Teradyne Inc. (NASDAQ: TER) reported a 70% year-over-year increase in third-quarter 2026 revenue, supported by strong growth across semiconductor testing, product testing and robotics as demand tied to artificial intelligence continued to shape its business mix. Non-GAAP earnings per share rose 169%, and the company expects fourth-quarter revenue of about $1.3 billion at the midpoint of its guidance.
Revenue totaled $1.306 billion for the quarter, compared with $769 million a year earlier and $1.329 billion in the second quarter. Teradyne said sales and non-GAAP EPS exceeded the high end of its guidance, marking the third consecutive quarter with company revenue near $1.3 billion.
Non-GAAP EPS increased to $2.29 from $0.85 a year earlier, although it was below the second quarter’s $2.47. Non-GAAP operating profit reached $413 million, representing 31.6% of revenue, up from $157 million and 20.4% in the prior-year period. Gross margin was 59.1%, compared with 58.5% a year earlier and 59.8% in the preceding quarter.
Operating expenses rose to $358 million from $293 million a year earlier, reflecting higher research and development and selling, general and administrative spending. R&D expense increased to $163 million from $125 million, while SG&A expense climbed to $195 million from $168 million.
Semiconductor Test Leads Growth
Semiconductor Test remained Teradyne’s largest business, generating $1.072 billion, or 82% of total revenue. Sales increased 77% year over year from $606 million but declined from $1.122 billion in the second quarter. The company reported record quarterly revenue in Memory and Integrated System Test.
Teradyne identified AI-related compute and memory demand as important growth drivers for Semiconductor Test. Management also highlighted the potential for gradual share gains in compute through dual-vendor qualification and production cycles. The presentation indicated that a qualified second supplier may initially build toward a 30% share, with an expected mature range of 30% to 70%, though actual outcomes depend on customer adoption and production ramps.
Product Test revenue rose 56% year over year to $138 million, accounting for 11% of company sales. The business benefited from opportunities associated with computing, optical transceivers, photonics and high-performance interconnects used in high-speed networks and data centers.
Robotics generated $96 million, up 28% from $75 million a year earlier but down from $100 million in the second quarter. Teradyne described the result as its highest-ever third-quarter Robotics revenue. The company is focusing the business on e-commerce, logistics, semiconductor and electronics applications while positioning its seventh-generation Universal Robots platform for industrial automation and physical AI deployments.
Product revenue across Teradyne totaled $1.164 billion, up from $632 million a year earlier, while service revenue increased to $142 million from $137 million.
Fourth-Quarter and Full-Year Outlook
For the fourth quarter, Teradyne expects revenue of $1.25 billion to $1.35 billion and non-GAAP EPS of $1.95 to $2.25. At the midpoint, revenue would be $1.3 billion and EPS would be $2.10. The company expects a non-GAAP gross margin of 57.5% to 58.5% and an operating margin of 28% to 30%.
At the midpoint of that guidance, full-year 2026 revenue would be about $5.2 billion, representing growth of more than 60% from 2025. Full-year non-GAAP EPS would be approximately $9.41, up 138% year over year.
Teradyne also reiterated the target earnings model it updated in February 2026. The model contemplates revenue of about $6 billion, a non-GAAP operating margin of roughly 30% to 34% and non-GAAP EPS of approximately $9.50 to $11.00, based on an automatic test equipment market of $12 billion to $14 billion. These figures are targets rather than current-quarter guidance.
The company introduced several products during the preceding 60 days spanning semiconductor wafer testing through AI data-center infrastructure. The launches included new UltraFLEXplus instruments, the Magnum E2 memory tester, the Titan HP platform for advanced AI data-center devices and test systems for MicroLED and silicon photonics applications.
Cash Flow and Risks
Teradyne ended the quarter with $625 million in cash and marketable securities, up from $517 million at the end of the second quarter. Inventory increased to $575 million from $403 million. Free cash flow was $227 million, compared with $378 million in the second quarter and $2 million a year earlier.
The company spent $99 million on share repurchases and $20 million on dividends during the quarter. Capital additions totaled $86 million.
Teradyne cautioned that its outlook remains subject to changes in economic conditions, customer demand and product-development schedules, as well as its ability to expand the Robotics business. Other cited uncertainties include supply constraints, higher R&D spending, tariffs, export controls, trade restrictions, geopolitical conflicts, tax changes and regulations affecting sales of semiconductor technology to China and other markets.
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