Keysight Technologies, Inc.KEYS
Keysight Technologies, Inc. Stock Compensation Disclosure
4. SHARE-BASED COMPENSATION
Keysight accounts for share-based awards in accordance with the provisions of the authoritative accounting guidance, which requires the measurement and recognition of compensation expense for all share-based payment awards made to our employees and directors, including RSUs, employee stock purchases made under our ESPP, employee stock option awards, and performance share awards granted to selected members of our senior management under the LTP Program, based on estimated fair values.
Description of Keysight’s Share-Based Plans
The 2014 Equity and Incentive Compensation Plan (“2014 Stock Plan”) was adopted on July 16, 2014 and became effective on November 1, 2014. It has been subsequently amended and restated multiple times by our board of directors with the most recent amendments taking effect on March 21, 2024, following stockholders approval. The maximum number of shares of common stock that may be issued under the plan is 28 million. The plan provides for the grants of awards in the form of stock options, stock appreciation rights, restricted stock, RSUs, performance-based shares and units, and cash awards. As of October 31, 2025, approximately 8 million shares were available for future awards.
RSUs under our share-based plans are granted to directors, executives, and employees. The estimated fair value of the RSUs granted under the 2014 Stock Plan is determined based on the market price of Keysight common stock on the date of
grant. RSUs generally vest, with some exceptions, at a rate of 25 percent per year over a period of four years from the date of grant.
Performance share awards under the LTP Program, administered through the 2014 Stock Plan, are granted to the company's executive officers and key employees. Participants in this program are entitled to receive unrestricted company shares after a three-year performance period, contingent upon the achievement of metrics and targets set by the Compensation and Human Capital Committee at the beginning of the performance period. These metrics may include total shareholder return (“TSR”), financial metrics like operating margin (“OM”), cost synergies, and others. For TSR-based awards the peer group comparisons are set at the beginning of the performance period, while OM targets are set each year in the first quarter of the respective year. The final payout under the LTP Program may range from zero to 200 percent of the target award based on actual performance.
The ESPP was adopted on July 16, 2014 and became effective on November 1, 2014. It was amended and restated effective March 21, 2024. The maximum number of shares of common stock that may be issued under the plan is 25 million. The ESPP allows eligible employees to contribute up to 10 percent of their base compensation to purchase shares of Keysight common stock at 85 percent of the closing market price at the purchase date.
Under our ESPP, employees purchased 497,913 shares for $62 million in 2025, 562,455 shares for $64 million in 2024, and 477,760 shares for $64 million in 2023. As of October 31, 2025, common stock authorized and available for issuance under our ESPP was 17,322,109 shares, which includes shares issued in November 2025 to participants in consideration of the aggregate contribution of $32 million as of October 31, 2025.
Impact of Share-based Compensation Awards
Share-based compensation expense has been recognized using a straight-line amortization method over the requisite service period. The impact of share-based compensation expense on our consolidated statement of operations was as follows:
| Year Ended October 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in millions) | |||||||||||||||||
| Cost of products and services | $ | 40 | $ | 27 | $ | 25 | |||||||||||
| Research and development | 44 | 38 | 38 | ||||||||||||||
| Selling, general and administrative | 92 | 80 | 73 | ||||||||||||||
| Total share-based compensation expense | $ | 176 | $ | 145 | $ | 136 | |||||||||||
| Income tax benefit realized from exercised stock options and similar awards | $ | 2 | $ | 3 | $ | 6 | |||||||||||
For 2025 and 2024, total share-based compensation expense includes $8 million and $10 million, respectively, of acquisition-related compensation to redeem certain outstanding unvested stock awards as of the date of the acquisition that were determined to relate to post-merger service periods.
Valuation Assumptions
The TSR-based performance awards were valued using a Monte Carlo simulation model, which requires the use of highly subjective and complex assumptions, including the price volatility of the underlying stock. The estimated fair value of restricted stock awards and the financial metrics-based performance awards (both OM and EPS) is determined based on the market price of Keysight’s common stock on the grant date. The compensation cost for financial metrics-based performance awards reflects the cost of awards that are probable to vest at the end of the performance period.
The following assumptions were used to estimate the fair value of TSR-based performance awards.
| Year Ended October 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Volatility of Keysight shares | 32% | 29% | 35% | ||||||||||||||
| Volatility of peer group | 31% | 18% | 25% | ||||||||||||||
| Price-wise correlation with peer group | 31% | 69% | 75% | ||||||||||||||
The above assumptions reflect the impact of a change in the peer group comparison for the performance awards granted in fiscal year 2025 from the S&P 500 index to the individual constituents of the S&P 500 index.
Share-based Payment Award Activity
Non-vested Awards
The following table summarizes non-vested award activity in 2025 for our LTP Program and restricted stock unit awards:
| Shares | Weighted average grant date fair value per share | ||||||||||
| (in thousands) | |||||||||||
| Non-vested at October 31, 2024 | 2,123 | $ | 157 | ||||||||
| Granted | 1,146 | 174 | |||||||||
| Vested | (804) | 157 | |||||||||
| Forfeited | (43) | 159 | |||||||||
| LTP Program incremental | (60) | 265 | |||||||||
| Non-vested at October 31, 2025 | 2,362 | $ | 163 | ||||||||
As of October 31, 2025, the unrecognized share-based compensation cost for non-vested stock awards was approximately $163 million, which is expected to be amortized over a weighted average period of 2.2 years. This includes $20 million of unrecognized compensation cost related to replacement awards that were granted to certain employees from the Spirent and OSG acquisitions to convert their unvested equity awards based on an exchange ratio as defined in the purchase agreement. Unrecognized share-based compensation cost does not include expense for financial metrics-based performance awards for which the targets have not yet been set. The total fair value of stock awards that vested in 2025, 2024, and 2023 was $132 million, $114 million, and $154 million, respectively. See Note 5, “Income Taxes,” for the tax impact on share-based award exercises and vesting.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Dec 17, 2025 | Showing above |
| 2024 | Dec 17, 2024 | |
| 2023 | Dec 15, 2023 | |
| 2022 | Dec 15, 2022 | |
| 2021 | Dec 17, 2021 | |
| 2020 | Dec 17, 2020 | |
| 2019 | Dec 18, 2019 | |
| 2018 | Dec 18, 2018 | |
| 2017 | Dec 20, 2017 | |
| 2016 | Dec 19, 2016 | |
| 2015 | Dec 21, 2015 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.