Chairman, President, and Chief Executive Officer at Keysight Technologies
Thank you, Jason, and thank you everyone for joining us. Keysight delivered another quarter of excellent results. Solid industry dynamics are accelerating demand for our differentiated solutions, and we continue to capitalize on broad-based technology investment across a diverse set of growing markets.
Today, I'll focus my comments on three key headlines. First, we delivered record Q3 orders, all-time record revenue, and our highest quarterly operating margin of the year. The durability of our business model was on full display as we continued to effectively navigate supply chain challenges. Second, Keysight's first-to-market software-centric solution strategy continues to yield consistently strong results. Since our launch in 2015 through our expected 2021 finish, we will have delivered 9% compound annual revenue growth and 16% annualized earnings growth, both well above our long-term commitments, despite significant headwinds of trade restrictions and a global pandemic. Our investments are well-aligned with the highest impact market opportunities as we continue to enable our customers' success and deliver value to our shareholders. Third, given our outstanding performance year-to-date, we expect to achieve 2021 year-over-year revenue growth of 16%, an EPS of $6.03, which represents 24% earnings growth at the midpoint of our guidance. We have strong momentum entering 2022 and our long-term revenue and earnings growth targets remain intact, and we expect to drive incremental margin expansion going forward.
Now, let's take a deeper look at our third quarter performance. Record Q3 orders of $1.3 billion grew 23%. All-time record revenue also grew 23% to $1.2 billion. We delivered gross margin of 65%, operating margin of 27%, and earnings of $1.54, which is well above the high end of our guidance and represents 29% year-over-year earnings growth.
Keysight continues to deliver outstanding growth despite year-over-year headwinds due to trade restrictions and ongoing supply chain disruption. Our growth rates are not just a result of soft year-over-year comparisons, but also reflects sustained multi-year above-market growth. For example, Q3 orders are up 18% and revenue was up 15% versus the same quarter in 2019, prior to the global pandemic. The strength and durability of our business model are delivering as expected. We see accelerated demand from our differentiated solutions from both existing and new customers. Our customer engagement throughout the pandemic has been strong, with approximately 1,900 new customers added in 2020, which we expect to exceed in 2021.
Looking at our business segments. For the third quarter in a row we reported double-digit year-over-year order and revenue growth across both segments and all regions, demonstrating the breadth and differentiated portfolio across a diverse set of end markets.
Our Electronic Industrial Solutions Group achieved strong double-digit order and revenue growth across all regions, as well as its fourth consecutive quarter of record revenue. Continued investment in chipsets for 5G data center, cloud, and AI applications drove demand for our differentiated semiconductor solutions, resulting in another quarter of record orders and revenue. Investment also remains high in advanced technology nodes and capacity expansion for mature processes to address surging global semiconductor demand.
Our general electronics business achieved record Q3 orders and revenue. Four consecutive quarters of double-digit order and revenue growth demonstrate Keysight's breadth of contributions across multiple industries. Strength in the quarter was driven by investments in customers' broad-based digital transformation, industrial IoT, digital health, industry 4.0, and advanced academic research.
In automotive, record Q3 orders and all-time record revenue were driven by the ongoing macroeconomic recovery, acceleration in EV and AV technology investment, and manufacturing expansion to meet pent-up demand. As the trend towards autonomous vehicles gains momentum, Keysight remains focused on enabling next-generation technologies across the automotive R&D workflow. We recently announced a new cellular vehicle-to-everything, or CV2X, Autonomous Drive Emulation solution, which provides a real-world environment emulator for in-lab testing to simulate realistic roadway scenarios. We continue to see steady demand for our EV and AV solutions, including automotive ethernet compliance and
Our Communications Solutions Group achieved record third quarter orders and revenue and delivered double-digit order and revenue growth, despite trade restrictions that impacted one of our larger customers in China.
Aerospace, defense, and government delivered record Q3 orders and revenue. Revenue grew double-digits across all major regions. While benefiting from a soft prior year comparison, growth was again driven by space, satellite, electromagnetic spectrum operations, 5G and early 6G research applications. US government and prime contractor investment was strong, while internationally, Europe rebounded from a year ago, coupled with solid growth in Asia. Our applications solutions strategy drove a significant win with a leading research institute in this quarter. Keysight's leading-edge integrated wireless and wireline test bed is enabling their next-generation terabit and 6G research. Our aerospace, defense and government customers will also benefit from our differentiated services offering to enable their mission-critical program needs. In Q3, we entered into multiple US prime contractor engagements for calibration and up-time services.
Commercial communications achieved third quarter record orders and revenue. Adjusted for the impact of China trade restrictions, commercial communications orders and revenue both grew double-digits. Ongoing strength was driven by global 5G deployments and the roll-out of new 5G chipsets and devices, O-RAN adoption, 400 gig and 800 gig ethernet for data centers, and increased spending by service providers.
Our collaboration with key 5G innovators remains strong as we continue to lead with new industry firsts. In partnership with Qualcomm, we were the first to achieve 10 gigabit per second 5G data connections. Keysight was also selected by Vodafone, along with other industry leaders such as Samsung, NEC and Dell, to deliver end-to-end cloud solutions for the deployment of Europe's first commercial O-RAN network. Sanjole, acquired earlier this year, had a strong quarter driven by expanding adoption of our WaveJudge wireless test system, which further enhances Keysight's 5G solutions for deployments.
Keysight continues to enable next-generation wireline standards, such as 800 gigabit ethernet. Our newly announced 800 gigabit ethernet solutions saw strong demand within the quarter. In recent partnership with Cisco and Amphenol, we demonstrated high-data rate multi-vendor interoperability, a key enabler of next-generation networks. The combination of our network application solutions from the Ixia acquisition and our leading physical layer bit-error rate testers and oscilloscopes is driving new levels of customer insight and value.
Our software and services solutions remain an important growth vector for Keysight. Higher value services are driving differentiation, while strengthening our competitive position. At greater than 30% of total revenue with ARR exceeding $1 billion, our growing mix of software and services is increasing the durability of our business model, while reducing overall cyclicality. They are both contributing to Keysight's margin expansion with operating margins at or above the company average.
Keysight's focus on operational excellence continues drives our consistent execution, and our employees are critical to our success. Employee growth is a key component of the Keysight Leadership Model, and we view our high-performance culture as a competitive advantage. As such, we are honored to have our team in Malaysia recognized as the overall winner of the Employee Experience Awards by Human Resources Online. This award is in recognition of the innovative programs deployed in the Malaysia HR team to proactively engage employees and create positive experiences, despite unprecedented, pandemic-related challenges. Our employees in Malaysia have done an outstanding job under difficult circumstances since COVID restrictions were imposed and our production operations were impacted. To mitigate the risk of COVID-19 to employees, customers, and suppliers, Keysight implemented a vaccine program for both Keysight employees and our suppliers. Over 95% of our employees at the Malaysian facility are now vaccinated. In addition, vaccination rates at our large US sites are above their local community averages.
In summary, our momentum continues, and our strategy is generating strong results. We have a track record of consistent execution and delivering on our commitments. I am confident in our ability to capitalize on many growth opportunities ahead of us as we finish the fiscal year and look forward to 2022.
Now, I would like to turn it over to Neil to discuss our financial performance and outlook in more detail.