts and geographies.

Speaker Change: We're also gaining early traction in sales channel leverage between ESI in key side to expand into select accounts and geographies.

Satish Dhanasekaran: Government incentives, particularly in US, Europe and Japan, are driving development of a robust ecosystem to commercialize open radio access networks. This quarter, Keysight's open radio access network solutions enables state-of-the-art open testing and integration centers across the globe from Europe to North America to Asia.

Satish Dhanasekaran: The collaboration resulted in a key win in the satellite communication space.

Speaker Change: The collaboration resulted in a key win in the satellite communications space Lastly.

Satish Dhanasekaran: Lastly, Keysight's design engineering software platform continues to grow. This quarter, we launched new releases for virtual prototyping and simulation capabilities, which address high-performance use cases across our communications, aerospace and defense, and automotive end markets.

Satish Dhanasekaran: Lastly, Keysight's design engineering software platform continues to grow. This quarter we launched new releases for virtual prototyping and simulation capabilities, which address high performance use cases across our communications, aerospace and defense, and automotive markets.

Speaker Change: Lastly, key sites design engineering software platform continues to grow this quarter, we launched new leases for virtual prototyping and simulation capabilities, which address high performance use cases across our communications aerospace and defense and automotive end markets in summary, the strength and differentiation.

Satish Dhanasekaran: Turning to aerospace defense and government, revenue and orders were down year-over-year but sequentially flat. The prolonged US budget approval process has caused delays in appropriation of funding for new projects which we expect to filter through over the next few quarters. In the interim, spending on defense modernization remains steady with healthy demand from U.S. Primes and allied governments. Keysight recently expanded its engagement with U.S, government through joint cyber defense collaborative to enhance cybersecurity resiliency. In the quarter, we secured key wins with U.S, and European Primes for spectrum operation applications. We also expanded a quantum footprint with a multi-hundred-cupid application win with a key government customer.

Satish Dhanasekaran: In summary, the strength and differentiation of Keysight's business model is enabling us to outperform in a variety of economic conditions. We're in well position to capitalize on technology inflections ahead of us and remain laser focused on value creation for both customers and shareholders.

Satish Dhanasekaran: In summary, the strength and differentiation of Keysight's business model is enabling us, to outperform in a variety of economic conditions.

Neil: <unk> of key sites business model is enabling us to outperform in a variety of economic conditions, we're well positioned to capitalize on technology inflections ahead of us and remain laser focused on value creation for both customers and shareholders with that I'll turn it over to Neil to discuss our financial performance.

Satish Dhanasekaran: We're well-positioned to capitalize on technology inflections ahead of us and remain laser-focused, on value creation for both customers and shareholders.

Neil Dougherty: With that, I'll turn it over to Neil to discuss our financial performance and outlook. Thank you, Satish, and hello everyone. Third quarter revenue of $1,217 million was above the high end of our guidance range and down 12% or 13% on a core basis. Orders of $1,249 million were essentially flat or down 1% on a core basis. Backlog at the end of the quarter grew $30 million to finish at $2.3 billion. Looking at our operational results, 4Q3, we reported a gross margin of 64%. Operating expenses of $484 million were up 1% year over year. Excluding acquisitions, S&A expenses were down 7%, reflecting our cost flexibility and actions taken to date.

Jason Kary: Transcripts provided by Transcription Outsourcing, LLC.

Neil Dougherty: With that, I'll turn it over to Neil to discuss our financial performance and outlook.

Neil: And outlook.

Neil Dougherty: Thank you, Satish, and hello, everyone.

Neil: Yeah.

Jason Kary: The most directly comparable gap financial metrics and reconciliations are on our website and all comparisons are on a year-over-year basis unless otherwise noted.

Neil: Thank you <unk> and Hello, everyone third quarter revenue of $1 billion and $217 million was above the high end of our guidance range and down 12% or 13% on a core basis orders of $1 $249 million were essentially flat or down 1% on a core basis backlog at the end of the quarter.

Neil Dougherty: Third quarter revenue of $1,217,000,000 was above the high-end of our guidance range and, down 12% or 13% on a core basis. Expenditures of $1,249,000,000 were essentially flat or down 1% on a core basis. Backlog at the end of the quarter grew $30,000,000 to finish at $2.3 billion.

Satish Dhanasekaran: Turning to electronic industrial solutions group, revenue continued to normalize from a strong prior year declining double digits as expected. Customers spending and market conditions remain muted, but we saw relative stability in orders and revenue on a sequential basis. In semiconductor, revenue was also down year over year versus an all-time high in Q3 last year. Orders increased low single digits and were up strongly on a sequential basis. While certain segments of the market continue to work through excess inventory, higher performance requirements for AI workloads drove spending in advanced nodes, hype bandwidth memory and silicon photonics technologies. The investments that we have made specific to these market opportunities resulted in increased demand from foundry and memory customers for a parametric wafer test solutions.

Neil: Grew $30 million to finish at $2 3 billion.

Neil: Looking at our operational results for Q3, we reported gross margin of 64% operating expenses of $484 million were up 1% year over year excluding.

Neil Dougherty: Looking at our operational results for Q3, we reported gross margin of 64%. Operating expenses of $484,000,000 were up 1% year over year.

Jason Kary: We assume no obligation to update them and encourage you to review our recent SEC filings for a more complete view of these risks and other factors.

Neil Dougherty: Regarding acquisitions, SG&A expenses were down 7% reflecting our cost flexibility and, actions taken to date.

Neil: Acquisitions, SG&A expenses were down, 7%, reflecting our cost flexibility and actions taken to date.

Neil Dougherty: Q3 operating margin was 24% or 26% on a core basis. Year-to-date core operating margin is down only 400 basis points, continuing to outperform, Keysight's down-cycle model and demonstrating the financial resiliency of the business.

Neil Dougherty: Q3 operating margin was 24% or 26% on a core basis. Year-to-date core operating margin is down only 400 basis points, continuing to outperform Keysight's down cycle model and demonstrating the financial resiliency of the business. During the quarter, we amended our tax returns from 2020 onward to reflect an amortization deduction related to a prior period corporate restructuring. This change reduces our effective non-GAAP tax rate from 17% to 14%, or 300 basis points, for fiscal year 2024 and going forward. Turning to earnings, we achieved $275 million of net income and delivered earnings of $1.41 per share, excluding the impact of the tax rate change.

Speaker Change: Q3, operating margin was 24% or 26% on a core basis yeah.

Year to date core operating margin is down only 400 basis points continuing to outperform key sites down cycle model and demonstrating the financial resiliency of the business.

Speaker Change: During the quarter, we amended our tax returns from 2020 onward to reflect an amortization deduction related to a prior period corporate restructuring.

Neil Dougherty: During the quarter, we amended our tax returns from 2020 onward to reflect an amortization, deduction related to a prior period corporate restructuring. This change reduces our effective non-gap tax rate from 17% to 14% or 300 basis points, for fiscal year 2024 and going forward.

Speaker Change: This change reduces our effective non-GAAP tax rate from 17% to 14% or 300 basis points for fiscal year 2024 and going forward.

Satish Dhanasekaran: In automotive, orders and revenue declined double digits. Lower auto manufacturing activity remains a headwind in the near term. In new mobility, EV orders were lower as demand for some battery tests and charging infrastructure investments were delayed, while AV orders grew mid-single digits on a sequential basis. The opportunities in R&D continue to grow as customer engagement in transition to software-defined vehicles ramps. As an example, riskier successfully completed the first car connectivity consortium digital key certification in conjunction with an XP. This certification strengthened strut in security of next generation vehicles. It also further expands key side security evaluation offering for the automotive industry.

Neil Dougherty: Turning to earnings, we achieved $275,000,000 of net income and delivered earnings of $1.41, per share excluding the impact of the tax rate change. This tax change added an additional $0.16 to earnings per share of which $0.11 relates, to the first half of FY24 and $0.05 to Q3. All in, we finished the quarter at $1.57 in earnings per share.

Speaker Change: Turning to earnings we achieved $275 million of net income and delivered earnings of $1 41 per share excluding the impact of the tax rate change.

Neil Dougherty: This tax changed at an additional 16 cents to earnings per share, of which 11 cents relates to the first half of FY24 and 5 cents to Q3. All in, we finished the quarter at $1.57 in earnings per share. Our weighted average share count for the quarter was 175 million shares. Moving to the performance of our segments, the communications solutions group generated revenue of $847 million, down 8% on both a reported and core basis. Commercial communications revenue of $572 million declined 6%, while aerospace defense and government revenue of $275 million was down 10%. Altogether, CSG delivered gross margin of 67% and operating margin of 26%.

Speaker Change: This tax change added an additional 16 to earnings per share of which <unk> 11 relates to the first half of FY 'twenty four and five to Q3 all in we finished the quarter at $1 57 in earnings per share our weighted average share count for the quarter was 175 million shares.

Neil Dougherty: Our weighted average share count for the quarter was 175,000,000 shares.

Neil Dougherty: Moving to the performance of our segments, the Communications Solutions Group generated, revenue of $847,000,000, down 8% on both the reported and core basis. Commercial Communications revenue of $572,000,000 declined 6% while Aerospace Defense and Government, revenue of $275,000,000 was down 10%.

Jason Kary: Lastly, management is scheduled to participate in upcoming investor conferences hosted by Jefferies, Deutsche Bank, Citi, and Goldman Sachs.

Speaker Change: Moving to the performance of our segments. The communications solutions group generated revenue of $847 million.

Speaker Change: Down 8% on both a reported and core basis.

Speaker Change: Commercial communications revenue of $572 million.

Speaker Change: <unk> declined 6%, while aerospace defense and government revenue of $275 million was down 10%.

Satish Dhanasekaran: In general, electronics, customer spending remains constrained, particularly in manufacturing China and the distribution channel. There were pockets of growth in digital health and advanced research for orders grew low double digits. Software and services revenues are resilient and grew this quarter, while accounting for 39% of total key side revenue. Annual recurring revenue from software and services also increased year-over-year and in Q3 accounted for roughly 29% of overall key side. Our eggplant software test automation platform is expanding with multiple consecutive quarters of double digit growth. We're also gaining early traction in sales channel leverage between ESI and key side to expand into select accounts and geographies. The collaboration resulted in a key win in the satellite communication space.

Neil Dougherty: Altogether, CSG delivered gross margin of 67% and operating margin of 26%.

Speaker Change: Altogether CSD delivered gross margin of 67% and operating margin of 26%.

Neil Dougherty: The electronic industrial solutions group generated revenue of $370 million, down 20% or 24% on a basis. EISG reported gross margin of 58% and operating margin of 25%.

Neil Dougherty: The Electronic Industrial Solutions Group generated revenue of $370,000,000, down 20% or 24% on a core basis. EISD reported gross margin of 58% and operating margin of 20%.

Speaker Change: The electronic industrial solutions group generated revenue of $370 million down, 20% or 24% on a core basis.

Speaker Change: ISG reported gross margin of 58% and operating margin of 20% an increase of approximately 100 basis points versus the prior quarter on slightly lower revenue.

Neil Dougherty: 80% in the increase of approximately 100 basis points versus the prior quarter on slightly lower revenue. Moving to the balance sheet and cash flow, we ended the quarter with $1.6 billion in cash and cash equivalence, generating cash flow from operations of $255 million and free cash flow of $222 million. For a total consideration of $150 million.

Speaker Change: Moving to the balance sheet and cash flow, we ended the quarter with $1 6 billion in cash and cash equivalents generating cash flow from operations of $255 million.

Speaker Change: And free cash flow of $222 million.

Speaker Change: Share repurchases this quarter totaled 1.07 million shares at an average price per share of approximately $140.

Satish Dhanasekaran: Lastly, Keysight's design engineering software platform continues to grow. This quarter we launched new releases for virtual prototyping and simulation capabilities which address high performance use cases across our communications, aerospace and defense, and automotive and markets.

Neil Dougherty: Now turning to our outlook, we expect to finish the year slightly better than anticipated, with fourth quarter revenue in the range of $1,245,000,000 to $1,265,000,000 and Q4 earnings per share in the range of $1.53 to $1.59 based on a weighted diluted share count of approximately 174,000,000 shares.

Speaker Change: For a total consideration of $150 million.

Neil Dougherty: Now turning to our outlook, we expect to finish the year slightly better than anticipated, with fourth quarter revenue in the range of $1,245 million to $1,265 million and Q4 earnings for share in the range of $1.53 to $1.59 based on a weighted diluted share count of approximately $174 million.

Satish Dhanasekaran: And now I will turn the call over to Satish.

Speaker Change: Now turning to our outlook.

We expect to finish the year slightly better than anticipated with fourth quarter revenue in the range of $1 $245 million to $1 billion to $265 million at Q4 earnings per share in the range of $1 53.

Satish Dhanasekaran: In summary, the strength and differentiation of Keysight's business model is enabling us to old perform in a variety of economic conditions. We're in valve position to capitalize on technology inflections ahead of us and remain laser focused on value creation for both customers and shareholders.

Speaker Change: To $1 59.

Speaker Change: Based on a weighted diluted share count of approximately 174 million shares.

Neil Dougherty: In closing, in an uncertain macro environment, we are executing on the, dimensions that we control, capturing the current market opportunities and positioning, Keysight for success as markets recover.

Neil Dougherty: In closing, in an uncertain macro environment, we are executing on the dimensions that we control, capturing the current market opportunities and positioning Keysight for success as markets recover.

Speaker Change: In closing and an uncertain macro environment, we are executing on the dimensions that we control capturing the current market opportunities and positioning key side for success as markets recover with that I will turn it back to Jason for the Q&A.

Neil Dordy: With that, I'll turn it over to Neil to discuss our financial performance and outlook. Thank you, Satish and hello everyone. Third quarter revenue of $1,217 million was above the high end of our guidance range and down 12% or 13% on a core basis. Orders of $1,249 million were essentially flat or down 1% on a core basis. Backlog at the end of the quarter grew $30 million to finish at $2.3 billion.

Jason Kary: With that, I will turn it back to Jason for the Q&A.

Jason Kary: Lastly, management is scheduled to participate in upcoming investor conferences hosted by Jeffries, Deutsche Bank City, and Goldman Sachs.

Satish Dhanasekaran: And now I will turn the call over to Satish.

Jason Kary: With that, I will turn it back to Jason for the Q&A. Thank you, Neil.

Satish Dhanasekaran: Good afternoon, everyone, and thank you for joining us today.

Jason Kary: Thank you, Neil.

Satish Dhanasekaran: My comments will focus on three key headlines.

Sarah: Thank you Neil Sarah could you please the instructions for the Q&A.

Operator: Sarah, could you please constructions for the Q&A? Absolutely. If you would like to ask a question, press star one.

Sierra: Sarah, could you please give the instructions for the Q&A?

Satish Dhanasekaran: Good afternoon everyone and thank you for joining us today.

Speaker Change: Absolutely.

Sarah: If you would like to ask a question press star one.

Operator: We ask you to please limit yourself to one question and one follow-up. To withdraw your question, press the pound sign. We will hold while we compile our Q&A roster.

Sarah: We ask that you please limit yourself to one question and one follow up to.

Satish Dhanasekaran: My comments will focus on three key headlines.

Sarah: To withdraw your question press the pound sign.

Neil Dordy: Looking at our operational results, 4Q3, we reported gross margin of 64%. Operating expenses of $484 million were up 1% year over year. Excluding acquisitions, S&A expenses were down 7% reflecting our cost flexibility and actions taken to date. Q3 operating margin was 24% or 26% on a core basis.

Sarah: We will hold while we compile the Q&A roster.

Mark Delaney: Our first question comes from the line of Mark Delaney with Goldman Sachs. Your line is now open.

Sierra: Absolutely.

Satish Dhanasekaran: Second, orders of $1.25 billion were slightly above expectations and in line with prior year and growing low single-digit sequential.

Our first question comes from the line of Mark Delaney with Goldman Sachs. Your line is now open.

Satish Dhanasekaran: In a mixed-demand environment, we continue to see stability and pockets of growth.

Sierra: If you would like to ask a question, press star 1.

Mark Delaney: Yes, some good afternoon. Thanks very much for taking my question. Orders were up slightly, both sequentially and year on year after being down year on year for the prior six quarters.

Yes, good afternoon, and thanks very much for taking my question orders were up slightly both sequentially and year on year after being down year on year for the prior six quarters, maybe you can help us better understand how meaningful you think the pickup in orders is is a sign that the cyclical environment may be changing.

Mark Delaney: Maybe we can best better understand how meaningful you think the pickup in orders is as a sign that the technical environment may be changing.

Neil Dordy: Year-to-date core operating margin is down only 400 basis points continuing to outperform Keysight's down cycle model and demonstrating the financial resiliency of the business.

Sierra: We ask that you, please limit yourself to one question and one follow-up.

Satish Dhanasekaran: Hi, Mark. Thanks for the question. Obviously, we're encouraged by the continued stability that we see in our base business. Inflations that are material and in our wireline business, some signs of rebound in semi, although it's too early to call it. And then there's some incremental weakness in the automotive sector.

Sarah: Yeah, Hi, Mark Thanks for the question. Obviously, we're encouraged by the continued stability that we've seen our base business inflections that are material and in our wireline business.

Neil Dordy: During the quarter, we amended our tax returns from 2020 onward to reflect an amortization deduction related to a prior period corporate restructuring. This change reduces our effective non-gap tax rate from 17% to 14% or 300 basis points for fiscal year 2024 and going forward. Turning to earnings, we achieved $275 million of net income and delivered earnings of $1.41 per share excluding the impact of the tax rate change. This tax changed at an additional 16 cents to earnings per share of which 11 cents relates to the first half of FY24 and 5 cents to Q3. All in, we finished the quarter at $1.57 in earnings per share. Our weighted average share count for the quarter was 175 million shares.

Sierra: To withdraw your question, press the pound sign.

Sierra: We will hold while we compile our Q&A roster.

Some signs of rebound in semi although it's too early to call. It. So and then there is some incremental weakness in.

Unknown Speaker: Our first question comes from the line of Mark Delaney with Goldman Sachs.

Sarah: In the automotive sector. So we put all in the Blender and I'd say in this current environment.

Satish Dhanasekaran: So we put all in the blender and say, in this current environment, we're encouraged by this, the turning to slight year-over-year growth, as we've seen, but it might be too soon to call a recovery this time. And the key point is we're executing well, and we feel good about our own portfolio and its differentiation and investments we have made to continue to keep that going.

Sarah: We are encouraged by this.

Sarah: Turning to slight year over year growth as we've seen but it might be too soon to call a recovery at this time and the key point is we are executing well and we feel good about the our own portfolio and its differentiation and the investments we have made to continue to keep that going.

Unknown Speaker: Your line is now open.

Speaker Change: Thanks for that my other question was a follow up on the orders you mentioned AI is a positive contributor yet again to commercial communications, maybe you can help us better understand what percentage of commercial communications ordered or tied to AI at this point and how impactful my AIB for revenue within commercial.

Neil Dordy: Moving to the performance of our segments, the Communications Solutions Group generated revenue of $847 million down 8% on both a reported and core basis. Commercial communications revenue of $572 million declined 6% while aerospace defense and government revenue of $275 million was down 10%. Altogether, CSG delivered gross margin of 67% and operating margin of 26%.

Mark Delaney: Yes.

Satish Dhanasekaran: So I know impactful my AIB for revenue within commercial comms that you look out over the next 12 months or so. Thank you. Thanks, Mark. Yeah, we're quite pleased that commercial communications orders grew double digits at this quarter. Again, as I mentioned, you know, we have a pretty diverse portfolio that caters to the entire communication cycle system with solutions. So you can think of wireless and wireline, and the wireline ecosystem represents roughly about 40 to 45% of our commercial communications business. And it's inflecting driven by the AI spend.

Speaker Change: <unk> you look out over the next 12 months or so thank you.

Mark Delaney: Good afternoon.

Speaker Change: Thanks, Mark Yes, we are quite pleased.

Speaker Change: Commercial communications orders.

Grew double digits.

Speaker Change: This quarter again as I mentioned.

Neil Dordy: The electronic industrial solutions group generated revenue of $370 million down 20% or 24% on a basis. EISG reported gross margin of 58% and operating margin of 25%.

Speaker Change: Have a pretty diverse portfolio.

Speaker Change: Caters to the entire communications ecosystem with solutions. So you can think of wireless and wireline and the wireline ecosystem, where our presence roughly about 40% to 45% of our commercial communications business and it's inflicting driven by the AI spent.

Neil Dordy: 80% in the increase of approximately 100 basis points versus the prior quarter on slightly lower revenue Moving to the balance sheet and cash flow, we ended the quarter with $1.6 billion in cash and cash equivalence generating cash flow from operations of $255 million and free cash flow of $222 million.

Satish Dhanasekaran: Now, when you think about how big this could be longer term, I think the answer is becoming quite clear that AI is going to be a pretty transformational technology that's going to lead to evolutions of multiple underlying waves of, you know, standards and technologies, but it's not yet played out today. Today, the state of the affairs is it's a highly concentrated opportunity set driven by the big investments paid by the hyperscalers, and it is a constricted sort of constrained, I should say, sort of environment from a supply perspective. So there are some challenges that the customers are working through.

Speaker Change: Now when you think about how big this could be longer term I think the answer is becoming quite clear that AI is going to be a pretty transformational technology, that's going to lead to evolutions of multiple underlying waves of.

Speaker Change: Standards and technologies, but it's not yet played out today the state of the apheresis its a highly concentrated opportunity set driven by the big investments made by the hyper scaler.

Satish Dhanasekaran: Second, orders of 1.25 billion for slightly above expectations and in line with prior year and growing low single digits sequentially.

Neil Dordy: For a total consideration of $150 million, now turning to our outlook, we expect to finish the year slightly better than anticipated with fourth quarter revenue in the range of $1,245 million to $1,265 million and Q4 earnings for share in the range of $1.53 to $1.59 based on a weighted deluded share count of approximately $174 million.

Speaker Change: It is a constricted sort of constrained I should say sort of.

Speaker Change: And what I meant from a supply perspective. So there are some challenges that the customers are working through so we're seeing.

Satish Dhanasekaran: So we're seeing, and we're picking up some of that capital investments that are playing out through our manufacturing business that is rapidly expanding. But equally, we're making good progress, I would say, in engaging with standardization across the entire stack and in making meaningful contributions in R&D across compute, power and thermal networking protocols and memory, all aspects of innovation that customers are playing into.

Speaker Change: We're picking up some of that capital investments that are playing out through our manufacturing business.

Speaker Change: That is rapidly expanding but equally we're making good progress I would say in engaging with standardization.

Satish Dhanasekaran: In a mixed demand environment, we continue to see stability and pockets of growth, particularly in commercial communications. The funnel of opportunities supports our outlook for second half orders to be above first half orders followed by a more gradual recovery in 2025, barring any further macroeconomic degradation.

Neil Dordy: In closing, in an uncertain macro environment, we are executing on the dimensions that we control capturing the current market opportunities and positioning Keysight for success as markets recover.

Speaker Change: Across the entire stack and in making meaningful contributions in R&D.

Speaker Change: <unk> compute power and terminal networking protocols in memory all aspects of innovation.

Jason Kary: With that, I will turn it back to Jason for the Q&A. Thank you, Neil.

Speaker Change: That customers are playing into but again the ecosystem I believe will broaden over time and our goal has been for the last 18 months to have this opportunity feel good about our market position.

Satish Dhanasekaran: But again, the ecosystem, I believe, will broaden over time, and our goal has been for the last 18 months to intercept this opportunity, feel good about our market position.

Operator: Sarah, could you please constructions for the Q&A? Absolutely. If you would like to ask a question, press star one. We ask you to please limit yourself to one question and one follow up. To withdraw your question, press the pound sign. We will hold while we compile our Q&A roster.

Aaron Rakers: Thank you. Our next question today comes from Aaron Rakers with Wolf Fargo.

Thank you.

Mark Delaney: Thanks very much for taking my question.

unknown: Subscribe to the YouTube channel of The Daily Beast.

Speaker Change: Our next question today comes from Aaron Rakers with Wells Fargo.

Aaron Rakers: Your line is not open. Yes, thanks for taking the question questions. I want to go back; you know, it's been a little while, but at the analyst day, you know, a little over a year ago, you had outlined a revenue caterer of five to seven percent.

Satish Dhanasekaran: Funnel of Opportunities supports our outlook for second half orders to be above first half, followed by a more gradual recovery in 2025 barring any further macroeconomic degradation.

Speaker Change: Your line is now open.

Satish Dhanasekaran: Third, we remain confident in the strength of our business model and are intently focused on value creation for both customers and our shareholders.

Aaron Rakers: Yes, thanks for taking the question questions.

Mark Delaney: Our first question comes from the line of Mark Delaney with Goldman Sachs.

Speaker Change: I want to go back.

Satish Dhanasekaran: Your line is not open. Yes, some good afternoon. Thanks very much for taking my question. Orders were up slightly, most sequentially, and year on year after being down year on year for the prior six quarters. Maybe we can best better understand how meaningful you think the pickup in orders is as a sign that the technical environment may be changing.

Got a little while but at the analyst day, a little over a year ago, you had outlined a revenue CAGR of 5% to 7%.

Mark Delaney: Orders were up slightly, both sequentially and year on year after being down year on year for the prior six quarters.

Satish Dhanasekaran: Third, we remain confident in the strength of our business model and are intently focused on value creation for both customers and our shareholders.

Aaron Rakers: I'm curious as we kind of see the stabilization of orders. We think about, you know, the return of growth here. Is there anything that's changed as we start to think about the next fiscal year that you would put out there for us to think about relative to that five to seven percent growth rate? And if so, I mean, you know, why wouldn't we expect even a stronger growth rate just given the easy comp that you're looking at?

Speaker Change: I am curious as we kind of see the stabilization of orders, we think about the return of growth here is there anything that's changed as we start to think about the next fiscal year that you would put out there for us to think about relative to that 5% to 7% growth rate and if so I mean why.

Mark Delaney: Maybe you can help us better understand how meaningful you think the pickup in orders is, as a sign that the cyclical environment may be changing.

Satish Dhanasekaran: Our capital allocation priorities have not changed. First, for strategically investing to deliver leading edge capabilities as new technologies inflect and to return the company to our long term growth trajectory.

Satish Dhanasekaran: Yes.

Satish Dhanasekaran: Second, we're expanding our Sam and growth opportunities through disciplined M&A and third, we are committed to return in capital through share repurchases.

Satish Dhanasekaran: Hi, Mark. Thanks for the question. Obviously we're encouraged by the continued stability that we see in our base business. Inflations that are material and in our wireline business, some signs of rebound in semi, although it's too early to call it. And then there's some incremental weakness in the automotive sector. So we put all in the blender and say in this current environment, we're encouraged by this. The turning to slight year or year growth as we've seen, but it might be too soon to call a recovery at this time. And the key point is we're executing well and we feel good about the our own portfolio and it's differentiation and investments we have made to continue to keep that going.

Satish Dhanasekaran: Hi, Mark.

Satish Dhanasekaran: In fact, we returned over 715 million or 78% of free cash flow over the past four quarters.

Why wouldn't we expect even a stronger growth rate just given the easy comps that youre looking at.

Satish Dhanasekaran: Thanks for the question.

Satish Dhanasekaran: Yeah, thank you, Aaron. Obviously, you know, our long-term view of the opportunities and the underlying drivers remains unchanged. And so we would expect the business to trend back to those levels. That's point number one. However, you know, look, 21 and 22 have been outsized years for our markets. And 23 was a flat year, a flat a year. We continue to deliver value in 24 is a down year for the market. And so our first priority is to say that we can, with the business conditions of stabilized. That was our sort of first milestone, I should say.

Satish Dhanasekaran: Our capital allocation priorities have not changed.

Erinn: Yes, Thank you erinn.

Satish Dhanasekaran: First, we're strategically investing to deliver leading-edge capabilities as new technologies inflect and to return the company to our long-term growth trajectory.

Speaker Change: Obviously, a long term view of the opportunities and the underlying drivers remain unchanged and so we would expect the business to <unk>.

And back to those levels. That's point number one however look at 'twenty, one and 22 have been outsized yields for our markets.

Speaker Change: 23 was a flat year or flattish year, we continue to deliver value and 24 is it down here for the market and so our first priority is to say that we can with the business conditions have stabilized that was our sort of first milestone I should say.

Satish Dhanasekaran: Obviously, we are encouraged by the continued stability that, we see in our base business, inflections that are material in our wireline business, some signs of rebound in semi, although it is too early to call it.

Satish Dhanasekaran: And as a sign of that, we feel good about what we had shared with you last quarter, which is that the second half orders would be greater than the first time. Okay, so that's the first thing.

Speaker Change: And as a sign of that we feel good about what we had shared with you last quarter, which is that the second half orders would be greater than the first half.

Satish Dhanasekaran: Thanks for that. My other question was a follow up on the orders. You mentioned AI as a positive contributor yet again to commercial communications. Maybe you can up us better understand what percentage of commercial communication orders are tied to AI at this point and how impactful my AIB for revenue within commercial comms that you look out over the next 12 months or so.

Satish Dhanasekaran: Second, we're expanding our SAM and growth opportunities through disciplined M&A.

Okay. So that's that's the first thing second is.

Satish Dhanasekaran: And third, we are committed to returning capital through share repurchase. In fact, we returned over $715 million or 78% of free cash flow over the past four quarters.

Satish Dhanasekaran: Second is, you know, the shape of the recovery, as we've seen, it's still a pretty mixed environment. And, you know, we're not at this point factoring in an in-phase recovery, if you will, across all our multiple end markets. And therefore, you know, we would, we would at this point say, you know, we're thinking about this as a slow, gradual recovery in 2025. However, the actions that we're taking in terms of things we control, our innovations, engagements with customers, are all with an intent to maximize. And I feel good about Keysight's position. Obviously, we want to see some more progression in the funnel dynamics, which are trending positive, but you'll hear more from Mark later.

Speaker Change: The shape of the recovery as we have seen it's still a pretty mixed environment and.

Speaker Change: We're not at this point factoring in and in Phase recovery, If you will across all of our multiple end markets and therefore.

Speaker Change: No.

Speaker Change: We would we would at this point say.

Satish Dhanasekaran: Turning to our business segments, CSG returned to order growth in Q3.

Satish Dhanasekaran: Thank you. Thanks, Mark. Yeah, we're quite pleased that commercial communications orders grew double digits at this quarter. Again, as I mentioned, you know, we have a pretty diverse portfolio that caters to the entire communication cycle system with solutions. So you can think of wireless and wireline, and the wireline ecosystem represents roughly about 40 to 45% of our commercial communications business, and it's inflecting driven by the AI spend. Now, when you think about how big this could be, longer term, I think the answer is becoming quite clear that AI is going to be a pretty transformational technology that's going to lead to evolutions of multiple underlying waves of, you know, standards and technologies, but it's not yet played out.

Speaker Change: We're thinking about this is a slow gradual recovery in 2025. However, the actions that we're taking in terms of things we control our innovations engagements with customers.

Satish Dhanasekaran: While revenue declined 8% year-over-year, we saw some modest improvement sequentially. Commercial communications orders grew low double digits.

Satish Dhanasekaran: Now let's begin with a brief overview of Keysight's third quarter performance. Revenue of $1.2 billion and earnings per share of $1.57 were above our expectations. And for the second consecutive quarter, we saw relative stability in both orders and revenues.

Mark: Are all with an intent to maximize and I feel good about key sites position, obviously, we want to see some more progression in the funnel dynamics, which are trending positive, but you'll hear more from Mark later.

Satish Dhanasekaran: Strong growth in wireline driven by AI more than offset the year-over-year decline in a sequentially stable wireless business. Wireline orders grew for third consecutive quarter driven by robust investment in the re-architecture of data center networks for 800 gig and terabet Ethernet data rates, AI model training and network performance.

Aaron Rakers: You know, we want to see that progress a bit more before we can talk about, you know, what those growth rates might be for 25. Yeah, very helpful.

Mark: We want to see that progress a bit more before we can.

Speaker Change: Talk about.

Satish Dhanasekaran: We're benefiting from the investments we've made to position Keysight ahead of this technology inflection.

What what those growth rates might be for 25.

Satish Dhanasekaran: Turning to our business segment.

Speaker Change: Yes, very helpful. And then just as a quick follow up I'm curious as you Neil I think a quarter or two ago, you talked about longer dated backlog builder orders I'm curious any update on that and what youre seeing in the market today.

Neil Dougherty: And just as a quick follow-up, I'm curious as you, Neil. I think a quarter or two ago, you talked about longer-dated backlog build or orders. I'm curious any update on that and what you're seeing in the market today. Yeah, the incoming order rate range reasonably stable in that upper single digits level of mix. And on the revenue side, we are trending in that direction.

Satish Dhanasekaran: CSG returned to order growth in Q3. While revenue declined 8% year-over-year, we saw some modest improvement sequentially. Commercial communications orders grew low, double digits.

Satish Dhanasekaran: Strong growth in wireline, driven by AI, more than offset the year-over-year decline.

Satish Dhanasekaran: Sequentially Stable Wireless Business, Wireline orders grew for third consecutive quarter driven by robust investment in the re-architecture of data center networks. 400 gig, 800 gig, and terabit Ethernet data rate.

Satish Dhanasekaran: AI model training and network performance.

Neil: Yes, the incoming order rate range reasonably stable in that upper single digits level of mix and on the revenue side, we are trending in that direction, we're not yet to the point where.

Satish Dhanasekaran: Today, the state of the affairs is a highly concentrated opportunity set driven by the big investments made by the hyperscalers, and it is a constricted sort of constraint, I should say, sort of an environment from a supply perspective. So there are some challenges that the customers are working through. So we're seeing, and we're picking up some of that capital investments that are playing out through our manufacturing business that is rapidly expanding.

Satish Dhanasekaran: We're benefiting from the investments we have made to position Keysight ahead of this technology inflection.

Satish Dhanasekaran: In R&D, we're enabling customers with our design and emulation solutions across the technology stack for key applications including GPU servers. AI Workload Emulation.

Satish Dhanasekaran: Performance Benchmark, In manufacturing, AI cluster and switching deployments drove capacity demand this quarter and we secured key wins in GPU rack connectivity applications. Keysight also collaborated with Cisco and Ponduit to demonstrate interconnect technologies in AI cluster networks, to reduce power consumption, were also actively engaged with customers, in the Ultra Ethernet Consortium to define future network architectures for AI and high-performance.

Neil Dougherty: We're not yet to the point where the revenues are at that level, but in the next quarter or two, we'd expect to achieve that. Yeah.

Neil: The revenues are at that level, but in the next quarter or two we would expect to achieve that.

Speaker Change: Yes. Thank you.

Thank you our next question.

Operator: Our next question. Holidays.

Michael Allen: Our next question comes from Matt Nickman with Story to Bank. Elan is not open.

Speaker Change: Our next question comes from Matt Knickman with Deutsche Bank. Your line is now open.

Satish Dhanasekaran: In wireless, demand has been stable for the past three quarters, albeit at a lower level on a year-over-year basis.

Satish Dhanasekaran: While customer spending remains cautious, the breadth of our solutions portfolio is enabling us to capture ongoing R&D investment in non-terrestrial networks.

Satish Dhanasekaran: In R&D, we're enabling customers with our design and emulation solutions across the technology stack for key applications including GPU servers, AI workload emulation and performance benchmarking.

Satish Dhanasekaran: But equally, we're making good progress, I would say, in engaging with standardization across the entire stack, and in making meaningful contributions in R&D across compute, power and thermal networking, protocols, and memory. All aspects of innovation that customers are playing into, but again, the ecosystem, I believe, will broaden over time, and our goal has been for the last 18 months to intercept this opportunity. Feel good about our market position.

Michael Allen: Hey guys, thanks for taking the question.

Satish Dhanasekaran: Open Radio Access Network Deployments and Release 18 of the 3GPP standard.

Speaker Change: Hey, guys. Thanks for taking my question. This is Michael Allen on for Matt with them.

Satish Dhanasekaran: Customers are also investing in scaling 5G and evaluating next generation technology.

Michael Allen: This is Michael Allen on for Matt Nickman. I was wondering if you could. Or are these delays kind of pushing more into the next quarter, or just, you know, kind of a slowdown of when you expect more of your year growth rate, or just any work color on that. Thank you.

Satish Dhanasekaran: For example, at the recent IEEE International Conference on Communications.

Michael Allen: I was just wondering if you could go into.

Speaker Change: A little more.

Speaker Change: Dig a little more to the aerospace to 80 Atg segment.

Speaker Change: Is.

Satish Dhanasekaran: In manufacturing, AI cluster and switching deployments drove capacity demand this quarter and we secured key wins in GPU rack connectivity applications with market leading customers. Keysight also collaborated with Cisco and Pondute to demonstrate interconnect technologies in AI cluster networks to reduce power consumption.

unknown: Thank you.

Speaker Change: Or are these delays are kind of pushing more into the next quarter or is it.

Speaker Change: Kind of a slowdown.

Speaker Change: Do you expect to see more of a year over year.

Growth rates or just any more color on that.

Satish Dhanasekaran: We're also actively engaged with customers in the ultra-eternet consortium to define future network architectures for AI and high performance workloads.

Speaker Change: Yes. Thank you.

Satish Dhanasekaran: I'd say the overarching trends, given the geopolitics that we're under, are positive. So that's number one. There is bipartisan support for budgets in defense in the United States and increasing support for raising budgets around the world. Japan just announced an increase, and Europe is also focused on that. And I feel good about key sites. Focus on focus. We've had in defense modernization with quantum solutions with solutions for after a magnetic spectrum operations space and satellite. They're all aligned with the right priorities.

Speaker Change: I'd say the overarching trends given the geopolitics that we're under are positive. So thats number one that has bipartisan support for <unk>.

Aaron Rakers: Our next question today comes from Aaron Raikers with Wolf Fargo.

Satish Dhanasekaran: Your line is not open. Yes, thanks for taking the question. Questions, I want to go back, you know, it's been a little while, but at the end of the day, you know, a little over a year ago, you had outlined a revenue caterer of 5 to 7%. I'm curious as we kind of see the stabilization of orders, we think about, you know, the return of growth here. Is there anything that's changed as we start to think about the next fiscal year that you would put out there for us to think about relative to that 5 to 7% growth rate? And if so, I mean, you know, why wouldn't we expect even a stronger growth rate just given the easy comp that you're looking at?

Speaker Change: Budgets in defense in the United States, and increasing support for raising budgets around the world, Japan, just announced an increase and in Europe is also focused on that and I feel good about key sites focus long term focus we've had in defense modernization with quantum solutions with solutions for.

Satish Dhanasekaran: In wireless demand has been stable for the past three quarters, albeit at a lower level on a year-over-year basis.

Satish Dhanasekaran: Keysight showcased early 6G technology together with, Government incentives, particularly in the US, Europe and Japan, are driving development of a robust ecosystem.

Satish Dhanasekaran: While customers spending remains cautious, the breadth of our solutions portfolio is enabling us to capture ongoing R&D investment in non-terrestrial networks, open radio access network deployments and release 18 of the 3GPP standard.

Satish Dhanasekaran: Customers are also investing in scaling 5G and evaluating next generation technologies.

Speaker Change: Electromagnetic spectrum operations space and satellite, they're all aligned with the right priorities, having said that the budgets and appropriation timing does have an impact really hard to predict on a quarterly basis, but we like the pipeline that's building.

Satish Dhanasekaran: Having said that, you know, the budgets and appropriation timing does have an impact really hard to predict on a quarterly basis, but we like the pipeline that's building. The prime contractors' backlog increases are also something we monitor in the US. And we feel good that those will all eventually flush into orders for us this year. Obviously, we're lapping a full year of 2023 of record levels for order and revenue for the aerospace and defense business. So you'll see some of the revenue levels are down and to the point about the long dated backlog. We have won some large systems businesses last year and this year, which will also convert into revenue next year.

Satish Dhanasekaran: For example, at the recent IEEE International Conference on Communications, Keysight showcased early 60 technology together with Ericsson.

Satish Dhanasekaran: Yeah, thank you, Aaron. Obviously, you know, our long-term view of the opportunities and the underlying drivers remain unchanged. And so we would expect the business to train back to those levels. That's point number one. However, you know, look, 21 and 22 have been outsized years for our markets. And 23 was a flat year, a flat a year. We continue to deliver value in 24. It's a down year for the market. And so our first priority is to say that we can, with the business conditions of stabilized.

Speaker Change: The prime contractors backlog increases are also something we monitor in the U S and we feel good that those will all eventually flush into orders for US. This year, obviously, we're lapping a full year of 2023 of record levels, our order and revenue for the aerospace and defense business. So youll see some.

Speaker Change: The revenue levels are down and to the point about the long dated backlog. We have won some large systems businesses last year and this year, which will also convert into revenue next year or so.

Satish Dhanasekaran: So, you know, I would say that the drivers remain intact or position remains solid and the pipeline is strong.

Satish Dhanasekaran: Commercialize Open Radio Access Network. This quarter, Keysight's Open Radio Access Network solutions enable state-of-the-art open testing and integration centers across the globe from Europe to North America to Asia.

Speaker Change: I would say that the drivers remain intact, our position remains solid and the pipeline is strong. Thank you.

Satish Dhanasekaran: That was our sort of first milestone, I should say. And as a sign of that, we feel good about what we had shared with you last quarter, which is that the second half orders would be greater than the first time. Okay, so that's, that's the first thing. Second is, you know, the shape of the recovery, as we've seen, it's still a pretty mixed environment. And, you know, we're not at this point factoring in an in phase recovery, if you will, across all our multiple end markets.

Satish Dhanasekaran: Turning to Aerospace Defense and Government, revenue and orders were down year over year, but sequentially flat.

Satish Dhanasekaran: The prolonged U.S. budget approval process has caused delays in appropriation of funding for new projects, which we expect to filter through over the next few quarters.

Satish Dhanasekaran: In the interim, spending on defense modernization remains steady, with healthy demand from U.S. primes and allied governments.

Satish Dhanasekaran: Keysight recently expanded its engagement with the U.S. government through a joint cyber defense collaborative to enhance cyber security.

Satish Dhanasekaran: In the quarter, we secured key wins with U.S. and European primes.

Operator: Thank you.

Satish Dhanasekaran: Spectrum Operation Applications, We also expanded our quantum footprint with a multi-hundred qubit application win with a key government customer.

Satish Dhanasekaran: Turning to Electronic Industrial Solutions Group, revenue continued to normalize from a strong prior year, declining double digits as expected.

Satish Dhanasekaran: Customer spending and market conditions remain muted, but we saw relative stability in orders and revenue on a sequential basis.

Operator: Awesome, thank you.

Satish Dhanasekaran: In semiconductor, revenue was also down year-over-year versus an all-time high in Q3 last year, orders increased low single digits and were up strongly on a sequential basis.

Speaker Change: Awesome. Thank you.

Satish Dhanasekaran: While certain segments of the market continue to work through excess inventory, higher performance requirements for AI workloads drove spending in advanced nodes, high-bandwidth memory, and silicon photonics technology.

Satish Dhanasekaran: The investments that we have made specific to these market opportunities resulted in increased demand from foundry and memory customers. Parametric Wafer Test Solution.

David Ridley: Our next question comes from David Ridley Lane with Bank of America. Your line is not open.

Speaker Change: Our next question comes from David Ridley Lane with Bank of America.

Speaker Change: Your line is now open.

David Ridley: Thank you. Yes, just on the automotive. I mean, I think, you know, the broader weakness in the EV markets well known. You know, I saw you mentioned clients delaying projects. Are they looking to?

Satish Dhanasekaran: In automotive, orders and revenue declined double digits. Lower auto manufacturing activity remains a headwind in the near term.

Speaker Change: Thank you yes.

Satish Dhanasekaran: And then there is some incremental weakness in the automotive sector.

Speaker Change: On the automotive.

Satish Dhanasekaran: We put it all in the, blender and say, in this current environment, we are encouraged by this returning to slight year over year growth, as we have seen, but it might be too soon to call a recovery at this time.

Satish Dhanasekaran: And the key point is we are executing well and we feel good about our own portfolio and, its differentiation and the investments we have made to continue to keep that going.

I think the broader weakness in the EV markets well known.

Satish Dhanasekaran: And therefore, you know, we would, we would at this point say, you know, we're thinking about this is a slow gradual recovery in 2025. However, the actions that we're taking in terms of things we control, our innovations, engagements with customers are all with an intent to maximize. And I feel good about Keysight's position. Obviously, we want to see some more progression in the funnel dynamics, which are trending positive, but you'll hear more from Mark later. You know, we want to see that progress a bit more before we can talk about, you know, what those growth rates might be for 25. Yeah, very helpful.

Speaker Change: Alright.

Speaker Change: You mentioned client delay in projects.

David Ridley: Or kind of restart, maybe at the beginning of calendar 2025, just sort of gain a sense of the tone in those customer conversation.

Speaker Change: To kind of restart maybe at the beginning of calendar 2025, just sort of again, a sense of the tone in those customer conversations.

Satish Dhanasekaran: Thanks for that, Satish.

Mark Delaney: My other question was a follow up on the orders.

Mark Wallace: Yeah, David, this is this is Mark. You know, it's hard to predict when the timing is for some of these projects. Some of them have very long processes associated with the procurement process, including proof of concepts. And then the projects themselves. Last many quarters, it falls into this category of some of the long dated business that we've been talking about for quite a while. What I think we are seeing though is the continuous focus on innovation with our key automotive customers, the AV side and some and software defined vehicles at this now migrating toward continued to show growth in the quarters sequentially.

Satish Dhanasekaran: In new mobility, EV orders were lower as demand for some battery test and charging infrastructure investments were delayed, while AV orders grew mid-single digits on a sequential basis, opportunities in R&D continue to grow as customer engagement in transition to software-defined vehicles ramps.

Speaker Change: Yes, David This is this is mark.

Satish Dhanasekaran: As an example, RISC-Q successfully completed, First Car Connectivity Consortium Digital Key Certification in conjunction with NXP. This certification strengthens trust.

Satish Dhanasekaran: Security of Next Generation, also further expands Keysight security evaluation offering for the autumn.

Satish Dhanasekaran: In general electronics, customer spending remains constrained, particularly in manufacturing, China, and the distribution channel.

Mark: It is hard to predict when the timing is for some of these projects.

Satish Dhanasekaran: There were pockets of growth in digital health and advanced research, but orders grew low doubly, software and services revenues are resilient and grew this while accounting for 39% Annual recurring revenue from software and services also increased year-over-year and in Q3 accounted for roughly 29% of overall... Our eggplant software test automation platform is expanding with multiple consecutive, Double-Digit Growth, are also gaining early traction in sales channel leverage between ESI and Keysight to expand into select Collaboration Result, key win in the satellite communication space.

Satish Dhanasekaran: Lastly, Keysight's design engineering software platform continues to grow. This quarter, we launched new releases for virtual prototypes. Simulation Capability.

Mark: Some of them have very long.

Mark: <unk> associated with the procurement process, including proof of concepts and then the projects themselves last many quarters.

Falls into this category of some of the long dated business that we've been talking about for quite a while what I think we are seeing though is the continuous focus on innovation with our key automotive customers.

Neil Dordy: And just as a quick follow up, I'm curious as you, Neil, I think a quarter or two ago, you talked about longer dated backlog build or orders. I'm curious any update on that and what you're seeing in the market today. Yeah, the incoming order rate range reasonably stable in that upper single digits level of mix. And on the revenue side, we are trending in that direction. We're not yet to the point where the revenues are at that level, but in the next quarter or two, we'd expect to achieve that. Yeah, thank you. Thank you.

Mark Delaney: You mentioned AI as a positive contributor, yet again, to commercial communications.

Mark Delaney: Maybe you can help us better understand what percentage of commercial communications orders, are tied to AI at this point and how impactful might AI be for revenue within commercial comms as you look out over the next 12 months or so.

Satish Dhanasekaran: We address high-performance use cases across our communications, aerospace and defense, and automotive.

Satish Dhanasekaran: In summary, the strength and differentiation of Keysight's business model is enabling us to outperform in a variety of economic, is well-positioned to capitalize on technology inflections ahead of us and remain laser-focused, value creation for both customers and shareholders.

Mark: Syed and software defined vehicles, it's now migrating toward.

Mark: Continued to show growth in the quarter sequentially.

Mark Wallace: We are continuing to work with customers in all regions. So this is a global situation that we are well positioned for.

Mark Delaney: Thank you.

Mark: We are continuing to work with custom.

Mark: Customers in all regions. So this is a global situation that we are well positioned for and what I would look forward in 2025 is.

Satish Dhanasekaran: Thanks, Mark.

Mark Wallace: And what I would look for in 2025 is some of the moderation of the slowness that we've experienced for many quarters around manufacturing as capacities are required to increase. And then I think, given the regulatory situation, the political climate, and the long-term commitments to e-mobility, I would expect the pause that we're seeing right now in some of these battery test and EV projects to begin gaining some momentum in the next several quarters.

Mark: The moderation of the slowness that we've experienced for many quarters around manufacturing.

Neil Dougherty: With that, I'll turn it over to Neil to discuss our financial performance and out, Thank you Satish and hello everyone. Third quarter revenue of $1,217,000,000 was above the high end of our guidance range and down 12% or 13% on a orders of $1,249,000,000 were essentially flat or down 1% on backlog at the end of the quarter grew $30 million to finish at $2.3 billion. Looking at our operational results for Q3, we reported gross margin of 64%.

Neil Dougherty: Operating expenses of $484 million were up 1% year over, Excluding acquisitions, SG&A expenses were down 7%, reflecting our cost flexibility and access.

unknown: Our next question. Holidays.

Matt Nicknam: Our next question comes from Matt Nickman with story to bank.

Mark: As capacities are required to increase and then I think given the regulatory situation that political climate in the long term commitments to E mobility I would expect the pause that we're seeing right now in some of these.

unknown: Elan is not open. Hey guys, thanks for taking the question. This is Michael Allen on for Matt Nickman. I was wondering if you could. Or are these delays kind of pushing more into into the next quarter or just, you know, kind of a slowdown of when you expect more of your year growth rate or just any work color on that.

Mark: Battery test and easy projects to begin gaining some momentum in.

Mark: In the next several quarters.

Mark: Okay.

Neil Dougherty: Understand, and then a quick one for Neil, just to check: when you said 14% tax rate going forward, that's a good baseline model in assumption for next fiscal year. Yeah, for next fiscal year, we actually would expect it to that tax rate to hold for multiple years.

Mark: Understood and then a quick one for Neil.

Neil: Just to just to check when you said, 14% tax rate going forward.

Speaker Change: That's a good baseline modeling assumption for next fiscal year.

Satish Dhanasekaran: Government incentives, particularly in US, Europe and Japan, are driving development of a robust ecosystem to commercialize open radio access networks.

Satish Dhanasekaran: Yeah, thank you. I'd say the overarching trends, given the geopolitics that we're under are positive. So that's number one. There is bipartisan support for budgets in defense in the United States and increasing support for raising budgets around the world. It's a lot of Japan just announced an increase and Europe is also focused on that. And I feel good about key sites. Focus on turn focus we've had in defense modernization with quantum solutions with solutions for from magnetic spectrum operations space and satellite.

Neil: Yes for next fiscal year, we would expect it to that tax rate to hold for multiple years.

Neil Dougherty: The next thing that we're aware of is the US guilty tax rates; that's a tax on offshore profitability, is scheduled to increase in 2027. So we'll need to evaluate the impact that on keys.

The thing that we're aware of is the U S guilty tax rates. That's a tax on offshore profitability is scheduled to increase in 2027, So we'll need to evaluate the impact of that on key side. Once we get closer to that implementation date and then the only other thing that would add as well both of the current presidential Cam.

Neil Dougherty: I once again, we get closer to that implementation date, and the only other thing that would add is both of the current presidential candidates have prioritized tax legislation for the first year of a new administration. Obviously, we don't have any way to assess what those programs would be like. And so this doesn't account for anything that could be passed as part of a new presidential administration, but the status quo through through 27. Got it.

Satish Dhanasekaran: This quarter, Keysight's open radio access network solutions enables state-of-the-art open testing and integration centers across the globe from Europe to North America to Asia.

Neil: Thats help prioritize tax legislation for the first year for New administration, obviously, we don't have any way to assess what those programs would be like in wood and so this doesn't account for anything that that could be passed as part of the new presidential administration, but status quo through through 'twenty seven.

Satish Dhanasekaran: They're all aligned with the right priorities. Having said that, you know, the budgets and appropriation timing does have an impact really hard to predict on a quarterly basis. But we like the pipeline that's building the prime contractors backlog increases are also something we monitor in the US and we feel good that those will all eventually flush into orders for us this year. Obviously, we're we're lapping full year of 2023 of record levels for order and revenue for the aerospace and defense business.

Neil: Got it thank you very much.

Meta Marshall: Our next question comes from Metamarshall with Morgan Stanley. The line is now open.

Neil Dougherty: Q3 operating margin was 24% or 26% on a core, Your today core operating margin is down only 400.

Meta Marshall: Our next question comes from meta Marshall with Morgan Stanley. Your line is now open.

Meta Marshall: Great. Thanks.

Satish Dhanasekaran: Turning to aerospace defense and government, revenue and orders were down year-over-year but sequentially flat.

Meta Marshall: Great. Thanks.

Meta Marshall: A couple of questions. Maybe on... and kind of the communications business.

Meta Marshall: A question, maybe on kind of the communications business.

Meta Marshall: And what do you see as catalyst for improvement in fiscal 25 in that business, even a fair gradual, and then just maybe as a second question, really probably limited updates, but any update on fire and acquisition, thanks.

Meta Marshall: What do you see as catalysts for improvement in fiscal 'twenty five in that business.

Satish Dhanasekaran: So you'll see some the revenue levels are are down and to the point about the long dated backlog. We have won some large systems businesses last year and this year, which will also convert into revenue next year. So, you know, I would say that the drivers are remain intact or position remains solid in the pipeline is from.

Meta Marshall: Is it a fair gradual and then just maybe as a second question realized probably limited updates, but any update on fire and acquisition.

unknown: Thank you. Awesome. Thank you.

Satish Dhanasekaran: Yeah, I would just say, you know, from a, from a spine, I'll take the second one first. You know, obviously I'm going to be limited by what I can add, but as I think an update to the situation is that we've received the shareholder approval, spider and shareholder approval for the transaction, and we're working through the regulatory, regulatory process. And at this point, as we've stated before, we expect the transaction to be completed in the first half of fiscal 25. As far as the your original question, I mean, it is quite exciting to see tremendous demand and inflection in the war line business. As I mentioned before, it is concentrated and it is in a supply constrained environment.

Speaker Change: Yes, I would just say.

Speaker Change: From a from a spine I'll take the second one first.

Speaker Change: Obviously, I am going to be.

Speaker Change: Limited by what I can add but I think an update to the situation is that we have received up to shareholder approval spine.

David Ridley: Our next question comes from David Ridley Lane with Bank of America. Your line is not open. Thank you. Yes. I saw the automotive, I mean, I think, you know, the broader weakness in the EV markets, well known, but, you know, I saw you mentioned clients, the Lane project. Are they looking to kind of restart maybe at the beginning of calendar 2025, just sort of gain a sense of the tone in those customer conversation.

Speaker Change: Despite and shareholder approval for the transaction and we're working through the regulatory.

Speaker Change: Regulatory process and at this point.

Speaker Change: As we have stated before we expect the transaction to be completed in the first half of fiscal 'twenty five.

Satish Dhanasekaran: Yeah, we're quite pleased that commercial communications orders grew double, digits this quarter.

Speaker Change: As far as the original question I mean, it was quite exciting to see tremendous demand an inflection in the wireline business as I mentioned before it is concentrated and it is in a supply constrained environment. So it remains to be seen how long.

Satish Dhanasekaran: Again, as I mentioned, you know, we have a pretty diverse portfolio that caters to the entire communications ecosystem with solutions.

Satish Dhanasekaran: So it remains to be seen how long the manufacturing buildouts go, but that's a near-term dynamic, and we're capitalizing on it.

Mark Wallace: Yeah, David, this is, this is Mark, you know, it's hard to predict when the timing is for some of these projects. Some of them have very long processes associated with the procurement process, including proof of concepts. And then the projects themselves last many quarters. It falls into this category of some of the long dated business that we've been talking about for quite a while. What I think we are seeing, though, is the continuous focus on innovation with our key automotive customers, the AV side and some and software defined vehicles that is now migrating toward continued to show growth in the quarters sequentially.

Speaker Change: The manufacturing build outs go, but thats, a near term dynamic and we're capitalizing on it I think the R&D opportunities associated with the multiple areas that I touched upon the key sites engaging with customers on we feel like is it gives us a good pipeline to go execute for the next three to five years.

Satish Dhanasekaran: I think the R&D opportunities associated with the multiple areas that I touched upon, the key sites engaging with customers on, we feel like it gives us a good pipeline to go execute for the next three to five year horizon, because there is going to be a bigger, bigger wave, and with any of these technology trends hard to really see it. So we're engaged, and we're making meaningful contributions for customers, but I would expect, you know, stability in wireless to continue and some increase, perhaps, in deployment activity across the globe, which would give further some signs of growth to our component test business there.

Speaker Change: Horizon, because theres going to be a bigger bigger wave and with any of these technology trends hard to really see it until it happens. So we're engaged and we're making meaningful contributions for our customers, but I would.

Speaker Change: <unk>.

Speaker Change: Stability in wireless to continue and some increased perhaps in.

Mark Wallace: We are continuing to work with customers in all regions. So this is a global situation that we are well positioned for. And what I would look for in 2025 is some of the moderation of the slowness that we've experienced for many quarters around manufacturing as capacities are required to increase.

Speaker Change: In deployment activity across the globe, which would give further some signs of growth to our component test business. There and then as I think about the.

Satish Dhanasekaran: And then as I think about the the war line set of the business continued, you know, investments in R&D, maybe some moderating manufacturing investments in the second half of next year, so that's sort of our thinking at this point.

Satish Dhanasekaran: So you can think of wireless and wireline, and the wireline ecosystem represents roughly about 40 to 45 percent of our commercial communications business.

Speaker Change: On the wireline side of the business continued.

Speaker Change: <unk> and R&D, maybe some moderating manufacturing investments in the second half of next year. So that's sort of our thinking at this point.

Satish Dhanasekaran: And it's inflecting driven by the AI spend.

Satish Dhanasekaran: Now, when you think about how big this could be, longer term, I think the answer is becoming quite clear that AI is going to be a pretty transformational technology that's going to lead to evolutions of multiple underlying waves of, you know, standards and technologies, but it's not yet played out.

Satish Dhanasekaran: The prolonged US budget approval process has caused delays in appropriation of funding for new projects which we expect to filter through over the next few quarters.

Mark Wallace: And then I think given the regulatory situation, the political climate and the long term commitments to e-mobility, I would expect the pause that we're seeing right now in some of these battery test and EV projects to begin gaining some momentum, you know, in the next several quarters.

Meta Marshall: Great, thank you.

Speaker Change: Great. Thank you.

Satish Dhanasekaran: Today, the state of the affairs is it's a highly concentrated opportunity set driven by the big investments made by the hyperscalers.

Speaker Change: Okay.

Betty Hussini: Our next question comes from Betty Hussini with sick. You know, I was not open.

Neil Dougherty: Continuing to outperform Keysight's down-cycle model and demonstrating the financial resilience, During the quarter, we amended our tax returns from 2020 onward to reflect an amortization deduction related to a prior period corporate restructuring. This change reduces our effective non-GAAP tax rate from 17% to 14%, fiscal year 2024 and going.

Speaker Change: Our next question comes from Mehdi Hosseini with Sig. Your line is now open.

Neil Dougherty: Turning to earnings, we achieved $275 million of net income. Delivered Earnings of $1.41 per share excluding the impact of the tax, This tax change added an additional $0.16 to Earnings Per Share, of which $0.11 relates to the first half of FY25.

Neil Dougherty: $0.05 to $0.05 to, All in, we finish the quarter at $1.57 in earnings per share. Our weighted average share count for the quarter was $175 million.

Satish Dhanasekaran: And it is a constricted sort of constrained, I should say, sort of environment from a supply perspective.

Neil Dougherty: Moving to the performance of our, Commercial Communications Revenue of $572 Million, Transcribed by Transcription Outsourcing, LLC.

Neil Dougherty: All together, CSG delivered gross margin of $0.67, and Operating Margin.

Neil Dougherty: The Electronic Industrial Solutions Group generated revenue of $370 million, down 20% © The Bulletproof Exhibit.

Betty Hussini: Yes, thanks for taking my question a couple of followers for me. Thanks for color and looking trends into the October quarter, but if I were just to take a look into the Q1 history of 25, historically, Q1 has been significantly down in terms of looking, and is there anything with the start of a new fiscal year that will make this year any different than prior years and I have a follow up. Yeah, I think as it relates step by 25, I think, you know, given given visibility is probably a little but premature for us to give too much guidance. As Citi said, we are expecting a moderate recovery into into 25.

Sierra: Ciara, could you please give the instructions for the Q&A?

Mehdi Hosseini: Yes. Thanks for taking my question a couple of follow ups for me.

unknown: This article is for educational purposes only and is not intended to represent the opinion of any individual.

Satish Dhanasekaran: So there are some challenges that the customers are working through.

unknown: © The Bulletproof Exhibit.

Satish Dhanasekaran: So we're seeing and we're picking up some of that capital investments that are playing out through our manufacturing business that is that is rapidly expanding.

Satish Dhanasekaran: But again, the ecosystem, I believe, will broaden over time.

Neil Dougherty: This article is for educational purposes only and is not intended EISD reported gross margin of 58, Operating Margin of 20, An increase of approximately 100 basis points versus the prior quarter on slightly lower rates.

Satish Dhanasekaran: But equally, we're making good progress, I would say, in engaging with standardization across the entire stack and in making meaningful contributions in R&D across compute power and thermal networking protocols and memory, all aspects of innovation that customers are playing into.

Satish Dhanasekaran: And our goal has been for the last 18 months to just have this opportunity, feel good about our market position.

Satish Dhanasekaran: Thank you.

Neil Dougherty: Moving to the balance sheet and cash.

Aaron Rakers: Our next question today comes from Aaron Rakers with Wells Fargo.

Neil Dougherty: End of the quarter with 1.6 billion dollars in cash and cash. Generating cash flow from operations of $255 million.

Sierra: Absolutely.

Speaker Change: Thanks for color on booking trends into the October quarter.

Neil Dougherty: Free Cash Flow of $222 Million, Shareholder purchases this quarter totaled 1.07 million shares at an average price per share of approximately $140, for a total consideration of $150,000.

Sierra: If you would like to ask a question, press star 1.

Neil Dougherty: Now turning to our, We expect to finish the year slightly better than anticipated.

Neil Dougherty: Fourth Quarter Revenue in the Range of $1,245,000,000 to $1,000,000,000.

Aaron Rakers: Your line is now open.

Sierra: We ask that you please limit yourself to one question and one follow-up.

Neil Dougherty: Q4 earnings per share in the range of $1.53.

Neil Dordy: Understand, and then a quick one for Neil, just to just to check, when you said 14% tax rate going forward, that's that's a good baseline modeling assumption for next fiscal year. Yeah, for next fiscal year, we actually would expect it to that tax rate to hold for multiple years. The next thing that we're aware of is the US guilty tax rates, that's a tax on offshore profitability is scheduled to increase in 2027.

Speaker Change: Just to take a look into the Q1 fiscal year 'twenty five historically.

Neil Dougherty: $1.59.

Neil Dougherty: Based on a weighted diluted share count of approximately 174 million shares.

Neil Dougherty: Uncertain macro environment, we are executing on the dimensions that we control capturing the current market, Positioning Keysight for success as market, With that, I will turn it back.

Neil Dougherty: Thank you, Neal.

Sierra: To withdraw your question, press the pound sign.

Speaker Change: Q1 has been seasonally down in terms of booking.

Aaron Rakers: Yes, thanks for taking the question.

Aaron Rakers: I want to go back, you know, it's been a little while, but at the analyst day, you know, a little over a year ago, you had outlined a revenue of 5 to 7%.

Speaker Change: Is there anything with the startup of new fiscal year that would make this year any different than prior years and I have a follow up.

Sierra: We will hold while we compile our Q&A roster.

Aaron Rakers: I'm curious, as we kind of see the stabilization of orders, we think about, you know, the return of growth here.

Speaker Change: Yes, I think.

Speaker Change: Related to that 525 I think.

unknown: Our first question comes from the line of Mark Delaney with Goldman Sachs.

Speaker Change: So given good visibility is probably a little premature.

Speaker Change: Premature for us to give too much guidance as <unk> said, we are expecting.

Aaron Rakers: Is there anything that's changed as we start to think about the next fiscal year that you would put out there for us to think about relative to that 5 to 7% growth rate?

Neil Dordy: So we'll need to evaluate the impact that on keys. I once again, we get closer to that implementation date and then the only other thing that would add is both of the current presidential candidates have prioritized tax legislation for the first year of a new administration. Obviously, we don't have any way to assess what those programs would be like. And so this doesn't account for anything that could be passed as part of a new presidential administration, but the status quo through through 27. Got it. Thank you very much.

Speaker Change: A moderate recovery into into into 25, I think as you as you have just noted and.

Satish Dhanasekaran: And if so, I mean, you know, why wouldn't we expect even a stronger growth rate, just given the easy comps that you're looking at?

Neil Dougherty: I think, as you have just noted in key sites core business, we do typically see a sequential decrease in the mid single digits, orders and revenue as we move from. Q1 Q4 into Q1, the one thing that we you will need to account for however is the ESI business has kind of the opposite seasonality, recognizing about 45% 40 to 45% of their revenues in the first quarter of key sites fiscal year. So you'll have the historical history would suggest throughout the key site business sequentially down in ESI sequentially up and we'll have to see how that plays out given given the market.

Speaker Change: <unk> core business, we do typically see a sequential decrease.

Satish Dhanasekaran: Yeah, thank you, Aaron.

Speaker Change: The decrease in the mid single digits orders in revenue as we move from Q1 Q4 into Q1. The one thing that you will need to account for however is the ESI business has kind of the opposite seasonality recognizing about 45%, 40% to 45% of their revenues in the first quarter of key sites fiscal <unk>.

Satish Dhanasekaran: Obviously, you know, our long-term view of the opportunities and the underlying drivers remain unchanged. And so, we would expect the business to trend back to those levels.

Speaker Change: So youll have the historical history would suggest throughout the key side business sequentially down and ESI is sequentially up and we'll have to see how that plays out given given the market environment.

Meta Marshall: Our next question comes from Metamarshal with Morgan Stanley. The line is now open. Great. Thanks. A couple of questions. Maybe on.., and kind of the communications business. And what do you see as catalyst for improvement in fiscal 25 in that business, even if they are gradual? And then just maybe a second question, really probably limited updates, but any updates on fire and acquisition, thanks.

Satish Dhanasekaran: That's point number one.

Mark Wallace: And Mehdi, maybe Mark can make a comment on the funnel dynamics.

Speaker Change: And then maybe mark can make a comment on the on the funnel dynamics.

Mark Wallace: Yeah, so Mehdi, the funnel, as we said before, is trending positive, I would say. And as I look at where we are today versus three months ago, so this is kind of a sequential trend. We're seeing more funnel intake, so that's new opportunities coming into our pipeline. And we're seeing speed or the velocity of which some of those deals are going through the funnel and closing, increasing as well.

Speaker Change: Yes.

Satish Dhanasekaran: However, you know, look, 21 and 22 have been outsized years for our markets.

So the funnel as we said before is is trending positive I would say and as I look at where we are today versus three months ago. So this is kind of the sequential trend.

Satish Dhanasekaran: Yeah, I would just say, you know, from a from a spine, I'll take the second one first, you know, obviously I'm going to be limited by what I can add. But as I think an update to the situation is that we've received the shareholder approval, spider and shareholder approval for the transaction, and we're working through the regulatory, regulatory process. And at this point, as we've stated before, we expect the transaction to be completed in the first half of fiscal 25.

Satish Dhanasekaran: And 23 was a flat year, a flattish year.

Satish Dhanasekaran: We continue to deliver value, and 24 is a down year for the market.

Mark: We're seeing more funnel intake, so thats new opportunities coming into our pipeline and we are seeing.

Mark: The velocity at which some of those deals are going through the funnel and closing increasing as well so that gives us a short term funnel that supports our guidance for Q4, and we will continue to watch this carefully but they're both there are improving pipeline dynamics that we're seeing in the business.

Mark Wallace: So that gives us a short-term funnel that supports our guide for Q4, and we'll continue to watch this carefully, but there are improving pipeline dynamics that we're seeing in the business.

Mark Wallace: Great, thanks for all the details, and if I may just have a follow-up on that, as you look into next fiscal year, calendar year, is there anything with wireless infrastructure, anything that would help with some technology upgrade would, would, and I mean, like, would, would existing foundations would need to be upgraded from another not standalone to a standalone. Or is there anything else that is out there that would also help with the upgrade, or is the recovery in the core telecom wireless telecom going to be driven by just a capacity expansion?

Speaker Change: Great. Thanks for all the details if I may just.

Satish Dhanasekaran: In the interim, spending on defense modernization remains steady with healthy demand from U.S.

Satish Dhanasekaran: As far as the your original question, I mean, it is quite exciting to see tremendous demand and inflection in the war line business, as I mentioned before, it is concentrated and it is in a supply constrained environment. So it remains to be seen how long the manufacturing buildouts go, but that's a near term dynamic and we're capitalizing on it. I think the R&D opportunities associated with the multiple areas that I touched upon the key sites, engaging with customers on, we feel like it gives us a good pipeline to go execute for the next three to five year horizon, because there is going to be a bigger, bigger wave.

Speaker Change: A follow up on that.

Speaker Change: As you look into <unk>.

Speaker Change: Next fiscal year calendar year is there anything with wireless infrastructure anything that would.

Speaker Change: Help with some technology upgrades.

Satish Dhanasekaran: Primes and allied governments.

And I mean like.

Speaker Change: With the existing base stations would need to be upgraded from another.

Speaker Change: Standalone to a standalone or is there anything else that is out there that would also help with the upgrade is the recovery in the core telecom and wireless telecom.

Satish Dhanasekaran: Keysight recently expanded its engagement with U.S, government through joint cyber defense collaborative to enhance cybersecurity resiliency.

Speaker Change: Given by just a capacity expansion.

Mark Wallace: Yeah, it's a really good question, Mehdi. I think, you know, the thing about our businesses, we tend to be more on the R&D labs of our customers, so we're on the front end. So towards the end, we see continued progression of standards, Release 17, Release 18, Release 19 coming in, and new teams such as AI in the context of R&D becoming real. Open R&D deployments are open R&D interoperability labs around the world of scaling. So all those are, you know, I would say positive trends, you know, from a sequential basis. And obviously, we're down from the peak as the CapEx cycle from telcos is down, but the stability in the businesses is good.

Speaker Change: Yes, it's a really good question Matt.

Speaker Change: <unk> I think.

Satish Dhanasekaran: In the quarter, we secured key wins with U.S, and European Primes for spectrum operation applications.

Satish Dhanasekaran: And with any of these technology trends hard to really see it until it happens, so, but we're engaged and we're making meaningful contributions for customers. But I would expect, you know, stability in wireless to continue and some increase perhaps in in deployment activity across the globe, which would give further some signs of growth to our component test business there. And then as I think about the the war line set of the business continued, you know, investments in R&D, maybe some moderating manufacturing investments in the second half of next year, so that's sort of our, our thinking at this point. Great, thank you.

The thing about our business is we tend to be more on the R&D.

Speaker Change: In the labs of our customers. So we're on the front end so towards that end. We see continued progression of standards released 17 released 18 released 19 coming in and new teams such as AI in the context of ran becoming real open ran deployments are open ran interoperability labs around the world at scale.

Satish Dhanasekaran: We also expanded a quantum footprint with a multi-hundred-cupid application win with a key government customer.

Speaker Change: <unk>. So all of those are I would say positive trends.

Speaker Change: From a sequential basis, and obviously were down from the peak as.

Speaker Change: The cabinet Capex cycle from telcos are down, but the stability in the business is good we feel good about our engagements around these next generation teams that I've mentioned and then some early activity around <unk> is picking up which we're making contributions to so.

Satish Dhanasekaran: And so, our first priority is to say that we can, with the business conditions have stabilized.

Mark Wallace: We feel good about our engagements around these next generation teams that I mentioned. And then some early activity around 60 is picking up, which we're making contributions to. So, but again, you know, I would expect that the 5G business will have some stability because there's more deployment activities in the world, and that that that should provide it some more stability until 60 arrives.

Satish Dhanasekaran: That was our sort of first milestone, I should say.

Mehdi Hosseini: Our next question comes from Betty Hussini with sick, you know, I was not open. Yes, thanks for taking my question a couple of followers for me. Thanks for color on the working trends into the October quarter, but if I were just to take a look into the Q1 history at 25, historically, Q1 has been significantly down in terms of looking, and is there anything with the start of a new fiscal year that was next year, any different than prior years and I have a follow up.

Speaker Change: But again.

Speaker Change: I would expect that the <unk> business will have some stability because there is more deployment activities around the world and that should provide.

Satish Dhanasekaran: In semiconductor, revenue was also down year over year versus an all-time high in Q3 last year.

Speaker Change: Some more stability until 60 arrives.

Speaker Change: Thank you.

Adam Thalheimer: Our next question comes from Adam Thalheimer with Thomas Davis. You know, I was not open.

Speaker Change: Our next question comes from Adam Thalheimer Cliff Thomas Davis. Your line is now open.

Satish Dhanasekaran: Orders increased low single digits and were up strongly on a sequential basis.

Mehdi Hosseini: Yeah, I think as it relates to that by 25, I think, you know, given given visibility is probably a little, but premature for us to give too much guidance as city said, we are expecting a moderate recovery into into into 25, I think as you have just noted. In key sites core business, we do typically see a sequential decrease in the mid single digits orders and revenue as we move from Q1 Q4 into Q1.

Satish Dhanasekaran: And as a sign of that, we feel good about what we had shared with you last quarter, which is that the second half orders would be greater than the first half.

Adam Thalheimer: Hey, good afternoon guys. Nice quarter. Thank you, Adam.

Speaker Change: Hey, good afternoon, guys nice quarter.

Unknown Speaker: Unknown Speaker Okay, so that's, that's the first thing.

Adam Thalheimer: Thank you Adam.

Adam Thalheimer: Sorry if I missed this, but the sequential revenue growth that you're looking for in Q4, is that way more towards communications that gives back both segments to be sequentially up? No one moment, but yeah, so this is the seasonal.

Speaker Change: Sorry, if I missed this but the sequential revenue growth that youre looking for in Q4 is that weighted more towards communications like do you expect both segments to be sequentially up.

Satish Dhanasekaran: While certain segments of the market continue to work through excess inventory, higher performance requirements for AI workloads drove spending in advanced nodes, hype bandwidth memory and silicon photonics technologies.

Oh, one moment, but yes. So this is the seasonal.

Neil Dougherty: I'll take, obviously, we see in both businesses that's probably going to skew a little bit more towards the cons business than the industrial business at this point, given some of the pressure that we continue to see in manufacturing and automotive that Satish has shared. And typically, end of the year, Adam, we would expect a seasonal uptake in our aerospace and defense business, which has always been the case. So that's another contributor as well.

Speaker Change: Uptick obviously, we see in both businesses, it's probably going to skew a little bit more towards the comms business than the industrial business at this point given some of the pressure that we continue to see in manufacturing and automotive <unk> shared and typically end of the year, Adam we would expect a seasonal ups.

Satish Dhanasekaran: The investments that we have made specific to these market opportunities resulted in increased demand from foundry and memory customers for a parametric wafer test solutions.

Mehdi Hosseini: The one thing that we you will need to account for, however, is the yes, I business has kind of the opposite seasonality, recognizing about 45% 40 to 45% of their revenues in the first quarter of key sites fiscal year. So you'll have the historical history would suggest throughout the key site business sequentially down in ESI sequentially up, and we'll have to see how that plays out given given the market. And Mehdi, maybe Mark can make a comment on the funnel dynamics.

Speaker Change: Taking our aerospace and defense business, which has always been the case, so that other contributor as well.

Neil Dougherty: Okay, and they're on the semiconductor side. Last quarter, you talked about fabrication delays; I think you said, might come back late Q4 or 2025. Can you just give an update there? Yeah, on the semi side, let's say that the project activities are returning and we were we started to see some sequential growth. The pipeline remains solid and especially around, you know, memory, which is stronger and technology suggests silicon photonics where we had invested with customers. And now AI is driving a higher sense of urgency to pull the trigger on those activities.

Adam Thalheimer: Okay and then.

Adam Thalheimer: On the semiconductor side last quarter, you talked about.

Adam Thalheimer: Fabrication delays I think you said might come back late Q4 of 2025 could you just give an update there.

Mehdi Hosseini: Yeah. So Mehdi, the funnel, as we said before, is is trending positive, I would say. And as I look at where we are today versus three months ago. So this is kind of a sequential trend. We're seeing more funnel intake. So that's new opportunities coming into our pipeline. And we're seeing speed or the velocity of which some of those deals are going through the funnel and closing, increasing as well. So that gives us a short-term funnel that supports our guide for Q4. And we'll continue to watch this carefully. But there are improving pipeline dynamics that we're seeing in the business. Great. Thanks for all the details.

Speaker Change: Yeah on the semi side I'd say that the project activities are returning and we were we started to see some sequential growth the pipeline remains solid and especially around <unk>.

Speaker Change: Memory, which is stronger and technology suggests silicon photonics, where we had invested with customers and now AI is driving a.

Speaker Change: Essentially the highest sense of urgency to pull the trigger on those activities some parts on the logic side still.

Neil Dougherty: Some parts on the logic sides, till, you know, it's still a mixed environment on the logic side, but we feel good about sequential recovery in that business. Great, thanks, guys.

Unknown Speaker: Second is, you know, the shape of the recovery, as we've seen, it's still a pretty mixed environment.

Speaker Change: It's still a mixed environment on the logic side, but.

Mehdi Hosseini: If I may just have a follow-up on that as you look into next fiscal year, calendar year, is there anything with wireless infrastructure, anything that would help with some technology upgrade would would and I mean like with existing foundations would need to be upgraded from another not standalone to a standalone. Or is there anything else that is out there that would also help with the upgrade or is the recovery in the core telecom wireless telecom going to be driven by just a capacity expansion.

Speaker Change: We feel good about sequential recovery in that business.

Speaker Change: Great. Thanks, guys.

Rob Jameson: Thank you. Our next question comes from Rob Jameson with Vertical Resource Partners.

Speaker Change: Thank you.

Satish Dhanasekaran: And, you know, we're not at this point factoring in an in phase recovery, if you will, across, all our multiple end markets.

Satish Dhanasekaran: And therefore, you know, you know, we would, we would at this point, say, we, you know, we're thinking about this as a slow, gradual recovery in 2025.

Satish Dhanasekaran: However, the actions that we're taking in terms of things we control, our innovations, engagements with customers, are all with an intent to maximize, and I feel good about Keysight's position, obviously, we want to see some more progression in the funnel dynamics, which are trending positive, but you'll hear more from Mark later, you know, we want to see that progress a bit more before we can, you know, talk about, you know, what, what those growth rates might be for 2025.

Speaker Change: Our next question comes from Rob Jameson with vertical research partners.

Rob Jameson: He lies not open. Hi there.

Satish Dhanasekaran: Yeah, very helpful.

Speaker Change: That is now open.

Rob Jameson: Hi, there.

Rob Jameson: Yeah, just a quick question on the auto exposure here. I know you talked about the EV weakness and some of the political, you know, headwinds there.

Speaker Change: Yes.

Speaker Change: Just a quick question on.

Speaker Change: The auto exposure here I know you talked about the weakness in some of the political.

Satish Dhanasekaran: But on the autonomous vehicle side, just a look to kind of have you expand a little bit on how that means on your core competencies of communications and maybe some color around what that opportunity might look like in the long term and how much as a percentage of total orders that is for that business. Yeah, so thank you. You know, as you, as you, as you have rightfully noted, you know, the automotive business and the automotive marketplace is transforming, right? And I think for Keysight, historically, very low exposure in that area. And as we have said before, we had grown the business to 500 million, almost from a very small base.

Speaker Change: Winds there, but on the autonomous vehicle side, just would look to kind of have you expand a little bit on how that leans on your core competencies of communications in.

Mehdi Hosseini: Yeah, it's a really good question. Mehdi, I think the thing about our businesses, we tend to be more on the R&D labs of our customers. So we're on the front end. So towards the end, we see continued progression of standards release 17 release 18 release 19 coming in and new teams such as AI in the context of ran becoming real open ran deployments or open ran interoperability labs around the world of scaling.

Speaker Change: And maybe some color around what that opportunity might look like in the long term and how much as a percentage of total orders that is for a pud.

Speaker Change: That business.

Aaron Rakers: And then just as a quick follow up, I'm curious, as you, Neil, I think a quarter or two ago, you talked about longer dated backlog build or orders.

Speaker Change: Yes, so thank you.

Speaker Change: As you have rightfully.

Aaron Rakers: I'm curious, any update on that and what you're seeing in the market today?

Speaker Change: The automotive business in the automotive marketplace is transforming right and I think for key side historically very low exposure in that in that area and as we have said before we have grown the business to $500 million almost from a very small base and a big part of that.

Neil Dougherty: Yeah, the incoming order rate remains reasonably stable in that upper single digits level of, mix.

Neil Dougherty: And on the revenue side, we are trending in that direction.

Neil Dougherty: We're not yet to the point where the revenues are at that level. But in the next quarter or two, we'd expect to achieve that.

Mehdi Hosseini: So all those are, you know, I would say positive trends, you know, from a sequential basis, you know, obviously we're down from the peak as as the capital capital cycle from telcos are down. But the stability in the business is good. We feel good about our engagements around these next generation teams that I mentioned. And then some early activity are on 60s picking up, which we're making contributions to so. But again, you know, I would expect that the 5G business will have some stability because there's more deployment activities on the world and that that that should provide it some more stability until 60 arrives. Thank you.

Satish Dhanasekaran: And a big part of that was really manufacturing one third of the businesses manufacturing and productions where we are engaged in the electronics manufacturing of it and we have a differentiated position there. Two thirds of the business obviously is all new mobility EV that Mark Wallace talked about earlier and AV as well. And it's a marketplace that continues to transform. On one dimension, you have, you know, Chinese, you know, battery, you know, call it commoditization pressures that customers are feeling, and yet the regulations are on batteries and their safety needs dictate more testing there in region.

Speaker Change: <unk> was really manufacturing of one third of the business is manufacturing and productions were.

Speaker Change: We are engaged in the electronics manufacturing of it and we have a differentiated position there two thirds of the business. Obviously is all new mobility EV that mark talked about earlier and AAV.

As well and so it's a marketplace that continues to transform on one dimension you have.

Speaker Change: Chinese.

Speaker Change: Battery.

Speaker Change: Ill.

Mark: Call. It commoditization pressures that customers are feeling and yet the regulations are on batteries and safety needs.

Mark: Take more testing there in region and on the other side I think the commercial ecosystem is starting to engage directly with the automakers and thats, what Marc defined as the software defined vehicle opportunity set with silicon software combining and it really plays to key sites traditional strength and it's more a extension.

Mark Wallace: And on the other side, I think the commercial ecosystem is starting to engage directly with automakers, and that's what Mark defined as the software defined vehicle opportunity set, with silicon software combining and really place to Keysight's traditional strength, and it's more a extension of what we do for traditional comms customers. And we're able to take those and go to market for them, mark anything.

Adam Thalhimer: Our next question comes from Adden Thalheimer with Thomas Davis. You know, I was not open. Hey, good afternoon guys, nice quarter. Thank you, Adam. Sorry if I missed this, but the sequential revenue growth that you're looking for in Q4, is that way more towards communications that you expect both segments to be sequentially up? No one moment, but yeah, so this is the seasonal. I'll take obviously we see in both businesses, it's probably going to skew a little bit more towards the cons business than the industrial business at this point, given some of the pressure that we continue to see in manufacturing and automotive that Satish has shared.

Mark: What we do for traditional comms customers and we're able to take those and go to market for them Mark anything no.

Mark Wallace: Yeah, no, you hit out in the last part. I was going to point out that this crosses over many parts of our business going back many years from our semiconductor and our comm CDA design tools to more and more our security and cyber types of tools that go into these environments with silicon. And the obviously leverage our strengths and commercial comms, which we've been capturing for many years with communication standards connecting vehicles to everything into the components that are used to sense as well as the computational capabilities and the standards that go within the digital standards and the optical standards that go within the vehicle itself.

Marc: No you hit on the last part I was going it was going to point out that this crosses over many parts of our business going back many years.

Marc: From our semiconductor and our comps EDA design tools to more and more our security and cyber types of tools that go into these these environments with silicon the obviously leverage our strengths in commercial comms, which we've been.

Satish Dhanasekaran: In automotive, orders and revenue declined double digits. Lower auto manufacturing activity remains a headwind in the near term.

Marc: Capturing for many years with communication standards connecting vehicles to everything.

Adam Thalhimer: And typically end of the year, Adam, we would expect a seasonal uptake in our aerospace and defense business, which has always been the case, so that's another contributor as well. Okay, and they're on the cynic conductor side. Last quarter, you talked about fabrication delays. I think you said, might come back late Q4 or 2025. Can you just give an update there? Yeah, on the semi side, I'd say that the project activities are returning and we were we started to see some sequential growth.

Into the components they are used to to sense as well as the computational capabilities and the standards that go within the digital standards in the optical standards ago within the vehicle itself. So that's the from radar to connected cars. This is crossing over multiple areas, where key site has a leadership position.

Mark Wallace: So that's the From radar to connected cars. This is crossing over multiple areas where Keysight has a leadership position, and that's why we continue to see such an active customer. Lansky. That's really helpful. Perfect.

Marc: And Thats why we continue to see such an active customer landscape.

Speaker Change: That's really helpful.

Operator: Thank you. And then I guess just one last one.

Speaker Change: Perfect. Thank you and then I guess, just one last one.

Satish Dhanasekaran: You know, I know there was a lot of volatility in the end of July, but just curious on demand trend through maybe the back half of the quarter and early look into, you know, August. You know, was there any material changes or, you know, was just kind of like plotting along or, you know, any positive negatives that we should be aware of. Now, we saw ramping in the quarter for months to month, but it wasn't necessarily unusual. We ended our first half in May, and that typically posted business in because we most of our sellers are on a six month quarter.

Adam Thalhimer: The pipeline remains solid and especially around, you know, memory, which is stronger and technology suggests silicon photonics, where we had invested with customers and now AI is driving a sense of a higher sense of urgency to pull the trigger on those. Activities, some parts on the logic sides till, you know, it's still a mixed environment on the logic side, but we feel good about sequential recovery in that business. Great. Thanks, guys. Thank you.

Speaker Change: I know there was a lot of volatility in the at the end of July.

Speaker Change: But just curious on demand trend through maybe the back half of the quarter, an early look into <unk>.

Speaker Change: August was there any material changes or is it just kind of like plodding, along or any positive negative that we should be aware of.

Speaker Change: Well, we saw ramping in the quarter for months to months, but it wasn't necessarily unusual we ended our first half in may.

Speaker Change: Typically pull some business in because we most of our sellers around the six month quota. So we had to start a little bit with the depleted funnel, but then we quickly through that and as I said, what we've seen throughout the last three months is the positive funnel dynamics, which is more funnel intake and then moving that business through the funnel. So I would say it was a fairly.

Satish Dhanasekaran: So we had to start a little bit with the with the depleted funnel, but then we quickly through that in. As I said, what we've seen throughout the last three months is the positive funnel dynamics, which is more funnel intake and then moving that business through the funnel. So I would say it was a fairly typical seasonality to the quarter, and we're two weeks in the queue for now. Great.

Rob Jameson: Our next question comes from Rob Jameson with vertical resource partners. He lies not open.

Rob Jameson: Hi there. Yeah, just a quick question on on the auto exposure here. I know you talked about the EV weakness and some of the political, you know, headwinds there. But on the economy, just a look to kind of have you expand a little bit on how that means on your core competencies of communications and and maybe some color around what that opportunity might look like in the long term and how much.

Speaker Change: Typical seasonality to the quarter and we're two weeks into Q4 now.

Satish Dhanasekaran: In new mobility, EV orders were lower as demand for some battery tests and charging infrastructure investments were delayed, while AV orders grew mid-single digits on a sequential basis.

Speaker Change: Great. Thank you.

Speaker Change: Thank you. Thank you.

Priyanka Thapha: Our next question comes from me, Chatterjee, with Jackie Morgan. You know, I was not open.

unknown: Your line is now open.

Semi Challenging: Our next question comes from semi challenging with J P. Morgan. Your line is now open.

Priyanka Thapha: Hi, this is Priyanka Thapha on for Samak Chatterjee. Just one question. You stated that you have a huge opportunity set because of hyperscaler investments. Are these hyperscalers direct customers for test equipment relative to the AI data center equipment testing, and which kind of areas?

Priyanka Mukherjee: Hi, This is priyanka thoughts on for pharmacology.

unknown: Yes, good afternoon.

unknown: Thanks very much for taking my question.

Speaker Change: Uh huh.

unknown: Orders were up slightly both sequentially and year on year after being down year on year for the prior six quarters.

Priyanka Choudhury: Just one question you stated that you have a huge opportunity set because of hyper scaler investments are these hyperscale as direct customers for test equipment relative to the AI data center equipment testing and which kind of areas can you potentially see this exposure to hyper scalar is broadening out.

Satish Dhanasekaran: The opportunities in R&D continue to grow as customer engagement in transition to software-defined vehicles ramps.

Rob Jameson: As a percentage of total orders that is for that business. Yeah, so thank you, you know, as you as you as you have rightfully noted, you know, the automotive business and automotive marketplace is transforming, right? And I think for Keysight, historically, very low exposure in that in that area. And as we have said before, we had grown the business to 500 million almost from a very small base. And a big part of that was was really manufacturing one third of the businesses manufacturing and productions where we are engaged in the electronics manufacturing of it.

Satish Dhanasekaran: As an example, riskier successfully completed the first car connectivity consortium digital key certification in conjunction with an XP.

Satish Dhanasekaran: Can you potentially see this exposure to hyperscalers broadening out over time? Thanks.

Speaker Change: Overtime.

Speaker Change: Thanks.

Satish Dhanasekaran: Thank you, Priyanka. So what I stated was obviously the hyperscaler investment in digital infrastructure upgrade and the capital equipment being deployed to upgrade the networks to be more AI ready, if you will, is proliferating to the ecosystem and the large supply chain. And we're benefiting from the manufacturing exposure there. So that was point number one.

unknown: Maybe you can help us better understand how meaningful you think the pickup in orders is as a sign that the cyclical environment may be changing.

Speaker Change #102: Thank you Priyanka. So what I stated was obviously, the hyperscale or investment in digital infrastructure upgrade and the capital equipment being deployed.

Satish Dhanasekaran: Yeah, hi, Mark.

Speaker Change #102: To upgrade their networks to to be more AI ready. If you will is proliferating to the ecosystem and the large supply chain and we're benefiting from the manufacturing exposure. There. So that was point number one, but we're increasing our exposure as some of the hyperscale us enter into silicon.

Rob Jameson: And we have a differentiated position there, two thirds of the business obviously is all new mobility, EV that Mark Wallace talked about earlier and AB as well. And it's a it's a marketplace that continues to transform on one dimension you have, you know, Chinese, you know, battery, you know, call it commoditization pressures that customers are feeling. And yet the regulations are on batteries and their safety needs dictate more testing there in region.

Satish Dhanasekaran: Thanks for the question.

Satish Dhanasekaran: But we're increasing our exposure as some of the hyperscalers entering to silicon programs and build their own organic capability. That's a growing customer base. That we're continuing to expand into. We're also participating in consortiums, you know, for more open standardization that some of the hyperscalers are leading. So we're making a growing contribution there.

Programs and build their own organic capability, that's a growing customer base.

Speaker Change #102: We're continuing to expand into we're also participating in consortium.

Speaker Change #102: For a more open standardization that some of the hyperscale as a leading so we're making a growing contribution there and we feel good about.

Rob Jameson: And on the other side, I think the commercial ecosystem is starting to engage directly with automakers. And that's what Mark defined as the software defined vehicle opportunity set with silicon software combining and really place to Keysight traditional strength. And it's more a extension of what we do for traditional comms customers. And we're able to take those and go to market for them. Mark anything further. Yeah, no, you hit on the last part.

Satish Dhanasekaran: And we feel good about our ability to take the physical and protocol air assets into this marketplace and provide total solutions for customers not only in traditional areas. You would expect us to in computation or connectivity, but also into emulating training and inference scheme so that, you know, AI can scale effectively.

Speaker Change #102: Our ability to take the physical and protocol layer assets.

Satish Dhanasekaran: Obviously, we're encouraged by the continued stability that we see in our base business, inflections that are material in our wireline business, some signs of rebound in semi, although it's too early to call it.

Satish Dhanasekaran: So and then there's some incremental weakness in the automotive sector.

Satish Dhanasekaran: So we put all in the blender and say, in this current environment, we're encouraged by this returning to slight year over year growth, as we've seen, but it might be too soon to call a recovery at this time.

Speaker Change #102: Into this marketplace and provide total solutions for customers not only in traditional areas you would expect us to in computation or connectivity, but also into emulating training and inference schemes so that.

Satish Dhanasekaran: And the key point is we're executing well, and we feel good about the our own portfolio and its differentiation and the investments we have made to continue to keep that going.

Satish Dhanasekaran: Thanks for that Satish.

unknown: My other question was a follow up on the orders.

unknown: You mentioned AI as a positive contributor yet again to commercial communications.

unknown: Maybe you can help us better understand what percentage of commercial communications orders are tied to AI at this point and how impactful might AI be for revenue within commercial comms as you look out over the next 12 months or so.

unknown: Thank you.

Satish Dhanasekaran: Thanks, Mark.

Satish Dhanasekaran: Yeah, we're quite pleased that commercial communications orders grew double digits this quarter.

Satish Dhanasekaran: Again, as I mentioned, you know, we have a pretty diverse portfolio that caters to the entire communications ecosystem with solutions.

Satish Dhanasekaran: So you can think of wireless and wireline.

Satish Dhanasekaran: And the wireline ecosystem represents roughly about 40 to 45% of our commercial communications business.

Satish Dhanasekaran: And it's inflecting driven by the AI spend.

Satish Dhanasekaran: Today, the state of the affairs is it's a highly concentrated opportunity set driven by the big investments made by the hyperscalers.

Satish Dhanasekaran: And it is a constricted sort of constrained, I should say, sort of environment from a supply perspective.

Speaker Change #102: AI can scale effectively.

Satish Dhanasekaran: This certification strengthened strut in security of next generation vehicles.

Rob Jameson: I was going to it was going to point out that this crosses over many parts of our business going back many years from our semiconductor and our comm CDA design tools to more and more our security and cyber types of tools that go into these these environments with silicon, the obviously leverage our strengths and commercial comms which we've been capturing for many years with communication standards connecting vehicles to everything. Into the components that are used to sense as well as the computational capabilities and the standards that go within the digital standards and the optical standards that go within the vehicle itself. So that's the from radar to connected cars. This is crossing over multiple areas where Keysight has a leadership position. And that's why we continue to see such an active customer. Lansky. That's really helpful.

Satish Dhanasekaran: So there are some challenges that the customers are working through.

Satish Dhanasekaran: So we're seeing and we're picking up some of that capital investments that are playing out through our manufacturing business that is that is rapidly expanding.

Satish Dhanasekaran: But again, the ecosystem, I believe, will broaden over time.

Satish Dhanasekaran: And our goal has been for the last 18 months to intercept this opportunity, feel good about our market position.

Speaker Change #102: Thanks.

Operator: Thanks.

Operator: Thank you.

unknown: Thank you.

Speaker Change #103: Thank you.

unknown: Our next question today comes from Aaron Rakers with Wells Fargo.

Jason Kary: Thank you all for your questions.

unknown: Your line is now open.

Speaker Change #104: Thank you all for your questions.

unknown: Yes, thanks for taking the questions.

unknown: I want to go back, you know, it's been a little while, but at the Analyst's Day, you know, a little over a year ago, you had outlined a revenue CAGR of five to seven percent.

Operator: That concludes our Q&A session for today.

That concludes our Q&A session for today I would like to turn the call back to Jason Kary for any closing remarks.

unknown: I'm curious, as we kind of see the stabilization of orders, we think about, you know, the return of growth here, is there anything that's changed as we start to think about the next fiscal year that you would put out there for us to think about relative to that five to seven percent growth rate?

unknown: And if so, I mean, you know, why wouldn't we expect even a stronger growth rate, just given the easy comps that you're looking at?

Satish Dhanasekaran: Yeah, thank you, Aaron.

unknown: Your line is now open.

Jason Kary: I would like to turn the call back to Jason Kerry for any closing remarks. Well, thanks, Sarah. And thanks, everyone, for joining us today.

Satish Dhanasekaran: Obviously, you know, our long term view of the opportunities and underlying drivers remain unchanged.

Satish Dhanasekaran: And so we would expect the business to, to trend back to those levels.

Satish Dhanasekaran: That's point number one.

Satish Dhanasekaran: However, you know, look at 21 and 22 have been outsized years for our market.

Satish Dhanasekaran: And 23 was a flat year, a flattish year, we continue to deliver value.

Neil Dougherty: Yep.

unknown: A couple of questions, maybe on.

Jason Kary: Well, thanks, Ciara and thanks, everyone for joining US today, we look forward to seeing you at the upcoming conferences this quarter and have a great day.

Satish Dhanasekaran: And 24 is a down year for the market.

Neil Dougherty: Thank you.

unknown: What do you see as catalysts for improvement in fiscal 25 in that, even if they are gradual.

Satish Dhanasekaran: And so our first priority is to say that we can with the business conditions have stabilized, that was our sort of first milestone, I should say.

Unknown Speaker: Our next question.

unknown: And then maybe the second question ...

Satish Dhanasekaran: And as a sign of that, we feel good about what we had shared with you last quarter, which is that the second half orders would be greater than the first half.

Unknown Speaker: Apologies.

unknown: Yeah, I would just say, you know, from a from a spine, I'll take the second one first.

Operator: We look forward to seeing you at the upcoming conferences this quarter and have a great day.

Satish Dhanasekaran: Okay, so that's, that's the first thing.

Unknown Speaker: Our next question comes from Matt Nickman with Deutsche Bank.

unknown: You know, obviously, I'm going to be limited by what I can add.

Meta Marshall: A couple of questions, maybe on.

Satish Dhanasekaran: Second is, you know, the shape of the recovery, as we've seen, it's still a pretty mixed environment.

Unknown Speaker: Your line is now open.

unknown: But I think an update to the situation is that we've received the shareholder approval, spider and shareholder approval for the transaction.

Unknown Speaker: I would just say, you know, from a, from a spot, and I'll take the second one first, you know, obviously, I'm going to be limited by what I can add.

Satish Dhanasekaran: It also further expands key side security evaluation offering for the automotive industry.

Satish Dhanasekaran: And, you know, we're not at this point factoring in an in phase recovery, if you will, across all our multiple end markets.

Unknown Speaker: Hey, guys.

unknown: And we're working through the regulatory, regulatory process.

Unknown Speaker: But I think an update to the situation is that we've received the shareholder approval, Spiderman shareholder approval for the transaction, and we're working through the regulatory process.

Satish Dhanasekaran: And therefore, you know, you know, we would, we would at this point, say, we, you know, we're thinking about this as a slow, gradual recovery in 2025.

Unknown Speaker: Thanks for taking the question.

unknown: And at this point, as we have stated before, we expect the transaction to be completed in the first half of fiscal 25.

Unknown Speaker: And at this point, as we have stated before, we expect the transaction to be completed, in the first half of fiscal 25.

Unknown Speaker: This concludes our conference call.

Unknown Speaker: This is Michael Allen on for Matt Nickman.

unknown: As far as the original question, I mean, it is quite exciting to see tremendous demand and inflection in the wireline business.

Unknown Speaker: As far as the original question, I mean, it is quite exciting to see tremendous demand, and inflection in the wireline business, as I mentioned before, it is concentrated and it is in a supply constrained environment.

You may now disconnect.

Satish Dhanasekaran: Obviously, we want to see some more progression in the funnel dynamics, which are trending positive, but you'll hear more from Mark later.

Unknown Speaker: I was just wondering if you could dig a little more, dig a little deeper into what's going, on with the ADG segment.

unknown: And as I mentioned before, it is concentrated and it is in a supply-constrained environment.

Unknown Speaker: So it remains to be seen how long the manufacturing build outs go.

Satish Dhanasekaran: You know, we want to see that progress a bit more before we can talk about, you know what what those growth rates might be for 2025.

Unknown Speaker: Are these delays kind of pushing more into the next quarter or is this kind of a slow, down of when you expect to see more year of year growth rates or just any more color on that?

unknown: So it remains to be seen how long the manufacturing buildouts go, but that's a near-term dynamic and we're capitalizing on it.

Unknown Speaker: But that's a near term dynamic, and we're capitalizing on it.

Satish Dhanasekaran: Yeah, very helpful.

Unknown Speaker: Yeah.

unknown: I think the R&D opportunities associated with the multiple areas that I touched upon, the key sites engaging with customers on, we feel like it gives us a good pipeline to go execute for the next three to five-year horizon because there is going to be a bigger wave.

Unknown Speaker: I think the R&D opportunities associated with the multiple areas that I touched upon the, key sites engaging with customers on, we feel like it gives us a good pipeline to go execute for the next three to five year horizon, because there is going to be a bigger wave.

unknown: And then just as a quick follow up, I'm curious as you, Neil, I think a quarter or two ago, you talked about longer dated backlog build or orders.

Satish Dhanasekaran: Thank you.

unknown: And with any of these technology trends, hard to really see it until it happens, but we're engaged and we're making meaningful contributions for customers.

Unknown Speaker: And with any of these technology trends, hard to really see it until it happens.

Operator: This concludes our conference call. You may now disconnect.

Jason Kary: This concludes our conference call.

unknown: I'm curious any update on that and what you're seeing in the market today.

Speaker Change #105: This concludes our conference call you may now disconnect.

Satish Dhanasekaran: I'd say the overarching trends, given the geopolitics that we're under, are positive.

unknown: But I would expect stability in wireless to continue and some increase perhaps in deployment activity across the globe, which would give further some signs of growth to our component test business there.

Unknown Speaker: So but we're engaged, and we're making meaningful contributions for customers.

unknown: Yeah, the incoming order rate reigns reasonably stable in that upper single digits level of mix, and on the revenue side, we are trending in that direction.

Satish Dhanasekaran: So that's number one.

unknown: And then as I think about the wireline side of the business, continued investments in R&D, maybe some moderating manufacturing investments in the second half of next year.

Unknown Speaker: But I would expect, you know, stability in wireless to continue, and some increase perhaps, in in deployment activity across the globe, which would give further some signs of growth to our component test business there.

unknown: We're not yet to the point where the revenues are at that level, but in the next quarter or two, we'd expect to achieve that.

Satish Dhanasekaran: There is bipartisan support for, you know, budgets in defense in the United States and, increasing support for raising budgets around the world.

unknown: So that's sort of our thinking at this point.

Unknown Speaker: And then as I think about the wireline side of the business, continued, you know, investments, in R&D, maybe some moderating manufacturing investments in the second half of next year.

unknown: Yeah, thank you.

Satish Dhanasekaran: Japan just announced an increase and Europe is also focused on that.

unknown: Our next question comes from Mehdi Hosseini with SICK.

Unknown Speaker: So that's sort of our thinking at this point.

unknown: Thank you.

Satish Dhanasekaran: And I feel good about Keysight's focus, long-term focus we've had in defense modernization with, quantum solutions, with solutions for electromagnetic spectrum operations, space and satellite.

unknown: Your line is now open.

Unknown Speaker: Great.

unknown: Apologies.

Satish Dhanasekaran: They're all aligned with the right priorities.

unknown: Yes, thanks for taking my question.

Unknown Speaker: Thank you.

unknown: Our next question comes from Matt Nickman with Deutsche.

Satish Dhanasekaran: Having said that, you know, the budgets and appropriation timing does have an impact, really, hard to predict on a quarterly basis.

unknown: A couple of followers for me.

Mehdi Hosseini: Our next question comes from Mehdi Hosseini with SIG.

unknown: Your line is now open.

Satish Dhanasekaran: We like the pipeline that's building.

unknown: Thanks for color on the flocking trends into the October quarter.

Mehdi Hosseini: Your line is now open.

unknown: Hey guys, thanks for taking the question.

Satish Dhanasekaran: The prime contractors backlog increases are also something we monitor in the U.S. and, we feel good that those will all eventually flush into orders for us.

unknown: But if I were just to take a look into the Q1 fiscal year 25, historically, Q1 has been seasonally down in terms of booking and is there anything with the start of the new fiscal year that would make this year any different than prior years that I have a Yeah, I think as it relates to 525, I think, You know, given visibility, it's probably a little bit premature for us to give too much guidance.

Mehdi Hosseini: Yes.

unknown: This is Michael Allen on for Matt.

Satish Dhanasekaran: This year, obviously, we're lapping a full year of 2023 of record levels for order and, revenue for the aerospace and defense business.

unknown: As Satish said, we are expecting a moderate recovery into 2025.

Mehdi Hosseini: Thanks for taking my question.

unknown: I'm just wondering if you could dig a little more to the aerospace, the ADG segment.

Satish Dhanasekaran: So you'll see some of the revenue levels are down.

unknown: I think, as you have just noted, in Keysight's core business, we do typically see a sequential decrease in the mid-single digits orders and revenue as we move from Q4 into Q1.

Mehdi Hosseini: A couple of follow-ups for me.

unknown: Or are these delays kind of pushing more into into the next quarter or is this, you know, kind of a slowdown of when you expect to see more of a year of year growth rates or just any more color on that?

Satish Dhanasekaran: And to the point about the elongated backlog, we have won some large systems businesses, last year and this year, which will also convert into revenue next year.

unknown: The one thing that you will need to account for, however, is the ESI business has kind of the opposite seasonality, recognizing about 40% to 45% of their revenues in the first quarter of Keysight's fiscal year.

Mehdi Hosseini: Thanks for color on the flocking trends into the October quarter.

Operator: This concludes our conference call. You may now disconnect.

Satish Dhanasekaran: Yeah, thank you.

You may now disconnect.

Satish Dhanasekaran: So, you know, I would say that the drivers are remaining intact.

This concludes our conference call you may now disconnect.

unknown: So, history would suggest you have the Keysight business sequentially down and ESI sequentially up, and we'll have to see how that plays out given the market environment.

Mehdi Hosseini: But if I were just to take a look into the Q1 fiscal year 25, historically, Q1 has been, seasonally down in terms of flocking.

Satish Dhanasekaran: I'd say the overarching trends, Given the geopolitics that we're under are positive, so that's number one, there is bipartisan support for, you know, budgets in defense in the United States and increasing support for raising budgets around the world.

Satish Dhanasekaran: Our position remains solid and the pipeline is strong.

unknown: And Mehdi, maybe Mark can make a comment on the on the funnel dynamics.

Mehdi Hosseini: And is there anything with the start of a new fiscal year that would make this year, any different than prior years?

Satish Dhanasekaran: Japan just announced an increase, and Europe is also focused on that.

Satish Dhanasekaran: Thank you.

unknown: Yeah.

Neil Dougherty: And I have a follow-up.

Satish Dhanasekaran: And I feel good about Keysight, focus, long term focus we've had in defense modernization, with quantum solutions with solutions for electromagnetic spectrum operations, space and satellite, they're all aligned with the right priorities.

David Ridley Lane: David Ridley Lane with Bank of America.

unknown: So the funnel, as we said before, is trending positive, I would say, and as I look at where we are today versus three months ago, so this is kind of a sequential trend, we're seeing more funnel intake, so that's new opportunities coming into our pipeline, and we're seeing, Great.

Neil Dougherty: Yeah, I think as it relates to FY25, I think, you know, given visibility, it's probably, a little bit premature for us to give too much guidance.

Satish Dhanasekaran: Having said that, you know, the budgets and appropriation timing does have an impact really hard to predict on a quarterly basis.

David Ridley Lane: Your line is now open.

unknown: Thanks for all the details.

Neil Dougherty: As Satish said, we are expecting a moderate recovery into 25.

Satish Dhanasekaran: But we like the pipeline that's building.

David Ridley Lane: Thank you.

unknown: If I may just have a follow up on that.

Neil Dougherty: I think as you have just noted, in Keysight's core business, we do typically see a sequential, decrease in the mid-single digits orders and revenue as we move from Q4 into Q1.

Satish Dhanasekaran: The prime contractors backlog increases are also something we monitor in the US and we feel good that those will all eventually flush into orders for us.

David Ridley Lane: Yes.

unknown: As you look into next fiscal year, calendar year, is there anything with wireless infrastructure, anything that would help with some technology upgrade, would, and I mean, like, would the existing base station, Transcripts provided by Transcription Outsourcing, LLC.

Neil Dougherty: The one thing that you will need to account for, however, is the ESI business has kind, of the opposite seasonality, recognizing about 40% to 45% of their revenues in the first quarter of Keysight's fiscal year.

Satish Dhanasekaran: This year, obviously, we're we're lapping full year of 2023 of record levels for order and revenue for the aerospace and defense business.

David Ridley Lane: Just on the automotive, I mean, I think, you know, the broader weakness in the EV market, is well known.

unknown: Yeah, it's a really good question, Mehdi.

Neil Dougherty: So you'll have the historical history would suggest you have the Keysight business sequentially, down and ESI sequentially up.

Satish Dhanasekaran: So you'll see some of the revenue levels are down. And to the point about the elongated backlog, we have won some large systems businesses last year and this year, which will also convert into revenue next year.

David Ridley Lane: But, you know, I saw you mentioned clients, Delaney projects, are they looking to kind, of restart maybe at the beginning of calendar 2025, just sort of getting a sense of the tone in those customer conversations?

unknown: I think, you know, the thing the thing about our business is, we tend to be more on the R&D, you know, labs of our customers.

Neil Dougherty: And we'll have to see how that plays out given the market.

Satish Dhanasekaran: So, you know, I would say that the drivers are remaining intact, our position remains solid in the pipeline is strong.

Mark Wallace: Yeah, David, this is this is Mark.

unknown: So we're on the front end. So towards that end, we see continued progression of standards release 17, release 18, release 19 coming in, and new themes such as AI in the context of RAN becoming real, open RAN deployments, or open RAN interoperability labs around the world are scaling.

Neil Dougherty: And Mehdi maybe Mark can make a comment on the on the funnel dynamics.

unknown: Thank you.

Mark Wallace: You know, it's hard to predict when the timing is for some of these projects.

unknown: So all those are, you know, I would say positive trends, you know, from a sequential basis.

Mark Wallace: Yeah so, Mehdi the funnel as we said before is is trending positive I would say and as I look at where we are today versus three months ago so this is kind of a sequential trend we're seeing more funnel intake so that's new opportunities coming into our pipeline and we're seeing speed or the velocity of which some of those deals are going through the funnel and closing increasing as well so that gives us a short-term funnel that supports our guide for Q4 and we'll continue to watch this carefully but there are improving pipeline dynamics that we're seeing in the business.

Mark Wallace: Perfect. Thank you. And then I guess just one last one. You know, I know there was a lot of volatility in the end of July, but just curious on demand trend through maybe the back half of the quarter and early look into, you know, August, you know, was there any material changes or, you know, was it just kind of like plotting along or, you know, any positive negatives that we should be aware of?

unknown: Awesome, thank you.

Mark Wallace: Some of them have very long processes associated with the procurement process, including proof, of concepts. And then the projects themselves last many quarters.

unknown: And obviously, we're down from the peak as, as the CAPEX cycle for from telcos are down.

Mark Wallace: Great thanks for all the details.

unknown: Our next question comes from David Ridley Lane with Bank of America.

Mark Wallace: It falls into this category of some of the long dated business that we've been talking, about for quite a while.

unknown: But the stability in the business is good.

Mehdi Hosseini: If I may just have a follow-up on that as you look into next fiscal year calendar year is there anything with wireless infrastructure anything that would help with some technology upgrade would would and I mean like would with existing base stations would need to be upgraded from another not a standalone to a standalone or is there anything else that is out there that would also help with the upgrade or is the recovery in the core telecom is wireless telecom going to be driven by just a capacity expansion?

Satish Dhanasekaran: In general, electronics, customer spending remains constrained, particularly in manufacturing China and the distribution channel.

unknown: Your line is now open.

Mark Wallace: What I think we are seeing, though, is the continuous focus on innovation with our key, automotive customers.

unknown: We feel good about our engagements around these next generation themes that I mentioned.

Mehdi Hosseini: Yes it's a really good question Mehdi I think you know the thing the thing about, our business is we tend to be more on the R&D you know labs of our customers so we're on the front end so towards that end we see continued progression of standards release 17 release 18 release 19 coming in and new teams such as a AI in the context of RAN becoming real open RAN deployments or open RAN, interoperability labs around the world are scaling so all those are you know I would say positive trends you know from a sequential basis and obviously we're down from the peak as as the cap per capex cycle for from telcos are down but the stability in the business is good we feel good about our engagements around these next generation themes that I mentioned and then some early activity around 6G is picking up which we're making contributions to so but again you know I would expect that the 5G business will have some stability because there's more deployment activities around the world and that that that should provide some more stability until 6G arrives.

unknown: Thank you.

Mark Wallace: The AV side and software defined vehicles that it's now migrating toward continue to, show growth in the quarter sequentially.

unknown: And then some early activity around 6G is picking up, which we're making contributions to.

Satish Dhanasekaran: Thank you.

unknown: Yes, just on automotive.

Mark Wallace: We are continuing to work with customers in all regions.

unknown: So but again, you know, I would expect that the 5G business will have some stability, because there's more deployment activities around the world. And that, that should provide some more stability until 6G arrives.

Satish Dhanasekaran: Thank you.

unknown: I mean, I think, you know, the broader weakness in the EV market is well known.

Mark Wallace: So this is a global situation that we are well positioned for.

unknown: Thank you.

Adam Thonheimer: Our next question comes from Adam Thonheimer with Thomas Davis.

unknown: But you know, I saw you mentioned clients Delane projects, are they looking to kind of restart, maybe at the beginning of calendar 2025?

Mark Wallace: And what I would look for in 2025 is some of the moderation of the slowness that we've, experienced for many quarters around manufacturing as capacities are required to increase.

unknown: Thank you.

Adam Thonheimer: Your line is now open.

unknown: Just sort of getting a sense of the tone in those, Yeah, David, this is uh, this is Mark.

Mark Wallace: And then I think given the regulatory situation, the political climate and the long term commitments, to e-mobility, I would expect the pause that we're seeing right now in some of these battery tests and EV projects to begin gaining some momentum, you know, in the next several quarters.

unknown: Our next question comes from Adam Thalhimer with Thomas Davis.

Adam Thonheimer: Hey good afternoon guys nice quarter.

unknown: You know, it's hard to predict when the timing is for some of these projects. Some of them have very long processes associated with the procurement process, including proof of concepts, and then the projects themselves last many quarters.

Mark Wallace: I understand.

unknown: Unknown Speaker.

Adam Thonheimer: Thank you Adam.

unknown: It falls into this category of some of the long dated business that we've been talking about for quite a while.

Neil Dougherty: And then a quick one for Neil, just to just to check, when you said 14 percent tax rate, going forward, that's that's a good baseline model and assumption for next fiscal year.

unknown: Hey, good afternoon, guys.

Unknown Speaker: Sorry if I missed this, but the sequential revenue growth that you're looking for in Q4 is that weighted more towards communications like do you expect both segments to be sequentially up?

unknown: What I think we are seeing, though, is the continuous focus on innovation with our key automotive customers, the AV side, and software defined vehicles that it's now migrating toward continue to show growth in the quarter sequentially.

Neil Dougherty: Yeah, for next fiscal year, we actually would expect it to that tax rate to hold for multiple, years.

unknown: Nice quarter.

Unknown Speaker: Hang on one moment but yeah so this is the seasonal, Uptick, obviously, we see in both businesses, it's probably going to skew a little bit more towards the comms business than the industrial business at this point, given some of the pressure that we continue to see in manufacturing and automotive that Satish has just shared.

unknown: We are continuing to work with customers in all regions.

Neil Dougherty: The next thing that we're aware of is the U.S. guilty tax rates, that's a tax on offshore, profitability is scheduled to increase in 2027.

unknown: Thank you, Adam.

Unknown Speaker: And typically, end of the year, Adam, we would expect a seasonal uptick in our aerospace and, defense business, which has always been the case, so that's another contributor as well.

unknown: So this is a global situation that we are well positioned for.

Neil Dougherty: So we'll need to evaluate the impact of that on Keysight once we get closer to that implementation, date.

unknown: Sorry if I missed this, but the sequential revenue growth that you're looking for in Q4, is that weighted more towards communications?

Unknown Speaker: Okay, and then there on the semiconductor side, last quarter, you talked about, fabrication delays, I think you said, might come back late Q4 or 2025.

unknown: And what I would look for in 2025 is some of the moderation of the slowness that we've experienced for many quarters around manufacturing as capacities are required to increase.

Neil Dougherty: And then the only other thing I would add is both of the current presidential candidates, have prioritized tax legislation for the first year of a new administration.

unknown: Like, do you expect both segments to be sequentially up?

Unknown Speaker: Can you just give an update there?

unknown: And then I think given the regulatory situation, the political climate and the long term commitments to e-mobility, I would expect the pause that we're seeing right now in some of these battery testing EV projects to begin gaining some momentum, you know, in the next several quarters.

Neil Dougherty: Obviously, we don't have any way to assess what those programs would be like.

unknown: Hang on one moment.

Unknown Speaker: Yeah, on the semi side, I'd say that the project activities are returning, and we were, we started to see some sequential growth, the pipeline remains solid, and especially around, you know, memory, which is stronger, and technologies such as silicon photonics, where we had invested with customers, and now AI is driving a higher sense of urgency to pull the trigger on those activities.

unknown: And then a quick one for Neil, just to just to check, when you said 14% tax rate going forward, that's, that's a good baseline modeling assumption for next fiscal year.

Neil Dougherty: And so this doesn't account for anything that it could be passed as part of a new presidential, administration.

unknown: But yeah, so this is the seasonal, Uptick, obviously, we see in both businesses.

Unknown Speaker: Some parts on the logic side still, you know, it's still a mixed environment on the logic side, but we feel good about sequential recovery in that business.

Neil Dougherty: Yeah, for next fiscal year, we actually would expect it to that tax rate to hold for multiple years.

Neil Dougherty: The status quo through through 27.

unknown: It's probably going to skew a little bit more towards the comms business than the industrial business at this point, given some of the pressure that we continue to see in manufacturing and automotive that Satish has just shared.

Unknown Speaker: Great, thanks, guys.

Neil Dougherty: The next thing that we're aware of is the US GILTI tax rates. That's a tax on offshore profitability is scheduled to increase in 2027.

Neil Dougherty: Got it.

unknown: And typically, end of the year, Adam, we would expect a seasonal uptick in our aerospace and defense business, which has always been the case. So that's another contributor as well.

Unknown Speaker: Thank you.

Neil Dougherty: So we'll need to evaluate the impact of that on Keysight once we get closer to that implementation date.

David Ridley Lane: Thank you very much.

unknown: Okay, and they're there on the semiconductor side, last quarter, you talked about, Fabrication delays, I think you said, might come back late Q4 or 2025.

Rob Jameson: Our next question comes from Rob Jameson with Vertical Research Partners.

Neil Dougherty: And then the only other thing I would add is, both of the current presidential candidates have prioritized tax legislation for the first year of a new administration.

Meta Marshall: Our next question comes from Metta Marshall with Morgan Stanley.

unknown: Can you just give an update there?

Rob Jameson: Your line is now open.

Neil Dougherty: Obviously, we don't have any way to assess what those programs would be like.

Meta Marshall: Your line is now open.

unknown: Yeah, on the semi side, I'd say that the project activities are returning.

Rob Jameson: Hi there.

Neil Dougherty: And so this doesn't account for anything that it could be passed as part of a new presidential administration, but the status quo through through 27.

Meta Marshall: Great, thanks.

unknown: And we were we started to see some sequential growth, the pipeline remains solid, and especially around, you know, memory, which is stronger and technology such as silicon photonics, where we had invested with customers.

Rob Jameson: Yeah, just a quick question on the auto exposure here.

unknown: Got it.

unknown: And now AI is driving a sense of a higher sense of urgency to pull the trigger on those activities.

Rob Jameson: I know you talked about the EV, weakness and some of the political, you know, headwinds there, but on the autonomous vehicle side, just would love to kind of have you expand a little bit on how that leans on your core competencies of communications, and maybe some color around what that opportunity might look like in the long term, and how much as a percentage of total orders that is for that business.

unknown: Thank you very much.

unknown: Some parts on the logic side still, you know, it's still a mixed environment on the logic side, but we feel good about sequential recovery in that this, Great.

Unknown Speaker: Yeah, so thank you.

Satish Dhanasekaran: There were pockets of growth in digital health and advanced research for orders grew low double digits.

Mark Wallace: Now, we saw ramping in the quarter for months to month, but it wasn't necessarily unusual. We ended our first half in May, and that typically posted business in because we most of our sellers are on a six month quarter. So we had to start a little bit with the with the depleted funnel, but then we quickly through that in, as I said, what we've seen throughout the last three months is the positive funnel dynamics, which is more funnel intake and then moving that business through the funnel. So I would say it was a fairly typical seasonality to the quarter, and we're two weeks in the queue for now. Great. Thank you.

unknown: Our next question comes from Meta Marshall with Morgan Stanley.

unknown: Thanks, guys.

Unknown Speaker: You know, as you rightfully noted, you know, the automotive business, and the automotive marketplace is transforming, right?

unknown: Thank you.

Unknown Speaker: And I think for Keysight, historically, very low exposure in that area.

unknown: Our next question comes from Rob Jameson with Vertical Research Partners.

Unknown Speaker: And as we have said before, we have grown the business to $500 million, almost from a very small base. And a big part of that was really manufacturing.

unknown: Hey Lance that all, Hi there.

Unknown Speaker: One third of the business is manufacturing and productions, where we are engaged in the electronics manufacturing of it, and we have a differentiated position there.

unknown: Yeah, just a quick question on on the auto exposure here.

Unknown Speaker: Two thirds of the business, two thirds of the business, obviously, is all new mobility, EV that Mark Wallace talked about earlier, and AV as well.

Satish Dhanasekaran: Software and services revenues are resilient and grew this quarter, while accounting for 39% of total key side revenue. Annual recurring revenue from software and services also increased year-over-year and in Q3 accounted for roughly 29% of overall key side.

unknown: I know you talked about the EV weakness and some of the political, you know, headwinds there.

Unknown Speaker: And it's a marketplace that continues to transform.

unknown: But on the autonomous vehicle side, just would love to kind of have you expand a little bit on how that leans on your core competencies of communications and, and maybe some color around what that opportunity might look like in the long term and how much as a percentage of total orders that is for for that Yeah, so thank you.

Unknown Speaker: On one dimension, you have, you know, Chinese, you know, battery, you know, you know, call it commoditization pressures that customers are feeling.

unknown: You know, as you as you as you rightfully noted, you know, the automotive business and automotive marketplace is transforming, right.

Unknown Speaker: And yet the regulations around batteries and their safety needs dictate more testing there in region.

unknown: And I think, for Keysight, historically, very low exposure in that in that area.

Unknown Speaker: And on the other side, I think the commercial ecosystem is starting to engage directly with automakers.

unknown: And as we have said before, we have grown the business to 500 million, almost from a very small base.

Unknown Speaker: And that's what Mark defined as the software defined vehicle opportunity set, with silicon software combining and really plays to Keysight's traditional strength.

unknown: And a big part of that was was really manufacturing, one third of the businesses, manufacturing and productions, where we are engaged in the electronics manufacturing of it. And we have a differentiated position there.

Unknown Speaker: And it's more a extension of what we do for traditional comms customers.

unknown: Two thirds of the business, obviously, is all new mobility, EV that Mark Wallace talked about earlier, and AV, as well.

Unknown Speaker: And we're able to take those and go to market for them.

unknown: And it's a it's a marketplace that continues to transform.

Unknown Speaker: Mark, anything further?

unknown: On one dimension, you have, you know, Chinese, you know, battery, you know, you know, call it commoditization pressures that customers are feeling.

Unknown Speaker: Yeah, no, you hit on the last part, I was going to point out that this crosses over, many parts of our business going back many years, from our semiconductor and our comms EDA design tools, to more and more our security and cyber types of tools that go into these environments with silicon.

unknown: And yet the regulations are on batteries, and they're on batteries.

Unknown Speaker: They obviously leverage our strengths in commercial comms, which we've been capturing for many years with communication standards, connecting vehicles to everything into the components that are used to sense as well as the computational capabilities and the standards that go within the digital standards and the optical standards that go within the vehicle itself.

unknown: And the safety needs dictate more testing there in region.

Unknown Speaker: So that's the from radar to connected cars, this is crossing over multiple areas where Keysight has a leadership position.

unknown: And on the other side, I think the commercial ecosystem is starting to engage directly with automakers.

Unknown Speaker: And that's why we continue to see such an active customer.

unknown: And that's what Mark defined as the software defined vehicle opportunity set, with silicon software combining and really plays to Keysight's traditional strength.

Unknown Speaker: Unknown Speaker That's really helpful.

unknown: And it's more a extension of what we do for traditional comms customers.

Unknown Speaker: Perfect.

unknown: And we're able to take those and go to market for them.

Unknown Speaker: Thank you.

unknown: Mark, anything further?

Unknown Speaker: And then I guess just one last one.

unknown: Yeah, no, you hit on the last part, I was gonna I was gonna point out that this crosses over many parts of our business going back many years, from our semiconductor and our comms EDA design tools, to more and more, our security and cyber types of tools that go into these these environments with silicon, they obviously leverage our strengths in commercial comms, which we've been capturing for many years with communication standards, connecting vehicles to everything, in to the components that are used to sense as well as the computational capabilities and the standards that go within the digital standards and the optical standards that go within the vehicle itself.

Unknown Speaker: You know, I know there was a lot of volatility in the, end of July, but just curious on demand trends through maybe the back half of the quarter and early look into, you know, August.

unknown: So that's the from radar to connected cars, this is crossing over multiple areas where Keysight has a leadership position.

Unknown Speaker: You know, was there any material changes or, you know, is it just kind of like plodding along or, you know, any positive negatives that we should be aware of?

unknown: And that's why we continue to see such an active customer, That's really helpful.

Unknown Speaker: Unknown Speaker Well, we saw ramping in the quarter from month, to month, but it wasn't necessarily unusual.

unknown: Perfect.

Unknown Speaker: We ended our first half in May, and that typically pulls some business in because we, most of our sellers are on a six month quota.

unknown: Thank you.

Unknown Speaker: So we had to start a little bit with the, with the depleted funnel, but then we quickly threw that in.

unknown: And then I guess just one last one.

Unknown Speaker: As I said, what we've seen throughout the last three months is the positive funnel dynamics, which is more funnel intake and then moving that business through the funnel.

unknown: You know, I know there was a lot of volatility in the end of July, but just curious on demand trends through maybe the back half of the quarter and early look into, you know, August, you know, was there any material changes?

Unknown Speaker: So I would say it was a fairly typical seasonality to the quarter and we're two weeks into Q4, now.

unknown: Or, you know, was it just kind of like plodding along or, you know, any positive negatives that we should be aware of?

Unknown Speaker: Unknown Speaker Great.

unknown: Now, we saw a ramping in the quarter from month to month, but it wasn't necessarily unusual.

Unknown Speaker: Thank you.

unknown: We ended our first half in May. And that typically pulls some business in because we most of our sellers are on a six month quota.

Unknown Speaker: Thank you.

unknown: So we had to start a little bit with a with a depleted funnel, but then we quickly threw that in.

Unknown Speaker: Unknown Speaker Thank you.

unknown: As I said, what we've seen throughout the last three months, is the positive funnel dynamics, which is more funnel intake, and then moving that business through the funnel.

Unknown Speaker: Coordinator Our next question comes from Samik Chatterjee with JP Morgan.

unknown: So I would say it was a fairly typical seasonality to the quarter.

Unknown Speaker: Your line is now open.

unknown: And we're two weeks into Q4 now.

Unknown Speaker: Unknown Speaker Hi, this is Priyanka Thapa on for Samik Chatterjee.

unknown: Great, thank you.

Unknown Speaker: Just one question.

unknown: Thank you.

Unknown Speaker: You stated that you have a huge opportunity set because of hyperscaler, investments. Are these hyperscalers direct customers for test equipment relative to the AI data center equipment testing?

unknown: Thank you.

Unknown Speaker: And which kind of areas can you potentially see this, exposure to hyperscalers broadening out over time?

unknown: Our next question comes from Samik Chatterjee with J.P. Morgan.

Unknown Speaker: Thanks.

unknown: Your line is now open.

Unknown Speaker: Samik Chatterjee Thank you, Priyanka.

Satish Dhanasekaran: Our eggplant software test automation platform is expanding with multiple consecutive quarters of double digit growth.

Samik Chatterjee: Our next question comes from me, Chatterjee with Jackie Morgan.

unknown: Hi, this is Priyanka Thapa on for Samik Chatterjee.

Unknown Speaker: So what I stated was, obviously the hyperscaler investment in digital infrastructure upgrade and the capital equipment being deployed to upgrade the networks to be more AI ready, if you will, is proliferating to the ecosystem and the large supply chain.

unknown: Just one question.

Unknown Speaker: And we're benefiting from the manufacturing exposure there.

unknown: You stated that you have a huge opportunity set because of hyperscaler investments. Are these hyperscalers direct customers for test equipment relative to the AI data center equipment testing?

Unknown Speaker: So that was point number one.

unknown: And which kind of areas can you potentially see this exposure to hyperscalers broadening out over time?

Unknown Speaker: But we're increasing our exposure as some of the hyperscalers enter into silicon programs and build their own organic capability.

Satish Dhanasekaran: You know, I was not open. Hi, this is Priyanka Thapha on for Samak Chatterjee. Just one question. You stated that you have a huge opportunity set because of hyperscaler investments. Are these hyperscalers direct customers for test equipment relative to the AI data center equipment testing, and which kind of areas can you potentially see this exposure to hyperscalers broadening out over time? Thanks. Thank you, Priyanka. So what I stated was obviously the hyperscaler investment in digital infrastructure upgrade and the capital equipment being deployed to upgrade the networks to to be more AI ready, if you will, is proliferating to the ecosystem and the large supply chain, and we're benefiting from the manufacturing exposure there.

unknown: Thanks.

Unknown Speaker: That's a growing customer base that we're continuing to expand into.

unknown: Thank you, Priyanka.

Unknown Speaker: We're also participating in consortiums for more open standardization that some of the hyperscalers are leading.

unknown: So what I stated was obviously the hyperscaler investment in digital infrastructure upgrade, and the capital equipment being deployed to upgrade the networks to be more AI ready, if you will, is proliferating to the ecosystem and the large supply chain, and we're benefiting from the manufacturing exposure there.

Unknown Speaker: So we're making a growing contribution there.

Satish Dhanasekaran: We're also gaining early traction in sales channel leverage between ESI and key side to expand into select accounts and geographies.

unknown: So that was point number one.

Unknown Speaker: And we feel good about our ability to take, the physical and protocol layer assets into this marketplace and provide total solutions for customers, not only in traditional areas you would expect us to in computation or connectivity, but also into emulating training and inference schemes so that AI can scale effectively.

unknown: But we're increasing our exposure, as some of the hyperscalers enter into silicon programs and build their own organic capability, that's a growing customer base that we're continuing to expand into.

Unknown Speaker: Thanks.

unknown: We're also participating in consortiums, you know, for more open standardization that some of the hyperscalers are leading.

Unknown Speaker: Thank you.

unknown: So we're making a growing contribution there.

Unknown Speaker: Thank you all for your questions.

unknown: And we feel good about our ability to take the physical and protocol layer assets into this marketplace and provide total solutions for customers, not only in traditional areas you would expect us to in computation or connectivity, but also into emulating training and inference schemes so that, you know, AI can scale effectively.

Unknown Speaker: That concludes our Q&A session for today.

unknown: Thanks.

Jason Kary: I would like to turn the call back to Jason Carey for any closing remarks.

unknown: Thank you.

Jason Kary: Well, thanks, Cierra, and thanks everyone for joining us today.

unknown: Thank you all for your questions.

Jason Kary: We look forward to seeing, you at the upcoming conferences this quarter and have a great day.

unknown: That concludes our Q&A session for today.

Jason Kary: I would like to turn the call back to Jason Kary for any closing remarks.

Jason Kary: Well, thanks, Sierra.

Jason Kary: And thanks, everyone, for joining us today.

Jason Kary: We look forward to seeing you at the upcoming conferences this quarter and have a great day.

Satish Dhanasekaran: The collaboration resulted in a key win in the satellite communication space.

Satish Dhanasekaran: Lastly, Keysight's design engineering software platform continues to grow. This quarter we launched new releases for virtual prototyping and simulation capabilities which address high performance use cases across our communications, aerospace and defense, and automotive and markets.

Satish Dhanasekaran: So that was point number one, but we're increasing our exposure as some of the hyperscalers entering to silicon programs and build their own organic capability. That's a growing customer base that we're continuing to expand into. We're also participating in consortiums, you know, for more open standardization that some of the hyperscalers are leading. So we're making a growing contribution there and we feel good about our ability to take the physical and protocol layer assets into this marketplace and provide total solutions for customers not only in traditional areas you would expect us to in computation or connectivity, but also into emulating training and inference scheme so that, you know, AI can scale effectively. Thanks. Thank you. Thank you all for your questions.

Satish Dhanasekaran: In summary, the strength and differentiation of Keysight's business model is enabling us to old perform in a variety of economic conditions.

Satish Dhanasekaran: We're in valve position to capitalize on technology inflections ahead of us and remain laser focused on value creation for both customers and shareholders.

Neil Dordy: With that, I'll turn it over to Neil to discuss our financial performance and outlook.

Neil Dordy: Thank you, Satish and hello everyone.

Neil Dordy: Third quarter revenue of $1,217 million was above the high end of our guidance range and down 12% or 13% on a core basis.

Jason Kary: That concludes our Q&A session for today.

Jason Kary: I would like to turn the call back to Jason Kerry for any closing remarks. Well, thanks area, Sierra, and thanks everyone for joining us today. We look forward to seeing you at the upcoming conferences this quarter and have a great day.

Neil Dordy: Orders of $1,249 million were essentially flat or down 1% on a core basis. Backlog at the end of the quarter grew $30 million to finish at $2.3 billion.

Neil Dordy: Year-to-date core operating margin is down only 400 basis points continuing to outperform Keysight's down cycle model and demonstrating the financial resiliency of the business.

Neil Dordy: Turning to earnings, we achieved $275 million of net income and delivered earnings of $1.41 per share excluding the impact of the tax rate change. This tax changed at an additional 16 cents to earnings per share of which 11 cents relates to the first half of FY24 and 5 cents to Q3. All in, we finished the quarter at $1.57 in earnings per share.

Neil Dordy: Our weighted average share count for the quarter was 175 million shares.

Operator: This concludes our conference call. You may now disconnect. This concludes our conference call. You may now disconnect.

Neil Dordy: The electronic industrial solutions group generated revenue of $370 million down 20% or 24% on a basis. EISG reported gross margin of 58% and operating margin of 25%.

Jason Kary: With that, I will turn it back to Jason for the Q&A.

Jason Kary: Thank you, Neil.

Operator: Sarah, could you please constructions for the Q&A?

Operator: Absolutely.

Operator: If you would like to ask a question, press star one.

Operator: We ask you to please limit yourself to one question and one follow up.

Operator: To withdraw your question, press the pound sign.

Operator: We will hold while we compile our Q&A roster.

Mark Delaney: Our first question comes from the line of Mark Delaney with Goldman Sachs.

Mark Delaney: Your line is not open.

Mark Delaney: Yes, some good afternoon.

Mark Delaney: Thanks very much for taking my question.

Mark Delaney: Orders were up slightly, most sequentially, and year on year after being down year on year for the prior six quarters.

Mark Delaney: Maybe we can best better understand how meaningful you think the pickup in orders is as a sign that the technical environment may be changing.

Satish Dhanasekaran: Hi, Mark.

Satish Dhanasekaran: Thanks for the question.

Satish Dhanasekaran: Obviously we're encouraged by the continued stability that we see in our base business.

Satish Dhanasekaran: Inflations that are material and in our wireline business, some signs of rebound in semi, although it's too early to call it.

Satish Dhanasekaran: And then there's some incremental weakness in the automotive sector.

Satish Dhanasekaran: So we put all in the blender and say in this current environment, we're encouraged by this.

Satish Dhanasekaran: The turning to slight year or year growth as we've seen, but it might be too soon to call a recovery at this time.

Satish Dhanasekaran: And the key point is we're executing well and we feel good about the our own portfolio and it's differentiation and investments we have made to continue to keep that going.

Mark Delaney: Thanks for that.

Mark Delaney: My other question was a follow up on the orders.

Mark Delaney: You mentioned AI as a positive contributor yet again to commercial communications.

Mark Delaney: Maybe you can up us better understand what percentage of commercial communication orders are tied to AI at this point and how impactful my AIB for revenue within commercial comms that you look out over the next 12 months or so.

Mark Delaney: Thank you.

Satish Dhanasekaran: Thanks, Mark.

Satish Dhanasekaran: Yeah, we're quite pleased that commercial communications orders grew double digits at this quarter.

Satish Dhanasekaran: Again, as I mentioned, you know, we have a pretty diverse portfolio that caters to the entire communication cycle system with solutions.

Satish Dhanasekaran: So you can think of wireless and wireline, and the wireline ecosystem represents roughly about 40 to 45% of our commercial communications business, and it's inflecting driven by the AI spend.

Satish Dhanasekaran: So we're seeing, and we're picking up some of that capital investments that are playing out through our manufacturing business that is rapidly expanding.

Satish Dhanasekaran: All aspects of innovation that customers are playing into, but again, the ecosystem, I believe, will broaden over time, and our goal has been for the last 18 months to intercept this opportunity.

Satish Dhanasekaran: Feel good about our market position.

Mark Delaney: Thank you.

Aaron Rakers: Our next question today comes from Aaron Raikers with Wolf Fargo.

Aaron Rakers: Your line is not open.

Aaron Rakers: Yes, thanks for taking the question.

Aaron Rakers: Questions, I want to go back, you know, it's been a little while, but at the end of the day, you know, a little over a year ago, you had outlined a revenue caterer of 5 to 7%.

Aaron Rakers: I'm curious as we kind of see the stabilization of orders, we think about, you know, the return of growth here.

Aaron Rakers: Is there anything that's changed as we start to think about the next fiscal year that you would put out there for us to think about relative to that 5 to 7% growth rate?

Aaron Rakers: And if so, I mean, you know, why wouldn't we expect even a stronger growth rate just given the easy comp that you're looking at?

Satish Dhanasekaran: Yeah, thank you, Aaron.

Satish Dhanasekaran: Obviously, you know, our long-term view of the opportunities and the underlying drivers remain unchanged.

Satish Dhanasekaran: And so we would expect the business to train back to those levels.

Satish Dhanasekaran: That's point number one.

Satish Dhanasekaran: However, you know, look, 21 and 22 have been outsized years for our markets.

Satish Dhanasekaran: And 23 was a flat year, a flat a year.

Satish Dhanasekaran: We continue to deliver value in 24.

Satish Dhanasekaran: It's a down year for the market.

Satish Dhanasekaran: And so our first priority is to say that we can, with the business conditions of stabilized.

Satish Dhanasekaran: That was our sort of first milestone, I should say.

Satish Dhanasekaran: And as a sign of that, we feel good about what we had shared with you last quarter, which is that the second half orders would be greater than the first time.

Satish Dhanasekaran: Okay, so that's, that's the first thing.

Satish Dhanasekaran: Second is, you know, the shape of the recovery, as we've seen, it's still a pretty mixed environment.

Satish Dhanasekaran: And, you know, we're not at this point factoring in an in phase recovery, if you will, across all our multiple end markets.

Satish Dhanasekaran: And therefore, you know, we would, we would at this point say, you know, we're thinking about this is a slow gradual recovery in 2025.

Satish Dhanasekaran: However, the actions that we're taking in terms of things we control, our innovations, engagements with customers are all with an intent to maximize.

Satish Dhanasekaran: And I feel good about Keysight's position.

Satish Dhanasekaran: Obviously, we want to see some more progression in the funnel dynamics, which are trending positive, but you'll hear more from Mark later.

Satish Dhanasekaran: You know, we want to see that progress a bit more before we can talk about, you know, what those growth rates might be for 25.

Aaron Rakers: Yeah, very helpful.

Aaron Rakers: And just as a quick follow up, I'm curious as you, Neil, I think a quarter or two ago, you talked about longer dated backlog build or orders.

Neil Dordy: I'm curious any update on that and what you're seeing in the market today.

Neil Dordy: Yeah, the incoming order rate range reasonably stable in that upper single digits level of mix.

Neil Dordy: And on the revenue side, we are trending in that direction.

Neil Dordy: We're not yet to the point where the revenues are at that level, but in the next quarter or two, we'd expect to achieve that.

Neil Dordy: Yeah, thank you.

Neil Dordy: Thank you.

Matt Nickman: Our next question.

Matt Nickman: Holidays.

Matt Nickman: Our next question comes from Matt Nickman with story to bank.

Matt Nickman: Elan is not open.

Matt Nickman: Hey guys, thanks for taking the question.

Matt Nickman: This is Michael Allen on for Matt Nickman.

Matt Nickman: I was wondering if you could.

Matt Nickman: Or are these delays kind of pushing more into into the next quarter or just, you know, kind of a slowdown of when you expect more of your year growth rate or just any work color on that.

Satish Dhanasekaran: Yeah, thank you.

Satish Dhanasekaran: I'd say the overarching trends, given the geopolitics that we're under are positive.

Satish Dhanasekaran: So that's number one.

Satish Dhanasekaran: There is bipartisan support for budgets in defense in the United States and increasing support for raising budgets around the world.

Satish Dhanasekaran: It's a lot of Japan just announced an increase and Europe is also focused on that.

Satish Dhanasekaran: And I feel good about key sites.

Satish Dhanasekaran: Focus on turn focus we've had in defense modernization with quantum solutions with solutions for from magnetic spectrum operations space and satellite.

Satish Dhanasekaran: They're all aligned with the right priorities.

Satish Dhanasekaran: Having said that, you know, the budgets and appropriation timing does have an impact really hard to predict on a quarterly basis.

Satish Dhanasekaran: But we like the pipeline that's building the prime contractors backlog increases are also something we monitor in the US and we feel good that those will all eventually flush into orders for us this year.

Satish Dhanasekaran: Obviously, we're we're lapping full year of 2023 of record levels for order and revenue for the aerospace and defense business.

Satish Dhanasekaran: So, you know, I would say that the drivers are remain intact or position remains solid in the pipeline is from.

David Ridley: Thank you.

David Ridley: Awesome.

David Ridley: Thank you.

David Ridley: Our next question comes from David Ridley Lane with Bank of America.

David Ridley: Your line is not open.

David Ridley: Thank you.

David Ridley: Yes.

David Ridley: I saw the automotive, I mean, I think, you know, the broader weakness in the EV markets, well known, but, you know, I saw you mentioned clients, the Lane project.

David Ridley: Are they looking to kind of restart maybe at the beginning of calendar 2025, just sort of gain a sense of the tone in those customer conversation.

Mark Wallace: Yeah, David, this is, this is Mark, you know, it's hard to predict when the timing is for some of these projects.

Mark Wallace: Some of them have very long processes associated with the procurement process, including proof of concepts.

Mark Wallace: And then the projects themselves last many quarters.

Mark Wallace: It falls into this category of some of the long dated business that we've been talking about for quite a while.

Mark Wallace: What I think we are seeing, though, is the continuous focus on innovation with our key automotive customers, the AV side and some and software defined vehicles that is now migrating toward continued to show growth in the quarters sequentially.

Mark Wallace: We are continuing to work with customers in all regions.

Mark Wallace: So this is a global situation that we are well positioned for.

Mark Wallace: And what I would look for in 2025 is some of the moderation of the slowness that we've experienced for many quarters around manufacturing as capacities are required to increase.

Neil Dordy: Understand, and then a quick one for Neil, just to just to check, when you said 14% tax rate going forward, that's that's a good baseline modeling assumption for next fiscal year.

Neil Dordy: Yeah, for next fiscal year, we actually would expect it to that tax rate to hold for multiple years.

Neil Dordy: The next thing that we're aware of is the US guilty tax rates, that's a tax on offshore profitability is scheduled to increase in 2027.

Neil Dordy: So we'll need to evaluate the impact that on keys.

Neil Dordy: I once again, we get closer to that implementation date and then the only other thing that would add is both of the current presidential candidates have prioritized tax legislation for the first year of a new administration.

Neil Dordy: Obviously, we don't have any way to assess what those programs would be like.

Neil Dordy: And so this doesn't account for anything that could be passed as part of a new presidential administration, but the status quo through through 27.

Neil Dordy: Got it.

Neil Dordy: Thank you very much.

Meta Marshall: Our next question comes from Metamarshal with Morgan Stanley.

Meta Marshall: The line is now open.

Meta Marshall: Great.

Meta Marshall: Thanks.

Meta Marshall: A couple of questions.

Meta Marshall: Maybe on.., and kind of the communications business.

Meta Marshall: And what do you see as catalyst for improvement in fiscal 25 in that business, even if they are gradual?

Meta Marshall: And then just maybe a second question, really probably limited updates, but any updates on fire and acquisition, thanks.

Meta Marshall: Yeah, I would just say, you know, from a from a spine, I'll take the second one first, you know, obviously I'm going to be limited by what I can add.

Mark Wallace: But as I think an update to the situation is that we've received the shareholder approval, spider and shareholder approval for the transaction, and we're working through the regulatory, regulatory process.

Mark Wallace: And at this point, as we've stated before, we expect the transaction to be completed in the first half of fiscal 25.

Mark Wallace: As far as the your original question, I mean, it is quite exciting to see tremendous demand and inflection in the war line business, as I mentioned before, it is concentrated and it is in a supply constrained environment.

Mark Wallace: So it remains to be seen how long the manufacturing buildouts go, but that's a near term dynamic and we're capitalizing on it.

Mark Wallace: I think the R&D opportunities associated with the multiple areas that I touched upon the key sites, engaging with customers on, we feel like it gives us a good pipeline to go execute for the next three to five year horizon, because there is going to be a bigger, bigger wave.

Mark Wallace: And with any of these technology trends hard to really see it until it happens, so, but we're engaged and we're making meaningful contributions for customers.

Mark Wallace: But I would expect, you know, stability in wireless to continue and some increase perhaps in in deployment activity across the globe, which would give further some signs of growth to our component test business there.

Mark Wallace: And then as I think about the the war line set of the business continued, you know, investments in R&D, maybe some moderating manufacturing investments in the second half of next year, so that's sort of our, our thinking at this point.

Meta Marshall: Great, thank you.

Betty Hussini: Our next question comes from Betty Hussini with sick, you know, I was not open.

Betty Hussini: Yes, thanks for taking my question a couple of followers for me.

Betty Hussini: Thanks for color on the working trends into the October quarter, but if I were just to take a look into the Q1 history at 25, historically, Q1 has been significantly down in terms of looking, and is there anything with the start of a new fiscal year that was next year, any different than prior years and I have a follow up.

Neil Dordy: Yeah, I think as it relates to that by 25, I think, you know, given given visibility is probably a little, but premature for us to give too much guidance as city said, we are expecting a moderate recovery into into into 25, I think as you have just noted.

Neil Dordy: In key sites core business, we do typically see a sequential decrease in the mid single digits orders and revenue as we move from Q1 Q4 into Q1.

Neil Dordy: The one thing that we you will need to account for, however, is the yes, I business has kind of the opposite seasonality, recognizing about 45% 40 to 45% of their revenues in the first quarter of key sites fiscal year.

Neil Dordy: So you'll have the historical history would suggest throughout the key site business sequentially down in ESI sequentially up, and we'll have to see how that plays out given given the market.

Mark Wallace: And Mehdi, maybe Mark can make a comment on the funnel dynamics.

Mark Wallace: Yeah.

Mark Wallace: So Mehdi, the funnel, as we said before, is is trending positive, I would say.

Mark Wallace: And as I look at where we are today versus three months ago. So this is kind of a sequential trend.

Mark Wallace: We're seeing more funnel intake.

Mark Wallace: So that's new opportunities coming into our pipeline. And we're seeing speed or the velocity of which some of those deals are going through the funnel and closing, increasing as well.

Mark Wallace: So that gives us a short-term funnel that supports our guide for Q4.

Mark Wallace: And we'll continue to watch this carefully.

Mark Wallace: But there are improving pipeline dynamics that we're seeing in the business.

Betty Hussini: Great.

Betty Hussini: Thanks for all the details.

Betty Hussini: If I may just have a follow-up on that as you look into next fiscal year, calendar year, is there anything with wireless infrastructure, anything that would help with some technology upgrade would would and I mean like with existing foundations would need to be upgraded from another not standalone to a standalone.

Betty Hussini: Or is there anything else that is out there that would also help with the upgrade or is the recovery in the core telecom wireless telecom going to be driven by just a capacity expansion.

Betty Hussini: Yeah, it's a really good question.

Betty Hussini: Mehdi, I think the thing about our businesses, we tend to be more on the R&D labs of our customers.

Betty Hussini: So we're on the front end.

Betty Hussini: So towards the end, we see continued progression of standards release 17 release 18 release 19 coming in and new teams such as AI in the context of ran becoming real open ran deployments or open ran interoperability labs around the world of scaling.

Betty Hussini: So all those are, you know, I would say positive trends, you know, from a sequential basis, you know, obviously we're down from the peak as as the capital capital cycle from telcos are down.

Betty Hussini: But the stability in the business is good.

Betty Hussini: We feel good about our engagements around these next generation teams that I mentioned.

Betty Hussini: And then some early activity are on 60s picking up, which we're making contributions to so.

Betty Hussini: But again, you know, I would expect that the 5G business will have some stability because there's more deployment activities on the world and that that that should provide it some more stability until 60 arrives.

Betty Hussini: Thank you.

Adam Thalhimer: Our next question comes from Adden Thalheimer with Thomas Davis.

Adam Thalhimer: You know, I was not open.

Adam Thalhimer: Hey, good afternoon guys, nice quarter.

Adam Thalhimer: Thank you, Adam.

Adam Thalhimer: Sorry if I missed this, but the sequential revenue growth that you're looking for in Q4, is that way more towards communications that you expect both segments to be sequentially up?

Adam Thalhimer: No one moment, but yeah, so this is the seasonal.

Adam Thalhimer: I'll take obviously we see in both businesses, it's probably going to skew a little bit more towards the cons business than the industrial business at this point, given some of the pressure that we continue to see in manufacturing and automotive that Satish has shared.

Adam Thalhimer: Okay, and they're on the cynic conductor side.

Adam Thalhimer: Last quarter, you talked about fabrication delays. I think you said, might come back late Q4 or 2025.

Adam Thalhimer: Can you just give an update there?

Adam Thalhimer: Yeah, on the semi side, I'd say that the project activities are returning and we were we started to see some sequential growth.

Adam Thalhimer: Activities, some parts on the logic sides till, you know, it's still a mixed environment on the logic side, but we feel good about sequential recovery in that business.

Adam Thalhimer: Great.

Adam Thalhimer: Thanks, guys.

Adam Thalhimer: Thank you.

Rob Jameson: Our next question comes from Rob Jameson with vertical resource partners.

Rob Jameson: He lies not open.

Rob Jameson: Hi there.

Rob Jameson: Yeah, just a quick question on on the auto exposure here.

Rob Jameson: I know you talked about the EV weakness and some of the political, you know, headwinds there.

Rob Jameson: But on the economy, just a look to kind of have you expand a little bit on how that means on your core competencies of communications and and maybe some color around what that opportunity might look like in the long term and how much.

Rob Jameson: As a percentage of total orders that is for that business.

Rob Jameson: Yeah, so thank you, you know, as you as you as you have rightfully noted, you know, the automotive business and automotive marketplace is transforming, right?

Rob Jameson: And I think for Keysight, historically, very low exposure in that in that area.

Rob Jameson: And as we have said before, we had grown the business to 500 million almost from a very small base.

Rob Jameson: And a big part of that was was really manufacturing one third of the businesses manufacturing and productions where we are engaged in the electronics manufacturing of it.

Rob Jameson: And we have a differentiated position there, two thirds of the business obviously is all new mobility, EV that Mark Wallace talked about earlier and AB as well.

Rob Jameson: And it's a it's a marketplace that continues to transform on one dimension you have, you know, Chinese, you know, battery, you know, call it commoditization pressures that customers are feeling.

Rob Jameson: And yet the regulations are on batteries and their safety needs dictate more testing there in region.

Rob Jameson: And on the other side, I think the commercial ecosystem is starting to engage directly with automakers.

Rob Jameson: And that's what Mark defined as the software defined vehicle opportunity set with silicon software combining and really place to Keysight traditional strength.

Rob Jameson: And it's more a extension of what we do for traditional comms customers.

Rob Jameson: And we're able to take those and go to market for them.

Rob Jameson: Mark anything further.

Rob Jameson: Yeah, no, you hit on the last part.

Rob Jameson: Into the components that are used to sense as well as the computational capabilities and the standards that go within the digital standards and the optical standards that go within the vehicle itself.

Rob Jameson: So that's the from radar to connected cars.

Rob Jameson: This is crossing over multiple areas where Keysight has a leadership position.

Rob Jameson: And that's why we continue to see such an active customer.

Rob Jameson: Lansky.

Rob Jameson: That's really helpful.

Rob Jameson: Perfect.

Rob Jameson: Thank you.

Rob Jameson: And then I guess just one last one.

Rob Jameson: You know, I know there was a lot of volatility in the end of July, but just curious on demand trend through maybe the back half of the quarter and early look into, you know, August, you know, was there any material changes or, you know, was it just kind of like plotting along or, you know, any positive negatives that we should be aware of?

Satish Dhanasekaran: Now, we saw ramping in the quarter for months to month, but it wasn't necessarily unusual.

Satish Dhanasekaran: We ended our first half in May, and that typically posted business in because we most of our sellers are on a six month quarter.

Satish Dhanasekaran: So we had to start a little bit with the with the depleted funnel, but then we quickly through that in, as I said, what we've seen throughout the last three months is the positive funnel dynamics, which is more funnel intake and then moving that business through the funnel.

Satish Dhanasekaran: So I would say it was a fairly typical seasonality to the quarter, and we're two weeks in the queue for now.

Satish Dhanasekaran: Great.

Satish Dhanasekaran: Thank you.

Priyanka Thapa: Our next question comes from me, Chatterjee with Jackie Morgan.

Priyanka Thapa: You know, I was not open.

Priyanka Thapa: Hi, this is Priyanka Thapha on for Samak Chatterjee.

Priyanka Thapa: Just one question.

Priyanka Thapa: You stated that you have a huge opportunity set because of hyperscaler investments.

Priyanka Thapa: Are these hyperscalers direct customers for test equipment relative to the AI data center equipment testing, and which kind of areas can you potentially see this exposure to hyperscalers broadening out over time?

Priyanka Thapa: Thanks.

Satish Dhanasekaran: Thank you, Priyanka.

Satish Dhanasekaran: So what I stated was obviously the hyperscaler investment in digital infrastructure upgrade and the capital equipment being deployed to upgrade the networks to to be more AI ready, if you will, is proliferating to the ecosystem and the large supply chain, and we're benefiting from the manufacturing exposure there.

Satish Dhanasekaran: So that was point number one, but we're increasing our exposure as some of the hyperscalers entering to silicon programs and build their own organic capability.

Satish Dhanasekaran: That's a growing customer base that we're continuing to expand into.

Satish Dhanasekaran: We're also participating in consortiums, you know, for more open standardization that some of the hyperscalers are leading.

Satish Dhanasekaran: So we're making a growing contribution there and we feel good about our ability to take the physical and protocol layer assets into this marketplace and provide total solutions for customers not only in traditional areas you would expect us to in computation or connectivity, but also into emulating training and inference scheme so that, you know, AI can scale effectively.

Satish Dhanasekaran: Thanks.

Operator: Thank you.

Jason Kary: Thank you all for your questions.

Jason Kary: That concludes our Q&A session for today.

Jason Kary: I would like to turn the call back to Jason Kerry for any closing remarks.

Jason Kary: Well, thanks area, Sierra, and thanks everyone for joining us today.

Jason Kary: We look forward to seeing you at the upcoming conferences this quarter and have a great day.

Operator: This concludes our conference call.

Operator: You may now disconnect.

Operator: This concludes our conference call.

You may now disconnect.

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