Teradyne’s third quarter was marked by strong AI-driven demand in semiconductor testing, which management cited as the primary catalyst for both revenue and non-GAAP earnings outperformance. CEO Gregory Smith attributed the sequential growth to “huge investments in cloud AI build-out,” particularly for compute, networking, memory, and power devices. Additionally, the company highlighted robust results in its memory test business, with shipments supporting high-bandwidth memory (HBM) and DRAM applications, offsetting ongoing weakness in robotics and mobile testing segments.
Is now the time to buy TER? Find out in our full research report (it’s free for active Edge members).
Teradyne (TER) Q3 CY2025 Highlights:
- Revenue: $769.2 million vs analyst estimates of $744.9 million (4.3% year-on-year growth, 3.3% beat)
- Adjusted EPS: $0.85 vs analyst estimates of $0.79 (7.4% beat)
- Adjusted EBITDA: $183.5 million vs analyst estimates of $178.2 million (23.9% margin, 3% beat)
- Revenue Guidance for Q4 CY2025 is $960 million at the midpoint, above analyst estimates of $819.7 million
- Adjusted EPS guidance for Q4 CY2025 is $1.33 at the midpoint, above analyst estimates of $1.02
- Operating Margin: 18.9%, down from 20.6% in the same quarter last year
- Inventory Days Outstanding: 104, down from 114 in the previous quarter
- Market Capitalization: $28.67 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Teradyne’s Q3 Earnings Call
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Christopher Muse (Cantor Fitzgerald) asked how much of the Q4 upside was driven by specific segments like HBM and VIP. CEO Gregory Smith explained the upside was concentrated in compute (about two-thirds) and memory (one-third), with HBM being a strong contributor.
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Mehdi Hosseini (SIG) pressed for details on Teradyne’s increased penetration in wafer-level testing and SLT. Smith emphasized new technologies like CoWoP and the growing importance of burn-in and system-level testing in ensuring reliability for AI chips.
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Timothy Arcuri (UBS) inquired about the mix of compute versus memory in upcoming quarters and the seasonality shift. CFO Sanjay Mehta responded that AI-driven compute projects are now the primary demand driver, supplanting previous patterns tied to mobile launches.
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James Schneider (Goldman Sachs) asked about mobile SoC prospects and OpEx leverage. Smith said mobile SoC remains uncertain, with growth dependent on handset sales, while Mehta reiterated the target of limiting OpEx growth to about half the rate of revenue growth in the future.
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Vedvati Shrotre (Evercore) sought clarity on HBM testing and market share opportunities. Smith explained that new test insertions for HBM are currently limited to one major manufacturer and that future model updates will reflect a greater weight on AI-related compute and memory.
Catalysts in Upcoming Quarters
Looking ahead, our analysts will be watching (1) whether AI-driven demand for compute and memory testing sustains momentum into 2026, (2) the pace at which new product launches like UltraFLEXplus and Magnum 7H gain further adoption, and (3) the impact of the CFO transition on operational execution and capital allocation. Progress in robotics and signs of recovery in non-AI segments will also be important to monitor.
Teradyne currently trades at $182.99, up from $144.26 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free for active Edge members).
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