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TERADYNE, INC (TER)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 revenue was $769 million and non-GAAP EPS was $0.85, both near the high end of guidance; revenue rose 4% YoY and 18% QoQ, driven by AI-related demand in Semiconductor Test, especially compute and HBM memory .
  • Teradyne guided Q4 2025 revenue to $920–$1,000 million, GAAP EPS to $1.12–$1.39, and non-GAAP EPS to $1.20–$1.46, citing robust AI test demand across compute, networking, and memory; non-GAAP GM is expected to be 57–58% with temporary supply chain/capacity expansion costs .
  • Q3 beat Wall Street consensus: revenue $769.2M vs $743.9M*, EPS $0.85 vs $0.791*; Q4 guidance brackets consensus revenue ($970.4M*) and non-GAAP EPS ($1.36*) as ramps shift into Q4 .
  • Catalyst: accelerating AI-driven ramps (compute ~two-thirds, memory ~one-third of Q4 upside), new SLT platform Titan HP launched for AI/cloud devices, and CFO transition announced, supporting capacity scaling into 2026 .
    Values retrieved from S&P Global*

What Went Well and What Went Wrong

What Went Well

  • AI compute and networking strength: “UltraFLEXplus … architected from the ground up for high performance processors and networking devices,” enabling fast test development and high-efficiency volume production; AI-related revenue composition rose to ~50% in Q3 and ~60% in Q4 outlook .
  • Memory upswing tied to HBM: Memory test sales more than doubled QoQ to $128M, with 75% DRAM (HBM) and 25% flash (SSD) for AI data centers; new singulated stack HBM test insertion began shipping in volume .
  • Guidance upgrade: “Q4’25 sales are expected to increase 25% sequentially and 27% from Q4’24,” reflecting accelerated AI project pull-ins; non-GAAP OP margin midpoint implied at 25.5% .

What Went Wrong

  • Robotics still challenged: Q3 Robotics revenue was $75M, flat QoQ and down YoY; indirect distribution remains weak despite growth in services (14% of sales) and AI-related products (~8% of sales) .
  • Margin headwinds in Q4: GM guided to 57–58% despite higher volumes due to factory expansion across geographies and one-time supply chain costs to meet accelerated deliveries .
  • Working capital drag: Q3 free cash flow was ~$2M as receivables and inventory rose with late-quarter shipments and upcoming AI ramps; share repurchases ($244M) and revolver use increased net interest expense expectations .

Financial Results

Revenue and EPS (Quarterly progression)

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$686 $652 $769
GAAP Diluted EPS ($USD)$0.61 $0.49 $0.75
Non-GAAP Diluted EPS ($USD)$0.75 $0.57 $0.85

YoY comparison and margins

MetricQ3 2024Q3 2025
Revenue ($USD Millions)$737 $769
GAAP Diluted EPS ($USD)$0.89 $0.75
Non-GAAP Diluted EPS ($USD)$0.90 $0.85
Non-GAAP Gross Margin %59.7% 58.5%
Non-GAAP Operating Margin %22.4% 20.4%

Actual vs Estimates and Guidance

ItemQ3 2025 ActualQ3 2025 Consensus*Q4 2025 GuidanceQ4 2025 Consensus*
Revenue ($USD Millions)$769.21 $743.85*$920–$1,000 $970.45*
Non-GAAP EPS ($USD)$0.85 $0.791*$1.20–$1.46 $1.357*
Values retrieved from S&P Global*

Segment breakdown

Segment ($USD Millions)Q2 2025Q3 2025
Semiconductor Test$492 $606
Product Test$85 $88
Robotics$75 $75

Semiconductor Test detail (Q3 2025)

Sub-Segment ($USD Millions)Q3 2025
SoC$440
Memory$128
Integrated Systems Test (SLT/HDD)$38

KPIs and capital deployment

KPIQ1 2025Q2 2025Q3 2025
Non-GAAP Gross Margin %60.6% 57.3% 58.5%
Non-GAAP Operating Margin %20.5% 15.1% 20.4%
Net Cash Provided by Operating Activities ($USD Millions)$161.64 $182.09 $49.05
CapEx ($USD Millions)$64.02 $50.41 $46.69
Share Repurchases ($USD Millions)$157.48 $117.40 $243.79
Dividend per Share ($USD)$0.12 $0.12 $0.12
Cash & Marketable Securities ($USD Millions)——Cash $272.70; Marketable $25.02 + $129.66

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)Q4 2025N/A$920–$1,000 New
GAAP EPS ($USD)Q4 2025N/A$1.12–$1.39 New
Non-GAAP EPS ($USD)Q4 2025N/A$1.20–$1.46 New
Non-GAAP Gross Margin %Q4 2025N/A57–58% New
OpEx (% of Sales)Q4 2025N/A31–33% New
Tax RateQ4 2025N/A14.5% (GAAP & Non-GAAP) New
Interest & OtherOngoingN/AExpect ~$2M net interest expense per quarter while revolver used New
DividendQ4 2025$0.12 last declared $0.12 payable Dec 17, 2025 Maintained

Additionally, management noted Q4 sales expected to increase 25% QoQ and 27% YoY, reflecting accelerated AI demand .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q3 2025)Trend
AI Compute & NetworkingQ2: “Strength in Compute expected to drive stronger second half results” ; Q1: visibility limited, long-term AI driver UltraFLEXplus differentiation; compute/networking ramps; AI-driven revenue composition ~50% in Q3, ~60% in Q4 Accelerating; mix shifting toward AI
Memory (HBM/DRAM/Flash)Q2: Strengthening demand outlook; timing uncertain Memory test $128M; 75% DRAM (HBM), 25% Flash; new singulated-stack HBM insertion shipping; Q4 growth split ~2/3 compute, ~1/3 memory Rising HBM-driven demand; new insertions
SLT/System-Level TestQ1: Mobile-driven SOCT was strongest Titan HP SLT launched for AI/cloud; SLT customers accelerating deliveries; incumbency and upgradeability advantages Strategic build-out; product innovation
Supply chain & CapacityQ2: Improved visibility into H2 Expediting supply chain; accelerating factory capacity across geographies; temporary cost headwinds in Q4 Scaling to meet AI ramps
RoboticsQ2/Q1: Ongoing restructuring; demand weak Flat QoQ, down YoY; indirect channel weak; services 14% of sales; AI-related products 8% Gradual improvement; mix shift to services/AI
Capital AllocationQ1: Authorized up to $1B buybacks through 2026 Q3 repurchases $244M; revolver usage; plan to keep cash/marketable ~ $400M Aggressive buybacks; balanced liquidity

Management Commentary

  • “Our Semiconductor Test Group delivered third quarter sales that exceeded expectations, driving company sales and profit to the high end of our Q3 guidance range… Growth was driven primarily by SoC solutions for artificial intelligence applications and strong performance in memory.” — Greg Smith, CEO .
  • “In memory, our Q3 memory test sales more than doubled from Q2 to $128 million… Our Magnum 7H product … can cover HBM3E and HBM4 … and provides upgrade headroom for HBM4E and HBM5.” .
  • “Q4 sales are expected to be between $920 million and $1 billion… We continue to expedite our supply chain, and we are accelerating production capacity growth at factories in multiple geographies to meet the demand.” — Sanjay Mehta, CFO .
  • “UltraFLEXplus architectural advantages become more valuable … enabling fast test development times and high efficiency volume production.” .
  • Product innovation: “Teradyne Titan HP is a breakthrough system level test solution … currently supporting up to two kilowatts of power, with a roadmap to support four kilowatts.” .

Q&A Highlights

  • Composition of Q4 upside: “It’s kind of 2/3 compute and networking and 1/3 memory… HBM is really strongly represented in that memory up.” .
  • Margin guide drivers: Despite volume tailwinds, Q4 GM (57–58%) reflects factory expansion and one-time supply sourcing costs to meet accelerated demand .
  • Seasonality and lumpiness: AI compute now drives demand; shipments can be lumpy; don’t extrapolate Q3→Q4 linearly into 2026 .
  • VIP concentration and merchant GPU pathway: Tester demand in VIP space driven by a few customers; Teradyne targets specifiers directly for merchant GPUs/CPUs, not foundries .
  • HBM insertions: Q4 HBM ramp is ~half new test insertion (singulated stack) and ~half additional capacity (wafer-level stack); only one major manufacturer routinely does singulated stack testing today .

Estimates Context

  • Q3 2025: Teradyne delivered a beat — Revenue $769.21M vs $743.85M*; Non-GAAP EPS $0.85 vs $0.791* .
  • Q4 2025: Guidance brackets Street — Revenue $920–$1,000M vs $970.45M*; Non-GAAP EPS $1.20–$1.46 vs $1.357*; implies strong sequential growth with temporary margin headwinds .
    Values retrieved from S&P Global*

Key Takeaways for Investors

  • AI compute/networking and HBM memory are the core growth engines; Q4 guide signals a significant ramp with upside skewed toward compute; position for lumpy but upward-trending demand into 2026 .
  • Near-term margin headwinds are transitory (factory expansion and expedited supply); expect leverage to improve as capacity catches up and one-time costs fade .
  • Semiconductor Test mix is shifting toward AI; UltraFLEXplus and Magnum 7H differentiation underpin share gains in compute and HBM test insertions; monitor merchant GPU wins as an additional optionality .
  • Working capital build reduced Q3 FCF; receivables/inventory tied to late-quarter shipments and upcoming ramps — watch cash conversion as the ramp normalizes .
  • Robotics is stabilizing with services and AI-related offerings growing, but core indirect channel remains soft; treat 2025 as a trough with gradual recovery .
  • Capital returns remain robust ($244M buybacks in Q3; $0.12 dividend declared for Dec. 17, 2025), with revolver bridging ramps; model ~$2M quarterly net interest expense while revolver is utilized .
  • Narrative moving the stock: magnitude and timing of AI project ramps, HBM insertion breadth, and any merchant GPU test platform wins; Q4 execution against accelerated deliveries is the near-term catalyst .