Semiconductor testing company Teradyne (NASDAQ:TER) announced better-than-expected revenue in Q4 CY2025, with sales up 43.9% year on year to $1.08 billion. On top of that, next quarter’s revenue guidance ($1.2 billion at the midpoint) was surprisingly good and 25.8% above what analysts were expecting. Its non-GAAP profit of $1.80 per share was 30.1% above analysts’ consensus estimates.
Teradyne (TER) Q4 CY2025 Highlights:
- Revenue: $1.08 billion vs analyst estimates of $975.6 million (43.9% year-on-year growth, 11% beat)
- Adjusted EPS: $1.80 vs analyst estimates of $1.38 (30.1% beat)
- Adjusted Operating Income: $314 million vs analyst estimates of $249.8 million (29% margin, 25.7% beat)
- Revenue Guidance for Q1 CY2026 is $1.2 billion at the midpoint, above analyst estimates of $954 million
- Adjusted EPS guidance for Q1 CY2026 is $2.07 at the midpoint, above analyst estimates of $1.25
- Operating Margin: 27.1%, up from 20.4% in the same quarter last year
- Free Cash Flow Margin: 20.2%, down from 29.9% in the same quarter last year
- Inventory Days Outstanding: 74, down from 104 in the previous quarter
- Market Capitalization: $37.75 billion
“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. Across all of our business groups – Semi Test, Product Test, and Robotics – we experienced sequential growth, and at the company level we achieved 13% growth in 2025,” said Teradyne CEO, Greg Smith.
Company Overview
Sporting most major chip manufacturers as its customers, Teradyne (NASDAQ:TER) is a US-based supplier of automated test equipment for semiconductors as well as other technologies and devices.
Revenue Growth
Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years. Unfortunately, Teradyne struggled to consistently increase demand as its $3.19 billion of sales for the trailing 12 months was close to its revenue five years ago. This wasn’t a great result and is a rough starting point for our analysis. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions.
We at StockStory place the most emphasis on long-term growth, but within semiconductors, a half-decade historical view may miss new demand cycles or industry trends like AI. Teradyne’s annualized revenue growth of 9.2% over the last two years is above its five-year trend, suggesting its demand recently accelerated.
This quarter, Teradyne reported magnificent year-on-year revenue growth of 43.9%, and its $1.08 billion of revenue beat Wall Street’s estimates by 11%. Company management is currently guiding for a 75% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 21.8% over the next 12 months, an improvement versus the last two years. This projection is admirable and suggests its newer products and services will fuel better top-line performance.
While Wall Street chases Nvidia at all-time highs, an under-the-radar semiconductor supplier is dominating a critical AI component these giants can’t build without.
Product Demand & Outstanding Inventory
Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business’ capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.
This quarter, Teradyne’s DIO came in at 74, which is 15 days below its five-year average. At the moment, these numbers show no indication of an excessive inventory buildup.
Key Takeaways from Teradyne’s Q4 Results
We were impressed by Teradyne’s strong improvement in inventory levels. We were also glad its EPS outperformed Wall Street’s estimates. Zooming out, we think this was a solid print. The stock traded up 10.2% to $275.31 immediately after reporting.
Teradyne may have had a good quarter, but does that mean you should invest right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.
