Analyst asks if the focus on consolidating test insertion (before complete package) is still a priority or if the holistic 'wafer-to-data-center' approach has taken precedence.

Greg explains that Teradyne participates in an open ecosystem at every step. While there's potential customer value in getting more tests from the same supplier, customers are adept at choosing the best solution at each stage. The holistic strategy is about participating in the ecosystem. “So I think the -- as you look at this wafer data center journey, there's a through line of Teradyne is a company that test things and our robotics help build things. And just about at every step of that process, we are a participant in an ecosystem.”

Analyst asks about the robotics business, its strategy updates, and its trajectory within the AI recovery and longer-term model.

Greg states that robotics is expected to grow in proportion with the rest of the company over the midterm, driven by physical AI applications. The fastest-growing segment is electronics manufacturing and semiconductors, linked to data center build-outs and reshoring efforts. “So robotics, we believe that robotics is positioned to essentially grow in proportion with the rest of the company over this midterm. And the important stuff that's going to drive that growth are physical AI applications.”

Analyst asks about changes in memory drivers (NAND/DDR5 vs HBM) and the outlook for memory into 2027, including potential lumpiness.

Greg notes that while HBM was expected to be strong, DDR business is surprisingly strong due to CPU-oriented applications. NAND is also seeing an inflection with customers pulling for more capacity. For 2027, he doesn't anticipate lumpiness in memory, expecting continued capacity additions and WFE investment. “The DDR market is stronger now than we thought it would be in January. In January, we were talking a little bit about that we anticipated that we would see a strengthening in NAND... What's different now is we actually have seen the beginning of that inflection and are actually getting pull from our customers for more NAND capacity.”

TER

Teradyne (TER) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Information Technology· Jul 29, 2026

Source: earnings call transcript

Executive summary

Teradyne Q2 FY26 — Record Revenue and EPS Driven by AI

Teradyne delivered record Q2 FY26 results, with AI serving as the primary growth engine across all business segments, validating its 'wafer-to-AI-data-center' strategy. The company is confident in a multiyear growth phase for the ATE TAM, driven by accelerating WFE investment and advanced packaging trends. Management is leaning into strategic investments to capture future opportunities, anticipating continued healthy growth into 2027.

Highlights

Total company revenue reached a record $1.3 billion, up over 100% year-over-year.
Non-GAAP EPS was $2.47, marking an increase of over 300% year-over-year.
AI-driven revenue accounted for over 60% of total revenue, demonstrating strong strategic execution.
All three business groups (Semi Test, Product Test, Robotics) achieved year-over-year and quarter-over-quarter growth.
Free cash flow for Q2 was $378 million, contributing to $579 million in H1 2026, up 150% from prior year.

Concerns

Gross margins sequentially decreased by 110 basis points to 59.8% due to product mix and non-recurring Q1 benefits.
Mobile segment revenue remains below historical levels, despite seasonal double-digit QoQ growth.
Compute order timing led to expected concentration in H1, with a next surge anticipated in H1 2027.

Guidance & targets

Category	Target	Timeline	Confidence
Q3 FY26 Revenue	$1.2 billion to $1.3 billion high materiality	Q3 · FY26	High
Q3 FY26 Non-GAAP EPS	$1.85 to $2.15 high materiality	Q3 · FY26	High
Q3 FY26 Gross Margins	58% to 59% medium materiality	Q3 · FY26	High
Q3 FY26 Operating Expenses as % of Sales	approximately 29% to 30% medium materiality	Q3 · FY26	High
Q3 FY26 Non-GAAP Operating Profit Rate	28% and 30% medium materiality	Q3 · FY26	High
H1 Weighted Revenue	50% to 52% of annual revenue high materiality	FY26	High
Q4 FY26 Operating Expenses	comparable to Q3 guidance medium materiality	Q4 · FY26	High
FY27 Growth	healthy growth high materiality	FY27	High
ATE TAM	reach or exceed $20 billion high materiality	End of decade · FY29	High
CPO Market Size	$300 million to $700 million medium materiality	CY28	Medium
WFE Capital Expenditure	approach $250 billion high materiality	End of decade · FY29	High
Total Transistor Production CAGR	15% to 20% CAGR high materiality	Midterm	High
Memory Bit Production CAGR	15% to 20% CAGR high materiality	Midterm	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Semi Test Exceeded $1 billion high watermark, driven by strong AI demand. Compute order timing offset by record memory and IST growth. SOC Revenue: $843 millionMemory Revenue: $212 millionIST Revenue: $67 million	$1.122 billion	128%	$11 million increase	—
Semi Test - SOC Compute remains the largest portion, growing nearly 600% YoY on strong AI demand. Diversified compute portfolio with second AI hyperscaler correlation and merchant GPU order. Auto and Industrial strengthened, Mobile grew seasonally but remains muted. Compute as % of SOC product revenue: 70%	$843 million	nearly 600% (Compute portion)	—	—
Semi Test - Memory Another record quarter, third consecutive over $200 million, driven by HBM, DRAM, and NAND resurgence. Strong demand signals for capacity additions. Book-to-bill ratio: over 2	$212 million	—	—	—
Semi Test - IST Driven by AI-related HDD storage demand from all 3 major suppliers. Expected continued growth in H2.	$67 million	94%	over 150%	—
Product Test Group Broad-based growth across all end markets (production board test, optical test, defense & aerospace, MLTP). Omnyx platform and MLTP showing strong momentum, expected continued growth in H2.	$107 million	26%	33%	—
Robotics Electronics manufacturing and semiconductor now largest end market segment, including AI data centers. US sales increased, US manufacturing center on track for opening. Electronics manufacturing and semiconductor revenue growth QoQ: 50%US sales as % of total robotics sales: 32%	$100 million	33%	9%	—

Orderbook & backlog

Memory book-to-bill ratio over 2 Q2 FY26

Driven by robust HBM and DRAM test solutions demand and resurgence in NAND.

Product announcements

Product	Type	Timeline	Details
Omnyx	launch	Q2 FY26

Deals & partnerships

Quantifi Photonics Acquisition to strengthen networking solutions, particularly for optical connections.

This acquisition was part of Teradyne's strategy to address extreme growth in networking, specifically for optical connections, and to develop leading-edge solutions from silicon photonics wafers to full data center racks.

MultiLane Test Products JV (MLTP) Joint venture for copper connections in networking.

The MLTP JV was formed to develop leading-edge solutions for copper connections, addressing the need for high-speed I/O and data center interconnect test solutions.

Capital programs

US Robotics Manufacturing Center on track

Our U.S.-based manufacturing center is on track for opening later this year.

Risks & headwinds

Compute order timing concentration H2 FY26

Order timing was concentrated in the first half of 2026.

Mitigation:Next surge for these customers is expected in the first half of 2027. The company is diversifying its compute portfolio and creating a foundation for future market share gains through dual-vendor strategies.

Mobile segment weakness Ongoing

Remains below historical levels despite seasonal double-digit QoQ growth.

Mitigation:Offset by strength in other segments, particularly AI-driven demand across the portfolio.

Gross margin pressure from product mix and new product launches Q3 FY26 and into 2027

Expected Q3 FY26 gross margins of 58% to 59%, down from 59.8% in Q2.

Mitigation:Reflective of product mix and new product launches, with memory continuing to be a strain from a margin perspective into 2027. Full-year gross margin expected just shy of target earnings model (around 59%).

Time lag in WFE-ATE correlation Ongoing

WFE CapEx revenue precedes ATE revenue by approximately 3 quarters.

Mitigation:Management uses WFE data to gain confidence in long-term ATE growth, acknowledging it's not a precise year-by-year predictor but signals direction for multi-year trends.

Supply chain disruption / single vendor dependency Next few years

Customers recognize the importance of derisking their supply chain.

Mitigation:Driving dual-vendor strategies at largest compute customers, which Teradyne sees as an important share driver. Qualification process takes 9-12 months to ramp, with incremental share growth up to 30% in the fast follower phase.

What to watch in Q3 FY26

Memory segment growth

H2 FY26

Current Record $212 million revenue in Q2 FY26, book-to-bill over 2

Target Continued growth in H2 FY26

Why it matters

Memory is a key driver of overall revenue growth, and its continued strength, especially in NAND, is crucial for the company's performance.

To aid your modeling, we expect growth in the second half in comparison to first half in memory, auto and industrial, IST, Product Test and Robotics Groups.

Find out whether TER delivers this. Inve re-checks your case every morning.

Q&A highlights

Analyst asks about the sustainability of the 8% ratio of Test TAM to WFE TAM and when Teradyne will see share gains from new engagements.

Greg confirms the 8% ratio is a recent rocket trajectory (from 4% in 2023 to 8% in 2026 YTD) and expects it to settle in the 7-9% range. He agrees with Advantest's TAM numbers but expects SOC share to be flat to slightly up for Teradyne in 2026, with more noticeable share gains starting gradually in 2027.

“The first 5 months of 2026, it's 8% of total Semi CapEx has been on test equipment. So it's kind of this rocket trajectory.”

asked by Timothy Arcuri · answered by Gregory Smith

2 min read 6 chapters

Detailed narrative

AI-Driven Growth Across Segments

Teradyne's Q2 FY26 performance was significantly bolstered by AI demand, driving record revenue of $1.3 billion and non-GAAP EPS of $2.47. All three business groups—Semi Test, Product Test, and Robotics—experienced year-over-year and quarter-over-quarter growth, with over 60% of total revenue attributed to AI-related activities. This broad-based growth underscores the company's successful 'wafer-to-AI-data-center' strategy.

Expanding ATE TAM and WFE Correlation

The company anticipates a multiyear growth phase for the ATE TAM, projecting it to reach or exceed $20 billion by the end of the decade. This optimism is fueled by accelerating semiconductor capital investment, particularly in wafer fab equipment (WFE), which is forecasted to approach $250 billion by the decade's end.

Test equipment is now outpacing fab equipment, a reversal of prior trends, driven by increased transistor and bit production (15-20% CAGR) and advanced packaging requirements.

Strategic Positioning in Compute and Memory

Teradyne is actively gaining market share in the compute segment, having delivered its first merchant GPU order and completed correlation with a second AI hyperscaler, diversifying its portfolio. In memory, robust demand for HBM and DRAM, coupled with a resurgence in NAND, led to a record quarter and a book-to-bill ratio over 2.

The memory TAM is expected to be over 40% larger in 2026 than 2025.

Growth in Product Test and Robotics

The Product Test Group saw strong growth across all end markets, including production board test and optical test, with new platforms like Omnyx gaining traction. Robotics revenue also increased significantly, driven by electronics manufacturing and semiconductor segments tied to AI data center build-outs, with a new US manufacturing center on track for opening later this year.

Capital Allocation and Financial Strength

The company prioritizes reinvestment in R&D and next-gen technologies to capitalize on growth opportunities. It ended the quarter with $517 million in cash and investments and generated $378 million in free cash flow, contributing to $579 million in H1 2026, up 150% YoY. Share buybacks of $69 million and $20 million in dividends were also executed.

Networking and CPO Opportunities

Teradyne is strategically addressing the extreme growth in networking for accelerator clusters, driven by frontier models. Through acquisitions like Quantifi Photonics and the MLTP JV, the company is developing leading-edge solutions for optical and copper connections, expecting the CPO market alone to reach $300 million to $700 million by 2028.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.