TERADYNE, INC Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Fourth Quarter and Full Year 2025 Results: Strong Q4 with 41% sequential revenue growth and over 100% non-GAAP earnings growth. Full year revenue was $3.2 billion, up 13% from prior year.
• AI-Driven Revenue: AI drove over 60% of Q4 2025 revenue, expected to be over 70% in Q1 2026.
• Business Segments: Semiconductor Test Group showed growth, Product Test Group grew from defense and aerospace strength, Robotics had 3 consecutive quarters of growth, and IST business delivered over 50% growth from 2024 to 2025.
• New Target Earnings Model: Framed around ATE TAM of $12 billion to $14 billion, expecting revenue ~$6 billion, gross margins 59%-61%, OpEx 27%-29% of revenue, leading to operating profit 30%-34% and non-GAAP EPS $9.50-$11.
• MultiLane Joint Venture: Expect to close in H1 2026, with results consolidated into Product Test Group results.

Segment Performance

• Semiconductor Test Group: Q4 2025 revenue was $883 million. Full year 2025, the group delivered 19% year-on-year growth. SoC test revenue grew 23% year-over-year driven by networking and VIP compute; memory test revenue was up slightly with share gains in HBM and DRAM.
• Product Test Group: 2025 revenue grew 8% driven by strength in defense and aerospace. Q4 2025, the group was $110 million and grew double digits sequentially and year-on-year.
• Robotics: 2025 saw 3 consecutive quarters of growth starting in Q2. Q4 2025, Robotics revenue was $89 million, up 19% from Q3, with >5% of revenue driven by a large e-commerce customer.

Guidance

• Q1 2026: Sales expected between $1.15 billion and $1.25 billion, non-GAAP EPS in the range of $1.89 to $2.25.
• New Target Model: Based on ATE TAM of $12-$14 billion, expecting revenue ~$6 billion, gross margins 59%-61%, OpEx 27%-29% of revenue. Expect growth across segments, including Semi Test Group gaining share, Product Test Group growth, and Robotics growth.

Risks

• Revenue lumpiness due to program timing and customer buying patterns.
• Uncertainty in predicting SoC TAM growth due to high concentration and product ramps.
• Dependence on a few large customers and potential impact of changes in their purchasing behavior.

Question and Answer

Q: On near term calendar '26 growth and share gain expectations, how to think about it?

A: Michelle Turner mentioned healthy backlog and better insights to first half, but cautioned against linearity due to lumpiness. Greg Smith added Q1 strength but caution on second half visibility.

Q: Longer-term on share of ATE TAM growth, key drivers?

A: Greg Smith mentioned compute TAM growth, expected share gain in compute, mobile recovery (not to 2021 peak), auto/industrial proportional gain, and memory incremental growth.

Q: On GPU test market share and ASIC share parlay?

A: Greg Smith said progress on GPU test, expecting production qualification, incremental share gain over years, with single-digit share to start and potential to reach 30%-70% balance over time.

Q: On mobile SoC TAM growth and capital efficiency?

A: Greg Smith said mobile TAM expected to grow due to complexity, but caution on capital efficiency as customer installed bases and SKU optimization moderate additional capacity needs.

Q: On HDD test growth and captive test platforms?

A: Greg Smith said HDD test revenue to double in 2026, with commercial test complementing internal test, and noting persistence of captive ATE strategies in some segments but potential change in others.