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    TER
    Earnings call· Jun 2026(Q2 FY26)

    TERADYNE Q2 FY26 earnings call TER

    Jul 29, 2026 Source

    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

    5

    • 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

    3

    • 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

    13
    CategoryTargetConfidence
    Q3 FY26 Revenue
    $1.2 billion to $1.3 billion
    high materiality
    High
    Q3 FY26 Non-GAAP EPS
    $1.85 to $2.15
    high materiality
    High
    Q3 FY26 Gross Margins
    58% to 59%
    medium materiality
    High
    Q3 FY26 Operating Expenses as % of Sales
    approximately 29% to 30%
    medium materiality
    High
    Q3 FY26 Non-GAAP Operating Profit Rate
    28% and 30%
    medium materiality
    High
    H1 Weighted Revenue
    50% to 52% of annual revenue
    high materiality
    High
    Q4 FY26 Operating Expenses
    comparable to Q3 guidance
    medium materiality
    High
    FY27 Growth
    healthy growth
    high materiality
    High
    ATE TAM
    reach or exceed $20 billion
    high materiality
    High
    CPO Market Size
    $300 million to $700 million
    medium materiality
    Medium
    WFE Capital Expenditure
    approach $250 billion
    high materiality
    High
    Total Transistor Production CAGR
    15% to 20% CAGR
    high materiality
    High
    Memory Bit Production CAGR
    15% to 20% CAGR
    high materiality
    High

    Segment performance

    6
    SegmentRevenueYoYQoQMargin
    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 billion128%$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 millionnearly 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 million94%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 million26%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 million33%9%—

    Operational metrics

    14
    Non-GAAP EPS
    $2.47up over 300% year-over-year
    Q2 FY26

    Record non-GAAP earnings per share.

    Non-GAAP Operating Margin
    33.7%
    Q2 FY26

    Operating margin for the quarter.

    Non-GAAP Gross Margin
    59.8%up 250 basis points year-over-year, down 110 basis points sequentially
    Q2 FY26

    Gross margins for the quarter, driven by Semi Test volume and product mix.

    Cash and investments balance
    $517 millionup over 30% from last quarter
    Q2 FY26

    Total cash and investments at the end of the quarter.

    Capital expenditures
    $26 millionincreased from last quarter
    Q2 FY26

    Increase in capital expenditures, driven by investments in innovation and operations scaling.

    Share buybacks
    $69 million
    Q2 FY26

    Amount spent on share repurchases during the quarter.

    Dividends paid
    $20 million
    Q2 FY26

    Total dividends paid in the quarter.

    AI-driven revenue
    more than 60%
    Q2 FY26

    Proportion of total revenue driven by AI-related demand.

    WFE CapEx as % of Semi CapEx
    8%
    First 5 months of 2026

    Percentage of total semiconductor capital expenditure allocated to test equipment, showing an upward trajectory.

    Memory TAM growth
    more than 40% larger
    FY26 vs FY25

    Expected growth in the memory total addressable market for the full year.

    Compute revenue growth
    nearly 600%year-over-year
    Q2 FY26

    Significant year-over-year growth in compute revenue within the SOC segment due to strong AI demand.

    Compute as % of SOC product revenue
    70%
    Q2 FY26

    Compute's share of SOC product revenue.

    Robotics Electronics manufacturing and semiconductor revenue growth
    50%from Q1
    Q2 FY26

    Quarter-over-quarter growth in the largest end market segment for Robotics, including AI data centers.

    Robotics US sales as % of total sales
    32%
    Q2 FY26

    Proportion of robotics sales attributed to the US market.

    Industry KPIs

    12
    MetricValueDetails
    Lead times16-week-ishweeks
    Backlog order book—
    Book to bill ratioover 2
    Ai data center revenuemore than 60%%
    Fab capacity utilization—
    Bookings net order intake—
    Wfe industry spend outlookapproach $250 billionUSD
    Design wins socket pipelineonecustomer
    Inventory channel inventory—
    Node platform ramp schedule—
    Wafer shipments foundry ASP—
    End market segment revenue mixSOC: $843 million; Memory: $212 million; IST: $67 million; Product Test: $107 million; Robotics: $100 millionUSD

    Orderbook & backlog

    1
    Memory book-to-bill ratioover 2Q2 FY26

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

    Product announcements

    1
    ProductTypeDetails
    Omnyxlaunch

    Deals & partnerships

    2
    Quantifi PhotonicsAcquisition 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

    1
    US Robotics Manufacturing Centeron track

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

    Risks & headwinds

    5
    Compute order timing concentrationH2 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 weaknessOngoing

    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 launchesQ3 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 correlationOngoing

    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 dependencyNext 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

    5

    Memory segment growth

    H2 FY26
    CurrentRecord $212 million revenue in Q2 FY26, book-to-bill over 2
    TargetContinued 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.

    Q&A highlights

    7

    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 read6 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

    06

    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.

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