TER Teradyne 10-Q 2026-09-27 section summaries

Teradyne (TER) — Q3 and nine months ended September 27, 2026

Teradyne’s sharp year-over-year growth was led by semiconductor testing and product revenue; services grew much more slowly. Profitability rose faster than revenue, while higher working-capital needs and capital spending absorbed cash. Asia Pacific accounted for about 86% of Q3 revenue.

Consolidated results

$ in millions, except diluted EPS and share data.

Q3 revenue increased 69.7% year over year and 9M revenue increased 85.9%. Product revenue grew 84.2% in Q3 and 103.8% in 9M, versus services growth of 3.4% and 7.4%, respectively. Q3 operating income rose 176.6%. Segment income before taxes, the measure Teradyne’s CODM uses for budgeting and resource allocation, is shown below; it is not the same as consolidated operating income.

Segments

$ in millions; segment profit is income before taxes.

Semiconductor Test revenue grew 77.0% in Q3 and 101.5% in 9M; Product Test grew 56.5% and 31.6%. Robotics returned to a small Q3 profit and narrowed its 9M loss. Total reportable-segment pretax income was $408.682 million versus $149.161 million in Q3 and $1.323 billion versus $369.204 million in 9M. Corporate and eliminations were $(4.391) million versus $(1.061) million in Q3, and $(9.623) million versus $(5.520) million in 9M, reconciling to consolidated pretax income of $404.291 million versus $148.100 million and $1.314 billion versus $363.684 million, respectively.

Cash flow and capital spending

$ in millions.

Cash flow benefited from higher earnings, but working-capital outflows increased, notably receivables ($302.733 million), inventory ($178.794 million) and prepayments and other assets ($224.940 million). Accounts payable and other liabilities provided $347.615 million. Investing outflows included $165.611 million for acquisitions and a $20.900 million business investment. Financing included $350 million drawn and $550 million repaid on the revolving facility, $173.502 million of share repurchases, and $61.024 million of dividends; prior-year 9M repurchases were $518.658 million.

Balance sheet, liquidity and commitments

$ in millions, except shares.

At September 27, implied tangible common equity—shareholders’ equity less goodwill and acquired intangible assets—was $2.927458 billion. Goodwill included $153.939 million of acquisition-related additions, partly offset by $11.182 million of foreign-currency translation; no intangible impairment was recorded in 9M. Nine-month stock-based compensation was $63.649 million, compared with $47.561 million.

In August, Teradyne replaced its $750 million revolver with a five-year, $1.0 billion senior secured facility maturing in August 2031. No borrowings were outstanding at quarter-end; the facility has a maximum consolidated leverage covenant of 3.50x and minimum interest coverage of 2.50x, and Teradyne reported compliance. Purchase commitments totaled $2.253 billion, including $1.906 billion due within one year. Contract manufacturer and supplier prepayments rose to $539.686 million from $364.170 million.

Business developments and other considerations

Teradyne acquired a controlling 75% stake in MultiLane Test Products (MLTP) in April for a total purchase price of $157.839 million, adding capabilities aimed at AI data-center demand for testing high-speed data connections. The preliminary allocation included $131.634 million of goodwill and $46.700 million of acquired intangibles. The remaining 25% is redeemable noncontrolling interest, carried at $49.065 million; the holder may have redemption rights beginning in 2029 under a contractual pricing formula. Teradyne also holds a 10% equity-method investment in Technoprobe, carried at $518.559 million versus a quoted fair value of $2.2424 billion.

On October 6, Teradyne agreed to invest $300 million for a minority, non-controlling stake in FormFactor, expected to close in Q4 subject to approvals and closing conditions. The companies plan to collaborate on semiconductor test solutions, including silicon photonics, high-performance computing, advanced packaging and high-bandwidth memory.

Deferred revenue and customer advances rose to $270.025 million from $204.012 million. Unsatisfied performance obligations due beyond one year totaled $131.1 million, with 57% expected to be recognized within 12 months. The product warranty liability increased to $27.935 million from $19.2 million at year-end. The Singapore tax holiday generated $16.4 million of 9M tax savings ($0.10 per diluted share), and was extended through 2035.

Teradyne — Q3 and nine months ended September 27, 2026

AI-related demand for semiconductor compute and memory drove sharply higher revenue and profitability. Semiconductor Test exceeded $1 billion in revenue for a third consecutive quarter; memory revenue reached a record $301 million, marking its fourth consecutive quarter above $200 million. Product Test also benefited from demand tied to AI infrastructure, while Robotics grew across electronics and semiconductor customers.

Consolidated results

Q3 revenue rose 69.8%; gross margin expanded 0.7 percentage points, reflecting increased sales and favorable product mix. For the first nine months, revenue grew 86.0%. Selling, administrative, and engineering expenses increased in dollars, including from strategic Semiconductor Test investment and higher variable compensation, but declined as a share of revenue. Q3’s effective tax rate was 14.8%, versus 15.8%; the nine-month rate was 14.4%, versus 13.8%. Nine-month interest expense rose to $7.0 million from $2.9 million, primarily due to debt outstanding during portions of 2026.

Segment performance

Segment profit is reported as income before taxes and equity earnings.

Nine-month segment revenue and profit were: Semiconductor Test, $3.305 billion versus $1.640 billion, and $1.262 billion versus $402.4 million; Product Test, $325.8 million versus $247.5 million, and $64.1 million versus $40.1 million; Robotics, $287.0 million versus $218.9 million, and a $3.2 million loss versus a $73.3 million loss. Corporate and eliminations were losses of $4.4 million in Q3 and $9.6 million for nine months, compared with losses of $1.1 million and $5.5 million, respectively, in 2025.

Q3 revenue growth was 76.9% in Semiconductor Test, 56.4% in Product Test, and 27.6% in Robotics. Nine-month growth was 101.5%, 31.6%, and 31.1%, respectively. Product Test’s growth reflected AI-infrastructure demand across board test, optical and high-speed interconnect, including MultiLane, as well as Wireless and Defense and Aerospace. Robotics’ nine-month improvement reflected higher volume, better mix, and lower operating expenses following restructuring; its revenue reached a record third-quarter level.

Cash flow, investment and financing

Operating cash flow increased substantially, while changes in operating assets and liabilities used $218.3 million, compared with $48.6 million used in 2025. Operating assets increased $706.5 million, including increases of $302.7 million in receivables, $224.9 million in prepayments and other assets, and $178.8 million in inventory. A $488.2 million increase in operating liabilities, primarily accounts payable and other liabilities ($347.6 million), partly offset that use.

Investing activity included $165.6 million of acquisition cash consideration, net of acquired cash. Teradyne acquired a controlling 75% interest in MultiLane Test Products Holding LLC in April for approximately $157.8 million, subject to customary adjustments; its results are included in Product Test. Financing included $200.0 million of net credit-facility repayments, $173.5 million of repurchases, $61.0 million of dividends, and $42.2 million for net settlements of employee stock awards. Teradyne repurchased 0.5 million shares at an average $349.62 per share, compared with approximately 5.1 million shares at $102.01 in the prior-year period. Cumulative repurchases under the $2.0 billion authorization were 12.5 million shares for $1.4818 billion, including excise tax. The quarterly dividend increased to $0.13 per share from $0.12.

Liquidity, strategy and risks

Cash, cash equivalents and marketable securities totaled $624.9 million at September 27, 2026, up from $448.3 million at year-end 2025. The balance comprised $460.7 million of cash and equivalents, $5.8 million of short-term marketable securities, and $158.3 million of long-term marketable securities. No short-term debt remained, compared with $200.0 million at year-end. A new five-year, $1.0 billion senior secured revolving facility replaced the prior facility; it expires in August 2031, had no quarter-end borrowings, and Teradyne was in covenant compliance. The company expects available liquidity and the facility to cover dividends, working capital, and expenditures for at least the next 12 months.

In October 2026, Teradyne agreed to invest $300.0 million for a minority, non-controlling interest in FormFactor, alongside a collaboration to develop test solutions for silicon photonics, high-performance compute, advanced packaging, and high-bandwidth memory. Closing was expected in Q4, subject to customary conditions and regulatory approvals. Management expects continued R&D investment, particularly in 2027.

Teradyne cited concentrated demand among a limited number of test-equipment customers and their supply partners, and risks from trade controls, tariffs, sanctions, and export restrictions. Compliance costs were not material during the nine months; IEEPA tariff refunds received in Q3 were also not material, and further refunds were not expected to materially affect results. The company reported no significant long-term earnings impact from inflation and no significant changes to critical accounting policies or estimates.

Teradyne reported no material changes in its market-risk exposures since those disclosed in its FY2025 Form 10-K, for the fiscal year ended December 31, 2025, filed February 19, 2026.

For the quarter ended September 27, 2026, Teradyne’s CEO and CFO concluded that disclosure controls and procedures were effective. The company reported no changes in internal control over financial reporting during the quarter that materially affected, or were reasonably likely to materially affect, those controls.

The company states that the risk factors in its FY2025 Form 10-K, filed February 19, 2026, remain applicable and should be considered together with this Form 10-Q. It cautions that risks not currently known, or currently considered immaterial, could nevertheless materially adversely affect its business, financial condition, or operating results. The section identifies no new specific risks or financial metrics.

During the fiscal quarter ended September 27, 2026, Vice President and General Counsel Ryan Driscoll adopted a Rule 10b5-1 trading plan on September 3, 2026. Under the plan, a broker may sell up to 3,614 shares, subject to price limits, beginning February 5, 2027. The plan is scheduled to terminate May 7, 2027, or earlier under specified conditions.