Keysight Reports Tuesday, and the Quarter It Is Being Compared To Was Cut $40 Million and Credited $97 Million

by Yemi Abiodun · August 16, 2026

Guidance & Outlook Reporter, Earnings Dispatch

Keysight Technologies releases fiscal third quarter results after the close on Tuesday, August 18, and holds its call at 1:30 p.m. PT, 4:30 p.m. ET, the same day, according to the company's own scheduling release issued through Business Wire on July 28. That release says Keysight "will release financial results for the fiscal third quarter ending July 31, 2026, after the close of the stock market on Tuesday, August 18, 2026." Nothing about the date is in dispute — Keysight published it itself rather than leaving it to a projection service.

What is worth settling before the print is which prior-quarter number the guidance is measured against. Keysight's April quarter produced a set of headline figures that the company described as the best in its history, and one large piece of them was a legal event rather than a commercial one.

In the second fiscal quarter ended April 30, 2026, Keysight reported revenue of $1.717 billion against $1.306 billion a year earlier, GAAP net income of $349 million and GAAP diluted earnings of $2.02 a share, and non-GAAP net income of $497 million, or $2.87 a share, on roughly 173 million diluted shares. Orders were $2.051 billion against $1.316 billion. Satish Dhanasekaran, president and chief executive, said in the release: "Keysight delivered the strongest quarter in the company's history, capping a record first half with all-time highs in orders, revenue, EPS, and free cash flow. The disciplined decisions and strategic investments we have made over the past several years are enabling us to capitalize on accelerating demand and outperform. With strong year-to-date momentum and a robust pipeline of opportunities, we are raising our expectations for fiscal 2026."

The results release also carries a footnote that does not appear in most summaries of the quarter. It states that in February 2026 "the United States Supreme Court determined that certain tariffs imposed pursuant to the International Emergency Economic Powers Act ('IEEPA') were not authorized by law." On that basis, per the same release, Keysight recorded a receivable of $100 million within "other current assets" representing recovery of tariffs previously paid and statutory interest on IEEPA tariff refunds, with corresponding offsets of $93 million to "cost of sales", $4 million to "selling, general and administrative expenses", and $3 million to "interest income". Separately, it recorded a $40 million liability within "other accrued liabilities" for the refund of tariff surcharge collected from customers, with "a corresponding reduction of revenue".

Read as arithmetic: the quarter's cost and expense lines were credited $97 million, interest income picked up $3 million of statutory interest, and the revenue line was reduced by $40 million. The net pre-tax effect was a positive $60 million, on a quarter that reported $418 million of pre-tax income. The reported gross profit of $1.178 billion on $1.717 billion of revenue — a 68.6% GAAP gross margin, against 62.3% in the year-ago quarter — is lifted by the $93 million credit sitting inside cost of sales.

Keysight quantified the clean version itself, and not only on the call. The company's own second-quarter results presentation, published alongside the release, carries an IEEPA tariff-refund table showing operating results excluding the refunds: revenue of $1,758 million, a gross margin of 67.6% and earnings per share of $2.58. Chief financial officer Neil Dougherty gave the same figures on the May 19 call. According to a transcript of that call published by The Motley Fool, he said: "This resulted in a $40 million reduction in Q2 revenue and a $97 million reduction in costs and expenses. Excluding these onetime impacts, Q2 revenue was $1.76 billion up 35%. Gross margin was 67.6%, up 300 basis points, and EPS was $2.58, up 52%."

So there are two second-quarter bases in circulation. The one in the headline figures, and in the reconciliation tables of the release itself, is $1.717 billion of revenue and $2.87 of non-GAAP EPS. The one the company's own presentation points at is $1.758 billion and $2.58. Neither the $1.758 billion nor the $2.58 appears anywhere in the results release; they live in the presentation deck and in the call. The gap in earnings per share is $0.29 — close to what a $60 million pre-tax swing is worth across 173 million shares once tax is applied.

Now put the guidance beside each. Keysight's outlook section says third-quarter revenue "is expected to be in the range of $1.730 billion to $1.750 billion," and adds that "the mid-point of the revenue range represents year-over-year growth of approximately 29%" — the company's own characterisation, not ours. Non-GAAP earnings per share are guided "in the range of $2.43 to $2.49, based on a weighted diluted share count of approximately 173 million shares." Against the reported base, the $1.740 billion midpoint is revenue rising about 1.3% sequentially while EPS falls about 14%. Against the base the company describes as clean, the guide is a sequential decline in both lines at every point of the range: revenue down about 0.5% at the top of the range, 1.0% at the midpoint and 1.6% at the bottom; EPS down about 3.5% at the top, 4.7% at the midpoint and 5.8% at the bottom.

The direction of the revenue comparison flips depending on which number is used. That is the practical consequence of a refund that lands in the revenue line: it makes the quarter it hits look smaller and the quarter after it look better by contrast. The company did not restate the second quarter; it disclosed the components and left the adjustment to the reader.

Two further details in the disclosure deserve a note. The $100 million is a receivable, recorded in other current assets — it is a claim, not cash already banked, and the release does not state when Keysight expects to collect it. The $40 million is a liability: money the company has recognised it owes back to customers who paid a tariff surcharge. Neither item is treated as an excluded item in the GAAP-to-non-GAAP reconciliation table, whose adjustments for the quarter are amortisation of acquisition-related balances, share-based compensation, acquisition and integration costs (benefits), restructuring and others, net loss (gain) on equity investments, and the adjustment for taxes. No line in that table mentions tariffs. Both items flowed through the $2.87.

The year-over-year framing has a second wrinkle. The 29% growth at the guidance midpoint is measured against fiscal third-quarter 2025 revenue of $1.352 billion, per Keysight's Form 10-Q for the quarterly period ended July 31, 2025, which also shows $940 million of Communications Solutions Group revenue and $412 million from the Electronic Industrial Solutions Group, and GAAP diluted earnings of $1.10 a share. That prior-year base contains no Spirent Communications. Keysight completed the Spirent purchase on October 15, 2025 — approximately £1.16 billion, or around $1.46 billion on a fully diluted basis, with Spirent's operations "integrated and reported within Keysight's Communications Solutions Group" and with Spirent's high-speed Ethernet, network security and channel emulation business lines divested as a condition of clearance, per Keysight's completion announcement. On the May call, per the same transcript, Dougherty said the company continues to expect "$375 million in FY 2026 revenue from the acquisitions and greater than $100 million in cost synergies and other operational efficiencies." Every fiscal 2026 year-over-year comparison therefore carries acquired revenue the prior-year base does not.

One calendar point, because Keysight's quarters are easy to misfile: the company's fiscal year ends October 31, as its own filings show. The "third quarter of 2026" reporting Tuesday runs May, June and July — two of its three months sit inside calendar Q2. Any estimate labelled for Keysight's Q3 is describing a period that closed on July 31, not one that runs to the end of September.

Three things are checkable on Tuesday and are not currently disclosed. Whether the July quarter carries any further tariff-refund or surcharge activity, since the guidance range was published without a stated assumption on that point. Whether the company presents the sequential comparison against $1.758 billion and $2.58 or against the reported figures. And what the segment margins look like once a $93 million cost-of-sales credit is out of the base — Communications Solutions Group booked $411 million of operating income on $1.231 billion of revenue in the April quarter, against $236 million on $913 million a year earlier, and the Electronic Industrial Solutions Group $161 million on $486 million against $92 million on $393 million.

A note on the underlying legal event, and on sourcing. The Supreme Court decided Learning Resources, Inc. v. Trump on February 20, 2026, holding that "IEEPA does not authorize the President to impose tariffs." That matches Keysight's release, which describes the ruling as having found the tariffs "were not authorized by law," and it is the reading consistent with refunds being owed to the company and surcharges being owed back to its customers. The published transcript of the May call renders the CFO's opening description of the same ruling in the opposite direction, as a decision "validating the IEEPA tariffs." The opinion and the filed release agree; the transcript does not, and on this point it is wrong.

Keysight has not provided a reconciliation of guided non-GAAP EPS to a GAAP figure. The release explains why in its own words: "Certain items impacting the GAAP tax rate pertain to future events and are not currently estimable with a reasonable degree of accuracy; therefore, no reconciliation of GAAP earnings per share to non-GAAP has been provided." For the first six months of fiscal 2026, GAAP net income was $630 million, or $3.64 a share, against non-GAAP net income of $873 million, or $5.05, on revenue of $3.317 billion.