Q2 2024 Earnings Summary
- Teradyne anticipates significant revenue growth in 2025 by expanding its market share in High Bandwidth Memory (HBM) testing, both in pre-stacked wafer tests and performance testing after stacking, and expects to break into additional accounts, fueling revenue growth.
- Strong demand in the Compute segment driven by AI, including increased networking silicon demand for AI-enabled servers, is creating growth opportunities for Teradyne, with expectations of continued tailwinds from both traditional GPU-based AI systems and vertically integrated producers' home-grown silicon.
- Teradyne expects a significant recovery in the mobile market in 2025, with mobile test demand likely to be significantly stronger than in 2023 and 2024, supporting their confidence in achieving a 20-25% compound annual growth rate (CAGR) through 2026, driven by growth in Mobility, Automotive, Industrial, Compute, and Robotics segments.
- Teradyne experienced shipment pull-ins from Q3 into Q2, indicating that some of the quarterly strength may be due to demand being brought forward, potentially leading to softer demand in subsequent quarters.
- Non-Semiconductor Test businesses are underperforming, with storage test down due to underutilized capacity, defense and aerospace projects delayed, and the production board business impacted by the automotive slowdown. Additionally, the Robotics segment is expected to grow at the low end of the 10% to 20% range and is projected to be roughly break-even in 2024, lower than initial expectations. ,
- Operating expenses (OpEx) are expected to grow approximately 8% for the full year, higher than the prior guidance of 5% to 7%, potentially impacting profitability as the company accelerates investments in R&D and sales.
-
Mobile TAM Recovery
Q: What are your expectations for the mobile TAM recovery in 2025?
A: We anticipate that the mobile TAM will significantly improve in 2025, likely reaching somewhere in the middle of the range between its 2021 peak of approximately $2 billion and the lower levels seen in 2023 ($900 million) and 2024 ($800 million). While it's unlikely to return to peak levels, the recovery should be much stronger than recent years. -
Compute Market Outlook
Q: How do you see the Compute market performing next year?
A: We expect the Compute market to remain strong in 2025, likely maintaining the high levels seen this year. While we don't anticipate a significant increase from the current $1.6 billion TAM, the market should stay robust, supported by continued demand in cloud AI and VIP customers. -
Robotics Business Profitability
Q: When will the Robotics business achieve profitability?
A: We expect our Robotics business to be breakeven in 2024 and become profitable in 2025. Although growth this year is at the lower end of our 10% to 20% range, we believe the trajectory towards profitability remains on track as we move into the future. -
HBM Market Share Growth
Q: Can you update us on your progress with HBM customers?
A: We are optimistic about expanding our market share in HBM testing. We aim to gain share in performance testing of stacked HBM memory and expect to break into additional HBM accounts in 2025. -
Impact of N2 Process Node
Q: How does the N2 process node affect your outlook?
A: We view N2 as an enabler for higher device complexity, particularly for cloud and edge AI applications. The increased complexity drives demand for our testing solutions, and we believe this will be a strong demand driver through 2025 to 2027. -
VIP Business Trajectory
Q: What's the outlook for your VIP business into 2025?
A: Currently, hundreds of testers are being used by multiple VIP customers. We expect to exit this year with twice as many testers being used by VIPs. Additional customers have planned to use our testers for parts releasing later this year and into 2025, indicating continued growth. -
DIS Sale Impact
Q: How does the DIS sale affect your guidance?
A: The DIS business contributed about $16 million this quarter and was approximately $100 million in 2023 revenue. Adjusting for the sale, we expect a shortfall of roughly 3 percentage points in growth. Without DIS, our year-over-year growth would increase by about 3 points. -
Mobile Modem Supplier Change
Q: How would a change in your large customer's modem supplier affect your business?
A: If our largest customer changes modem suppliers, it would have a slight positive impact for us but not a significant one. The effects are relatively small compared to the overall application processor business. -
Compute Testers and AI
Q: Is AI-driven demand affecting your networking test business?
A: Yes, the growth in AI is increasing the need for high-speed data links in servers, boosting demand for our networking testers. We're seeing a trend toward higher networking content per server, which benefits our business alongside traditional GPU demand. -
Robotics Service Revenue
Q: When will service and software significantly contribute to Robotics revenue?
A: We are piloting managed service plans and seeing good customer uptake. However, building necessary infrastructure and sales cycles takes time, so we anticipate material revenue impact from service and software in 2025.
Research analysts covering TERADYNE.