KEYS Shareholder/Stockholder Letter Transcript:
Keysight Technologies Inc.
1400 Fountaingrove Parkway
Santa Rosa, California 95403
Satish Dhanasekaran
President & Chief Executive Officer
January 27, 2025
To our Stockholders:
In fiscal year 2024, Keysight successfully navigated the downturn in our markets, delivering full-year revenue of
$5 billion and non-GAAP earnings per share of 6 dollars and 27 cents versus the record highs of 2023. The flexibility
of our operating model and disciplined execution resulted in non-GAAP operating margin of 26 percent and free
cashflow of over $900 million. These results were in line with the external operating model commitments we outlined
at our Investor Day in 2023. The resilience of the business is enabled by the differentiation of our portfolio, a diverse
set of end markets, and the durability of our operating model, which were all on display in 2024.
Over the past year, we continued to make the investments to position the company for outperformance as markets
recover. Sustained investment in R&D and key acquisitions have enabled us to capture early positions in emerging
technologies such as AI and 6G. Looking ahead, the pace of technology innovation and digitization is accelerating
and proliferating across multiple industries and use cases. Our strong customer engagement will help us capitalize
on these technology waves and inflections.
At the same time, Keysight s software-centric solutions strategy increased the services and software contributions we
made to our customer s design process. Software and services revenue growth this year outpaced Keysight overall,
with annual recurring revenue growing to approximately $1.5 billion, or 30% of total revenue. The recent acquisition
of ESI expanded our design engineering software portfolio, which enables us to participate earlier in our customers
design workflows and increase our contributions to their R&D and innovation processes.
This year the Communications Solutions Group (CSG) reported revenue of $3.4 billion, a decrease of 7 percent over
last year as demand normalization continued.
In commercial communications, our first-to-market solutions strategy enabled us to deliver value in the emerging AI
market. We played a key role in the expansion of data center infrastructure and benefited from customer investments
in silicon photonics, chiplets, and high-speed electrical and optical interconnects to support the accelerated transition
to higher networking speeds. Wireless markets stabilized throughout the year, albeit at a lower level. Our
differentiated solutions helped customers address the ongoing evolutions of the 5G standard, non-terrestrial networks,
open RAN, and early 6G research. While market headwinds resulted in commercial communications revenue being
down 7 percent, we were encouraged to see orders grow for the full year.
Aerospace, defense, and government revenue decreased by 8 percent, down from a record high in 2023. Demand
remained strong from government and prime contractors in the U.S. and Europe due to investment in defense
modernization. We remain confident in our solutions portfolio for this market and our ability to serve customers
design needs in strategic applications for radar and spectrum operations, space and satellite, and signal monitoring.
The Electronic Industrial Solutions Group s (EISG) growth was muted by headwinds across multiple markets. In
2024, EISG revenue decreased 12 percent to $1.6 billion. Semiconductor declined, yet saw pockets of growth as
AI-related demand drove broad-based foundry investments in leading-edge technologies, including advanced nodes,
high-bandwidth memory, and silicon photonics. In automotive, customer spending slowed and large-scale battery
projects were delayed, driving declines in both orders and revenue. General electronics growth was isolated to digital
health and advanced research applications, which was offset by continued constraint in customer manufacturing
spending.
Looking ahead, our base case for fiscal year 2025 is for a slow, gradual recovery in what remains a mixed demand
environment. Our differentiated solutions, diversified portfolio, strong customer relationships, and the agility of our
teams position Keysight well as markets stabilize and enable us to capitalize on emerging opportunities as technology
transitions accelerate.
We remain committed to our corporate social responsibility (CSR) goals, helping build a better planet through
sustainably-developed solutions that enabled customers to meet their own CSR objectives and drive purposeful
innovations. We continue to prioritize transparency with stakeholders and are preparing for emerging regulatory
disclosure requirements. We were pleased to be included on Time s World s Most Sustainable Companies, Barron s
100 Most Sustainable U.S. Companies for 2024, the Dow Jones Sustainability Index, and MSCI ESG Leaders
indices, underscoring our commitment to sustainability and responsible business practices.
Keysight also earned recognition throughout the year across key dimensions of the business, reinforcing our
commitment to excellence. We were proud to receive multiple employer awards, including being ranked #41 on
Time s Best Midsize Companies list and earning three distinctions from Forbes: America s Best Employers for
Women, Best Large Companies, and Best Employers for Diversity, where we ranked an impressive #8.
Lastly, given our customer focus we were particularly pleased to receive accolades for customer excellence, including
the 2024 International Business Award for achievement in customer satisfaction and the 2024 Globee Business Award
for customer excellence. In the technology space, we were honored with awards from EM World Innovation and
Tech.AD Europe, reflecting our leadership in advancing innovation.
The strong dedication and commitment of our global teams is responsible for our business performance and these
external recognitions. The spirit of accelerating innovation runs deep throughout our company, and I am proud that
we continue to live the values of the Keysight Leadership Model in service to our customers success.
Despite the external challenges of the past year, we believe our performance and execution position us well to
outperform as markets recover. With a strong close to the year, I am excited for what lies ahead for Keysight in FY25
and beyond.
1/27/2025 Letter Continued (Full PDF)