Teradyne (NASDAQ: TER) revenue jumps 70%, but guidance centers on flat sales

What happened

Teradyne, Inc. (NASDAQ: TER) reported third-quarter revenue of $1.31 billion, up 70% from a year earlier and above the top of its guidance.

GAAP net income attributable to Teradyne was $342.4 million, or $2.17 per diluted share, up from $0.75 a year earlier. The company says earnings rose more than 150%. Non-GAAP earnings were $2.29 per diluted share, against $0.85 in the third quarter of 2025.

Most of the revenue came from one business, and margins held up.

Key numbers

Metric	Latest	Change	Source
Third-quarter revenue	$1.31 billion	from $769 million, +70%	SEC 8-K Exhibit 99.1
GAAP diluted EPS	$2.17	from $0.75, +189.3%	Calculated from SEC 8-K
Non-GAAP diluted EPS	$2.29	from $0.85, +169.4%	Calculated from SEC 8-K
GAAP gross margin	59.1%	from 58.4%, +0.7 percentage points	Calculated from SEC 8-K
Operating cash flow	$313.6 million	from $49.1 million, +539.4%	Calculated from SEC 8-K
Fourth-quarter revenue guidance	$1.25 billion to $1.35 billion		SEC 8-K Exhibit 99.1

Read more: Teradyne (TER) company research

Where the revenue came from

Semiconductor Test produced $1.07 billion of revenue. That is 82.1% of the total by OptimistFi's calculation. Product Test added $138 million and Robotics $96 million.

The release describes record revenue in Memory and Integrated Systems Test, driven by "all things AI." CEO Greg Smith said, "Demand extended across the AI value chain, from memory and hard disk drive test to high-speed interconnect and robotics."

Robotics, the smallest of the three segments, had its highest third-quarter revenue to date and became profitable, the release says.

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Margins and cash conversion

Against the year-earlier quarter, growth did not cost margin. GAAP gross margin was 59.1%, up from 58.4%. GAAP operating margin was 30.8%, up from 18.9%. Both were lower than in the second quarter, when gross margin was 59.8% and operating margin 32.9%.

Cash conversion improved more sharply. Operating cash flow was $313.6 million, up from $49.1 million a year earlier. By OptimistFi's calculation that is 90.2% of consolidated net income, compared with 41.0% in the third quarter of 2025.

Growth still absorbs cash. The cash flow statement shows $170.9 million added to inventories and $165.3 million to prepayments and other assets in the quarter. Buybacks fell to $99.3 million from $243.8 million a year earlier. Short-term debt was zero on Sept. 27 against $200 million at Dec. 31, 2025.

Why it matters

OptimistFi has argued that Teradyne's value depends on chip complexity and automation turning into revenue without hurting gross margin or cash conversion. This quarter supports that view. Year-over-year growth came with a higher gross margin and much stronger cash conversion.

The main caveat is direction. Revenue slipped from $1.33 billion in the second quarter, and margins eased in the same comparison. The non-GAAP figures also leave out items such as acquired intangible asset amortization, restructuring and ERP costs.

The release's own risk list names decreased or delayed demand from significant customers, and tariffs or export controls imposed by the U.S. or China, as factors that could change results.

What's next

Teradyne holds its earnings call at 8:30 a.m. ET on Oct. 28, with presentation materials available from 7:30 a.m.

Fourth-quarter revenue guidance is $1.25 billion to $1.35 billion. The $1.3 billion midpoint is slightly below the third-quarter figure, so the outlook centers on flat sales. GAAP guidance is $1.88 to $2.18 per diluted share, which straddles the third-quarter result. Non-GAAP guidance is $1.95 to $2.25, which tops out below it.

The fourth-quarter report will test that outlook. Revenue above $1.35 billion with gross margin near the third quarter's level would strengthen the case. Revenue below $1.25 billion would weaken it.

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