Teradyne Q1 Earnings Call Highlights

Key Points

• Teradyne reported a record Q1 with revenue of roughly $1.3 billion and non‑GAAP EPS of $2.56, as AI‑related demand climbed to nearly 70% of sales.
• Semiconductor Test revenue topped $1.1 billion (SoC $882M, memory $203M), reflecting a shift to an AI‑dominant portfolio; Robotics grew 32% and the company introduced Photon 100 and Omnyx test platforms for silicon photonics and server boards.
• For Q2 Teradyne guided revenue of $1.15–$1.25 billion and non‑GAAP EPS of $1.86–$2.15, reiterated its long‑term model ($6B revenue, $9.50–$11.00 EPS) but cautioned about quarter‑to‑quarter “lumpy” orders and spent about $165 million on two strategic transactions.

Teradyne NASDAQ: TER reported record first-quarter 2026 results, pointing to accelerating AI-driven demand across its businesses while cautioning that ordering patterns and customer build-out schedules can still create quarter-to-quarter “lumpy” revenue. The company also introduced new test platforms aimed at emerging networking and data center applications and closed two transactions designed to expand its product test and software capabilities.

Record quarter driven by AI demand

CEO Gregory Smith said Teradyne delivered “record results” in the first quarter, with revenue of approximately $1.3 billion and non-GAAP earnings per share of $2.56. Smith said the quarter exceeded the company’s prior revenue high-water mark from the mobile-driven peak in the second quarter of 2021 by $200 million, or 18%.

Smith attributed the performance to “durable AI demand drivers” and the company’s “wafer-to-AI data center strategy,” which he said is generating demand across Semiconductor Test, Product Test, and Robotics. He said AI-related demand represented nearly 70% of Q1 revenue, up from about 60% in Q4 2025.

Smith framed Teradyne’s strategy around three trends—verticalization, electrification, and AI—while also highlighting the risks of customer and program concentration. As large, vertically integrated technology customers expand, he said revenue can become concentrated in “a smaller number of very large ASIC and commercial device programs,” increasing the potential for short-term peaks and valleys in demand timing.

Segment performance: Semiconductor Test surpasses $1 billion

CFO Michelle Turner reported first-quarter sales of $1.282 billion and non-GAAP EPS of $2.56, both above the high end of guidance. Total sales rose 87% year-over-year and 18% sequentially, while non-GAAP EPS increased 241% year-over-year and 42% sequentially. Turner noted the company continued to have “two specifying customers and one purchasing customer greater than 10% of our revenue” during the quarter.

In Semiconductor Test, Turner said revenue reached $1.1 billion, “breaking the billion-dollar threshold for the first time,” up 26% sequentially and over 100% year-over-year. Within Semi Test, she detailed:

• SoC revenue of $882 million
• Memory revenue of $203 million
• IST revenue of $27 million

Turner said continued AI strength in compute and memory drove results, noting compute represented roughly 75% of SoC product revenue—an evolution she described as a shift from a mobile-centric portfolio to “AI dominant.” She added that within auto and industrial, revenue “nearly doubled sequentially from a low base” due to power management demand tied to AI data center build-outs.

Smith said automotive and industrial markets showed “moderate but steady recovery,” with signs of strength in automotive primarily for ADAS and increased demand for power going into AI data centers. He also said mobile appeared “a bit weaker” as memory pricing and availability affected demand, especially outside the iOS ecosystem.

On memory, Turner said revenue of $203 million was “relatively flat to our record last quarter,” driven by robust HBM and DRAM demand, and that Teradyne successfully ramped its newest memory tester generation, Magnum 7. Smith added the company was beginning to see increasing flash test demand driven by SSD and expects the overall memory market to deliver “solid TAM growth” in 2026, with Teradyne aiming to gain low single-digit share.

Product Test revenue was $80 million, up 8% year-over-year, led by “sustained defense and aerospace demand and production board test,” Turner said.

Robotics growth and new products for photonics and data centers

Robotics revenue was $91 million, up 32% year-over-year, marking the company’s “fourth sequential quarter of growth,” Turner said. Smith highlighted the sequential growth as notable given Q1 is typically seasonally weaker, citing customer engagement across e-commerce, electronics manufacturing, and semiconductor end markets. Turner said shipments tied to the company’s large e-commerce customer increased sequentially and that AI revenue rose to 15% of robotics sales.

Smith also outlined two new product introductions tied to Teradyne’s wafer-to-data center strategy:

• Photon 100, a silicon photonics and co-packaged optics (CPO) test platform based on UltraFLEXplus, aimed at bringing silicon photonics testing “from lab to fab.” Smith said the market is in early stages but could become a meaningful networking TAM expansion opportunity, estimating it could reach $300 million to $700 million per year over the midterm.
• Omnyx, a production board test platform for server boards and tray assemblies, designed to combine power, thermal, optical, and TDR capabilities to detect defects affecting AI data center build-outs.

In response to analyst questions, Smith said the silicon photonics market in 2026 was “probably…right around 100-ish,” with some uncertainty. He also said Teradyne’s share in silicon photonics/CPO in 2026 appeared “quite balanced” with a competitor, calling it “really early days” with few end customers ramping to production.

Margins, capital allocation, and Q2 outlook

Turner said first-quarter gross margin was 60.9%, up 370 basis points sequentially, driven by strong Semi Test volume and mix, as well as “non-recurring operational impacts.” Non-GAAP operating income was $480 million, and operating margin was 37.5%, both records. She said the expected Q2 gross margin range of 58% to 59% reflects “normalized” conditions, with about half the sequential step-down tied to one-time benefits that occurred in Q1.

Teradyne ended the quarter with roughly $400 million in cash and investments, Turner said, and paid $20 million in dividends. She said share buybacks were “de minimis.” Turner also said two April transactions used about $165 million of cash in Q2 and were funded via the company’s credit revolver:

• The MultiLane Test Products joint venture, which closed April 8 and will be consolidated into the Product Test group.
• The acquisition of TestInsight, which closed April 16 and was described as strengthening design-to-test software capabilities.

For the second quarter, Turner guided to revenue of $1.15 billion to $1.25 billion and non-GAAP EPS of $1.86 to $2.15, with gross margin of 58% to 59% and operating expenses at approximately 27% to 28% of sales. She said the company still expects first-half weighted results, with 55% to 60% of annual revenue in the first half, reflecting strong demand signals but also “potential order lumpiness” that could shift revenue timing.

On merchant GPU, Smith said Teradyne received its “first multi-system production test orders” in Q1 and expects shipments, installation, and production use in Q2. Turner added that the company has line of sight to about $50 million in merchant GPU revenue for the year, though visibility into the second half is limited. Smith said capturing greater GPU share depends on executing a “fast follower” strategy to bring additional SKUs onto Teradyne’s platform, and he suggested the company’s longer-term model does not require outsized GPU share, saying low double-digit share could be sufficient to support its targets.

Teradyne reiterated its target earnings model of $6 billion in revenue and $9.50 to $11.00 in non-GAAP EPS, with Smith closing the call by describing 2026 as “the year of execution” as the company heads into what it expects will be “another really strong quarter” in Q2.

About Teradyne NASDAQ: TER

Teradyne, Inc is a global supplier of automatic test equipment and related services principally used to test semiconductors, wireless products and complex electronic systems. Founded in 1960, the company is headquartered in North Reading, Massachusetts, and has a long history of developing capital equipment and software that help semiconductor manufacturers, electronics OEMs and contract manufacturers validate product performance and reliability during design and production.

The company's product portfolio centers on automatic test equipment (ATE) and system-level test solutions that address chip- and board-level validation, burn-in and reliability screening.

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