Teradyne, Inc. (TER) Earnings & Analysis

Latest quarter

Teradyne reported Q2 FY2026 revenue of $1.3 billion, compared with the consensus of $1.2 billion, and adjusted EPS of $2.47 as the consensus counts it, compared with consensus adjusted EPS of $2.04. The company reported revenue growth of 103.9% from Q2 FY2025 and diluted EPS growth of 385.7% to $2.38.

Teradyne’s filing attributed a $629.9 million increase in Semiconductor Test revenue to higher compute and memory sales related primarily to AI applications; Product Test revenue rose $22.1 million on AI-related demand and Defense and Aerospace growth, while Robotics revenue increased $25.0 million on collaborative-robot-arm and autonomous-mobile-robot sales. The filing said gross margin rose 2.6 percentage points to 59.8%, primarily because of higher Semiconductor Test sales and product mix, while operating margin was 32.9%. Teradyne reported free cash flow of $378.4 million, compared with $131.7 million a year earlier. The company reported revenue, gross margin and operating margin above its respective Q2 guidance ranges.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

Greg Smith said AI drove a second consecutive quarter of record revenue, and that more than 60% of second-quarter revenue was AI-driven. He said all three business groups grew from both the prior year and the prior quarter, with data-center investment supporting demand across compute, memory, flash memory, storage, power, board test, high-speed interconnect and robotics.

Smith said Semiconductor Test demand reflected HBM and DRAM strength as well as a resurgence in NAND final test. Michelle Turner said Semiconductor Test revenue rose 128% from Q2 2025, including $843 million in SOC revenue, $212 million in memory revenue and $67 million in IST revenue. Turner said compute represented 70% of SOC product revenue and grew nearly 600% year over year, while IST grew more than 150% from the preceding quarter.

Smith said Teradyne delivered its first merchant-GPU customer order in the quarter and completed correlation with a second AI hyperscaler. He said dual-vendor qualification by large compute customers is intended to reduce supply-chain risk and secure required capacity, and that moving from qualification to production ramp generally takes nine to 12 months. Smith said market share during the fast-follower phase could rise from zero to about 30%.

Smith said the company was investing further in next-generation products, customer teams, and organic and inorganic opportunities across its wafer-to-data-center strategy. Turner said Q3 operating expenses would reflect continued R&D and go-to-market investment, while Smith said Teradyne expects 2027 growth consistent with the transistor and bit dynamics he described. In response to a question on memory demand, Smith said DDR was stronger than the company expected in January and said customers had begun seeking additional NAND capacity.

Guidance

For Q3 FY2026, Teradyne expects operating expenses of 29.0% to 30.0% of sales, compared with its previous Q2 expectation of 27.0% to 28.0% of sales. The company expects a non-GAAP operating-profit rate of 28.0% to 30.0%, compared with its previous Q2 expectation of 30.0% to 32.0%.