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Teradyne (TER)
NASDAQ:TER
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Teradyne
(NASDAQ:TER)
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Rating:77Outperform
Price Target:
$343.00
▲(19.75% Upside)
Action:ReiteratedDate:02/05/26
The score is driven by strong financial quality (profitability and low leverage) and very bullish technical momentum. This is tempered by weaker 2025 cash flow conversion and a demanding valuation (high P/E, low yield), while the earnings call adds support via strong AI-led guidance but with visibility and concentration risks.
Positive Factors
Conservative balance sheet & strong ROE
Teradyne’s low leverage and sizable equity provide durable financial flexibility. Healthy ROE (~18–20%) indicates efficient capital use and supports sustained dividends, buybacks or opportunistic M&A. This conservatism helps the business weather semiconductor cycle volatility over months.
AI-driven Semiconductor Test demand and backlog
Structural adoption of AI in data centers is creating multi-quarter demand for high-end ATE. A substantial backlog tied to AI workloads increases near-term visibility and supports higher-capacity system deployments, strengthening long-term revenue durability and aftermarket service streams.
High margins and consistent cash generation
Sustained high gross margins reflect pricing power from complex ATE and service mix, enabling healthy operating profits and recurring cash flow. Consistent free cash flow generation funds reinvestment and shareholder returns, supporting long-term competitiveness and capital allocation flexibility.
Negative Factors
Revenue lumpiness and customer concentration
Significant revenue swings from a small number of large programs reduce predictability and increase execution risk. Program timing or a single large customer decision can materially shift quarterly results, complicating planning and potentially producing sharp sequential variability over months.
High exposure to AI data-center end market
Concentration in AI data-center spending amplifies cyclicality tied to hyperscaler budgets and GPU cycles. While AI demand is powerful, reliance on one end market raises vulnerability to program timing, share shifts (merchant GPU ramps) and capital spending cycles that can reverse rapidly.
Weakened cash conversion in 2025
A decline in cash conversion reduces internal funding capacity and increases sensitivity to working capital swings. Over a multi-month horizon this can constrain opportunistic investments or require more cautious capital returns, especially if cyclical revenues lead to inventory or receivable pressure.
Teradyne (TER) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$46.70B
Dividend Yield0.24%
Average Volume (3M)3.91M
Price to Earnings (P/E)54.6
Beta (1Y)1.85
Revenue Growth4.56%
EPS Growth-15.44%
CountryUS
Employees6,500
SectorTechnology
Sector Strength88
IndustrySemiconductors
Share Statistics
EPS (TTM)1.80
Shares Outstanding156,555,950
10 Day Avg. Volume3,643,412
30 Day Avg. Volume3,910,416
Financial Highlights & Ratios
PEG Ratio23.29
Price to Book (P/B)10.83
Price to Sales (P/S)9.49
P/FCF Ratio67.22
Enterprise Value/Market Cap1.00
Enterprise Value/Revenue14.65
Enterprise Value/Gross Profit25.13
Enterprise Value/Ebitda59.92
Forecast
1Y Price Target
$311.40Price Target Upside8.72% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering17
EPS Forecast (FY)6.33
Revenue Forecast (FY)$4.18B
Teradyne Business Overview & Revenue Model
Company DescriptionTeradyne, Inc. designs, develops, manufactures, sells, and supports automatic test equipment worldwide. The company operates through Semiconductor Test, System Test, Industrial Automation, and Wireless Test segments. The Semiconductor Test segment offers products and services for wafer level and device package testing in automotive, industrial, communications, consumer, smartphones, cloud computer and electronic game, and other applications. This segment also provides FLEX test platform systems; J750 test system to address the volume semiconductor devices; Magnum platform that tests memory devices, such as flash memory and DRAM; and ETS platform for semiconductor manufacturers, and assembly and test subcontractors in the analog/mixed signal markets. It serves integrated device manufacturers that integrate the fabrication of silicon wafers into their business; fabless companies that outsource the manufacturing of silicon wafers; foundries; and semiconductor assembly and test providers. The System Test segment offers defense/aerospace test instrumentation and systems; storage test systems; and circuit-board test and inspection systems. The Industrial Automation segment provides collaborative robotic arms, autonomous mobile robots, and advanced robotic control software for manufacturing, logistics, and light industrial customers. The Wireless Test segment provides test solutions for use in the development and manufacture of wireless devices and modules, smartphones, tablets, notebooks, laptops, peripherals, and Internet-of-Things devices under the LitePoint brand name. This segment also offers IQxel products for Wi-Fi and other standards; IQxstream solution for testing GSM, EDGE, CDMA2000, TD-SCDMA, WCDMA, HSPA+, LTE, and 5G technologies; IQcell, a multi-device cellular signaling test solution; IQgig test solution; and turnkey test software for wireless chipsets. Teradyne, Inc. was incorporated in 1960 and is headquartered in North Reading, Massachusetts.
How the Company Makes MoneyTeradyne makes money primarily by selling capital equipment, software, and related services across its business segments. (1) Semiconductor Test: The largest revenue stream for Teradyne is the sale of automatic test equipment (ATE) platforms and instruments used by chipmakers and semiconductor test subcontractors to validate and screen integrated circuits during production. Revenue is driven by shipments of new test systems and configuration content (test instruments, options, and performance upgrades) aligned to semiconductor device types (e.g., compute, mobility, automotive, industrial). Teradyne also earns recurring and follow-on revenue from services such as installation, maintenance/support contracts, calibration/repair, spare parts, and system upgrades, which extend the life and capability of deployed testers. (2) System Test: Teradyne generates revenue from test solutions that validate electronic systems and modules (for example, storage and wireless/communications-related testing), typically sold as integrated test platforms that can include hardware, software, fixtures, and engineering services. Similar to Semiconductor Test, this business also contributes service, support, and aftermarket revenue tied to the installed base. (3) Robotics: Through its robotics businesses (including collaborative robots and autonomous mobile robots), Teradyne earns revenue from selling robots and automation solutions to industrial customers, as well as associated software, peripherals, and support services. Robotics revenue is influenced by factory automation adoption, customer capital spending, and the breadth of applications addressed (material handling, machine tending, intralogistics, and related use cases). Across segments, Teradyne’s earnings are affected by the cyclical nature of semiconductor and industrial capital expenditures, product mix (high-end testers and instrumentation vs. base configurations), and the size of its installed base that supports ongoing service and upgrade revenue. Specific partnership details or customer concentration figures: null.
Teradyne Key Performance Indicators (KPIs)
Any
Revenue by Segment
Highlights income from different business units, shedding light on which segments drive growth and profitability, and where the company might face challenges.
Highlights income from different business units, shedding light on which segments drive growth and profitability, and where the company might face challenges.
Data provided by:
The Fly
The FlyTeradyne Earnings Call Summary
Earnings Call Date:Feb 02, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:Apr 28, 2026
Earnings Call Sentiment Positive
The call presented very strong operational and financial results, led by an AI-driven surge across Semiconductor Test, with record-like quarterly revenue, large sequential growth, strong margins, robust cash generation, and an ambitious midterm target earnings model. Offsetting these positives are recurring concerns about revenue lumpiness, customer concentration, inventory write-downs, and limited visibility into the second half of 2026 (including merchant GPU timing). On balance, the highlights (broad revenue/earnings beat, AI-powered demand, clear pathway to materially higher midterm earnings, and healthy capital returns) materially outweigh the lowlights, though execution and timing risks remain.Q4-2025 Updates
Positive Updates
Quarterly Revenue and EPS Beat
Q4 sales of $1.083 billion and non-GAAP EPS of $1.80 were both above the high end of guidance; Q4 was the highest revenue quarter of 2025 and the company's second-highest quarter ever.
Strong Sequential Growth Driven by AI
Company reported 41% sequential revenue growth in Q4; AI-driven demand accounted for >60% of revenue in Q4 (40–50% in Q3) and is expected to drive >70% of revenue in Q1 2026.
Semiconductor Test Strength (SoC & Memory)
Semi Test revenue was $883M in Q4. SoC revenue was $647M, up 47% quarter-over-quarter; memory revenue was $206M, up 61% quarter-over-quarter and a record sales quarter for memory. Full-year Semiconductor Test grew 19% YoY; SoC test revenue grew 23% YoY; compute grew 90% YoY.
Full Year Revenue and EPS Growth
Full year 2025 revenue was $3.2 billion, up 13% YoY; non-GAAP EPS was $3.96, a 23% increase versus prior year.
Improved Profitability and Cash Generation
Q4 non-GAAP gross margin 57.2% and operating profit rate 29%; non-GAAP operating profit dollars roughly doubled to $314M quarter-on-quarter; Q4 free cash flow $219M and $450M for the full year.
Aggressive Shareholder Returns and Strong Liquidity Management
Returned $204M to shareholders in Q4 and $785M for the full year (174% of free cash flow); ended 2025 with $448M of cash and marketable securities and emphasized opportunistic capital allocation for M&A and buybacks.
Positive Group-Level Momentum
Product Test grew double digits in Q4 and full year Product Test up 8% driven by defense/aerospace and successful Quantifi Photonics integration; Robotics revenue $89M (up 19% from Q3) with a meaningful e-commerce ramp (>5% of Robotics revenue in Q4).
Ambitious Evergreen Target Earnings Model
At an assumed ATE TAM of $12–$14B, Teradyne targets roughly $6B revenue, 59–61% gross margin, 27–29% OpEx, 30–34% operating profit, and non-GAAP EPS of $9.50–$11, implying ~2x revenue and ~2.5x EPS vs 2025 over the midterm.
Strategic Business Development
Announced majority-owned joint venture with MultiLane to address high-speed I/O and data-center interconnect test demand (expected close in H1 2026) and noted new HDD and SLT customer wins and broader IST customer diversification; expecting HDD revenue to roughly double from 2025 to 2026.
Negative Updates
Revenue Lumpiness and Customer Concentration
Business remains lumpy and concentrated: in 2025 there were two specifying customers >10% and one purchasing customer >10%; management repeatedly cautioned that a few large program ramps can materially move results quarter-to-quarter and year-to-year.
Uncertainty in 2H 2026 Visibility
Management has limited visibility into the second half of 2026 and expects a possible 2–3 quarter surge followed by a digestion period; ATE TAM growth for 2026 quoted very broadly (20–40%), reflecting material uncertainty.
Inventory Write-Down and Margin Pressure in Non-Semi Lines
Q4 non-GAAP gross margins (57.2%) were offset by lower Product Test group margins, robotics mix and an inventory write-down on legacy products, indicating some product-line margin pressure.
Mobile Market Uncertainty
Mobile TAM outlook is uncertain — management expects complexity to rise (mobile TAM modeled ~1.5x current) but is cautious on unit volumes and capital efficiency improvements, which could limit upside from mobile recovery.
Merchant GPU Ramp Timing and Share Uncertainty
Merchant GPU revenue was not included in Q1 guidance and is expected to contribute in 2H 2026; management expects single-digit share initially with multi-year ramp to potentially reach a competitive balance, creating timing risk to modeled revenue.
Dependence on AI Data Center Concentration
AI data center demand is now the primary growth driver (40–70% of revenue across recent quarters), increasing exposure to a single major end-market and associated cyclicality and program timing risk.
Potential Near-Term Digest Period
Management warned the strong Q1 run rate could be followed by a shorter digestion period as program timing and customer buying patterns normalize, introducing downside sequencing risk to 2026 cadence.
Company Guidance
Teradyne guided Q1 2026 revenue of $1.15–$1.25 billion (midpoint +11% sequential, +75% YoY) with non‑GAAP EPS of $1.89–$2.25 on ~158 million diluted shares; Q1 gross margin 58.5%–59.5% (midpoint +180 bps QoQ), OpEx up ~6% vs Q4 and running ~26%–28% of sales, and an implied non‑GAAP operating profit rate of ~32% at the midpoint. Management said AI will drive upwards of ~70% of Q1 revenue, they have a healthy backlog and expect 2026 to be front‑loaded (roughly 60% of sales in H1), and the MultiLane JV (closing H1) will be consolidated into Product Test and be accretive with de minimis EPS impact. Longer term, at an ATE TAM of $12–$14 billion they target roughly $6 billion of revenue with 59%–61% gross margin, OpEx 27%–29% of revenue, operating profit 30%–34% and non‑GAAP EPS $9.50–$11 (about 2x 2025 revenue and ~2.5x 2025 EPS).Teradyne Financial Statement Overview
Summary
Strong profitability and a conservative balance sheet support resilience (low leverage, healthy ROE), and revenue rebounded in 2025. The main offset is weaker cash conversion in 2025 (OCF and FCF covering a lower share of net income) and a notable step-up in debt, even if leverage remains low.Income Statement
Revenue rebounded in 2025 (+11.6% YoY) after a downcycle in 2022–2023, showing improving demand. Profitability remains strong with ~58–59% gross margin and ~17–19% net margin in 2023–2025, but margins are still well below the 2020–2021 peak (net margin ~25–27% and higher operating margins). Overall: solid earnings power and recovery momentum, with some evidence of post-peak normalization in profitability.78
Positive
Balance Sheet
The balance sheet is conservatively levered, with low debt relative to equity (debt-to-equity ~0.05–0.12 from 2023–2025). Shareholders’ equity is sizable (~$2.8B in 2024–2025) and returns on equity are healthy (~18–20% recently), though down from the exceptionally strong 2020–2021 levels. Key watch item: total debt increased notably in 2025 versus 2024, even though leverage remains low overall.86
Very Positive
Cash Flow
Cash generation is positive and consistent, with operating cash flow around ~$585–$674M in 2023–2025 and free cash flow ~$426–$474M. However, cash conversion has weakened: in 2025, operating cash flow covered only ~61% of net income and free cash flow was ~67% of net income (both below prior years). Free cash flow also dipped slightly in 2025 (about -1.4% YoY), indicating some working-capital or investment-related drag despite stable profitability.67
Positive
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 3.19B | 2.82B | 2.68B | 3.16B | 3.70B |
| Gross Profit | 1.87B | 1.65B | 1.54B | 1.87B | 2.21B |
| EBITDA | 768.08M | 732.41M | 640.26M | 954.78M | 1.30B |
| Net Income | 554.05M | 542.37M | 448.75M | 715.50M | 1.01B |
Balance Sheet | |||||
| Total Assets | 4.17B | 3.71B | 3.49B | 3.50B | 3.81B |
| Cash, Cash Equivalents and Short-Term Investments | 322.00M | 599.67M | 819.73M | 894.38M | 1.37B |
| Total Debt | 347.14M | 134.54M | 147.71M | 197.06M | 240.76M |
| Total Liabilities | 1.37B | 889.42M | 960.93M | 1.05B | 1.25B |
| Stockholders Equity | 2.80B | 2.82B | 2.53B | 2.45B | 2.56B |
Cash Flow | |||||
| Free Cash Flow | 450.41M | 474.08M | 425.59M | 414.67M | 965.89M |
| Operating Cash Flow | 674.41M | 672.18M | 585.23M | 577.92M | 1.10B |
| Investing Cash Flow | -368.62M | -622.34M | -179.65M | 43.75M | 120.36M |
| Financing Cash Flow | -562.25M | -251.77M | -501.91M | -892.99M | -1.01B |
Teradyne Technical Analysis
Positive
286.42
Price Trends
274.01
Positive
226.99
Positive
167.67
Positive
Market Momentum
3.51
Positive
51.31
Neutral
50.11
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TER, the sentiment is Positive. The current price of 286.42 is below the 20-day moving average (MA) of 309.43, above the 50-day MA of 274.01, and above the 200-day MA of 167.67, indicating a neutral trend. The MACD of 3.51 indicates Positive momentum. The RSI at 51.31 is Neutral, neither overbought nor oversold. The STOCH value of 50.11 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for TER.
Teradyne Risk Analysis
Teradyne disclosed 34 risk factors in its most recent earnings report. Teradyne reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Teradyne Peers Comparison
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
77 Outperform | $46.70B | 54.64 | 19.88% | 0.24% | 4.56% | -15.44% | |
68 Neutral | $10.63B | 26.10 | 8.73% | 0.81% | 0.13% | -16.17% | |
66 Neutral | $16.97B | 54.25 | 6.12% | 0.47% | 0.59% | 25.65% | |
64 Neutral | $23.59B | 183.93 | 1.53% | ― | -16.13% | -81.06% | |
63 Neutral | $46.65B | 26.78 | 12.81% | 2.29% | 8.01% | 10.41% | |
61 Neutral | $37.18B | 12.37 | -10.20% | 1.83% | 8.50% | -7.62% | |
56 Neutral | $30.11B | 136.11 | 0.97% | 1.28% | -17.33% | -76.71% |
* Technology Sector Average
TER
Teradyne
298.27
208.43
232.01%
ASX
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21.52
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126.10%
AMKR
Amkor
44.63
25.27
130.53%
ENTG
Entegris
111.64
11.27
11.23%
ON
ON Semiconductor
59.88
15.83
35.94%
STM
STMicroelectronics
33.46
8.37
33.34%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.