Teradyne ((TER)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The recent earnings call from Teradyne painted a picture of a company experiencing robust performance, primarily driven by strong demand in the AI and semiconductor test sectors. The company reported notable increases in both revenue and earnings per share (EPS). However, this positive sentiment was tempered by challenges in the mobile and auto industrial segments, flat performance in robotics, and rising operating expenses.
Sequential Revenue and EPS Growth
Teradyne reported an impressive 18% sequential increase in revenue and a 49% rise in non-GAAP EPS for the third quarter of 2025. This growth was largely fueled by the strong AI demand in semiconductor tests, highlighting the company’s ability to capitalize on emerging technology trends.
AI Demand Surge
The surge in AI-related demand significantly boosted the semiconductor test segment. The company’s compute-related revenue exceeded expectations by more than 50% compared to three months ago, underscoring the growing importance of AI in driving business performance.
Memory Test Revenue Spike
Memory test sales more than doubled from the previous quarter, reaching $128 million. This spike was largely driven by AI applications, with DRAM accounting for 75% of the memory revenue, indicating a strong market demand for memory components in AI technologies.
Robotics Growth from AI Products
Robotics sales for AI-related products showed growth, increasing from 6% in Q2 to over 8% in Q3. Additionally, service revenue rose from 12% to 14%, reflecting the expanding role of AI in the robotics sector.
Strong Q4 Guidance
Teradyne provided optimistic guidance for the fourth quarter, expecting sales between $920 million and $1 billion, with non-GAAP EPS projected between $1.20 and $1.46. This guidance is driven by anticipated continued demand for AI-related compute, networking, and memory.
Weakness in Mobile and Auto Industrial Segments
Despite the overall positive performance, the mobile and auto industrial segments remained weak, impacting the company’s broader business performance. This highlights an area of concern that could affect future growth.
Flat Robotics Revenue
Robotics revenue remained flat quarter-on-quarter and declined year-over-year. Volume shipments to large e-commerce customers did not significantly impact the 2025 revenue, indicating challenges in achieving growth in this segment.
High Operating Expenses
Operating expenses rose to $293 million, driven by increased investments in R&D, sales, and marketing tied to AI, as well as higher variable compensation. This increase reflects the company’s strategic focus on capturing AI opportunities.
Low Free Cash Flow
Free cash flow was notably low at $2 million, impacted by net working capital increases related to accounts receivable and inventory growth. This highlights potential liquidity challenges that the company may need to address.
Forward-Looking Guidance
Looking ahead, Teradyne expects continued growth driven by AI demand. The company forecasts Q4 sales between $920 million and $1 billion, a significant increase from Q3’s $769 million. Non-GAAP EPS is projected to rise to between $1.20 and $1.46. The company anticipates that AI-related demand for compute, networking, and memory will continue to drive growth. Operating expenses are expected to increase further, reflecting ongoing investments in R&D and sales.
In summary, Teradyne’s earnings call highlighted a strong performance driven by AI demand, with significant revenue and EPS growth. However, challenges in certain segments and rising expenses present potential hurdles. The company’s forward-looking guidance remains optimistic, with expectations of continued growth fueled by AI-related opportunities.