Keysight Technologies (KEYS) could deliver stronger-than-expected fiscal Q2 growth as demand tied to artificial intelligence data centers and aerospace and defense markets continues to "strengthen," Morgan Stanley said in a report Friday.

The investment bank said recent results from Viavi Solutions (VIAV) and Anritsu reinforced positive trends in AI networking, data center testing and aerospace and defense demand ahead of Keysight's fiscal Q2 earnings report, according to the report.

Keysight is scheduled to release its Q2 financial results, after the close of the stock market on May 19.

Investors are "likely expecting" fiscal Q2 orders of about $1.71 billion to $1.72 billion and revenue near $1.75 billion, though orders could come in slightly lower at roughly $1.68 billion to $1.70 billion because of the timing of a large aerospace and defense deal, "that may make sequentials more challenging," the report said.

Keysight may need to exceed revenue expectations by about $50 million and raise full-year guidance closer to 25% growth to "sustain momentum," Morgan Stanley said.

Morgan Stanley has an equal weight rating on Keysight Technologies and raised its price target to $305 from $268.

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