Which businesses drove third-quarter results?

  • Teradyne reported third-quarter 2026 revenue of 1.306 billion dollars, above the market consensus of 1.268 billion dollars but down 1.7% sequentially; non-GAAP earnings per share were 2.29 dollars, above the consensus of 2.05 dollars.
  • Product testing revenue was 138 million dollars, about 26% above market consensus; semiconductor testing revenue was 1.072 billion dollars, 2% above consensus. Robotics revenue was 96 million dollars, below the consensus of 106 million dollars and down 4% sequentially.
  • The midpoint of the company’s fourth-quarter revenue guidance was 1.3 billion dollars, slightly above the market consensus of 1.277 billion dollars; the midpoint of non-GAAP earnings-per-share guidance was 2.10 dollars, above the consensus of 2.05 dollars. Goldman Sachs believes results and guidance were only slightly above consensus, while investors had previously held relatively optimistic expectations, and expects the stock to trade within a range in the near term.

What will sustain growth in 2027?

  • Management expects first-quarter 2027 revenue to exceed fourth-quarter 2026 revenue and to continue growing sequentially in every quarter of 2027. The outlook rests on a healthy year-end order backlog and improved visibility into customer demand, contrasting with earlier concerns among some investors about weakness in the first half of 2027.
  • Memory testing revenue reached 301 million dollars in the third quarter, up 42% sequentially to a quarterly record, with demand coming from HBM, DRAM testing and a recovering NAND market. Management expects the memory business to grow significantly in 2027 after new fab capacity comes online, with HBM as the main driver.
  • Goldman Sachs believes lower HBM stack layer counts could allow constrained DRAM wafer supply to yield more HBM stacks, increasing demand for performance testing; Teradyne’s share of HBM performance testing is higher than its share of DRAM wafer sort testing.
  • In computing, two large cloud service customers are expected to ramp up beginning in mid-2027, while a commercial GPU customer will also contribute incremental revenue. Orders for large AI infrastructure projects are intermittent, and delays in ramping revenue from the GPU customer would affect the pace of growth.

What constraints do robotics and gross margin face?

  • After the robotics business declined sequentially in the third quarter, management expects growth to resume in the fourth quarter and continue into 2027. Robotics revenue from its largest customer tripled from 2025 to 2026; based on the customer’s deployment plans, further growth in 2027 is weighted toward the second half.
  • Third-quarter gross margin was 59.1%, up 0.6 percentage points year over year, helped by volume and product mix; the fourth-quarter guidance midpoint was 58.0%, below the market consensus of 58.5%. Management expects volume and product mix to remain favorable for gross margin in 2027, including growth in higher-margin product testing, but input cost pressures will offset some of the gains.

Why did Goldman Sachs raise earnings forecasts but lower its price target?

  • Goldman Sachs raised its 2027 revenue forecast from 6.229 billion dollars to 6.499 billion dollars and its non-GAAP earnings-per-share forecast from 11.50 dollars to 12.50 dollars; its earnings-per-share forecasts for 2026 through 2028 rose by an average of about 7%.
  • The bank maintained its Buy rating but lowered its 12-month price target from 465 dollars to 440 dollars: the normalized earnings-per-share estimate used remained at 12.50 dollars, while the valuation multiple fell from 37 times to 35 times because peer multiples declined.