Teradyne, Inc.
Analysis
Teradyne is no longer a phone-cycle company: compute has passed mobile as the biggest slice of its chip-test business, and AI now drives most of its revenue. The next few years hang on whether a handful of enormous AI programs ramp when management expects. How much of that AI revenue is compute versus memory?
- AI now drives most of Teradyne's revenue, and it is still gaining.
AI-related demand moved from half of sales in Q3 FY2025 to roughly 70% by Q1 FY2026, and compute overtook mobile as the largest part of the chip-test business. Growth now hangs on a few very large programs instead of a broad phone cycle. Which customers drive Teradyne's compute test revenue today?
- The customer list is finally widening past the first two hyperscalers.
A merchant GPU customer went into production in Q2 FY2026, correlation finished at a second hyperscaler, and new hard-drive and system-test customers came on. Each added logo makes one program slipping less likely to wipe out a quarter.
- Visibility stops about two quarters out, so records and air pockets alternate.
Management expects 50% to 52% of 2026 revenue in the first half, because tester orders follow customer device ramps that can slide by a quarter. One slipped program turns a record quarter into a flat one. How variable has Teradyne's quarterly revenue been since 2024?
- AI data center spending keeps growing for years rather than quarters. Tester orders follow wafer output, which keeps rising, so the market it sells into widens rather than peaks.
- Merchant GPU share climbs from nothing toward the 30% to 70% band. A rival supplies nearly all of it today, so each slice won adds new orders rather than taking them from elsewhere.
- Robotics reaches break-even and grows with the rest of the company. Break-even turns a unit that has dragged on results into one that adds to them, with a larger e-commerce order ramping.
- Almost all of the growth rests on a very few enormous programs. Two customers each bring in more than a tenth of revenue, so one program slipping a quarter moves the whole company.
- Memory, the fastest-growing piece, is also the lowest-margin one. Gross margin eased from its Q1 record as memory took a bigger share of sales, and management expects that to continue.
- The second-half orders never arrive on the schedule management assumes. Visibility reaches only two quarters out, so if big programs slide the year lands weak while the spending stays high.
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How Teradyne turned $3.2B of revenue into $650.1M of operating income.
| Revenue | ||
|---|---|---|
| Product | $2.7B | ▲ 15.92% YoY |
| Service | $529.8M | ▲ 0.93% YoY |
| Total revenue | $3.2B | |
| Gross profit | $1.9B | 58.2% |
| Operating income | $650.1M | 20.4% |