Teradyne Q2 Earnings Call Highlights

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Teradyne (NASDAQ:TER) reported record second-quarter revenue of more than $1.3 billion as AI-related demand lifted results across its Semiconductor Test, Product Test and Robotics businesses. Non-GAAP earnings per share reached $2.47, up more than 300% from a year earlier, according to Chief Executive Officer Greg Smith.

“For the second quarter in a row, we delivered record revenue, and once again, AI was the driver,” Smith said. He said AI-driven revenue represented more than 60% of the company’s sales during the quarter.

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Revenue rose 4% sequentially from the prior quarter’s previous record. For the first half of 2026, Teradyne generated $2.6 billion in revenue and non-GAAP EPS of $5.02, increases of nearly 100% and 275%, respectively, from the prior-year period.

Semiconductor Test Leads Growth

Teradyne’s Semiconductor Test business exceeded $1 billion in quarterly revenue for the second consecutive quarter. Revenue in the segment increased $11 million from the first quarter and rose 128% year over year.

• System-on-chip revenue was $843 million.
• Memory revenue was $212 million, marking a record quarter and the third consecutive quarter above $200 million.
• Integrated Systems Test revenue was $67 million, up 94% year over year and more than 150% sequentially.

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Compute accounted for 70% of SoC product revenue, with compute revenue rising nearly 600% from the prior-year quarter, Chief Financial Officer Michelle Turner said. Teradyne completed correlation with a second AI hyperscaler customer during the quarter and shipped a previously announced merchant GPU order.

Memory demand was supported by HBM and DRAM test solutions, as well as a resurgence in NAND final test. Turner said memory manufacturers’ longer-term capacity-expansion plans drove the company’s quarterly memory book-to-bill ratio above two.

Smith said Teradyne expects the 2026 memory total addressable market to be more than 40% larger than in 2025, with growth accelerating in the second half. He also said the company does not currently expect particular lumpiness in memory demand in 2027 because capacity additions and testing plans are extending into next year.

Data Center Build-Out Broadens Opportunity

Smith said the continued data center build-out is contributing demand beyond core compute chips, including flash memory, hard disk drives, power devices, board test, high-speed interconnect and robotics. He described Teradyne’s strategy as following the value chain “from wafer to data center.”

The company said global wafer-fab-equipment capital expenditures are forecast to approach $250 billion by the end of the decade. Teradyne expects that rising wafer production, denser semiconductor process technologies and more advanced packaging will support higher automated test equipment demand.

Smith said Teradyne sees a path for the overall ATE market to reach or exceed $20 billion as WFE capital spending approaches that level. He cautioned, however, that the relationship between WFE spending and test-equipment demand is more meaningful over three- to five-year periods than on a quarterly or annual basis, given production and purchasing lead times.

The company also highlighted emerging dual-vendor strategies among large compute customers. Smith said Teradyne has one compute customer in a mature dual-vendor phase, one in a fast-follower phase and one in qualification before production ramp. He expects market-share gains from new qualifications to emerge gradually in 2027.

In networking, Teradyne said it is pursuing opportunities across copper, pluggable optics and co-packaged optics. The company expects the CPO test market alone to be worth $300 million to $700 million by 2028, though Smith said the range reflects uncertainty about the timing and scale of production ramps. For 2027, he indicated the market could be closer to the low end of a trajectory toward $300 million.

Product Test and Robotics Expand

Product Test Group revenue rose 26% year over year and 33% sequentially to $107 million. Turner cited broad-based growth in production board test, optical test, defense and aerospace, and scale-up networking. The company said its Omnics production board-test platform began shipping during the second quarter, with further growth expected in the second half.

Robotics revenue totaled $100 million, up 33% year over year and 9% sequentially. Revenue from electronics manufacturing and semiconductors increased 50% from the first quarter and became the group’s largest end market, according to Turner. U.S. sales represented 32% of Robotics revenue, while Teradyne’s U.S.-based manufacturing center remains on track to open later this year.

Smith said Teradyne expects Robotics to grow broadly in line with the rest of the company over the medium term, driven in part by automation needs tied to data-center construction and efforts to reshore assembly and test processes.

Margins, Cash Flow and Outlook

Second-quarter gross margin was 59.8%, up 250 basis points from a year earlier but down 110 basis points sequentially, partly due to one-time benefits in the first quarter. Non-GAAP operating income was $448 million, representing a 33.7% operating margin.

Teradyne ended the quarter with $517 million in cash and investments, up more than 30% sequentially. Free cash flow was $378 million for the quarter and $579 million for the first half. The company paid $20 million in dividends and repurchased $69 million of shares during the quarter.

For the third quarter, Teradyne forecast revenue of $1.2 billion to $1.3 billion and non-GAAP EPS of $1.85 to $2.15. It expects gross margin of 58% to 59% and a non-GAAP operating profit rate of 28% to 30%.

Turner said the company expects second-half growth versus the first half in memory, automotive and industrial, IST, Product Test and Robotics. That growth is expected to be partly offset by mobile softness and compute order timing. Teradyne anticipates renewed growth in 2027, supported by ATE market expansion and projected market-share gains.

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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