Teradyne (TER) Risk Analysis

We believe that our technological position depends primarily on the technical competence and creative ability of our engineers. In a rapidly evolving market, such as ours, the development or acquisition of new technologies, commercialization of those technologies into products and market acceptance and customer demand for those products are critical to our success. In the electronics, semiconductor, and robotics industries, products are often replaced by more technologically advanced substitutes and, as demand for older technology falls, the price at which such products can be sold drops. If we cannot advance new technologies to meet our customers' demands, our revenues and financial condition may be adversely impacted. Successful product development or acquisition, introduction and acceptance depend upon a number of factors, including: - new product selection and ability to predict market requirements and design new products that address those requirements;- ability to meet customer requirements including with respect to safety and cybersecurity;- development of competitive products by competitors;- timely and efficient completion of product design;- timely and efficient implementation of manufacturing and manufacturing processes;- timely remediation of product performance issues, if any, identified during testing;- assembly processes and product performance at customer locations;- differentiation of our products from our competitors' products;- management of customer expectations concerning product capabilities and product life cycles;- transition of customers to new product platforms;- compliance with product safety regulations;- ability to protect products from cyber attacks when used by our customers;- ability to attract and retain technical talent; and - innovation that does not infringe on the intellectual property rights of third parties.

Our use of AI tools may subject us to significant competitive, legal, regulatory and other risks, and there can be no assurance that our use of AI tools will enhance our products, business operations or result in a benefit to us. Our competitors may be more successful in their use of AI tools, including by developing superior products or improving their operations with the assistance of AI. Additionally, there could be adverse impacts from flawed algorithms, including related to incorporation of third-party copyrighted materials into large language models; data quality and bias, as well as challenges implementing and maintaining AI tools, such as the complications arising from integrating such tools with existing systems and practices, and from reliance on third-party AI vendors. Our use of AI tools, or our customers uses of our products that incorporate AI, could also result in the loss of confidential information or intellectual property or an inability to claim or enforce intellectual property rights, as well as subject us to risks related to intellectual property infringement or misappropriation, data privacy, cybersecurity, and the unauthorized use of our data. The jurisdictions in which we conduct business have and may adopt laws and regulations related to AI, which could cause us to incur greater compliance costs, limit our use of AI tools, or subject us to legal liabilities.

Capital equipment providers in the electronics, semiconductor industries and robotics, such as Teradyne, have, in the past, been negatively impacted by both sudden slowdowns in the global economies and recurring cyclicality within those industries. These cycles, which can be driven by broad changes to Semiconductor buying patterns, or to specific markets within the Semiconductor industry, have resulted in periods of over-supply; a trend we believe will continue to occur. Our business and results of operations depend, in significant part, upon capital expenditures of manufacturers of semiconductors, electronics, and other industrial products, which in turn depend upon the current and anticipated market demand for those products. Disruption or deterioration in global or industry-specific economic conditions may reduce customer purchases of our products, thereby reducing our revenues and earnings. In addition, such adverse changes in economic conditions, and resulting slowdowns in the market for our products, may, among other things, result in increased price competition for our products, increased risk of excess and obsolete inventories, increased risk in the collectability of our accounts receivable from our customers, potential reserves for credit losses and write-offs of accounts receivable, increased risk of restructuring charges, and higher operating costs as a percentage of revenues, which, in each case and together, adversely affect our operating results. We are unable to predict the likely duration, frequency and severity of disruptions in financial markets, credit availability, and adverse economic conditions throughout the world, and we cannot ensure that the level of revenues or new orders for a fiscal quarter will be sustained in subsequent quarters. We have taken actions to address the effects of general economic variability and recurring industry cyclicality, including implementing cost control and reduction measures. We cannot predict whether these measures will be sufficient to offset global or market-specific disruptions that might affect our businesses and we may need to take additional or different measures in the future.

Our business is international in nature, with our sales, service and administrative personnel and our customers and suppliers located in numerous countries throughout the world. Our operations, and those of our customers and suppliers, are subject to disruption for a variety of reasons, including work stoppages, acts of war and geopolitical conflict, terrorism, health epidemics, fires, earthquakes, hurricanes, typhoons, volcanic eruptions, energy shortages, telecommunication failures, tsunamis, flooding or other natural disasters, including as a result of global climate change. Any disruptions from these events could require substantial expenditures and recovery time to fully resume operations and could also have a material adverse effect on our operations and financial results to the extent that losses are uninsured or exceed insurance recoveries, and to the extent that such disruptions adversely impact our relationships with our customers. Additionally, any such disruption could materially increase our costs and expenses as well as cause delays in, among other things, shipments of products to our customers, our ability to perform services requested by our customers, or the installation and acceptance of our products at customer sites. Any of these conditions could have a material adverse effect on our business, financial condition or results of operations.

We invest significant resources in the design, manufacturing and testing of our products. However, from time to time, we discover design or manufacturing defects in our products after they have been shipped and, as a result, we have incurred development and remediation costs and settled warranty and product liability claims. In addition, when our products contain defects or have reliability, quality or safety issues, in the past we have conducted a product recall which has resulted in significant repair or replacement costs and substantial delays in product shipments, which in the future could damage our reputation and could make it more difficult to sell our products. We may continue to have warranty and product liability claims or product recalls in the future. Any of these results could have a material adverse effect on our business, results of operations or financial condition.

Competition for employees with skills we require is intense in the high technology industry. We expect intense competition for employees will continue in 2026. Our success will depend on our ability to attract and retain key technical employees. The loss of one or more key or other employees, a decrease in our ability to attract additional qualified employees, or the delay in hiring key personnel could each have a material adverse effect on our business, results of operations or financial condition. In addition, existing or new immigration laws, policies or regulations in the U.S. may limit the pool of available talent in the highly skilled technical labor market.

We are subject to U.S. laws and regulations that limit and restrict the export of some of our products and services and may restrict our transactions with certain customers, business partners, suppliers and other persons. In certain circumstances, export control and economic sanctions regulations prohibit the export of certain products, services and technologies, and in other circumstances are required to obtain an export license. We must also comply with export restrictions and laws imposed by other countries affecting trade and investments. Our export compliance program may not be sufficient to prevent all inadvertent compliance violations and there are risks that the compliance controls could be circumvented, exposing us to legal liabilities. As further described below, we cannot quantify the impact that the export controls and economic sanctions has had on our sales, however, compliance with these laws has limited our ability to compete in certain regions, and could continue to limit them in the future. Changes in, and responses to, U.S. trade policy could reduce the competitiveness of our products and cause our sales to drop, which could have a material adverse effect on our business, financial condition or results of operations. The U.S. government from time to time has issued export restrictions that prohibit U.S. companies from exporting U.S. manufactured products, foreign manufactured products with more than 25% controlled U.S. content, foreign made product which was produced using U.S. technology, as well as U.S. origin technology. For example, the U.S. Department of Commerce has restricted the access of U.S. origin technologies to certain Chinese semiconductor companies by adding those companies to the Entity List and the Foreign Direct Product Rule ("FDP") under U.S. Export Administration Regulations ("EAR"). The addition of certain of these companies to the Entity List has had and will continue to have an adverse impact on our business with these customers. We cannot guarantee that we will be able to file for licenses with the U.S. Department of Commerce or otherwise take actions in the future to minimize the impact of the restrictions on our business. The U.S. Department of Commerce issued and continues to update a list of companies in China and other countries that it considered to be military end users. Compliance with the military end user rule has impacted our ability to sell products to certain customers in China. We cannot be certain that the actions we take will address all of the risks associated with the export controls that may impact our business and our compliance controls could be circumvented, exposing us to legal liabilities. We anticipate the U.S. Department of Commerce will continue to release new export control regulations. These regulations may continue to have an adverse impact on certain actual or potential customers and on the global semiconductor industry. To the extent the regulations impact actual and potential customers or disrupt the global semiconductor industry, our business and revenues will be adversely impacted. In response to the regulations issued by the U.S. Department of Commerce, the Chinese government has passed new laws, including blocking legislation, which may impact our business activities in China. The Company is assessing the potential impact of these new Chinese laws and monitoring relevant laws and regulations issued by the Chinese government. The impact of these new Chinese laws on our business activities in China remains uncertain at this time.

From time to time, we may be subject to litigation or other administrative, regulatory or governmental proceedings, including tax audits and resulting claims that could require significant management time and resources and cause us to incur expenses and, in the event of an adverse decision, pay damages or incur costs in an amount that could have a material adverse effect on our financial position or results of operations. For information regarding litigation proceedings in which we are currently engaged, please refer to the discussion under Note O: "Commitments and Contingencies" in the Notes to Consolidated Financial Statements.

We are subject to paying income taxes in the United States and other countries where we operate. Our effective tax rate is dependent on where our earnings are generated and the tax regulations and the interpretation and judgment of administrative tax or revenue authorities in the United States and other countries. We have pursued a global tax strategy that could be adversely affected by the mix of earnings and tax rates in the countries where we operate, changes to tax laws (including but not limited to Pillar Two), tax regulations or an adverse tax ruling by administrative authorities. Because of increasing focus by government taxing authorities on multinational corporations, the tax laws of certain countries in which we do business could change on a prospective or retroactive basis, and as a result our liabilities for taxes, interest and penalties, could significantly increase and adversely affect our financial results. We are also subject to tax audits in the countries where we operate. Any material change in our tax liability resulting from changes in tax laws, tax regulations, administrative rulings or audits from an administrative tax or revenue authority could negatively affect our financial results. As a multinational corporation, we are subject to income taxes as well as non-income-based taxes, in both the United States and various foreign jurisdictions. In certain foreign jurisdictions, we qualify for tax incentives and tax holidays based on our ability to meet, on a continuing basis, various tests relating to our employment levels, research and development expenditures and other qualification requirements in a particular foreign jurisdiction. If we fail to qualify or fail to remain qualified for certain foreign tax incentives and tax holidays, we may be subject to further taxation or an increase in our effective tax rate which would adversely impact our financial results. In December 2025, we entered into an agreement with the Singapore Economic Development Board which extended our Singapore tax holiday under substantially similar terms to the agreement which expired on December 31, 2025. The new tax holiday is scheduled to expire on December 31, 2035. The tax savings attributable to the Singapore tax holiday for the years ended December 31, 2025, 2024 and 2023 were $21.6 million or $0.14 per diluted share, $17.1 million or $0.10 per diluted share, and $1.4 million or $0.01 per diluted share, respectively. These tax savings may not be achievable in subsequent years due to changes in Singapore's tax laws or the issuance of new global minimum tax laws.

We are subject to both domestic and international environmental regulations and statutory strict liability relating to the use, storage, discharge, site cleanup and disposal of hazardous chemicals used in our manufacturing processes. In addition, future regulations in response to global climate change may affect us, our suppliers, and our customers. Such regulations could cause us to incur additional direct costs for compliance, as well as increased indirect costs resulting from our customers and/or suppliers. Future climate change regulations could result in decreased demand for our products. If we fail to comply with present and future regulations, or are required to perform site remediation, we could be subject to future liabilities or cost, including penalties or the suspension of production. Present and future regulations may also: - restrict our ability to expand facilities;- restrict our ability to ship certain products;- require us to modify our operations logistics;- require us to acquire costly equipment; or - require us to incur other significant costs and expenses. Pursuant to present U.S. federal regulations and agreements, we are conducting groundwater and subsurface assessment and monitoring and are implementing remediation and corrective action plans for facilities located in Massachusetts and New Hampshire which are no longer conducting manufacturing operations. As of December 31, 2025, we have not incurred material costs as a result of the monitoring and remediation steps taken at the Massachusetts and New Hampshire sites. We may in the future be subject to additional assessment and monitoring or other corrective action as a result of environmental liabilities and may incur significant future costs or disruptions to our operations resulting in a negative impact on our business or financial condition. The directive on the Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment (the "RoHS Directive") and the directive on Waste Electrical and Electronic Equipment (the "WEEE Directive") altered the form and manner in which electronic equipment is imported, sold and handled in the European Union. Other jurisdictions, such as China, have followed the European Union's lead in enacting legislation with respect to hazardous substances and waste removal. Ensuring compliance with the RoHS Directive, the WEEE Directive and similar legislation in other jurisdictions, and integrating compliance activities with our suppliers and customers could result in additional costs and disruption to operations and logistics and thus, could have a negative impact on our business, operations or financial condition.

We face significant competition throughout the world in each of our reportable segments. Some of our competitors have substantial financial and other resources to pursue engineering, manufacturing, marketing and distribution of their products. In addition, we are subject to trade regulations imposed by the United States government, which may not impact some of our competitors. We also face competition from emerging Asian companies and internal development at several of our customers. Some of our competitors have introduced or announced new products with certain performance characteristics that may be considered equal or superior to those we currently offer. We expect our competitors to continue to improve the performance of their current products and to introduce new products or new technologies that provide improved cost of ownership and performance characteristics. In addition, the semiconductor industry has experienced significant consolidation over the past several years. Consolidation among our competitors or customers could lead to a changing competitive landscape, which could negatively impact our competitive position. If in the future we are unable to maintain our competitive position, we could experience downward pressure on prices, fewer customer orders, reduced margins, the inability to take advantage of new business opportunities and a loss of market acceptance of our products, any of which could have a material adverse effect on our revenues and results of operations.