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    TER
    Earnings call· Mar 2025(Q1 FY25)

    TERADYNE, INC TER

    Apr 29, 2025 Source

    Executive summary

    Teradyne Q1 FY25 — Strong Semi Test & AI Accelerator Demand Amidst Macro Uncertainty

    Teradyne delivered strong Q1 results, driven by Semi Test, particularly SOC for mobile and record loading for AI accelerators, exceeding expectations for revenue, gross margin, and EPS. However, the company faces significant headwinds from customer uncertainty and order pushouts due to trade policy, leading to limited visibility beyond Q2 FY25. Strategic investments in AI and verticalization continue, alongside prudent expense management and a robotics restructuring to lower the breakeven point, positioning the company for long-term growth despite the challenging near-term macro environment.

    Highlights

    5

    • Q1 revenue of $686M was towards the high end of guidance, with non-GAAP EPS of $0.75 above the high end of expectations.

    • Semi Test revenue reached $543M, with SOC contributing $406M, driven by strength in mobile.

    • Compute revenue grew year-over-year in Q1, with record loading on UltraFLEX and UltraFLEXplus testers for AI accelerators.

    • Memory business secured a coveted HBM4 performance test win with a major DRAM manufacturer, expected to begin shipping in H2 FY25.

    • Robotics received the largest order in its history from a global automotive manufacturer for both MiR AMRs and UR cobot arms.

    Concerns

    4

    • Customers are pushing out orders due to heightened uncertainty around end market demand and trade policy, particularly in mobile, automotive, and industrial segments.

    • Visibility is very limited beyond Q2 FY25, and prior expectations for the full year are not being reaffirmed.

    • Robotics revenue was $69M, declining both sequentially and year-over-year, with an operating loss of $22M.

    • A significant sequential decline in Memory revenue is expected in Q2 FY25 as customers continue to digest installed HBM test capacity.

    Guidance & targets

    7
    CategoryTargetConfidence
    Q2 FY25 Sales
    $610M - $680M
    high materiality
    High
    Q2 FY25 Gross Margins
    56.5% - 57.5%
    medium materiality
    High
    Q2 FY25 OpEx
    40.5% to 44.5% of second quarter sales
    medium materiality
    High
    Q2 FY25 Non-GAAP Operating Profit Rate
    14.5%
    medium materiality
    High
    Q2 FY25 Non-GAAP EPS
    $0.41 to $0.64
    high materiality
    High
    Q2 FY25 GAAP EPS
    $0.35 to $0.58
    high materiality
    High
    Share Buyback Target
    up to $1B
    high materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Semi Test
    Strength in SOC was driven primarily by mobile. Memory revenue was lower as customers digest HBM capacity. IST revenue was up both sequentially and year-over-year, driven by new SLT shipments for mobile and first AI compute revenue.
    SOC Revenue: $406MMemory Revenue: $109MIST Revenue: $27M
    		$543M———
    Product Test
    Wireless test revenue growth was offset by weakness in production board test tied to the automotive industry and timing of programs in defense and aerospace.
    Wireless Test Revenue: $29MWireless Test Growth YoY: 20%
    		$74Mdown 4%——
    Robotics
    Revenue declined both sequentially and year-over-year due to macro headwinds. Operating loss was in line with expectations. Restructuring reduced operating breakeven revenue from $440M to $365M.
    UR Contribution: $49MMiR Contribution: $20M
    		$69MdecliningdecliningOperating Loss: $22M (non-GAAP)

    Operational metrics

    14
    Non-GAAP gross margin
    60.6%
    Q1 FY25

    Above guidance due primarily to product mix.

    Non-GAAP operating expenses
    $275Mup year-over-year, down sequentially
    Q1 FY25

    Increased investment in target opportunities, but down sequentially due to implemented spending controls.

    Non-GAAP operating profit
    20.5%
    Q1 FY25

    Operating profit rate for the quarter.

    Share repurchases
    $157M
    Q1 FY25

    Amount of shares repurchased in the quarter.

    Dividends paid
    $19M
    Q1 FY25

    Total dividends paid in the quarter.

    Cash and marketable securities balance
    $622M
    end of Q1 FY25

    Balance at the end of the first quarter.

    Tax rate (excluding discrete items)
    13.5%
    Q1 FY25

    On a GAAP and non-GAAP basis.

    Robotics GAAP operating loss
    $37M
    Q1 FY25

    Includes restructuring primarily associated with go-to-market consolidation and amortization of intangible assets.

    Robotics life-to-date GAAP losses
    $231M
    life-to-date

    Cumulative GAAP losses for the Robotics division.

    Robotics cumulative non-GAAP operating profit
    $47M
    life-to-date

    Cumulative non-GAAP operating profit for the Robotics division.

    Robotics operating breakeven revenue
    $365Mdown from $440M
    FY25

    Reduced due to restructuring in Q1.

    Revenue from one customer >10%
    Yes
    Q1 FY25

    One customer directly or indirectly drove more than 10% of revenue.

    Revenue shipped to China
    19%
    Q1 FY25

    Indigenous Chinese customers' share is up from 5% in the past 2 years.

    Tariff impact on Q2 EPS
    $0.02
    Q2 FY25

    Expected small increase of cost of sales and operating expenses, included in Q2 guidance.

    Industry KPIs

    7
    MetricValueDetails
    Lead timesgenerally pretty short
    Ai data center revenueRecord loading on UltraFLEX and UltraFLEXplus testers for AI accelerators; First AI compute revenue in IST; PBT making gains in AI compute
    Fab capacity utilizationimproved considerably
    Bookings net order intakeLargest order in Robotics history; HBM4 performance test win
    Design wins socket pipelineHBM4 performance test win; 13 of 13 WiFi 7 opportunities; Titan HP initial acceptance
    Node platform ramp schedule2-nanometer and gate all around on the horizon
    End market segment revenue mixSemi Test: $543M; SOC: $406M; Memory: $109M; IST: $27M; Product Test: $74M; Wireless Test: $29M; Robotics: $69M; UR: $49M; MiR: $20MUSD

    Product announcements

    3
    ProductTypeDetails
    HBM4 Performance Testmilestone
    Titan HPmilestone
    MiR 1200launch

    Deals & partnerships

    2
    Quantifi PhotonicsAcquisition to establish leadership in silicon photonics test.

    Teradyne is on track to close the acquisition of Quantifi Photonics in the second quarter to establish a leadership position in silicon photonics test, a critical aspect of its strategy to gain share in high-performance computing.

    Analog Devices (ADI)Strategic partnership to deploy UR cobots and MiR AMRs for collaborative automation.

    Teradyne announced a strategic partnership with ADI, which will deploy UR cobots and MiR AMRs to support ADI's collaborative automation initiative, targeting the semiconductor market for diversified growth in robotics.

    Risks & headwinds

    7
    Trade policy and customer uncertainty around end-market demandBeyond Q2 FY25

    Orders pushed out; visibility very limited beyond Q2 FY25.

    Mitigation: Prudently managing expenses, generating operating leverage, continuing critical investments, variable business model.

    Tariff impact on end-market demand

    Minimal direct impact on Teradyne's model, but concern for end-market demand in mobile, automotive, and industrial segments.

    Mitigation: Tariff impact generally passed along to customers in affected regions; minimal impact on business model efficiency.

    Memory market digestion of HBM capacityQ2 FY25

    Significant sequential decline in Memory revenue expected in Q2 FY25.

    Mitigation: DRAM expected to dominate memory mix in 2025; HBM4 win secured for H2 FY25 shipping.

    Challenging macro backdrop for Robotics

    Robotics revenue declined sequentially and year-over-year; operating loss of $22M (non-GAAP) in Q1.

    Mitigation: Structural reorganization to consolidate customer-facing organizations, reduced operating breakeven revenue from $440M to $365M.

    Weakness in wireless test end marketSince 2023

    Generally weak since 2023.

    Mitigation: Team continued to secure majority of opportunities in wireless networking sockets (won 13 of 13 WiFi 7 opportunities in Q1).

    Weakness in Production Board Test

    Tied to the automotive industry and timing of programs in defense and aerospace.

    Mitigation: Making gains in AI compute by leveraging Semi Test technologies.

    Potential impact of AI diffusion rules or semiconductor trade restrictions

    May impact the compute market.

    Mitigation: Monitoring changes in trade policy; continuing critical investments in AI.

    What to watch in Q2 FY25

    5

    Order pushouts due to trade policy

    Beyond Q2 FY25
    Currentorders to push out as we discussed last month
    TargetStabilization or clearer customer forecasts

    Why it matters

    Customer uncertainty and order pushouts impact revenue visibility and end-market demand, especially in mobile, automotive, and industrial segments.

    Although the direct impact of current and anticipated 90-day tariffs on our model is minimal, we are more concerned about the impact of tariffs on the end market demand. Many of our customers, primarily in the mobile, automotive and industrial segments are reviewing their capital acquisition plans, and we do not have firm forecasts from them at this time. Beyond the second quarter, our visibility is very limited.

    Q&A highlights

    8

    Why are Teradyne seeing pushouts due to tariffs when OSAT customers are seeing pull-ins? Which end verticals are most affected?

    Pull-ins primarily affect existing capacity, not new capital equipment. Teradyne's pushouts are mainly from automotive and industrial customers. The potential end-market impact on mobile is a concern yet to be fully realized.

    “The pushouts that we were talking about at Analyst Day are -- the situation is essentially the same as it was back then, and the pushouts are primarily coming from our customers that serve the auto and industrial space. We haven't seen significant pushouts associated with mobile, but we are concerned about the potential end market impact that like that is an effect yet to be seen that we don't have information about.”

    asked by Krish Sankar · answered by Gregory Smith

    2 min read6 chapters

    Detailed Narrative

    01

    Q1 Performance Highlights

    Teradyne delivered Q1 FY25 revenue of $686 million, towards the high end of its guidance range, with non-GAAP gross margin of 60.6% and non-GAAP EPS of $0.75, both exceeding expectations due to favorable product mix. Semi Test revenue was strong at $543 million, primarily driven by SOC for the mobile end market and record loading on UltraFLEX and UltraFLEXplus testers for AI accelerators. The Memory business secured a significant HBM4 performance test win with a major DRAM manufacturer, expected to ship in the second half of the year.

    02

    Macro & Trade Policy Impact

    The company is experiencing order pushouts from customers, particularly in the mobile, automotive, and industrial segments, due to heightened uncertainty around end-market demand and international trade policy. While the direct impact of tariffs on Teradyne's business model is minimal, management is concerned about the broader effect on end-market demand. This uncertainty has led to very limited visibility beyond Q2 FY25, and the company is not reaffirming full-year expectations.

    03

    Strategic Investments & Expense Management

    Despite the challenging macro environment, Teradyne continues to make critical investments aligned with long-term themes of AI, verticalization, and electrification. The company is prudently managing expenses, with Q1 non-GAAP operating expenses down sequentially, aiming for operating leverage. A structural reorganization in the Robotics division, consolidating sales, marketing, and service, reduced the operating breakeven revenue from $440 million to $365 million.

    04

    AI & SLT Opportunities

    Teradyne is seeing emerging opportunities in the AI compute space. Its IST business achieved initial customer acceptance for the new Titan HP, targeted at system-level test (SLT) of AI accelerators, and recorded its first AI compute revenue in Q1. The Production Board Test (PBT) business is also leveraging Semi Test technologies to gain traction in AI compute for server-level product testing, addressing the increasing complexity and high cost of failure of these end products.

    05

    Robotics Business Developments

    The Robotics division, comprising UR and MiR, received its largest order ever from a global automotive manufacturer for both AMRs and cobot arms, demonstrating successful cross-division selling. The new MiR 1200 pallet jack is now in pilot installations with distributors and lead customers. While facing macro headwinds🌐, the long-term drivers of AI, onshoring, and advanced robotics remain intact, with the semiconductor market identified as a key target for diversified growth.

    06

    Semi Test Market Trends

    Mobile demand in Q1 was transitory📎, driven by supply chain transitions rather than a broad end-market recovery. The Memory business expects a significant sequential decline in Q2 as customers digest HBM capacity installed in 2024, with DRAM expected to dominate the memory mix. However, utilization rates for mobile testers have improved, and the company is optimistic about future demand recovery driven by 2-nanometer and gate-all-around transitions, and new SLT opportunities in mobile.

    AI-generated summary of the company’s earnings call. Not investment advice.