Teradyne NASDAQ: TER reported third-quarter 2026 revenue above $1.3 billion, up 70% from a year earlier, as demand tied to artificial intelligence continued to support its semiconductor test, product test and robotics businesses.
Non-GAAP earnings per share were $2.29, up more than 150% year over year. CEO Greg Smith said AI-related revenue represented more than 60% of total company revenue during the quarter, reflecting demand for equipment used across the computing supply chain, from semiconductor wafers and modules to data-center racks.
“AI was the driver again this quarter,” Smith said, describing the company’s strategy as extending from “wafer to AI data center.”
Semiconductor Test Revenue Tops $1 Billion
Teradyne’s Semiconductor Test segment generated more than $1 billion in third-quarter revenue, a 77% increase from the prior-year period. The segment included $676 million in system-on-chip revenue, $301 million in memory revenue and $95 million in integrated systems test revenue.
Compute revenue increased nearly 50% year over year on continuing AI-related demand, according to CFO Michelle Turner. She said Teradyne expects its customers’ adoption of dual-vendor sourcing strategies to create additional opportunities in compute testing in 2027.
Smith said the company’s first hyperscaler customer has reached the mature phase of its dual-vendor program, with the next major ramp expected in mid-2027. A merchant GPU customer is in the fast-follower phase, while a second hyperscaler has passed qualification and is expected to make capacity purchases in the second half of 2027. Teradyne also has a third hyperscaler in initial qualification.
The company said semiconductor capital spending devoted to test equipment increased to 8.1% during the first eight months of 2026 from 6.4% in 2025. Smith said rising forecasts for semiconductor capital expenditures in 2027 and beyond support the potential for a prolonged expansion in the automated test equipment market.
Memory revenue set another company record at $301 million, following a record established in the prior quarter. Turner said robust demand for high-bandwidth memory and DRAM test systems, along with a resurgence in NAND, supported the result. Looking toward 2027, Smith said HBM is expected to be the largest driver of memory-market growth, though Teradyne also anticipates growth across other memory categories.
Smith said supply constraints are prompting some AI accelerator providers to use lower HBM stack heights, which could increase the number of memory stacks requiring performance testing. He said Teradyne has a higher share in HBM performance testing than in DRAM wafer sort.
New Products and Expanding Capacity
During the quarter, Teradyne introduced several products intended for next-generation AI and data-center devices. These included the UltraPin5000-EM for extended-memory characterization, the UltraVS64-HP for testing accelerators consuming up to 15,000 amps, and the UltraPort-PCIe6, which Smith called the industry’s first automated test equipment solution for PCIe Gen 6.
The company also introduced the Iris 100 for optical testing of microLED and VCSEL emitters, expanded burn-in capabilities for the Titan HP platform, launched the UltraFLEXplus S for edge AI devices and released the Magnum E2 DRAM tester.
Smith said Teradyne has increased manufacturing capacity for its UltraFLEXplus platform to about four times the level of 18 months ago and is planning another expansion. The company qualified a second contract manufacturer for the platform in 2026 and is also adding capacity for memory and power-test products.
Inventory increased as Teradyne prepared for expected 2027 growth and addressed longer lead times for components, management said. Turner said the inventory build was roughly evenly split between support for demand and procurement of components that could become constrained.
Product Test and Robotics Growth
Product Test revenue rose 56% year over year to $138 million, supported by demand for production board test, optical test and high-speed interconnect applications related to AI infrastructure. The segment’s book-to-bill ratio was 1.4 during the quarter, with particular strength in the MultiLane Test Products joint venture.
Robotics revenue increased 28% from a year earlier to $96 million, marking the group’s highest third-quarter revenue and its achievement of profitability during the period. Electronics and semiconductor applications became robotics’ largest vertical, Smith said, as manufacturers increasingly use robots for assembly and testing of data-center equipment.
Teradyne introduced the Universal Robots Gen 7 collaborative-robot platform in the third quarter. Turner said the robotics business has partnerships with NVIDIA, Analog Devices, Scale AI, Generalist, Bright Machines and Sereact.
Smith said physical AI could become a significant growth driver for robotics, though he expects broad end-market adoption to be more of a 2028 development than a 2027 event, aside from the company’s major robotics customer. Teradyne expects robust growth from that customer in 2027 as automation deployments expand more broadly across distribution centers.
Margins, Cash Flow and Outlook
Third-quarter gross margin was 59.1%, up 60 basis points from a year earlier but down 70 basis points sequentially due primarily to product mix. Non-GAAP operating income was $413 million, representing a 31.6% operating margin.
Teradyne ended the quarter with $625 million in cash and investments, up 21% sequentially. Free cash flow was $227 million for the quarter and $806 million for the first nine months of 2026. The company paid $20 million in dividends and repurchased $99 million in shares during the quarter.
For the fourth quarter, Teradyne forecast revenue of $1.25 billion to $1.35 billion and non-GAAP EPS of $1.95 to $2.25. It expects gross margin of 57.5% to 58.5%, operating expenses equal to 28.5% to 29.5% of sales, and a non-GAAP operating profit rate of 28% to 30%.
At the midpoint of its fourth-quarter outlook, Teradyne expects approximately 20% revenue growth from the prior-year fourth quarter and full-year revenue of about $5.2 billion, up more than 60%. Turner said the company expects 2027 to be another year of healthy growth, with strong backlog and improving visibility into coming quarters.
About Teradyne (NASDAQ:TER)
Teradyne, Inc develops and supplies automated test equipment and industrial automation products. Its systems help manufacturers test the functionality, performance, and reliability of semiconductor devices, electronic systems, wireless products, and other complex products throughout the production process.
The company's product portfolio includes semiconductor test systems, memory and system-level test equipment, and solutions for printed circuit boards and electronic products. Teradyne also provides collaborative robots through Universal Robots and autonomous mobile robots through Mobile Industrial Robots (MiR), supporting applications such as assembly, material handling, machine tending, packaging, and warehouse logistics.
Founded in 1960 and headquartered in North Reading, Massachusetts, Teradyne serves customers worldwide, including semiconductor manufacturers, electronics producers, automotive companies, and industrial businesses.
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