Teradyne 10-Qquarter ended 2026-06-28
Positive
AI compute and high-bandwidth memory demand drove record Semiconductor Test sales; favorable mix and operating leverage lifted margins.
Filed 2026-07-31 13:00 ET
Key figures · Q2 FY2026 · period ended 2026-06-28
- Revenue$1.3BYoY +103.9%QoQ +3.6%
- Operating income$437.8MYoY +382.5%QoQ −7.4%
- Net income$374.5MYoY +377.9%QoQ −6.1%
- Total assets$4.9BYoY +30.9%QoQ +11.1%
- Total debt$0Previous quarter $0
- Shareholders' equity$3.4BQoQ +9.3%
- Tangible book value$2.7BQoQ +3.5%
How this filing reads
- Health+0.6H1 OCF was $734M versus $773M net income; borrowings were zero, with $517M liquidity.
- Momentum+0.9Q2 revenue rose 104% to $1.33B, while operating income increased to $438M from $90.7M.
- Outlook+0.4Management reports record Semiconductor Test demand, while $1.78B in component commitments heightens exposure to a slowdown.
Executive Summary
Teradyne’s AI-driven semiconductor test expansion delivered Q2 revenue growth of 104% and substantially faster earnings growth, as favorable product mix and operating leverage outweighed higher investment spending. Semiconductor Test generated 84% of revenue, making the company increasingly dependent on AI compute and memory demand despite improving Robotics results and expansion into data-center connectivity testing. H1 operating cash flow largely matched earnings, but receivables and substantial component commitments make demand durability and cash collection critical. For investors, the filing supports a profitable AI-infrastructure growth thesis, tempered by customer concentration, trade restrictions and the risk of committing resources ahead of a cyclical slowdown.
Key Financial Highlights
| Metric | Q2 2026 | H1 2026 / period-end | Investor interpretation |
|---|---|---|---|
| Revenue | $1.33B, +104% Y/Y | $2.61B, +95% Y/Y | Semiconductor testing dominated growth. |
| Gross profit / margin | $795M / 59.8%, vs 57.2% | $1.58B / 60.3%, vs 58.9% | Higher volume and favorable mix improved profitability. |
| Operating income | $438M, vs $90.7M | $911M, vs $212M | Revenue growth substantially outpaced operating costs. |
| GAAP net income / diluted EPS | $375M / $2.38, vs $78.4M / $0.49 | $773M / $4.91, vs $177M / $1.10 | Earnings growth primarily reflected operating performance. |
| OCF / FCF | — | $734M / $579M | Receivables absorbed cash; capital expenditures reduced available cash further. |
| Total assets | — | $4.93B, +18% since year-end | Expansion included receivables and acquisition assets. |
| Total equity / tangible common equity | — | $3.47B / $2.71B | Equity increased 24%; goodwill and acquired intangibles explain the tangible-equity gap. |
- Cash conversion: H1 OCF equaled 95% of net income; operating assets and liabilities consumed $142M, including a $302M receivables outflow partly offset by liabilities and customer advances. Capital expenditures increased to $155M from $114M.
- Liquidity: Cash, cash equivalents and marketable securities totaled $517M; Credit Agreement borrowings fell from $200M at year-end to zero. The undrawn $750M secured revolving facility expires on 12/10/2026.
- Capital returns: H1 repurchases of $74.2M and dividends of $40.7M did not shrink the share count; outstanding shares increased by 0.290M to 156M, net of issuance.
- Investment valuation: The 10% Technoprobe holding had a $515M carrying value versus $2.46B quoted market value; that market-value premium is not reflected in the investment’s carrying amount.
Business Developments
- Semiconductor Test: Q2 revenue reached $1.12B, +128% Y/Y, with system-on-chip revenue of $843M and Memory revenue of $212M. Management reported a second consecutive record quarter, supported by AI compute, high-bandwidth memory, dynamic random-access memory and renewed NAND final-test demand.
- Robotics recovery: Q2 revenue increased 33% to $99.9M, marking a fifth consecutive quarter of sequential growth. Higher volume and lower restructuring-related expenses narrowed the pretax loss to $2.58M from $18.5M; electronics manufacturing and semiconductor customers were the largest end-markets.
- Product Test expansion: Q2 revenue increased 26% to $107M on AI-related and Defense and Aerospace demand. The $158M purchase of a 75% MultiLane interest adds high-speed connection testing for AI data centers; management expects additional investment supporting growth in 2027. Quantifi Photonics adds photonic testing capabilities, broadening exposure beyond chip testing.
Risk Assessment
- Demand and customer concentration: Semiconductor Test supplies 84% of Q2 revenue, and sales depend on a limited number of significant customers and their supply partners; weaker AI investment could disproportionately affect growth and margins.
- Trade exposure: Asia Pacific generated $1.16B, or 87% of Q2 revenue, making export restrictions, sanctions and tariffs consequential for market access and compliance costs.
- Procurement and working capital: Component commitments of ≈$1.78B, including $1.56B due within one year, create cash and inventory exposure if demand slows while receivables remain elevated.
- Acquisition execution: MultiLane’s preliminary allocation includes $132M of goodwill and $46.7M of intangibles; realizing value requires commercial growth and integration, while disappointing results could expose acquisition assets to impairment.
- Facility renewal: The revolving facility expires on 12/10/2026; although undrawn, failure to extend it would reduce funding flexibility during an investment-heavy expansion.
This 10-Q lists no risk factors of its own and refers to the annual report. The risks above come from the rest of this filing. Full list: the company's 10-Ks on SEC.
Strategic Outlook and Investor Actionables
Management is investing in Semiconductor Test leadership while extending into AI connectivity and photonics and restoring Robotics profitability. The thesis requires sustained AI testing demand to support these investments; the main threat is a demand reversal after procurement and spending commitments have increased.
- Semiconductor durability: Starting from $1.12B Q2 revenue and $427M pretax income, subsequent filings should show whether compute and memory demand sustains growth and profitability or reverses.
- Robotics recovery: Starting from $99.9M revenue and a $2.58M pretax loss, success means continued growth reaching profitability; renewed losses or stalled sales would weaken the diversification case.
- Product Test diversification: Starting from $107M Q2 revenue but H1 pretax income down to $22.7M, connectivity and photonics expansion works if growth translates into improving segment earnings, not merely additional acquisition costs.
- Cash discipline: Starting from $734M H1 OCF versus $773M net income, subsequent filings should show receivables converting into cash as investment continues; rising working-capital absorption or renewed borrowing would signal greater funding pressure.
Figures are computed from the filing's XBRL data; the summary and scores are written by an AI model reading the filing.
Model 006 · prompt bdad6d7239