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Teradyne Q3 Earnings Beat Estimates, Revenues Increase Year over Year
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Key Takeaways
Teradyne's Q3 earnings surged 169.4%, while revenues jumped 69.8% year over year.
AI-driven demand fueled record revenues in Memory and Integrated Systems Test.
TER's operating margin rose to 31.6%, while Robotics achieved record Q3 revenues and profitability.
Teradyne (TER - Free Report) reported third-quarter 2026 non-GAAP earnings of $2.29 per share, up 169.4% year over year and beating the Zacks Consensus Estimate by 12.26%.
Revenues increased 69.8% year over year to $1.306 billion and surpassed the consensus mark by 2.77%. Results benefited from record revenues in Memory and Integrated Systems Test, supported by artificial intelligence (AI)-related demand. The company also exceeded the upper end of its quarterly revenue guidance.
TER's Semiconductor Test Unit Dominates Sales Mix
Semiconductor Test generated revenues of $1.072 billion, which accounted for 82.1% of total quarterly revenues. The segment remained Teradyne’s largest business, benefiting from demand across AI-related testing applications.
Product Test contributed $138 million, representing 10.6% of total revenues. Robotics generated $96 million, which accounted for the remaining 7.4%. The revenue distribution highlights the company's continued reliance on Semiconductor Test while reflecting contributions from its other businesses.
Record revenues in Memory and Integrated Systems Test reflected expanding demand for testing solutions across the AI ecosystem. The company benefited from opportunities spanning memory devices, hard disk drives, and high-speed interconnect technologies.
Management emphasized the strength of its wafer-to-data-center strategy, which addresses testing requirements across different stages of AI infrastructure development.
The Robotics business delivered its highest third-quarter revenues to date and achieved profitability. This milestone reflected progress in a business that complements Teradyne's semiconductor and electronics testing operations.
Management also highlighted the increasing diversification of its business as it approaches 2027. Demand across multiple AI-related applications supported quarterly performance and broadened opportunities beyond traditional semiconductor testing.
Non-GAAP gross profit increased 71.5% year over year to $771.3 million. Non-GAAP gross margin expanded to 59.1% from 58.5% in the year-ago quarter, an improvement of 60 basis points.
Selling and administrative expenses increased 17.6% year over year to $199 million. However, these expenses represented 15.2% of revenues, down from 22% in the prior-year period, reflecting improved expense absorption amid higher sales.
Engineering and development expenses increased 30.7% year over year to $163.1 million. As a percentage of revenues, these expenses declined to 12.5% from 16.2%, indicating revenue growth outpaced development spending.
Non-GAAP income from operations surged 163.2% year over year to $412.9 million. The non-GAAP operating margin expanded to 31.6% from 20.4%, up 1,120 basis points. The expansion reflected stronger profitability as the company benefited from increased business volumes and operating leverage.
TER's Balance Sheet and Cash Flow Position
As of Sept. 27, 2026, Teradyne had cash and cash equivalents of $460.7 million compared with $293.8 million as of Dec. 31, 2025.
Net cash provided by operating activities reached $313.6 million in the third quarter, up from $49.1 million in the year-ago period.
The company repurchased $99.3 million of common stock and paid $20.3 million in dividends.
Teradyne Issues Fourth-Quarter 2026 Guidance
For the fourth quarter of 2026, Teradyne expects revenues between $1.25 billion and $1.35 billion. The midpoint of the guidance range stands at $1.30 billion.
Non-GAAP earnings are expected to be between $1.95 and $2.25 per share.
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Teradyne Q3 Earnings Beat Estimates, Revenues Increase Year over Year
Key Takeaways
Teradyne (TER - Free Report) reported third-quarter 2026 non-GAAP earnings of $2.29 per share, up 169.4% year over year and beating the Zacks Consensus Estimate by 12.26%.
Revenues increased 69.8% year over year to $1.306 billion and surpassed the consensus mark by 2.77%. Results benefited from record revenues in Memory and Integrated Systems Test, supported by artificial intelligence (AI)-related demand. The company also exceeded the upper end of its quarterly revenue guidance.
TER's Semiconductor Test Unit Dominates Sales Mix
Semiconductor Test generated revenues of $1.072 billion, which accounted for 82.1% of total quarterly revenues. The segment remained Teradyne’s largest business, benefiting from demand across AI-related testing applications.
Product Test contributed $138 million, representing 10.6% of total revenues. Robotics generated $96 million, which accounted for the remaining 7.4%. The revenue distribution highlights the company's continued reliance on Semiconductor Test while reflecting contributions from its other businesses.
Teradyne, Inc. Price, Consensus and EPS Surprise
Teradyne, Inc. price-consensus-eps-surprise-chart | Teradyne, Inc. Quote
Teradyne Benefits From Broad AI-Driven Demand
Record revenues in Memory and Integrated Systems Test reflected expanding demand for testing solutions across the AI ecosystem. The company benefited from opportunities spanning memory devices, hard disk drives, and high-speed interconnect technologies.
Management emphasized the strength of its wafer-to-data-center strategy, which addresses testing requirements across different stages of AI infrastructure development.
The Robotics business delivered its highest third-quarter revenues to date and achieved profitability. This milestone reflected progress in a business that complements Teradyne's semiconductor and electronics testing operations.
Management also highlighted the increasing diversification of its business as it approaches 2027. Demand across multiple AI-related applications supported quarterly performance and broadened opportunities beyond traditional semiconductor testing.
TER’s Operating Margins Expand Despite Higher Costs
Non-GAAP gross profit increased 71.5% year over year to $771.3 million. Non-GAAP gross margin expanded to 59.1% from 58.5% in the year-ago quarter, an improvement of 60 basis points.
Selling and administrative expenses increased 17.6% year over year to $199 million. However, these expenses represented 15.2% of revenues, down from 22% in the prior-year period, reflecting improved expense absorption amid higher sales.
Engineering and development expenses increased 30.7% year over year to $163.1 million. As a percentage of revenues, these expenses declined to 12.5% from 16.2%, indicating revenue growth outpaced development spending.
Non-GAAP income from operations surged 163.2% year over year to $412.9 million. The non-GAAP operating margin expanded to 31.6% from 20.4%, up 1,120 basis points. The expansion reflected stronger profitability as the company benefited from increased business volumes and operating leverage.
TER's Balance Sheet and Cash Flow Position
As of Sept. 27, 2026, Teradyne had cash and cash equivalents of $460.7 million compared with $293.8 million as of Dec. 31, 2025.
Net cash provided by operating activities reached $313.6 million in the third quarter, up from $49.1 million in the year-ago period.
The company repurchased $99.3 million of common stock and paid $20.3 million in dividends.
Teradyne Issues Fourth-Quarter 2026 Guidance
For the fourth quarter of 2026, Teradyne expects revenues between $1.25 billion and $1.35 billion. The midpoint of the guidance range stands at $1.30 billion.
Non-GAAP earnings are expected to be between $1.95 and $2.25 per share.
TER’s Zacks Rank & Other Stocks to Consider
Teradyne currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader Zacks Computer and Technology sector include ACI Worldwide (ACIW - Free Report) , Affirm (AFRM - Free Report) and AMETEK (AME - Free Report) . While AFRM and AME sport a Zacks Rank #1 (Strong Buy), ACI Worldwide carries a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
ACI Worldwide shares have gained 14.3% in the year-to-date period. ACI Worldwide is set to report third-quarter 2026 results on Nov. 5.
Shares of Affirm have lost 2.3% year to date. Affirm is set to report first-quarter fiscal 2027 results on Nov. 5.
Shares of AMETEK have rallied 19.9% year to date. AMETEK is slated to report third-quarter 2026 results on Nov. 3.