Keysight Technologies, Inc. (KEYS) stock intrinsic value fair value estimate & owner earnings analysis

Keysight Technologies sells the electronic design software and test equipment that engineers use to develop and validate wireless, networking, semiconductor, aerospace and defense, and automotive products. About 69% of fiscal 2025 revenue came from Communications Solutions and 31% from Electronic Industrial Solutions. Revenue was $5,375M in fiscal 2025 (year ended October 31), up 8% after a 9% decline in fiscal 2024. Orders were $5,452M, above revenue. How we measure earnings: we start with cash from operations, remove swings in working capital (receivables, inventory, payables, deferred revenue, tax balances), and subtract stock compensation as a real cost ($162M in 2025). We then subtract only the capital spending needed to stay in business, which is roughly all of it here ($128M of spending, about $116M after removing an allowance for growth). Per share, this gives $4.42, $4.57, $5.51, $6.88, $6.13, $5.90 and $4.79 for fiscal 2019 through 2025. Amortization of acquired intangibles ($145M in 2025) is added back because it is a sunk acquisition cost, and we carry the risk of that technology wearing out in the cases below rather than in the earnings level. We use fiscal 2019 to 2025 because it starts after the 2017 Ixia acquisition was absorbed. It includes both the 2020 and 2024 downturns and the 2022 peak, so it covers a full cycle. The median is $5.51 per share, and that is the earnings level used in the base case. In 2024 and 2025 large swings in tax balances partly offset each other, which is why 2025 looks weaker than the underlying business; averaging the two years gives about $5.35. Growth check: owner earnings per share fell about 19% in fiscal 2025 ($4.79 versus $5.90), and the base case assumes no growth from the $5.51 normal level, so nothing rests on a rebound. Per-share owner earnings were $4.42 in fiscal 2019 and $4.79 in fiscal 2025, essentially flat over six years despite revenue growth, so we do not credit market growth, new products or share gains. Returning to $5.51 is a return to a level reached in fiscal 2021 and again from 2022 to 2024, not growth. Base case (about $74 per share): $5.51 per share held flat for ten years, then a slow 3% annual fade. The evidence for persistence is a decade of positive owner earnings at $4.4 to $6.9 per share through two downturns, plus $884M of deferred revenue (current and long-term) from software and service contracts at October 31, 2025. Nothing beyond that is credited. Bear case (about $47 per share): earnings settle at $4.00 per share (below any year since 2019, and under fiscal 2019's $4.42) and fade 6% a year after year ten. The named pressures are tariffs that management says hit fiscal 2025 results, Asia Pacific being about 41% of revenue, and the sharp 2024 revenue decline. Long-term debt rose from $1.79B to $2.53B in 2025 after the Spirent purchase, which is manageable against roughly $0.8 to 1.2B of yearly owner earnings but leaves less room in a downturn. Bull case (about $92 per share): earnings return to $6.50 per share and stay there, a level between the fiscal 2022 peak of $6.88 and fiscal 2023's $6.13, with a 2% fade after year ten. Orders grew 8% in 2025 across all regions, which is the visible lever. We give no credit to Spirent, the Synopsys optical business or Ansys PowerArtist beyond what has already shown up in results, because they closed on October 15 to 17, 2025 and have no earnings history with Keysight. Spirent was bought for $1,564M in cash, and Keysight sold part of it to Viavi for $399M to meet regulatory conditions. What could make this wrong: a deeper, longer decline in wireless and networking test spending than 2024's, or a technology shift that makes Keysight's instruments less necessary. Buybacks are not counted in per-share value because they use the same cash that owner earnings already measure. We did not reconcile the size of the fiscal 2024 deferred tax charge ($268M) to its cause and treated it as a timing item.