Teradyne surges on AI-driven earnings beat and record guidance
Automated test equipment maker forecasts Q1 2026 revenue far above Wall Street expectations as AI-related demand approaches 60% of sales
Teradyne shares surged more than 23% in extended trading Tuesday after the automated test equipment maker delivered quarterly results that handily exceeded analyst expectations, driven by what chief executive Greg Smith described as explosive demand across all business segments tied to artificial intelligence.
The North Reading, Massachusetts-based company reported non-GAAP earnings per share of $1.80 for the fourth quarter of 2025, surpassing the consensus estimate of $1.36 by more than 32%. Revenue reached $1.083 billion, a 43.9% increase from the prior year and well ahead of Street projections ranging from $968.8 million to $980.8 million.
But it was the company's forward-looking guidance that truly captivated investors. Teradyne forecast first-quarter 2026 revenue between $1.15 billion and $1.25 billion, with the midpoint exceeding analyst estimates of approximately $947 million by roughly 27%. The company projected non-GAAP earnings per share of $1.89 to $2.25 for the quarter, significantly above the $1.25 consensus.
"Our fourth quarter results came in above the high end of our guidance range, fueled by AI-related demand in compute, networking and memory within our Semi Test business," Smith said in a statement. "All business groups grew sequentially and we expect year-over-year growth across all our businesses in 2026."
The quarter represented a turning point for Teradyne's revenue composition. AI-driven revenue approached 60% of the total mix by the end of the fourth quarter, marking a dramatic shift toward the higher-margin semiconductor testing applications that power AI infrastructure. The transformation positions the company as a direct beneficiary of the massive capital expenditures by hyperscale cloud providers building out AI computing capacity.
Segment performance underscored the breadth of the recovery. Semiconductor Test revenue reached $883 million, Product Test contributed $110 million, and Robotics generated $89 million—all showing sequential growth. The diversified revenue streams helped drive 13% overall company growth for 2025, a notable acceleration after a period of industry softness.
Analysts raced to upgrade their outlooks following the announcement. Evercore ISI raised its price target on Teradyne shares from $200 to $280 while maintaining an Outperform rating, citing the positive AI-linked fundamentals. The move reflected growing confidence that Teradyne has established itself as a critical infrastructure provider for the AI build-out, with its semiconductor testing equipment essential for validating the advanced chips that power AI applications.
The stock's rally extended into regular trading, with shares adding 3.5% to close at $249.53. The move pushed Teradyne's market capitalization above $38 billion and brought the year-to-date gain to more than 90%. The stock now trades above its 50-day moving average of $204.57 and has more than doubled from its 200-day average of $133.78, reflecting the rapid re-rating of the company's growth prospects.
Current analyst sentiment remains broadly positive, with 11 Buy ratings, 5 Hold ratings, and 1 Sell rating, according to market data. The consensus price target stands at $220, suggesting some analysts may need to revise their forecasts higher following the guidance surprise.
Looking ahead, investors will be watching whether Teradyne can maintain the torrid growth pace as AI infrastructure spending continues. The company's guidance implies full-year 2026 revenue could approach $5 billion, a substantial acceleration from 2025 levels. However, the cyclical nature of semiconductor capital expenditures remains a risk factor, particularly if AI spending patterns shift or macroeconomic conditions deteriorate.
For now, Teradyne has successfully navigated its transition from a traditional cyclical semiconductor equipment maker to a direct AI infrastructure play. With AI-related demand approaching nearly two-thirds of its business and a forecast that significantly exceeded even bullish expectations, the company has demonstrated that it is positioned to capitalize on what many analysts view as a multi-year infrastructure build-out cycle.