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INCOME TAXES
 12 Months Ended
Oct. 31, 2025
Income Tax Disclosure [Abstract]  
INCOME TAXES
5.    INCOME TAXES
The domestic and foreign components of income before taxes are:
 Year Ended October 31,
 202520242023
 (in millions)
U.S. operations$255 $170 $237 
Non-U.S. operations827 695 1,120 
Total income before taxes$1,082 $865 $1,357 
The provision for income taxes consisted of:
 Year Ended October 31,
 202520242023
 (in millions)
U.S. federal taxes:   
Current$97 $(52)$185 
Deferred(17)(47)(54)
Non-U.S. taxes:   
Current147 31 105 
Deferred(29)323 54 
State taxes, net of federal benefit:   
Current18 4 13 
Deferred(3)(8)(3)
Total provision for income taxes$213 $251 $300 
In addition, included in net loss from discontinued operations is income tax expense of $13 million for 2025 related to the divestiture of Spirent’s high-speed ethernet, network security, and channel emulation business lines to Viavi. See Note 2, “Acquisitions,” for additional information.
The following table presents the components of the deferred tax assets and liabilities:
 October 31,
 20252024
(in millions)
Deferred Tax Assets
Inventory$29 $27 
Intangibles87 127 
Property, plant and equipment32 29 
Warranty reserves7 8 
Pension benefits22 26 
Employee benefits, other than retirement39 29 
Net operating loss, capital loss, and credit carryforwards606 307 
Share-based compensation30 22 
Deferred revenue56 48 
Lease obligations55 54 
Hedging and currency costs1 1 
R&D capitalization130 91 
Others19 16 
Total deferred tax assets1,113 785 
Tax valuation allowance(497)(218)
Total deferred tax assets less valuation allowance$616 $567 
Deferred Tax Liabilities
Inventory$(5)$(3)
Intangibles(236)(148)
Property, plant and equipment(20)(18)
Pension benefits(91)(82)
Employee benefits, other than retirement— (1)
Unremitted earnings of foreign subsidiaries(19)(18)
Deferred revenue(1)(1)
ROU lease assets(52)(52)
Hedging and currency costs(21)(23)
Others(14)(7)
Total deferred tax liabilities(459)(353)
Total deferred tax assets, net of deferred tax liabilities$157 $214 
The increase in deferred tax assets in 2025 as compared to 2024 primarily relates to additional U.K. capital losses from the Spirent acquisition and the capitalization of research and experimental expenditures for the U.S. tax filing group, partially offset by a decrease in deferred tax assets due to the amortization of intangibles in Singapore. The increase in deferred tax liabilities in 2025 as compared to 2024 primarily relates to intangible assets from the Spirent acquisition recognized in purchase accounting which are not deductible for tax purposes when amortized.
In October 2025, we completed the acquisition of Spirent. As part of purchase accounting, we recorded net deferred tax liabilities of $168 million. This consists of $286 million of valuation allowance and $168 million of deferred tax liabilities primarily related to intangibles recorded in the Spirent purchase accounting, offset by net operating loss, capital loss, and credit carryforwards of $286 million.
As of October 31, 2025, there was a deferred tax liability of $19 million for the tax liability expected to be imposed upon the repatriation of unremitted foreign earnings that are not considered indefinitely reinvested. As of October 31, 2025, the cumulative amount of undistributed earnings considered indefinitely reinvested was $105 million. No deferred tax liability has been recognized on the basis difference created by such earnings since it is our intention to indefinitely reinvest those earnings in the company’s foreign operations. The amount of the unrecognized deferred tax liability on the indefinitely reinvested earnings was $4 million.
Valuation allowances require an assessment of both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable. Such assessment is required on a jurisdiction-by-jurisdiction basis.
The $497 million valuation allowances as of October 31, 2025 were mainly related to net operating losses in Luxembourg, capital losses, and net operating losses in the U.K., as well as California research credits from acquired entities that are subject to change in ownership limitations.
As of October 31, 2025, there were U.S. federal net operating loss carryforwards of $16 million and U.S. state net operating loss carryforwards, primarily from acquired entities, of $57 million. The U.S. federal net operating losses will expire in years beginning 2027 through 2029 if not utilized. Of the total U.S. state net operating loss carryforwards, $48 million was subject to change of ownership limitations under various state tax provisions and subject to valuation allowance. The U.S. state net operating loss carryforwards will begin to expire in 2027, which will result in an immaterial tax impact if not utilized. As of October 31, 2025, there were U.S. federal foreign tax credit carryforwards of $7 million. The U.S. federal foreign tax credits will begin to expire in 2031. Due to certain limitations, $2 million of U.S. federal foreign tax credits were subject to valuation allowance. There were U.S. state research credit carryforwards of approximately $38 million. Of the total U.S. state research credit carryforwards, $21 million are California research credits that can be carried forward indefinitely, but due to change of ownership limitations, the California research credits were subject to valuation allowance.
As of October 31, 2025, there were foreign net operating loss carryforwards of $925 million. Of the total foreign loss, $1 million will expire in 2026. The remaining loss consisted of $683 million that will expire in years beginning 2028 through 2044 if not utilized and $241 million that can be carried forward indefinitely. Of the $925 million of foreign net operating loss carryforward, $690 million is subject to a valuation allowance. As of October 31, 2025, there were foreign capital loss carryforwards of $1,195 million that can be carried forward indefinitely and $4 million of tax credits in foreign jurisdictions that can be carried forward indefinitely. The foreign capital loss carryforwards were subject to valuation allowance as we do not expect to generate income of the type required to utilize these losses. As of October 31, 2025, there were $130 million of interest deduction carryforwards that can be carried forward indefinitely.
The differences between the U.S. federal statutory income tax rate and our effective tax rate are:
 Year Ended October 31,
 202520242023
 (in millions)
Profit before tax times statutory rate$227 $182 $285 
State income taxes, net of federal benefit14 (3)8 
U.S. research credits(20)(21)(22)
U.S. officers’ compensation limitation7 5 6 
Share-based compensation12 7 2 
Current U.S. tax on foreign earnings57 43 139 
U.S. benefit on foreign sales(17)(14)(17)
Foreign earnings taxed at different rates(90)(73)(113)
Singapore incentive deferred tax rate impact— 315 — 
Deferred taxes on foreign earnings not considered indefinitely reinvested— — 6 
Reduction in tax reserves due to Malaysia refund— (61)— 
Prior year change in potential U.S. benefit from non-U.S. tax reserves(19)35 — 
Change in unrecognized tax benefits27 12 3 
U.S. prior year return adjustment(4)(15)6 
U.S. prior year GILTI tax deduction refund claim— (165)— 
Pillar Two13 — — 
Other, net6 4 (3)
Provision for income taxes$213 $251 $300 
Effective tax rate20 %29 %22 %
The effective tax rate was 20 percent, 29 percent, and 22 percent for 2025, 2024, and 2023, respectively.
The tax rate in 2025 was lower than the U.S. statutory rate, primarily due to a lower effective tax rate on foreign earnings and the utilization of foreign tax credits, offset by U.S. taxes on GILTI inclusion, and the impact of Pillar Two minimum taxes.
In July 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into law in the U.S. The OBBBA includes numerous provisions that affect corporate taxation, including changes to bonus depreciation, the expensing of domestic research costs, and modifications to certain U.S. international tax rules. The company has analyzed the impacts of the OBBBA and reflected them in the current period. These impacts do not have a material effect on the tax rate for the year ended October 31, 2025. The majority of the tax law changes will take effect in future years.
The OECD reached agreement among certain member countries to implement a global minimum tax framework, commonly referred to as Pillar Two, which established a minimum 15 percent income tax rate. Various countries have passed legislation to comply with the Pillar Two model rules. A subset of these rules became effective for Keysight in the current fiscal year. While we expect to meet transitional safe harbor requirements in most jurisdictions, there are a limited number of jurisdictions where we expect Pillar Two taxes to apply. The income tax provision for the year ended October 31, 2025 includes the effects of Pillar Two taxes, resulting in tax expense of $13 million.
The decrease in the effective tax rate of 9 percentage points from 2024 to 2025 was primarily due to the absence of the 2024 one-time income tax items in 2025, partially offset by the increase of taxes on the impact of Pillar Two minimum taxes.
The tax rate in 2024 was higher than the U.S. statutory rate primarily due to the impact of a one-time income tax charge to decrease deferred tax asset values from the Singapore statutory tax rate to an incentive tax rate, partially offset by a one-time income tax benefit related to the GILTI tax deductions for intangible asset amortization and the release of tax reserves related to Malaysia income tax assessment appeal. The tax rate in 2023 was higher than the U.S. statutory rate primarily due to the impact of U.S. tax capitalization of research and experimental expenditures, partially offset by the net impact from the proportion of worldwide earnings taxed at lower statutory tax rates in non-U.S. jurisdictions and the U.S. tax imposed on those non-U.S. jurisdictions. The increase in the effective tax rate of 7 percentage points from 2023 to 2024 was primarily due to the one-time income tax items in 2024.
Keysight benefits from tax incentives in several jurisdictions, most significantly in Singapore and Malaysia. The tax incentives provide lower rates of taxation on certain classes of income and require thresholds of investments and employment in those jurisdictions. The Singapore tax incentive expires July 31, 2029 while the Malaysia tax incentive expired on October 31, 2025. We are in the process of renewing our Malaysia tax incentive.
The calculation of our tax liabilities involves uncertainties in the application of complex tax law and regulations in a multitude of jurisdictions. Although the guidance on the accounting for uncertainty in income taxes prescribes the use of a recognition and measurement model, the determination of whether an uncertain tax position has met those thresholds requires significant judgment by management. In accordance with the guidance on the accounting for uncertainty in income taxes, for all U.S. and other tax jurisdictions, we recognize potential liabilities for anticipated tax audit issues based on our estimate of whether, and the extent to which, additional taxes and interest will be due. We include interest and penalties related to unrecognized tax positions within the provision for income taxes in the consolidated statements of operations. Accrued interest and penalties are included on the related tax liability line in the consolidated balance sheet.
The aggregate changes in the balances of our unrecognized tax benefits including all federal, state, and foreign tax jurisdictions are as follows:
Year Ended October 31,
202520242023
 (in millions)
Gross balance, beginning of year$222 $266 $234 
Additions due to acquisition— 2 — 
Additions for tax positions related to the current year23 24 37 
Additions for tax positions from prior years2 — 1 
Reductions for tax positions from prior years— (22)— 
Settlements with taxing authorities— (45)— 
Statute of limitations expirations(6)(3)(5)
Impact from currency fluctuations— — (1)
Gross balance, end of year$241 $222 $266 
As of October 31, 2025, the total amount of gross unrecognized tax benefits, excluding interest and penalties, was $241 million. Of this amount, $150 million would impact our effective tax rate.
Cumulatively, interest and penalties accrued as of 2025, 2024, and 2023 were $49 million, $38 million, and $41 million, respectively. We recognized a tax benefit for interest and penalties, related to unrecognized tax benefits in 2025 of $11 million,
which included a tax benefit of $2 million for penalties released due to statute lapses, offset by tax expense of $13 million for interest and penalties accrued in the current year. We recognized tax benefit of $6 million and tax expense of $5 million for interest and penalties related to unrecognized tax benefits in 2024 and 2023, respectively.
The open tax years for the U.S. federal income tax return and most state income tax returns are from fiscal year ending October 31, 2020 through the current tax year. For the majority of our non-U.S. entities, the open tax years are from fiscal year ending October 31, 2020 through the current tax year.
At this time, management does not believe that the outcome of any future or current examination will have a material impact on our consolidated financial statements. We believe that we have an adequate provision for any adjustments that may result from tax examinations. However, the outcome of tax examinations cannot be predicted with certainty. Given the numerous tax years and matters that remain subject to examination in various tax jurisdictions, the ultimate resolution of current and future tax examinations could be inconsistent with management’s current expectations. If that were to occur, it could have an impact on our effective tax rate in the period in which such examinations are resolved.
U.S. federal foreign tax credits expiration The U.S. federal foreign tax credits will begin to expire in 2031