Key Stats for Teradyne Stock
- Price Change for Teradyne stock: 20.5%
- Current Share Price as of Oct. 29: $174
- 52-Week High: $177
- $TER Stock Price Target: $154
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What Happened?
Teradyne (TER) stock surged over 20% after the automated test equipment maker crushed earnings expectations and issued blockbuster fourth-quarter guidance driven by explosive AI-related demand.
The company’s semiconductor test business delivered results that exceeded expectations, pushing overall revenue and profit to the high end of guidance.
Third-quarter revenue grew 4% year-over-year to $769 million, beating analyst estimates of $743.85 million. Non-GAAP earnings came in at $0.85 per share, down about 5.5% from last year but above Wall Street’s $0.79 per share forecast.
CEO Greg Smith announced that Teradyne expects Q4 revenue between $920 million and $1 billion, representing a massive 25% sequential increase from Q3. That guidance easily beat the analyst consensus of just $817 million. Non-GAAP EPS guidance of $1.20 to $1.46 (midpoint $1.33) also crushed expectations of $1.04.
“As we look ahead to Q4, AI-related test demand remains robust across compute, networking, and memory segments,” Smith said.
The guidance represents 27% growth over Q4 of 2024, signaling that the AI infrastructure buildout is accelerating into year-end.
The third-quarter results showed the shifting composition of Teradyne’s business. System-on-a-Chip (SoC) revenue hit $440 million, up 11% sequentially and 12% year-over-year.
Memory test revenue more than doubled sequentially to $128 million, driven by HBM (high-bandwidth memory) and AI-related LPDDR demand.
About 75% of memory revenue came from DRAM, with nearly all of it from the final DRAM and HBM performance tests.
For TER stock investors, the most striking detail was the extent to which AI now dominates the business.
Smith revealed that AI-related applications accounted for roughly 50% of the company’s total revenue in Q3. That figure jumps to about 60% in Q4, a dramatic shift from Teradyne’s historical reliance on mobile device testing.
“Our view of the second half of 2025 revenue is more than 50% higher than our expectations just 3 months ago,” Smith said, referring specifically to the compute segment.
Some of that increase came from customers pulling orders forward, but much of it reflects genuine demand acceleration.
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What the Market Is Telling Us About Teradyne Stock
The market’s enthusiastic reaction to TER stock suggests investors believe Teradyne is perfectly positioned to capitalize on the multi-year AI infrastructure buildout.
The company’s UltraFLEXplus test system was explicitly architected for high-performance processors and networking devices with demanding power and test data requirements. As AI chips become more complex, Teradyne’s architectural advantages become more valuable.
TER stock investors also received encouraging news about the company’s progress in memory testing. Teradyne now participates in all major HBM test insertions: memory-die wafer sort, post-stack wafer test, and singulated-stack test.
In Q3, Teradyne began volume shipments for the singulated stack test insertion after winning a design-in during Q2. Management expects memory test revenue to sustain 2024 levels despite an overall memory test market down in the low double digits this year.
One key development: Teradyne is making progress in winning design wins from new VIP (vertical-integrated player) customers and merchant GPU makers.
However, Smith was careful to note that Q3 results and Q4 guidance don’t include any revenue from these new opportunities.
If and when those design wins materialize into volume shipments, they could provide significant upside to current projections.
Teradyne is also seeing higher utilization rates and fewer system upgrades among its installed base of UltraFLEX testers.
Management believes customers have exhausted their inventory of underutilized systems, which means future demand inflections should translate more directly into new system sales rather than simply reactivating idle equipment.
For TER stock, the fourth quarter marks a new high watermark for capacity and shipping capability. Management acknowledged that pulling forward some Q1 projects into Q4 is part of the story, so investors shouldn’t simply extrapolate Q3-to-Q4 growth into a straight line for 2026.
But Smith emphasized that the company expects “continued strength” and “solid growth” in 2026, driven primarily by AI and what he calls “verticalization”—the trend of hyperscalers designing their own custom chips.
Gross margins came in at 58.5% in Q3, above guidance due to a favorable mix. For Q4, margins are expected to dip slightly to 57-58% due to one-time supply costs related to meeting accelerated demand and investments in factory expansion across multiple geographies.
Operating expenses are rising as Teradyne invests in R&D and go-to-market capabilities for AI opportunities. At the midpoint of Q4 guidance, non-GAAP operating profit margin should hit 25.5%.
Teradyne also announced a CFO transition, with Michelle Turner replacing Sanjay Mehta as CFO, effective November 3. Mehta, who has served as CFO since 2019, will remain as an executive adviser to support capacity expansion before retiring in 2026.
From a capital allocation perspective, Teradyne continues to return cash aggressively to shareholders. It repurchased $246 million of stock in Q3 and paid $19 million in dividends.
Year-to-date, Teradyne has returned $575 million to shareholders—approximately 2.5 times its free cash flow for the period. Management plans to maintain roughly $400 million in cash while using credit lines more frequently to fund operations.
Looking beyond 2025, Smith said the long-term themes of AI, verticalization, and electrification “remain firmly intact.”
It plans to provide updated long-term financial targets during its January earnings call, but management strongly hinted that AI-driven segments will account for a much larger share of the business model in the future.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
