Teradyne Surges 13% as AI Chip Testing Demand Drives Record Results
February 3, 2026 · by Fintool Agent
Teradyne+13.41% stock soared 13.4% to $282.98 on Tuesday after the semiconductor test equipment maker demolished fourth-quarter expectations, with AI-related demand now driving more than 60% of revenue and propelling the company to its second-highest revenue quarter in history.
The company reported Q4 revenue of $1.083 billion, crushing the $978 million consensus by 11% and surging 44% from a year ago. Non-GAAP earnings of $1.80 per share beat the $1.36 estimate by 32%, with net income more than doubling sequentially.
"Our Q4 results were above the high end of our guidance range, fueled by AI-related demand in compute, networking and memory within our Semi Test business," said CEO Greg Smith. "In 2026, we expect year-over-year growth across all of our businesses, with strong momentum in compute driven by AI."
The Numbers That Matter
| Metric | Q4 2025 | Q4 2024 | YoY Change |
|---|---|---|---|
| Revenue | $1,083M | $753M | +44% |
| Non-GAAP EPS | $1.80 | $0.95 | +89% |
| GAAP EPS | $1.63 | $0.90 | +81% |
| Semi Test Revenue | $883M | $561M | +57% |
| Operating Profit Rate | 29.0% | 21.7% | +730 bps |
The semiconductor test segment—now 82% of total revenue—was the primary driver, with SoC test revenue of $647 million (up 47% sequentially) and memory test revenue of $206 million (up 61% sequentially), marking a record quarter for the memory business.
Ask Fintool AI AgentAI Now Dominates the Revenue Mix
The most striking development is the acceleration of AI-driven revenue. In Q3, AI applications drove 40-50% of Teradyne's sales. By Q4, that jumped to over 60%. Looking ahead to Q1 2026, management expects approximately 70% of revenue to be AI-related.
This represents a fundamental shift in Teradyne's business. Back in 2023, only about 10% of SoC product revenue came from compute applications, with 50% in auto/industrial and 40% in mobile. By 2025, nearly 50% was in compute, with auto/industrial and mobile each balanced around 25%.
"Compute product revenue grew 90% year-over-year," CFO Michelle Turner said on the earnings call. "This growth can be attributed to the decisions and investments we've made over the past few years that are now yielding."
The company maintains roughly 50% market share in the VIP (vertically integrated processor) compute testing market, though Smith cautioned that "no share is safe" as Nvidia-2.84% and hyperscalers continue to evaluate test platforms for their custom silicon.
Blowout Guidance Points to New Records
Teradyne's Q1 2026 outlook far exceeded Wall Street expectations:
| Metric | Q1 2026 Guidance | Consensus | Beat |
|---|---|---|---|
| Revenue | $1,150M - $1,250M | $926M | +24% at midpoint |
| Non-GAAP EPS | $1.89 - $2.25 | $1.25 | +66% at midpoint |
| Gross Margin | 58.5% - 59.5% | - | +180 bps QoQ |
| Operating Profit | 30.5% - 33.5% | - | Record |
At the midpoint, Q1 revenue of $1.2 billion would be a new quarterly record, up 11% sequentially and 75% year-over-year.
Management signaled that 2026 will break from historical patterns. Unlike prior years when 53% of revenue came in Q2/Q3 driven by mobile device cycles, 2025 saw Q4 as the largest quarter (32% of full-year revenue). For 2026, the company expects roughly 60% of sales in the first half—the inverse of 2025.
Ask Fintool AI AgentThe $6 Billion Vision
Perhaps the most significant announcement was Teradyne's new "evergreen" target earnings model. Rather than anchoring to a specific future year, management framed expectations around when the ATE (Automated Test Equipment) market reaches $12-14 billion, up from approximately $9 billion in 2025.
| Metric | 2025 Actual | Target Model |
|---|---|---|
| ATE TAM | $9B | $12-14B |
| Teradyne Revenue | $3.2B | $6.0B |
| Gross Margin | 58.3% | 59-61% |
| Operating Profit | 22.3% | 30-34% |
| Non-GAAP EPS | $3.96 | $9.50-$11.00 |
The model implies roughly 2x revenue growth and 2.5x EPS expansion from 2025 levels. Smith emphasized that this outlook is "de-risked" by Teradyne's diversified end-market exposure: if mobile and auto/industrial recover as expected while compute continues its trajectory, the company has multiple paths to hit the target.
Merchant GPU: The Next Frontier
Management revealed progress on winning business with merchant GPU customers—widely understood to be Nvidia-2.84%. Smith said Teradyne is "making great progress" on production qualification, with expectations for material revenue in the second half of 2026.
"Once we achieve qualification, I believe we'll incrementally gain share from these devices over the course of a couple of years," Smith said. "We see that as more of a factor in the second half of 2026... Single-digit kind of share numbers to start."
The opportunity is significant: the compute portion of the SoC TAM was approximately $5 billion in 2025, with the VIP (custom ASIC) segment at just over $600 million. As hyperscalers build more custom AI chips and NVIDIA expands production, test equipment demand should accelerate.
Robotics: Finally Turning the Corner
After years of restructuring—including layoffs of approximately 400 employees in 2025—Teradyne's robotics division delivered three consecutive quarters of growth. Q4 revenue of $89 million was up 19% sequentially, with greater than 5% coming from "a large e-commerce customer."
That e-commerce customer is expected to drive roughly 3x revenue growth in 2026, with Smith indicating the relationship "will be ramping in a larger number of facilities" in subsequent years. The segment is targeting breakeven in 2026, with positive contribution thereafter.
Ask Fintool AI AgentStock Performance: Near All-Time Highs
Tuesday's 13.4% surge brought shares to $282.98—just below the intraday high of $285.92, which represents a new 52-week high. The stock has more than tripled from its 52-week low of $65.77, reflecting the dramatic shift in AI chip testing demand.
At $283, Teradyne trades at approximately 70x forward earnings based on the $4.00+ EPS Street estimates for 2026—a premium valuation that reflects expectations for sustained AI-driven growth.
What to Watch
Near-term catalysts:
- Merchant GPU qualification announcement (expected H1 2026)
- Q2 2026 guidance (likely at the March earnings call)
- MultiLane joint venture closing (expected Q2 2026)
Key risks:
- Customer concentration: Three 10%+ customers (two specifiers, one purchaser)
- Limited second-half visibility: Management emphasized "lumpiness" in compute demand
- Mobile uncertainty: Capital efficiency improvements by customers could limit TAM recovery
The bottom line: Teradyne's Q4 results validate the company's multi-year pivot from mobile to AI compute. With AI driving 60%+ of revenue and a target model pointing to $11 EPS, the stock's premium valuation appears justified—as long as data center buildout continues unabated.