Teradyne (TER) Q4 FY25 earnings call: guidance and Q&A

How should we think about calendar 2026 revenue, particularly the H1/H2 weighting and overall growth rate, given the Q1 strength?

Michelle Turner noted strong backlog and better H1 visibility for 2026, expecting sales to be 60% in H1 and 40% in H2 (inverse of 2025). Greg Smith cautioned that Q1 strength might be a 2-3 quarter surge leading to digestion, and H2 visibility is limited, making full-year linearity unpredictable.

“The run rate that we have in Q1 is like we have a fair amount of strength in Q1. We don't have great visibility into the second half. So we're a little bit cautious that we don't want people to sort of take that and run with it for the full year. We expect that we're in kind of a 2-, 3-quarter surge that may lead to a shorter period of digestion afterwards.”

asked by Christopher Muse · answered by Gregory Smith

What are the key drivers for Teradyne's ATE market share to grow from ~25% to ~46% as implied by the new target model?

Greg Smith clarified the model implies ATE share in the low 40s, not 46%. He expects share gains in compute (from a lower base), maintaining share in mobile (which will grow with complexity), and incremental growth in memory. IST and Robotics also contribute to overall revenue growth, balancing the portfolio.

“I think we are -- like thinking about it from a long-term model perspective, we expect to gain share in compute. We expect the mobile market to probably get to maybe 1.5x the size that it is now, and we maintain the share that we have.”

asked by Christopher Muse · answered by Gregory Smith

Can you provide a breakdown of the 2025 SoC TAM ($7.2B) between compute, mobile, and auto, and the VIP TAM within compute?

Greg Smith estimated 2025 TAMs: Compute ~$5 billion, Mobility ~$1 billion, Auto/Industrial just under $1 billion, and Service ~$700 million. For memory, the overall TAM was just under $1.4 billion, with DRAM accounting for ~$1.2 billion. VIP compute was estimated at just over $600 million.

“Our expectation was that compute was in the neighborhood of $5 billion for the year. Mobility in about $1 billion; auto industrial just under $1 billion and service was in the $700 million range. For memory, overall, we think that the TAM was just under $1.4 billion and $1.2 billion of that was DRAM.”

asked by Timothy Arcuri · answered by Gregory Smith

What is the sensitivity of the $6 billion near-term revenue target to the ATE market, and how was this target derived?

Greg Smith stated the $6 billion is a balanced number, with the biggest uncertainty being the speed of market growth. He highlighted confidence from potential share gains in compute, mobile complexity growth, IST diversification, and Robotics' e-commerce catalyst. He emphasized that the model is achievable over the next few years, depending on how quickly the ATE TAM grows.

“I think the -- first, I'll say that it's a balanced number that there are potential balloons and anchors around our $6 billion. Probably the most important uncertainty is the speed at which the market grows. Like how long does it take to get to this kind of a TAM size?”

asked by Mehdi Hosseini · answered by Gregory Smith

What are the realistic market share expectations for GPU test this year and over the next three years, and can this translate to ASIC market share?

Greg Smith stated they are progressing towards production qualification for merchant GPU, expecting incremental share gains over a couple of years. Q1 guidance does not include merchant GPU revenue, but it's expected to be a material factor in H2 2026. Initial share will be single-digit, potentially reaching 30-70% in competitive dual-source situations over time.

“Once we achieve qualification, I believe we'll incrementally gain share for these devices over the course of a couple of years. I just want to be clear that our guidance for Q1 does not include any merchant GPU revenue. We see that as more of a factor in the second half of 2026.”

asked by Sreekrishnan Sankarnarayanan · answered by Gregory Smith

Can you outline the catalysts for GPU share gain, including platform differentiation, device power/complexity, and new test insertions?

Greg Smith identified several catalysts: Teradyne's resilient supply chain and shorter lead times, better tester reliability and uptime (advocated by OSATs), next-generation instruments with increased power and memory for test programs, and superior capabilities for mission-mode testing within the server environment, enabling higher coverage and earlier defect detection.

“The first and most obvious is that they believe that we have a more resilient supply chain that we're able to respond to demand with generally shorter lead times. And that's an important thing when their demands are somewhat unpredictable. The second is that it's actually a better tester.”

asked by Brian Chin · answered by Gregory Smith

Looking to the medium term and the target earnings model, do you foresee a broadening of the AI compute customer base to reduce lumpiness, given current concentration?

Greg Smith expects additional logos (4-5 programs) in VIP compute wins within the $12B-$14B TAM model, but not a massive expansion to dozens of customers. He anticipates Teradyne and Advantest will compete generationally for new design wins, with decisions based on tester features and reliability rather than incumbency.

“So in a $12 billion to $14 billion TAM, our expectation is that we would add additional logos in terms of VIP compute wins. But it's not like it's going to go from a very small number to dozens. It's more like 4 or 5 different programs.”

asked by Samik Chatterjee · answered by Gregory Smith