Q4 2024 Earnings Summary
- Teradyne expects strong growth in their Semiconductor Test business in 2025, driven by increased confidence and strengthened outlook over the past 90 days, particularly in the Semi Test segment, which saw acceleration into more business in Q4 of 2024.
- Despite challenges in the Robotics business, Teradyne is restructuring to improve efficiency and has made significant progress, including the introduction of new AI-enabled products and adding AI content to their products, positioning them well for future growth when the market recovers.
- Utilization rates of Teradyne's semiconductor test equipment have increased by approximately 10% year-on-year exiting 2024, and the business has shifted from upgrades to more system sales, indicating increased demand and potential for revenue growth.
- Teradyne's Robotics business is facing ongoing losses and underperformance due to prolonged weakness in the industrial automation market, which has not shown signs of recovery since 2022. The company reduced its 2025 growth forecast for robotics to about 10%, down from previous expectations of high teens growth.
- The company anticipates a significant slowdown in its compute segment, with the compute TAM expected to grow only 5% in 2025 compared to 57% growth in 2024. This slowdown is attributed to increased efficiency in production and customers' reduced need for test equipment, which could limit Teradyne's revenue growth in this key sector.
- Teradyne has had to restructure its Robotics business multiple times, highlighting persistent challenges in achieving profitability and growth in this segment. Ongoing restructuring efforts may indicate difficulties in capitalizing on the industrial automation market, raising concerns about the viability of their investment in this area.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +12% (from $670.7M to $752.9M) | Total revenue increased by 12% YoY driven by strong gains in Semiconductor Test revenue, which more than offset declines in Robotics and EMEA revenue. This growth built on previous periods’ lower semiconductor sales, demonstrating that renewed demand—especially from AI-related markets—helped reverse recent downward trends. |
Semiconductor Test | +45% (from $431.0M to $626.3M) | Semiconductor Test revenue surged by 45% YoY because of robust sales in computing and memory applications driven by AI-related demand, including record HBM DRAM shipments. This remarkable improvement recovers from the previously lower values observed in Q4 2023, highlighting a significant market rebound. |
Robotics | -18% (from $128.7M to $98.2M) | Robotics revenue declined by 18% YoY mainly due to ongoing sales channel transformations and a weak industrial macro environment, which further impacted demand compared to the higher revenue levels in Q4 2023. These challenges have persisted despite previous quarterly improvements in some robotics segments. |
EMEA Revenue | -38% (from $106.76M to $65.61M) | EMEA revenue fell steeply by 38% YoY, reflecting significant regional market contractions and persistent macroeconomic pressures that worsened compared to the prior period’s performance. This decline underscores the continuing struggle in a region where economic headwinds have not yet abated. |
Asia Pacific Revenue | Slight increase (from $433.48M to $444.03M) | Asia Pacific revenue edged up modestly, indicating stability with incremental gains largely driven by AI-related increments in semiconductor test segments. This slight improvement suggests that growth in local demand helped overcome earlier challenges, reflecting a positive but limited rebound compared to previous values. |
Americas Revenue | Nearly flat (around $130M) | Americas revenue remained nearly unchanged YoY, as the balanced interplay of stronger semiconductor test performance and soft robotics results maintained overall stability. This steady performance reflects a mature market where previous fluctuations have now largely stabilized. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Sales (Revenue) | Q1 2025 | 5%-10% lower QoQ vs. Q4 2024 | $660M-$700M | no change |
Gross Margins | Q1 2025 | Slightly below target model | 58.5%-59.5% | no change |
Operating Expenses | Q1 2025 | Expected to grow 15%-20% YoY | 41.5%-42.5% of sales | no prior guidance |
Non-GAAP EPS | Q1 2025 | No prior guidance | $0.58-$0.68 | no prior guidance |
Non-GAAP Operating Profit | Q1 2025 | No prior guidance | 17% | no prior guidance |
Operating Expenses | FY 2025 | Low teens YoY increase | 8%-10% YoY increase | lowered |
SOC Test TAM | FY 2025 | No prior guidance | $4.7B-$5.1B | no prior guidance |
Memory TAM | FY 2025 | No prior guidance | $1.3B-$1.5B | no prior guidance |
Revenue Growth in Robotics | FY 2025 | No prior guidance | 10% | no prior guidance |
Gross Margins | FY 2025 | No prior guidance | 59%-60% | no prior guidance |
GAAP Tax Rate | FY 2025 | No prior guidance | 15.25% | no prior guidance |
Non-GAAP Tax Rate | FY 2025 | No prior guidance | 15% | no prior guidance |
Share Buybacks | FY 2025 | No prior guidance | Up to $400M | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Revenue | Q4 2024 | $710 million to $760 million | 752.9 million | Met |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Robotics business challenges | Cited underperformance and macro headwinds; reorganized UR and MiR, introduced channel growth and AI-enabled products. | Faced weak market conditions, ended 2024 with a 13% non-GAAP operating loss, and continued restructuring to lower breakeven revenue to $365M. | Consistent focus on reducing losses and leveraging new product introductions for future growth. |
Semiconductor test & HBM growth | AI-driven demand drove record memory revenue; TAM forecasts were revised upward; strong share in HBM performance test. | Expects 7% YoY SOC TAM growth in 2025; memory reached $500M from AI-driven HBM demand, but capacity digestion may soften equipment needs. | Ongoing driver of growth; near-term caution on capacity absorption but long-term optimism. |
AI-driven compute demand & slowdown | Projected high demand from AI applications but flagged potential slowdowns or TAM flattening; still saw robust near-term outlook. | AI demand remains strong; highlighted efficiency gains reducing future test capacity needs. Expects stable demand across 2025 with a slight bias to 2H. | Repeated bullish sentiment tempered by efficiency concerns and possible future moderation. |
Confidence in 2025 broad growth | Consistent optimism, citing AI and mobile/auto rebounds as main contributors to 2025 performance. | Foresees a second-half 2025 recovery across semi, auto, and industrial segments; targets 10% robotics growth. | Sustained confidence each quarter, with 2025 as a key inflection point. |
Pull-ins from future quarters | Q3 call noted customers pulling in future forecasts; earlier calls highlighted accelerated demand (e.g., Q3 → Q2). | No mention in Q4 2024. | No longer mentioned in Q4, indicating diminishing importance of early pull-ins. |
Low exposure to China | Previously stated 10% sales to China, with limited impact from local tester competition. | No mention in Q4 2024. | Dropped from discussion after Q3, suggesting less emphasis on China-focused effects. |
New AI-enabled robotics products | Consistent launches of AI-powered robots (e.g., MiR1200, UR AI toolkit) and NVIDIA partnerships. | Highlighted MiR1200 Pallet Jack and UR’s AI accelerator; expects integrated AI to drive new segments. | Continuously expanding AI-driven robotics portfolio and partnerships. |
Shift from upgrades to full systems | Mentioned in Q2 as nearing a shift once utilization rates rose, but not discussed in Q3 or Q1. | Observed tipping point: more full system sales vs. upgrades by end of 2024. | Reemerged in Q4 after initial mention in Q2, reflecting evolving capacity utilization. |
Reduced robotics growth forecast | Revised from 5–10% and lower end of 10–20% in earlier calls due to weak macro environment. | Guided around 10% YoY, down from high teens; attributed to conservative view of market conditions. | Gradual downward adjustment from high-teens to about 10%. |
Increased utilization rates | Q3 saw mid- to high single-digit gains; Q2 expected a strong H2 rise; Q1 observed increasing utilization with short visibility. | Noted a 10% YoY utilization uptick and shift from upgrades to system sales. | Steady increase throughout the year, now fueling more complete system demand. |
-
Semi Test Growth Drivers
Q: What drives low single-digit Semi Test share growth?
A: Teradyne anticipates low single-digit share growth in Semi Test, driven by maintaining the 50% share in compute VIPs as the TAM grows. Incremental improvement in mobile is expected due to increased complexity filling underutilized testers. In auto and industrial, despite a short-term slowdown, increasing semiconductor content per model year should lead to modest growth. -
VIP Test TAM and Share
Q: What is the VIP test TAM forecast and Teradyne's share?
A: The VIP test TAM is expected to be $400–$500 million in 2025, growing to around $600 million in 2026. Teradyne aims to maintain its 50% share, expecting to win one in two sockets by leveraging strong product differentiation and customer relationships. -
Infineon Partnership Benefits
Q: What are the benefits of the Infineon partnership?
A: Teradyne will accelerate its roadmap to cover new device types and higher powers in the discrete semiconductor market. Infineon benefits by having its test capabilities commercialized, addressing the entire market rather than just Infineon's needs. -
HBM Test Outlook
Q: What is the outlook for HBM test demand?
A: HBM test demand may see digestion in 2025 due to existing capacity but could recover in 2026. The timing of the transition to HBM4 is key; an earlier ramp could pull capacity needs into 2025, providing upside to the TAM. -
Compute TAM Growth Slowing
Q: Why is compute TAM growth slowing to 5% in 2025?
A: Compute TAM growth is slowing to 5% due to increased production efficiency as devices mature, reducing test times. While AI cloud demand remains strong, test equipment needs don't grow in lockstep due to efficiency gains. -
AI Compute Customers and Share
Q: How will Teradyne maintain 50% share in AI compute?
A: Teradyne plans to maintain its 50% share by leveraging product differentiation and strong relationships with design service providers and hyperscalers. It expects to add one or two new customers between 2025 and 2026. -
Robotics Restructuring Confidence
Q: What gives confidence in the robotics restructuring plan?
A: The restructuring combines marketing, sales, and service of UR and MiR to improve efficiency and partner experience. Despite market weakness, progress with AI-enabled products and OEM channels is positive. -
Robotics Profitability Plan
Q: What is the plan to make robotics profitable?
A: Teradyne aims to reset robotics breakeven to $365 million in 2024, focusing on efficiency to generate positive operating margin even under weak conditions. They plan to leverage top-line growth by limiting OpEx increases and improving gross margins. -
System-Level Test Growth
Q: How does system-level testing contribute to growth?
A: System-level test is a long-term growth factor, adding necessary test insertions to achieve required quality, contributing to expected test revenue growth of 12–17% through 2028. -
Utilization Rates and Capacity
Q: What is the status of test cell utilization rates?
A: Utilization rates have increased by about 10% year-over-year exiting 2024 due to upgrades activating idle testers. The business has shifted from upgrades to system sales as utilization tightens, indicating capacity investments in the second half. -
Second Half Recovery Risks
Q: What are the risks to second-half improvement?
A: Recovery depends on end-market conditions in mobile, auto, and industrial sectors. Teradyne sees utilization tightening and has a pipeline that gives confidence, but macroeconomic headwinds pose risks. -
Revenue Assumptions for 2028
Q: What are the revenue assumptions behind the 2028 model?
A: Teradyne expects overall revenues to grow 12–18%, with test revenues growing 12–17% and robotics 18–24% annually. This is based on drivers like AI compute growth, silicon content in cars, and system-level test expansion. -
Consolidating Robotics Go-to-Market
Q: What does consolidating go-to-market in robotics entail?
A: Teradyne combined marketing, sales, and service functions of UR and MiR to create a unified organization, improving efficiency and partner experience, as many partners work with both product lines. -
2-Nanometer Ramp Outlook
Q: What is the outlook for 2-nanometer ramp timing?
A: Early production of 2-nanometer devices is expected in late 2025, with the bulk in 2026. These devices have higher complexity, requiring more tester memory and higher peak power, leading to equipment upgrades. -
Compute Market Dynamics
Q: How are compute and mobile segments expected to grow?
A: Compute is expected to grow, driven by AI cloud demand, while mobile is anticipated to have a modest increase. The shift from mobile to high-performance compute affects dynamics, with primary benefits from client compute expected in the wireless business unit. -
Outlook for 2025 Revenue Growth
Q: What changed in Teradyne's outlook for 2025 revenue growth?
A: Revenue is expected to grow about 15% from 2024 levels, with Semi Test strength offsetting lower robotics growth due to market conditions. The earlier expectation of high-teens growth was adjusted due to a reduced robotics market outlook. -
SoC Compute Revenue Growth
Q: How is SoC compute revenue expected to grow?
A: Compute will be one of the largest growers, with TAM increasing in compute VIPs from $300 million in 2024 to around $600 million in 2026. Mobile is expected to be flat to slightly up, with auto and industrial growing. -
Robotics Market Benchmark
Q: Is the robotics industry benchmark down this year?
A: Teradyne anticipates the broader robotics market to be down about 5%, with Teradyne expecting to outperform and grow around 10%. If the market were flat, they would expect growth of around 20%. -
Plan B for Robotics Business
Q: Is there a Plan B if robotics doesn't improve?
A: The company is not considering divesting the robotics business; they believe in its long-term growth potential despite market headwinds. They aim to improve efficiency and generate positive operating margin under weak conditions. -
SOC Test TAM Breakdown
Q: What is the SOC test TAM breakdown for 2025?
A: The SOC TAM is expected to be $4.9 billion in 2025, with $2.3 billion in compute, $0.9 billion in mobile, $1 billion in auto and industrial, and $0.7 billion in service. -
Details on Revenue Assumptions
Q: What are the finer details behind revenue assumptions?
A: Revenue growth assumptions are based on both top-down and bottoms-up analysis, considering segment drivers like AI compute, silicon content in cars, and share gains in compute. Test revenues are expected to grow at 12–17%, and robotics at 18–24% annually.
Research analysts covering TERADYNE.