Teradyne Tops Its Own Guidance on AI Test Demand, but Shares Drop After Hours

Teradyne's third-quarter revenue rose 70% as demand for AI chip-testing gear drove results above the company's own guidance.

Teradyne reported third-quarter 2026 results on Oct. 27, 2026, after the market close. The quarter ended Sept. 27, 2026.

Revenue was $1.306 billion, up 70% from $769 million a year earlier.

Teradyne had guided the quarter to revenue of $1.20 billion to $1.30 billion. It had guided adjusted earnings to $1.85 to $2.15 a share.

Adjusted earnings are the company's non-GAAP measures. Non-GAAP means figures adjusted outside standard accounting rules.

AI demand filled the test business

Semiconductor Test brought in $1.072 billion of the revenue. Product Test added $138 million and Robotics added $96 million.

The company said Memory and Integrated Systems Test set revenue records, driven by AI demand. Robotics posted its highest third-quarter revenue to date and turned profitable.

"Demand extended across the AI value chain, from memory and hard disk drive test to high-speed interconnect and robotics," Chief Executive Greg Smith said. He added that the breadth drove results above the high end of guidance.

Adjusted earnings were $2.29 a share, up from $0.85 a year earlier. Analysts polled by FactSet expected $2.09 a share on sales of $1.27 billion.

Teradyne cleared the earnings tally by $0.20 a share, a TickerGrove calculation. Sales topped the tally by about 2.8%, also a TickerGrove calculation.

Margins and cash followed sales higher

Reported net income was $342.4 million, or $2.17 a share. A year earlier it was $119.6 million, or $0.75 a share.

Reported gross margin was 59.1%, up from 58.4% a year earlier. Reported operating margin was 30.8%, up from 18.9%.

Operating cash flow was $313.6 million in the quarter. A year earlier it was $49.1 million.

Teradyne bought back $99.3 million of its stock in the quarter. It declared a quarterly dividend of $0.13 a share.

Growth did cool from the spring: revenue slipped about 1.7% from the second quarter's $1.329 billion, a TickerGrove calculation.

Fourth-quarter guidance sits above forecasts

For the fourth quarter, Teradyne guided revenue to $1.25 billion to $1.35 billion. It guided adjusted earnings to $1.95 to $2.25 a share.

The guidance midpoints are $1.3 billion of sales and $2.10 of adjusted earnings. Wall Street was modeling $2.07 a share on sales of $1.27 billion for the quarter.

The outlook is company guidance, not a result. On sales it points to a fourth quarter roughly level with the third.

Shares fell despite the beat

Shares sank nearly 7% to $302 in after-hours trading, Investor's Business Daily reported. That followed a 4.8% gain in Tuesday's regular session, to a $323.68 close.

The drop came even though results cleared both Wall Street targets and the company's own guidance range.

What remains unknown

What remains unknown is why investors sold a quarter that beat on both lines, because the release gives no reason for the after-hours move. Also unknown is whether AI test demand holds this pace into 2027, a question management takes up on its Oct. 28 call. What to watch is that call, memory-test orders for the fourth quarter, and whether Robotics stays profitable after its record quarter. The verified record is clear on the quarter itself: AI chip-testing demand drove revenue up 70% and profit far higher.