Teradyne Surges 22% as AI Test Demand Drives Record Q4
Semiconductor test equipment maker posts 44% revenue growth to $1.08B, issues Q1 guidance well above estimates. Stock gaps higher on compute and memory strength.
Teradyne just reminded Wall Street what happens when AI demand meets test equipment bottlenecks.
The semiconductor test company reported Q4 revenue of $1.08 billion—up 44% year-over-year and above the high end of its own guidance. More importantly, Q1 guidance came in at $1.15-1.25 billion versus analyst estimates of $928 million. Shares jumped 22% in after-hours trading.
That's the kind of beat that makes analysts rewrite their models.
The AI Connection
Teradyne makes the equipment that tests chips before they ship. Every AI accelerator, memory module, and compute chip needs testing. When Nvidia, AMD, and memory makers ramp production, Teradyne's order book fills up.
CEO Greg Smith connected the dots on the earnings call: "Our Q4 results were above the high end of our guidance range, fueled by AI-related demand in compute, networking and memory within our Semi Test business."
The semiconductor test segment generated $883 million in Q4 revenue—the bulk of the company's total. Product test added $110 million, and robotics contributed $89 million.
All three segments grew sequentially. That's unusual. Usually one segment carries the others. This quarter, the AI tide lifted everything.
The Guidance Shock
Q1 guidance is where things got interesting.
Management expects revenue of $1.15-1.25 billion for the current quarter. The Street was modeling $928 million. Adjusted EPS guidance of $1.89-2.25 compares to a consensus estimate of $1.24.
Those aren't modest beats—they're gaps of 24% on revenue and 53% on earnings at the midpoint. Either analysts completely misread the demand environment, or Teradyne visibility improved dramatically in the last few weeks.
The company also projected "year-over-year growth across all of our businesses" in 2026, with "strong momentum in compute driven by AI."
Where the Growth Is
The compute and memory strength traces back to the AI buildout. Data center operators are deploying AI accelerators at unprecedented scale. Each chip requires testing before deployment. Teradyne is one of the few companies with the equipment to handle that volume.
Memory is equally important. AI workloads are memory-intensive, driving demand for high-bandwidth memory (HBM) and faster DRAM. Memory testing has been a growth driver for Teradyne alongside compute.
The robotics business—which includes collaborative robots for manufacturing and warehouse operations—grew sequentially but remains a smaller piece of the story. Management sees potential there as automation adoption accelerates, but it's not the near-term catalyst.
Valuation After the Move
Teradyne closed Monday at $112. A 22% after-hours move puts the stock around $137 at the open—assuming it holds.
At that level, the stock trades at roughly 60x trailing earnings and 35x the midpoint of Q1 guidance annualized. Expensive by historical standards, but test equipment companies have traditionally commanded premium multiples when positioned at the center of a secular theme.
The comparison is ASML, the lithography equipment monopoly that trades at similar multiples. Teradyne doesn't have ASML's market dominance, but it operates in a similarly constrained supply chain where capacity additions take years.
The Semiconductor Ecosystem
Teradyne's results add to the picture painted by TSMC's Q4 profit surge and ASML's record orders. The semiconductor supply chain is running hot, and the test equipment segment is no exception.
AMD reports after the bell Tuesday and will provide another data point on AI chip demand. Nvidia reports later in February. Each result fills in more of the mosaic.
Risk Factors
The obvious risk is cyclicality. Semiconductor test equipment is notoriously boom-and-bust. When chip demand softens, test equipment orders fall faster. Teradyne has navigated these cycles before, but nothing goes up forever.
For now, though, the company is riding the AI wave. Management sees demand extending through 2026, and their Q1 guidance suggests they have line of sight into order trends.
The stock will likely open significantly higher Tuesday. Whether it holds depends on how investors weigh the near-term momentum against the eventual cyclical turn. For more on the AI chip sector, see our earnings coverage of semiconductor names this week.