Q1 2026 Teradyne Inc Earnings Call

April 29, 2026

Speaker #1: And I'm hearing these about to begin. Ladies and gentlemen, good morning, and welcome to the Tear Dines Quarter 2026 earning conference call. At this time, all participants are in a listen-only mode.

Operator: Ladies and gentlemen, good morning, and welcome to Teradyne's Q2 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the prepared remarks. At that time, if you wish to ask a question, please press star one on your telephone keypad. As a reminder, today's call is being recorded. I'll now like to turn the call over to Amy McAndrews, Vice President of Corporate Affairs for Teradyne. Please go ahead.

Speaker #1: A question-and-answer session will follow the prepared remarks. At that time, we will ask a question based on your telephone keypad. As a reminder, this call is being recorded.

Speaker #1: I would now like to turn the call over to Amy McAndrews, VP of Corporate Relations for TearDyne. Please go ahead.

Speaker #2: Thank you, Operator. Good morning, everyone, and welcome to our discussion of TearDyne's most recent financial results. I'm joined this morning by our CEO, Greg Smith, and our CFO, Michelle Turner.

Amy McAndrews: Thank you, operator. Good morning, everyone, and welcome to our discussion of Teradyne's most recent financial results. I am joined this morning by our CEO, Greg Smith, and our CFO, Michelle Turner. Following our opening remarks, we will provide details of our performance for Q1 2026 and our outlook for Q2. The press release containing our Q1 results was issued last evening. We are providing slides as well as a copy of these prepared remarks on the Teradyne investor website that may be helpful in following the discussion. Replays of this call will be available via the same page after the call ends. The matters that we discuss today will include forward-looking statements that involve risks that could cause Teradyne's results to differ materially from management's current expectations. We caution listeners not to place undue reliance on any forward-looking statements included in this presentation.

Speaker #2: Following our opening remarks, we'll provide details of our performance for the first quarter of 2026 and our outlook for the second quarter. The press release containing our first quarter results was issued last evening.

Speaker #2: The following slides reveal a copy of these prepared remarks from the TearDyne investor website that may be helpful in following the discussion. Replays of this call will be available via the same page after the call ends.

Speaker #2: The matters that we discussed today will include forward-looking statements that involve risks that could cause TearDyne's results to diminish. We caution listeners not to rely on any forward-looking statements included in this presentation.

Speaker #2: We encourage you to review the Safe Harbor Statement contained in the slides accompanying this presentation as well as the risk factors described in our annual report on Form 10-K for the fiscal year ended December 31st, 2025, on file with the agency.

Amy McAndrews: We encourage you to review the safe harbor statement contained in the slides accompanying this presentation, as well as the risk factors described in our annual report on Form 10-K for the fiscal year ended 31 December 2025 on file with the SEC. These forward-looking statements are made only as of today. During today's call, we will refer to non-GAAP financial measures. We have posted additional information concerning these non-GAAP financial measures, including reconciliation to the most directly comparable GAAP financial measures, where available, on the investor page of our website. Looking ahead between now and our next earnings call, Teradyne expects to participate in technology-focused investor conferences hosted by Bernstein, TD Cowen, Stifel, and Bank of America. Our quiet period will begin at the close of business on 12 June 2026. Following Greg and Michelle's comments this morning, we will open up the call for questions.

Speaker #2: Additionally, forward-looking statements are made only as of today. During today's call, we will refer to non-GAAP financial measures. We have posted additional information concerning these non-GAAP financial measures including reconciliation to the most comparable GAAP financial measures where available on the investor page website.

Speaker #2: Looking at between now and our next earnings call, TearDyne expects to participate in technology-focused investor conferences hosted by Bernstein, TD Cowan, Stifel, and Bank of America.

Speaker #2: Our quiet period will begin at the closing on June 12th, 2026. Following grand conference this morning, we'll open up the call for questions. This call is scheduled for one hour.

Speaker #2: Greg?

Speaker #3: Good morning. With revenue of approximately $1.3 billion, and non-GAAP EPS of $2.56, earnings delivered results in the first quarter of 2026. Our PVI watermark was in the consumer-driven mobile peak of Q2 of 2021.

Amy McAndrews: This call is scheduled for 1 hour. Greg.

Greg Smith: Good morning. With revenue of approximately $1.3 billion and non-GAAP EPS of $2.56, Teradyne delivered record results in Q1 of 2026. Our previous high watermark was in the consumer-driven mobile peak of Q2 of 2021. In Q1 of 2026, our revenue was $200 million or 18% higher than that previous record. This new record comes from durable AI demand drivers and the continuing acceleration of our wafer-to-AI data center strategy. This strategy is delivering demand across Teradyne's portfolio. In Q1, AI-related demand accounted for nearly 70% of our revenue, up from about 60% in Q4 of 2025. Our strategy continues to be anchored across three broad trends: verticalization, electrification, and AI. Verticalization is the concentration of our business into extremely large, vertically integrated technology companies.

Speaker #3: In Q1 of 2026, our revenue was $200 million or 18% higher than that previous record. This new record comes from durable AI manufacturers and the continuing acceleration of our wafer-to-AI data center strategy.

Speaker #3: This strategy is delivering demand across TearDyne's portfolio. In Q1, AI-related demand accounted for nearly 70% of our revenue, up 60% in Q4 of 2025.

Speaker #3: Our strategy continues to be anchored across three broad trends. Verticalization, electrification, and AI. Verticalization is the concentration of our business into extremely large vertically integrated technology companies.

Speaker #3: The verticalization trend was clear by 2024 and continues to accelerate. This includes companies like Hyperscalers, but also huge AI ecosystem enablers like Foundries, merchant compute, memory, and networking companies.

Greg Smith: The verticalization trend was clear by 2024 and continues to accelerate. This includes companies like hyperscalers, but also huge AI ecosystem enablers like foundries, merchant compute, memory, and networking companies. Many of these companies are customers of all three of our businesses, SemiTest, product test, and robotics. This product portfolio enables us to serve their needs from wafer to data center. While these massive customers are driving strong growth, it also means that the business is increasingly concentrated to these customers and to a smaller number of very large ASIC and commercial device programs. This concentration also increases the risk that bottlenecks in other areas could shift demand for our products, which can lead to short-term demand peaks and valleys superimposed over long-term strong growth trend. In other words, it's lumpy growth. The electrification trend continues.

Speaker #3: Many of these companies are customers of all three of our businesses, semiconductor test, product test, and products. And this product portfolio enables us to serve their needs from wafer to data center.

Speaker #3: While these massive customers are driving strong growth, it also means that the business is increasingly concentrated to these customers to explore another very large, basic, and commercialized program.

Speaker #3: This concentration also increases the risk that bottlenecks in other areas could shift demand for our products, which can lead to short-term demand peaks and valleys superimposed over long-term strong growth.

Speaker #3: In other words, it's growth. Electrification continues. In the auto industrial segment, 46% of our revenue came from data center devices in the first quarter.

Speaker #3: Which historically has been dominated by automotive and industrial devices. We also have to say AI is the dominant force in our business. We talk about the opportunity presented by AI as three superimposed waves, each building on the one before it.

Greg Smith: In the auto industrial segment, 46% of our revenue came from data center devices in Q1, which historically has been dominated by automotive and industrial devices. It goes without saying, AI is the dominant force shaping our business. We think about the opportunity presented by AI as 3 superimposed waves, each building on the one before it. We are in the heart of the first wave, which focused on the build-out of general purpose AI data center capacity. This was behind the massive increase in data center spend in 2025. In 2026, we are entering the second wave. While there is still huge investment in general purpose AI data centers, these data centers are being augmented with compute silicon optimized for inference at scale. This wave will grow to a high run rate over the next few years.

Speaker #3: We are in the heart of the first wave, which focused on the build-out of general-purpose AI data center capacity. This was behind the massive increase in data centers in 2025.

While these massive customers are driving strong growth, it also means that the businesses increasingly concentrated to these customers and to a smaller number of very large Asic and Commercial device programs.

Speaker #3: In 2026, we are entering the second wave. While there is still huge investment in general-purpose AI data centers, these data centers are being augmented with compute silicon at scale.

This concentration also increases the risk that bottlenecks and other areas could shift demand for our products, which can lead to short-term demand Peaks and valleys superimposed over long-term. Strong growth Trend. In other words, it's lumpy growth.

Speaker #3: This wave will grow to a higher rate over the next few years. Still yet to come is the edge AI physical AI wave. As the technologies for silicon, packaging, memory, and AI models improve, compelling use cases for AI will be emerging.

The electrification trend continues in the auto industrial segment. 46% of our Revenue came from data center devices in the first quarter which historically had been dominated by automotive and Industrial devices.

Greg Smith: Still yet to come is the edge AI, physical AI wave. As the technologies for silicon, packaging, memory, and AI models improve, compelling use cases for AI at the edge will be emerging. Obvious examples of this are self-driving cars, robotics, PCs, wearables, and smartphones. These waves are broad-based, and we expect them to stack on top of each other, driving significant ATE TAM growth over the full midterm. Because of Teradyne's wafer-to-data center strategy and our historic strength in mobile, automotive, and industrial, we are well-positioned to ride each of these waves as they arrive. Back in our January call, we shared that we expected robust double-digit year-over-year growth. We still expect that the compute TAM and revenue will grow significantly from an already strong 2025 base. We're seeing healthy engagement with both networking and Virtual IP compute customers, and our pipeline of new design wins remains robust.

Speaker #3: Obvious examples of this are self-driving cars, robotics, PCs, wearables, and smartphones. These waves are broad-based, and we expect them to stack on top of each other driving significant ATE TAM growth over the full mid-term.

It goes without saying, AI is the dominant force shaping our business. We think about the opportunity presented by AI as three superimposed waves, each building on the one before it. We are in the heart of the first wave, which focuses on the buildup of general purpose AI data center capacity.

Speaker #3: Because of TearDyne's major data center strategy, and our exploration of mobile automotive industrial, we are well positioned to ride each of these waves as they arrive.

This was behind the massive increase in data center, spent in 2025.

Speaker #3: Back in our January call, we shared that we expected robust double-digit year-over-year growth. We still expected the compute TAM will grow significantly from early strong 2025 base.

This wave will grow to a high run rate over the next few years.

Still yet to come is The Edge AI? Physical AI wave.

Speaker #3: We're seeing healthy engagement with both networking and VIP compute customers and our pipeline of new design wins remains robust. Aligned with this momentum, I am pleased to share that we have received our first multi-system production test orders for merchant GPUs in Q1.

As the Technologies for silicon packaging memory and AI models improve compelling use cases. For AI at the edge will be emerging.

Obvious examples of this are self-driving, cars, robotics, PCS, wearables, and smartphones.

Speaker #3: We expect these systems to ship, be installed, and be in production in Q2. Customer engagement remains strong, and we are well positioned to capture further share as we bring devices on our platform.

Greg Smith: Aligned with this momentum, I am pleased to share that we have received our first multi-system production test orders for merchant GPU in Q1. We expect these systems to ship, be installed, and be in production in Q2. Customer engagement remains strong, and we are well-positioned to capture further share as we bring up more devices on our platform. In automotive and industrial, we're seeing moderate but steady recovery in both TAM and revenue. There are signs of strength in automotive for primarily ADAS, and we're seeing increased demand for power going into AI data centers. As of now, mobile appears a bit weaker with memory pricing and availability affecting end market demand, especially outside the iOS ecosystem. Memory test demand appears to be even stronger than our view in January, with AI compute demand for both HBM and DRAM continuing to act as an accelerator.

These waves are broad-based, and we expect them to stack on top of each other, driving significant TAM growth over the full midterm.

Speaker #3: In automotive and industrial, we're seeing moderate and steady recovery in both TAM and revenue. There are signs of strength in automotive, primarily ADAS, and we're seeing increased demand for power going into AI data centers.

Because of paradigms wafer to Data Center strategy and our historic strengths and mobile automotive and Industrial. We are well positioned to ride each of these waves as they arrive.

Back in our January call, we shared that we expected robust double-digit year-over-year growth.

Speaker #3: As of now, both memory and availability affecting demand, especially outside of the iOS ecosystem. Memory test demand appears to be even stronger than our view in January, with AI compute demand for both HBM and DRAM continuing to act.

We still expect that the compute Tam and revenue will grow significantly from an already strong, 2025 Bass.

We're seeing healthy engagement with both networking and VIP compute customers and our pipeline of new design wins remains robust.

Speaker #3: We're also beginning to see increasing flash demand driven by SSDs. The overall memory market is on track for solid TAM growth for the year, and we expect to gain low single-digit share.

Aligned with this momentum. I am pleased to share that we have received our first multi-system production, test orders for merchants, GPU and q1. We expect these systems to ship be installed and be in production in Q2.

Greg Smith: We're also beginning to see increasing flash test demand driven by SSD. The overall memory market is on track for solid TAM growth for the year, and we expect to gain low single-digit share. In 2025, our IST Group expanded its HDD customer base and entered the SLT compute market. Now, in 2026, IST is on track to deliver against this expanded opportunity. We're seeing strength in HDD driven by greater than 20% annual exabyte growth fueled by AI. This translates into longer test times per drive and a larger HDD TAM and revenue for Teradyne. In robotics, we delivered our 4th consecutive Q of sequential growth. This is particularly notable because Q4 is typically our strongest quarter and Q1 is typically down. We're seeing strong customer engagement across e-commerce, electronics manufacturing, and semiconductor end markets.

Speaker #3: In 2025, our IST group expands customer base and entered the SLT compute. Now in 2026, IST is on track to deliver against this expanded opportunity.

Customer engagement remains strong and we are well positioned to capture further share as we bring up more devices on our platform.

Speaker #3: We're seeing strength in HDD driven by greater than 20% annual exabyte growth fueled by AI. This per drive and a larger in robotics, we delivered our fourth consecutive quarter of sequential growth.

In Automotive and Industrial, we're seeing moderate but steady recovery in both TAM and revenue. There are signs of strength in Automotive, primarily for ADAS, and we're seeing increased demand for power going into AI data centers.

As of now mobile appears a bit weaker with memory pricing and availability affecting end market demand, especially outside the iOS ecosystem.

Speaker #3: This is particularly notable because Q4 is typically our strongest quarter, and Q1 is typically done. We're seeing strong engagement across e-commerce, electronics manufacturing, and semiconductor end markets.

Memory test demand appears to be even stronger than our view in January with AI compute demand. For both HPM and DM continuing to act as an accelerator. We're also beginning to see increasing flash test demand driven by SSD

Speaker #3: Robotics is a key part of our AI our wafer to AI data center strategy with robotic-assisted assembly, test, and data center operations. Our robotics being used in environmental sensing, in data centers, we recently demonstrated a complex system AI workshop in partnership with generalists as part of the recent NVIDIA GTC.

The overall memory Market is on track for solid Tam growth for the year and we expect to gain low single digit share.

In 2025, our IST group expanded its HDD, customer base and entered the SLT compute Market.

Greg Smith: Robotics is a key part of our AI our wafer-to-AI data center strategy with robotic-assisted assembly, test, and data center operations. Our robots are being used in environmental sensing in data centers, and we recently demonstrated a complex physical AI work cell in partnership with Generalist as part of the recent NVIDIA GTC. In prior calls, we have often talked about the investments that we are making to capture growth opportunities coming from our wafer-to-data center strategy. In Q1, these investments have resulted in two significant new product introductions. The first is Photon 100, which is our platform for silicon photonics and co-packaged optics testing. The Photon 100 is based on our proven UltraFLEXplus tester and is bringing SiPh testing from lab to fab.

Now in 2026 IST is on track to deliver against this expanded opportunity.

Speaker #3: In prior calls, we have often talked about the investments that we are making after these come from our wafer to data center strategy. In Q1, these investments have resulted in two significant new product introductions.

we're seeing strength in HDD driven by greater than 20% annual exabyte growth fueled by AI,

This translates into longer test times per drive and a larger HDD TAM and revenue per terabyte.

Speaker #3: The first is photon 100, which is our platform for silicon photonics and co-packaged optics testing. The photon 100 is based on our multiplex processor and is bringing I'll remind you that silicon photonics and co-packaged optics are in the very early stages of a ramp that will likely be substantial.

In robotics we delivered our fourth consecutive quarter of sequential growth. This is particularly notable because Q4 is typically our strongest quarter and q1 is typically down

We're seeing strong customer engagement across e-commerce, electronics, manufacturing, and semiconductor markets.

Speaker #3: There is uncertainty about the timing and the slope of this ramp. For scale-out and scale-up networking is going to be a big chunk of the total networking TAM.

Robotics is a key part of our AI to our wafer to AI data center strategy, with robotic assisted assembly test and data center operations.

Greg Smith: I will remind you that silicon photonics and co-packaged optics are in the very early stages of a ramp that will likely be substantial. As optical interconnections are increasingly used for scale-out and then scale-up networking, there is uncertainty about the timing and the slope of this ramp, it is going to be a big chunk of the total networking TAM. As this market grows, we also expect to bring significantly more efficient test solutions online. It would be a mistake to linearly extrapolate from today's test strategies and economics. That being said, we expect that this is a meaningful TAM expansion opportunity which could reach $300 to 700 million per year over the midterm. The second product introduction is Omnex, which is a new production board test platform designed to address the unique set of test challenges for server boards and tray assemblies.

Speaker #3: As this market grows, we also expect to bring significantly more efficient test solutions online. So it would be a mistake to linearly extrapolate from today's test strategies and outcomes.

Our robots are being used in environmental sensing in data centers and we recently demonstrated a complex physical AI work cell in partnership with generalists as part of the recent Nvidia GTC.

Speaker #3: That being said, we expect that this is a meaningful TAM expansion opportunity which could reach 300 to 700 million dollars per year over the mid-term.

In Prior calls, we have often talked about the Investments that we are making to capture growth opportunities. Coming from our wafer to Data Center strategy. In q1, these Investments have resulted in 2, significant new product, introductions

Speaker #3: The second product introduction is Omnix. Which is a new production test platform with a unique set of tests. This platform uses power, thermal, optical, and TDR test capabilities from across all of TearDyne to enable earlier detection of defects that are plaguing the build of AI data centers.

The first is Photon 100, which is our platform for silicon photonics and C- packaged Optics, testing.

Speaker #3: In addition, we continue to pursue opportunities to grow our business. Our multi-lane test products joint venture closed on April 8th, and we believe this partnership will accelerate the development of high-speed I/O and data center interconnect test solutions and AI data centers transition from data centers to backlink and mid-plane architectures.

Greg Smith: This platform uses power, thermal, optical, and TDR test capabilities from across all of Teradyne to enable earlier detection of defects that are plaguing the build-out of AI data centers. In addition, we continue to pursue inorganic opportunities to grow our business. Our MultiLane Test Products joint venture closed on 8 April, and we believe this partnership will accelerate the development of high-speed IO and data center interconnect test solutions, a critical test need as AI data centers transition from cable-based connections to backplane and midplane architectures. Additionally, we closed the acquisition of Test Insight two weeks ago. Test Insight is the leading provider of test development tools that are used with our testers and complete competing platforms. This acquisition strengthens Teradyne's design to test software capabilities, enabling us to build a virtual test environment, which will reduce time to market for complex AI and networking devices.

Speaker #3: Additionally, we closed the acquisition of Test Insight two weeks ago. Test Insight is the leading provider of test development tools that are used with our testers and compute platforms.

Meaningful Tam expansion opportunity, which could reach 300 to 700 million dollars per year over the midterm.

The second product introduction is.

Speaker #3: This acquisition strengthens TearDyne's capabilities enabling us to build a virtual test environment which will reduce time to market for complex AI and networking devices.

On new production board. Test platform designed to address the unique set of test challenges for Server boards and Trey assemblies.

Speaker #3: In summary, Q1 2026 was a record quarter. We're executing our strategy, capitalizing on secular drivers, and delivering value for customers and shareholders. Our team especially our operations team and manufacturing partners went above and beyond to hit this ramp, and I'm grateful for their hard work and skill.

Optical and TDR test capabilities from across all of Paradigm to enable earlier detection of defects that are plaguing the buildout of AI data centers.

Greg Smith: In summary, Q1 2026 was a record quarter for Teradyne. We're executing our strategy, capitalizing on secular growth drivers, and delivering value for our customers and shareholders. Our team, especially our operations team and manufacturing partners, went above and beyond to hit this ramp, and I'm grateful for their hard work and skill. We came into the second quarter with a lot of momentum and confidence that 2026 will be a strong growth year, and we are well on our way to achieving our target earnings model. With that, I'll turn the call over to Michelle.

Speaker #3: And confidence that we are well on our way to achieving our target earnings model. With that, I'll turn the call over to Michelle.

In addition, we continue to pursue inorganic opportunities to grow our business and our multi-lane test products. Our joint venture closed on April 8th, and we believe this partnership will accelerate the development of high-speed IO and data center interconnect test solutions—a critical test need as AI data centers transition from cable-based connections to backplane and midplane architectures.

Speaker #4: Thank you, Greg, and good morning, everyone. Today, I will cover our first quarter financial results and the second quarter of 2026 outlook. First quarter sales were a billion 282 million dollars with non-GAAP EPS of $2.56.

Additionally, we closed the acquisition.

Of test Insight two weeks ago.

Test Insight is the leading provider of test development tools that are used with our testers and complete competing platforms.

Speaker #4: Both above the high end of our guidance range. Total company sales were up 87% from first quarter last year and up 18% sequentially from last quarter.

Michelle Turner: Thank you, Greg, and good morning, everyone. Today, I will cover our Q1 financial results and our Q2 2026 outlook. Starting first with Q1. Q1 sales were $1.282 billion with non-GAAP EPS of $2.56, both above the high end of our guidance range. Total company sales were up 87% from Q1 last year and up 18% sequentially from last quarter. Non-GAAP earnings per share was up 241% from Q1 last year and up 42% sequentially from last quarter. This represents a record financial performance for the company, driven by all things AI across all three of our business groups. In the quarter, we continue to have 2 specifying customers and 1 purchasing customer greater than 10% of our revenue.

This acquisition strengthens paradigms design to test software capabilities. Enabling us to build a virtual test environment which will reduce time to market for complex, Ai and networking devices.

Speaker #4: Non-GAAP earnings per share was up 241% from first quarter last year and up 42% sequentially from last quarter. This represents a record financial performance for the company.

Speaker #4: Across all three of our businesses, we continue to have two specifying customers and one purchasing customer greater than 10% of our revenue. Building on that, let's look a little deeper at revenue starting with Semitest.

In summary, q1 2026 was a record quarter for Paradigm. We're executing our strategy capitalizing on secular growth drivers and delivering value for our customers and shareholders. Our team, especially our operations team, and Manufacturing Partners. When above and beyond to hit this ramp and I'm grateful for their hard work and skill.

Speaker #4: 1.1 billion breaking the billion dollar threshold for the first time. 26% from last quarter and over 100% year over year versus Q1 2025. The revenue breakdown within Semitest was SOC at 882 million.

We came into the second quarter with a lot of momentum and confidence that 2026 will be a strong growth year. And we are well on our way to achieving our target earnings model. With that, I'll turn the call over to Michelle.

Thank you, Greg and good morning everyone. Today, I will cover our first quarter Financial results and our second quarter 2026 Outlook.

Michelle Turner: Building on that, let's look a little deeper at revenue, starting with SemiTest. Revenue was $1.1 billion, breaking the billion-dollar threshold for the first time, up 26% sequentially from last quarter and over 100% year-over-year versus Q1 2025. The revenue breakdown within SemiTest was SoC at $882 million, memory at $203 million, and IST at $27 million. The key drivers were continued AI strength in compute segments and memory. At roughly 75%, compute is the largest portion of our SoC product revenue. This continues the evolution of our test portfolio from being mobile-centric, shifting to AI-dominant. Within auto and industrial, revenue nearly doubled sequentially from a low base last quarter, driven by power management demand increases for AI data center build-outs.

Speaker #4: And IST at 27 million. Drivers were continued AI strength and compute segments and memory. At roughly 75% compute is the largest portion of our SOC product revenue.

Starting first with q1. First quarter sales were a billion 282 million with non-gaap, EPS of 2.56, both above the high end of our guidance range.

Total company sales were up 87% from the first quarter last year and up 18% sequentially from last quarter.

Speaker #4: This continued evolution from mobile-centric shifting to AI memory. With auto and industrial, revenue nearly doubled sequentially from a low base last quarter driven by power management demand increases for AI data center buildouts.

Non-gaap earnings per share was up 241% from first quarter last year and up 42% sequentially. From last quarter.

This represents a record financial performance for the company. Driven by all things AI across all 3 of our business groups.

Speaker #4: Mobile revenue was roughly 2025 and remains a muted impact increasing the importance of compute in our SOC portfolio. Aligned with our strong top-line performance, operationally we have more than doubled our ultra-flex plus shipments over the last nine months, while our 2016 week lead times.

In the quarter, we continue to have two specifying customers and one purchaser greater than 10% of our revenue.

Building on that. Let's look a little deeper at Revenue, starting with semi test.

Revenue was 1.1 billion, breaking the billion dollar threshold for the first time up, 26% sequentially from last quarter and over a 100% year-over-year versus q1 2025.

Michelle Turner: Mobile revenue was roughly flat with Q4 2025. Remains a muted impact to our overall results with the increasing importance of compute in our SoC portfolio. Aligned with our strong top-line performance, operationally, we have more than doubled our UltraFLEXplus shipments over the last 9 months while sustaining our 12 to 16-week lead times. Our multi-source strategy, primarily leveraging contract manufacturers, provides ultimate flexibility for our customers while ensuring capacity continuity in today's dynamic environment. Moving on to memory. Our memory business delivered another strong quarter of $203 million in revenue, relatively flat to our record last quarter, driven by robust HBM and DRAM test solution demand. We also successfully ramped the newest generation of our memory tester, Magnum V.

Speaker #4: Our multi-quarter strategy primarily leveraging contract manufacturers provides ultimate flexibility for our customers while ensuring capacity continuity in today's dynamic environment. Moving on to memory.

The revenue breakdown within semi tests was SOC at 882 million.

Memory at $203 million and IST at $27 million.

Speaker #4: Our memory business delivered another strong quarter of 203 million for a record last quarter driven by robust HBM and DRAM test solution demand. We also successfully ramped the newest generation of our memory tester, Magnum 7.

The key drivers were continued AI strength and compute segments and memory.

At roughly 75% compute is the largest portion of our SOC product Revenue.

This continues, the evolution of our test portfolio, from being mobile Centric, shifting to AI dominant.

Speaker #4: Was relatively flat year over year, so we are seeing early indicators for potential growth driven primarily by HDD in the second half and continuing into 2027.

Within Auto and Industrial, revenue nearly doubled sequentially from a low base last quarter, driven by power management. Demand is increasing for AI data center buildouts.

Speaker #4: Product test group revenue was 80 million up 8% year over year. Sustained defense and aerospace demand and production support tests. Robotics revenue was 91 million up 32% year over year, representing our fourth sequential quarter of growth.

Mobile revenue was roughly flat with fourth quarter 2025, and remains a new impact to our overall results, with the increasing importance of compute in our SOC portfolio.

Michelle Turner: IST revenue of $27 million was relatively flat year over year, though we are seeing early indicators for potential growth, driven primarily by HDD in the H2 and continuing into 2027. Product test group revenue was $80 million, up 8% year over year. Growth was led by sustained defense and aerospace demand and production board tests. Robotics revenue was $91 million, up 32% year over year, representing our fourth sequential quarter of growth. Our one sales team approach is delivering results with revenue strength across end market verticals in e-commerce, electronics manufacturing, and semiconductors, including in AI data centers. Shipments associated with our large e-commerce customer increased sequentially, and AI revenue increased to 15% of the quarter's sales. Now moving down the P&L. A confluence of positive factors delivered record earnings results, including peak AI-driven volume, favorable product mix, and non-recurring one-time benefits.

Aligned with our strong Topline performance operationally. We have more than doubled. Our ultraflex plus shipments over the last 9 months while sustaining our 12 to 16 week lead times.

Speaker #4: Our one sales team approach is delivering results and e-commerce better, including an AI data centers. Shipments associated with our large e-commerce customer increased sequentially and AI revenue increased to 15% of the quarter's sales.

Our multi-source strategy, primarily leveraging contract manufacturers, provides ultimate flexibility for our customers while ensuring capacity continuity in today's dynamic environment.

Moving on to memory.

Speaker #4: A confluence of positive factors including peak AI-driven volume, favorable product mix, and non-recurring one-time benefits. Gross margin for the quarter was 60.9% up 370 basis points volume and product non-recurring operational impacts.

Driven by robust hbm and dram test solution, demand.

We also successfully ramp the newest generation of our memory tester Magnum 7.

IST revenue of 27 million was relatively flat year-over-year though, we are seeing early indicators for potential growth driven primarily by HDD in the second half in continuing into 2027.

Speaker #4: Opex, the client sequentially from last quarter and was favorable to guidance due primarily to the timing of non-recurring engineering. Non-GAAP operating income was 480 million with an operating margin of 37.5%.

Product test group revenue was $80 million, up 8%. Year-over-year growth was led by sustained defense and aerospace demand and production board test.

Michelle Turner: Gross margin for the quarter was 60.9%, up 370 basis points sequentially, driven by strong SemiTest volume and product mix and non-recurring operational impacts. OpEx declined sequentially from last quarter and was favorable to guidance due primarily to the timing of non-recurring engineering. non-GAAP operating income was $480 million, with an operating margin of 37.5%, both all-time financial records. Now moving on to capital allocation. Our capital allocation strategy remains consistent, and that is to maintain cash reserves to enable us to run the business and have dry powder for M&A. We ended the quarter with cash and investments of roughly $400 million. Working capital, predominantly in accounts receivable, increased and supported the revenue growth delivered in the quarter.

Speaker #4: Now moving on to capital allocation. Our capital allocation strategy remains consistent and that is to maintain cash reserves to enable us to run the business and have dry powder for cash and investments of roughly 400.

Robotics Revenue was 91 million up 32% year-over-year representing our fourth sequential quarter of growth.

Our 1 Sales team approach is delivering results with Revenue strength across in Market, verticals, and e-commerce Electronics, manufacturing and semiconductors including an AI data centers.

Speaker #4: Predominantly in accounts receivable, increase in support of the revenue growth delivered in the quarter. Capital expenditures were flat year over year with the expectation that Q2 will increase and operation scaling.

Shipments associated with our large e-commerce, customer increased sequentially, and AI Revenue increased. The 15% of the quarter sales

Speaker #4: Our share buybacks were de minimis. As Greg mentioned, we closed on two important inorganic asset opportunities this month. On April 8th, we closed on our previously announced multi-lane test.

Now, moving down the p&l, a Confluence of positive factors, delivered record, earnings results, including Peak, AI, driven volume, favorable product, mix and non-recurring, 1-time benefits.

Gross margin for the quarter was 60.9% of 370 basis points, sequentially driven by strong semmit test, volume and product mix and non-recurring operational impacts.

Speaker #4: Business will be consolidated into the product will reflect our share of the results of this business. On April 16th, we closed on the acquisition of Test Insight Business, furthering our wafer to AI data center product penetration.

Michelle Turner: Capital expenditures were flat year-over-year with the expectation that Q2 will increase, driven by continued investments in innovation and operation scaling. We paid $20 million in dividends in the quarter, and our share buybacks were de minimis. As Greg mentioned, we closed on two important inorganic asset opportunities this month. On 8 April, we closed on our previously announced MultiLane Test Products joint venture. The results of this business will be consolidated into the Product Test Group, and our EPS will reflect our share of the results of this business. On 16 April, we closed on the acquisition of Test Insight business, furthering our wafer-to-AI data center product penetration. Combined, these two deals used roughly $165 million of cash in Q2, which we funded via our credit revolver. Looking ahead to our Q2 guidance.

Opex declined sequentially from last quarter, and was favorable the guidance. Due primarily to the timing of non-recurring engineering.

Non-gaap operating income was 480. Million with an operating margin of 37.5%, both All Time Financial records.

Speaker #4: Roughly 165 million of cash, which we funded via our credit revolver. Looking ahead to our second quarter guidance. For the quarter, we expect revenue in the range of 1.15 billion to 1.25 billion and non-GAAP EPS in 15 cents.

Now, moving on to Capital, allocation.

Our Capital allocation strategy remains consistent and that is to maintain cash, reserves to enable us to run the business and have dry powder for m&a.

We ended the quarter with cash and Investments of roughly 400 million.

Speaker #4: Gross expected to be in the range of 58% to 59%, normalized for peak volumes and one-time benefits. Operating expenses are expected to run at approximately 27 to 28% of second quarter sales.

Working capital, predominantly in accounts receivable, increased in support of the revenue growth delivered in the quarter.

Capital expenditures were flat year-over-year with the expectation. That Q2 will increase driven by continued Investments and Innovation and operations scaling.

Speaker #4: Profit rate is expected to be based on current customer order visibility, we continue to expect first half weighted revenue with approximately 55 to 60% of annual revenue expected in the first half.

Michelle Turner: For the quarter, we expect revenue in the range of $1.15 billion to $1.25 billion, and non-GAAP EPS of $1.86 to $2.15. Gross margins are expected to be in the range of 58% to 59%, normalized for peak volumes and one-time benefits. Operating expenses are expected to run at approximately 27% to 28% of Q2 sales. The non-GAAP operating profit rate is expected to be between 30% and 32%. Based on current customer order visibility, we continue to expect H1 weighted revenue with approximately 55% to 60% of annual revenue expected in H1. This expanded range from three months ago recognizes the continued strong demand signals we are hearing from our customers, while also balancing potential order lumpiness that could impact revenue timing across quarters or years.

We paid 20 million in dividends in the quarter, and our share BuyBacks were diminished.

Speaker #4: Recognizes the continued customers while also balancing potential order lumpiness that could impact revenue timing, across quarters or years. For the year, we have line of sight to about 50 million in revenue for merchant GPU.

As Greg mentioned, we closed on 2 important inorganic asset opportunities. This month on April 8th. We closed on our previously announced multi-lane, test products joint venture the results of this business will be Consolidated into the product test group and our EPS will reflect our share of the results of this business.

On April 16th, we closed on the acquisition of Test Insight business, furthering our wafer-to-AI data center product penetration.

Speaker #4: The second half is quite limited with increasing period. So in closing, our teams delivered exceptional financial results reflecting strong execution and robust demand across our portfolio, aligned with our way for the data center strategy.

Combined these 2 deals, use a roughly 1655 of cash in the second quarter which we funded via our credit revolver.

Speaker #4: We and our target model of six-month revenue and $11 in non-GAAP EPS. I want to thank all of our Caroline team members for their performance and operational discipline in delivering for our customers and shareholders.

Looking ahead to our second quarter guidance, for the quarter, we expect revenue in the range of $1.15 billion to $1.25 billion, and non-GAAP EPS of $1.86 to $2.15.

Michelle Turner: For the year, we have line of sight to about $50 million in revenue for merchant GPU, our visibility into H2 is quite limited with increasing contributions over the midterm period. In closing, our teams delivered exceptional financial results reflecting strong execution and robust demand across our portfolio, aligned with our wafer-to-data center strategy. We remain confident in the full year trajectory and our target model of $6 billion in revenue and $9.50 to $11 in non-GAAP EPS. I wanna thank all of our Teradyne team members for their performance and operational discipline in delivering for our customers and shareholders. With that, we'll open the call for questions. Operator?

Gross margins are expected to be in the range of 58% to 59%, normalized, for peak volumes and one-time benefits.

Operating expenses are expected to run at approximately 27% to 28% of second quarter sales.

Speaker #4: With that, we'll open the call for questions.

Speaker #1: Thank you. We will now be taking questions. If you wish to ask a question, please press star one on your telephone keypad. You may remove yourself from the queue by pressing star two.

The non-GAAP operating profit rate is expected to be between 30% and 32%.

Speaker #1: In the interest of time, we ask you please limit yourself to one question and one quick follow-up. With UBS, please go ahead.

Based on current customer order visibility, we continue to expect first half weighted revenue, with approximately 55 to 60% of annual revenue expected in the first half.

Speaker #3: Greg, I guess my question is just on the back half of the year. So it's a bit of a disconnect. It sounds like the demand signals that if anything gotten better over the past three months, but you're not raising guidance for the back half of the year.

This expanded range from 3 months ago, recognizes the continued strong demand signals. We are hearing from our customers while also balancing potential order lumpiness, that could impact Revenue timing across quarters or years,

Operator: Thank you. We will now be taking questions from Teradyne research analysts. In the interest of time, we ask you please limit yourself to one question and one quick follow-up. We'll take our first question from Timothy Arcuri with UBS. Please go ahead, your line is open.

Speaker #3: Is this kind of came up as well. So is this to something like downstream of your business? And I know you did talk about this VIP stuff can be very lumpy.

For the year, we have line of sight to about 50 million in revenue for merchants GPU. But our visibility into the second half is quite limited with increasing contributions over the midterm period.

Speaker #3: So maybe that's part of it. So you can talk about that. Thanks.

Speaker #4: Hi, good morning, Tim. It's Michelle. I'll start and then Greg can add some specifics. So let me start with where we're at today. Quarter, you heard that throughout our script for the company.

Timothy Arcuri: Thanks a lot, Greg. I guess my question is just on H2. It's a bit of a disconnect. It sounds like the demand signals, if anything, gotten better over the past 3 months, but you're not raising guidance for H2. You know, this kind of came up on your competitor's call as well. Is this to some degree like factoring in some constraints that maybe are downstream of your business? I know you did talk about this, you know, VIP stuff can be very lumpy, so maybe that's part of it. If you can talk about that. Thanks.

So in closing, our teams delivered exceptional Financial results, reflecting strong execution, and robust demand across our portfolio aligned with our way for the data center strategy. We remain confident in the full year trajectory and our Target model of 6 billion in revenue and $9.50 to $11 and non-gaap eps.

Speaker #4: I mean, when you look at our Q2 guidance, it's equally strong. So revenue of 1.15 billion to 1.25 billion. This represents about an 84% after coming off of a really strong Q1.

Members for their performance and operational discipline, and delivering for our customers and shareholders. With that, we'll open the call for questions. Operator?

Speaker #4: As a result of the strength in the first half, we have expanded our first half revenue range to 55 to 60%. So this is a change from January where we've given a point estimate of 60%.

Michelle Turner: Hi, good morning, Tim. It's Michelle. I'll start and then Greg can add some specifics from a customer perspective. Let me start with where we're at today. Q1 was an exceptional quarter, a record quarter. You heard that throughout our script for the company. When you look at our Q2 guidance, it's equally strong. Revenue of $1.15 billion to $1.25 billion, this represents about a 84% year-over-year growth at the midpoint after coming off a really strong Q1 of 87% growth. As a result of the strength in the H1, we have expanded our H1 revenue range to 55% to 60%. This is a change from January 2024, where we'd given a point estimate of 60%.

Thank you. We will now be taking questions from Paradigm research analysts at this time. If you wish to ask a question, please press star 1 on your telephone keypad, you may remove yourself from the queue, by pressing star 2.

In the interest of time, we ask you, please limit yourself to one question and one quick follow-up.

Speaker #4: So the low end of the range, so this is either lumpiness in terms of large customer ordering patterns or it could also be hiccups in the AI data center buildout, the ecosystem, if you will.

And we'll take our first question from Timothy Arcuri with UBS. Please go ahead, your line is open.

Speaker #4: In terms of when our testers actually get accepted. So these dynamics, as you know, can impact revenue within the quarter. So that is part of the dynamics that's playing out in the second half.

Thanks a lot Greg. Um I guess my question is just on the back half of the year so it's a bit of a disconnect. It sounds like the demand signals that there's anything gotten better over the past 3 months, but you're not raising guidance for the back half of the year, is this, you know, this kind of came up on the, on your

Speaker #4: When I think about the high end of the range, this really reflects continued strength that we're seeing from a demand perspective. Across compute, networking, and memory.

Cam competitors call as well. So, is this to some degree like factoring in some constraints that maybe are Downstream of your business? And I know you did talk about this, you know, VIP stuff can be very lumpy, so maybe that's part of it so you can talk about that. Thanks.

Michelle Turner: When I think about the ranges, just to kind of bound this, the low end of the range really reflects the potential for timing impact. This is either lumpiness in terms of large customer ordering patterns, or it could also be hiccups in the AI data center build-out, the ecosystem, if you will, in terms of when our testers actually get accepted. These dynamics, as you know, can impact revenue within the quarter or across year boundaries. That is part of the dynamics that's playing out in H2. When I think about the high end of the range, this really reflects continued strength that we're seeing from a demand perspective across compute, networking, and memory. The other element I would add to this is in terms of visibility.

Speaker #4: In terms of visibility, so we talked to improve visibility from a customer ordering perspective. That is consistent with where we're at today. So historically, this business has had about 13 weeks of visibility.

Hi good morning Tim. It's Michelle. I'll start and then Greg can add some specifics from a customer perspective. So let me start with where we're at today. 211 was an exceptional quarter, a record quarter, you heard that throughout our script for the company

Speaker #4: Coming into this year, we improved that. We can see another quarter out not as long as the current quarter. We still do have to think about Q4.

Speaker #3: Yeah. So and Tim, let me give you a little bit more color in terms of sort of how the first half, second half polarization breaks down by sort of technology.

Michelle Turner: We talked in our January call around improved visibility from a customer ordering perspective. That is consistent with where we're at today. Historically, this business has had about 13 weeks of visibility. Coming into this year, we improved that. We can now see into another quarter out, although not as strong as the current quarter. We still do have some undefined parts as we think about Q4.

Speaker #3: The part of our business that we believe most is VIP compute. And that's like we have pretty good visibility into the timing of programs associated with that.

Speaker #3: And the specific customers that we have we think that that's like that is really strong in the first half of the year. And the next wave of that, the next generation of that technology is early 27.

Greg Smith: Yeah. And Tim, let me give you a little bit more color in terms of sort of how the H1/H2 polarization breaks down by sort of group or technology. The part of our business that we believe is most H1-weighted is VIP compute, and that's, you know, like we have pretty good visibility into the timing of programs associated with that and the specific customers that we have. We think that that's like it's really strong in the H1 of the year, and the next wave of that for the next generation of that technology is early 2027. It might start bleeding in or pulling into the end of 2026. We really don't know about that.

Speaker #3: It might start bleeding in or pulling into the end of 2026, but we really don't know about that. When you go from then to like very, very strong and we think through the year, but our visibility isn't as strong into the second half and we've historically seen that sort of filling in more as time goes on.

I mean, when you look at our 2 2 guides, it's equally strong. So revenue of 1.15 billion to 1.25 billion. This represents about a 84% year-over-year growth at the midpoint after coming off of a really strong q1 of 87% growth. So as a result of the strength, in the first half, we have expanded our first half, uh, Revenue range to 55 to 60%. So this is a change from January where we've given a point estimate of 60%. So when I think about the ranges, um, just to kind of balance this, the low end of the range, really reflects the potential for timing impacts. So this is either lumpiness in terms of large customer ordering patterns, or it could also be hiccups in the AI data center. Build out the ecosystem. If you will, in terms of when our testers actually get accepted so these Dynamics as you know, can impact Revenue within the quarter, or across your boundaries. And so, that is part of the Dynamics that's playing out in second half. When I think about the high end of the range

Speaker #3: Like as you look beyond two quarters, you start to see that sort of down. So there's potential upside in the networking space. When you look at memory, that I think is actually going to end up being more back half weighted than front half.

This really reflects continued strength that we're seeing from a demand perspective across compute, networking, and memory. Then the other element I would add to this is in terms of visibility. So, we talked in our January call about improved visibility from a customer ordering perspective, and that is consistent with where we're at today. Historically, this business has had about 13 weeks of visibility coming into this year. We improved that; we can now see into another quarter out, although not as strong.

It is the current quarter, and so we still do have some undefined parts as we think about Q4.

Greg Smith: When you go from then to like networking has started off very, very strong, and we think it's gonna stay at a, at a reasonably strong level through the year. Our visibility isn't as strong into H2, and we've historically seen that sort of filling in more as time goes on. You know, like as you look beyond 2 quarters, you start to see that sort of, that tending to go up, not down. There's potential upside in the networking space. When you look at memory, that I think is actually gonna end up being more H2 weighted than H1 weighted. That's a counter thing. The stronger that memory gets, the more we're gonna be able to trend towards that 55% end of the range that we gave.

Speaker #3: So that's a stronger memory gets the more we're going to be able to trend towards that 55% end of the range that we gave.

Speaker #3: And then if you look beyond the semiconductor test part of this, oh well, actually in semiconductor tests, just to sort of right now, segment and we expect that to continue.

Speaker #3: What we're seeing and hearing from those customers is that the rest of their portfolio that there are like there's reduced inventory and we haven't seen that translate to increased demand for equipment in the auto and industrial part of that beyond data center.

Speaker #3: So then moving beyond that, getting into IST, we definitely think that's stronger. We're talking about coming off of a base point. So there's a lot of upside to go before it really moves the needle at the enterprise level.

Greg Smith: If you look beyond the SemiTest part of this. Well, actually in SemiTest, just to sort of finish the story around auto and industrial, right now, data center is hot, hot in that segment, and we expect that to continue. What we're seeing and hearing from those customers is that the rest of their portfolio, that there are, there's reduced inventories and potential demand increases, we haven't seen that translate into increased demand for capital equipment in the, you know, in the auto and industrial part of that beyond data center. Moving beyond that, getting into IST, we definitely think that's stronger H2 than H1. I mean, we're talking about coming off of a base at $27 million in Q1.

Yeah, so and Tim. Let me let me give you a little bit more color in terms of sort of how the first half second half polarization breaks down by sort of grouper technology. The the part of our business that we believe is most first half, weighted is VIP compute and that's, you know, like we have pretty good visibility into the timing of programs associated with that. And the specific customers that we have. We think that that's like, like that. It's really, really strong in the first half of the year and the next wave of that. For the next generation of that of, uh, that technology is early 27. It might start believing in or pulling into the end of 2026, but we really don't know about that. When you go from then to like networking, networking has started off very, very strong and we think it's going to stay at a at a reasonably strong level through the year. But our visibility isn't as strong and

Speaker #3: Product tests similarly will be back half weighted. But again, it's a smaller percentage of the total. And typically in the first half, but we've started this year at a really good run rate.

Into the second half and we've historically seen um that sort of filling in more as time goes on, you know? Like as you look Beyond 2 quarters, you start to see that sort of um uh, that tending to go up, not down. So uh, there's potential upside in the networking space.

Speaker #3: And so we like the signs are encouraging, but we've learned to be very careful about predicting what's going to happen. Space. So yes, yes, yes.

Speaker #3: Thank you for that. I guess I just then wanted to ask you about the TAM for the year. So you didn't give us a TAM.

Greg Smith: There's a lot of upside to go before it really moves the needle at the enterprise level. Product tests similarly will be H2 weighted. Again, it's like a smaller percentage of the total. Typically, our H2 is much stronger in robotics than the H1, but we've started this year at a really good run rate. We, you know, like the signs are encouraging, but we've learned to be very careful about predicting what's gonna happen beyond lead time in the robotics space. Did that help a little bit?

Speaker #3: I know Advantage is saying like low nines for SOC and sort of low to mid twos for memory. So kind of a total of been pretty close to their number.

Speaker #3: Total 11.5 for the year. Is that like a reasonable TAM number for the year?

Speaker #5: So bearing in mind how far we're about the 2025 was April. So make that the big asterisk on this answer. You know that like because a lot changed last year.

Timothy Arcuri: It does, Greg. Yes, yes. Thank you for that. I guess I just wanted to ask you about the TAM for the year. You didn't give us a TAM. I know Advantest is saying like low nines for SoC and sort of low to mid twos for memory, kind of a total of like, you know, $11.5 billion. You've usually been pretty close to their number, you know, a bit lower in memory and a bit higher in SoC. Is that total $11.5 billion for the year? Is that like a, you know, reasonable TAM number for the year?

Speaker #5: April view through the full year view. There's three like just at a logical level, there are three possible things. One is that people have overcorrected in terms of estimating what the TAM is or it could follow the same pattern.

Folio that there are like there's reduced um inventories and potential demand increases. But we haven't seen that translate into increased demand for Capital Equipment in the you know uh in the auto and Industrial part of that Beyond data center. So moving beyond that uh, getting into IST we definitely think that's stronger second half than first half. But I mean we're talking about coming off of a base at 27 million in q1. So there's there's a lot of upside to go before. It really moves the needle at the, at the Enterprise level. Um, product tests. Similarly, will be back half weighted. Um, but again, it's uh, like a smaller percentage of the total and

Greg Smith: Bearing in mind how far off both Teradyne and Advantest were about the 2025 TAM when it was April, like, so make that the big asterisk on this answer. You know, that like, because a lot changed last year and the TAM strengthened significantly from the April view through the full year view. Now for 2026, there's three, you know, like just at a logical level, there are three possible things. One is that people have overcorrected in terms of estimating what the TAM is, people have gotten the TAM exactly right, or it could follow the same pattern that it followed in 2025. I would say that, you know, like we are not talking about a TAM publicly because we feel really uncertain about which of those timelines we're living in.

Speaker #5: I would say that like we are not talking about a TAM publicly because we feel really uncertain about which of those timelines we're living in.

Typically our second half is much stronger in robotics than the first half. But we've started this year at a really good run rate and so um we you know like the the signs are encouraging, but we've learned to be very careful about predicting what's going to happen Beyond lead time in the robotic space. So does that help a little bit?

Speaker #5: I don't think the numbers that Advantage gave are I don't feel confident enough in our okay, great. Thank you.

Speaker #1: Thank you. We'll take our next question from TJ Muse of Cantor Fitzgerald. Please go ahead. Your line is open.

It does great. Yes, yes, yes, yes. Thank you for that. I guess, I guess then wanted to ask you about the Tam for the year so you didn't give us a tam. I know. And Dan test is saying like low 9s for SSC and sort of low to mid Twos for memory. So kind of a total of like, you know, 115. You've usually been pretty close to their number, you know, a bit lower in memory and a bit higher in SOC. So is that

Speaker #3: for on your first merchant GPU with follow through there. What kind of are the steps to try to ascertain greater percentage penetration there? As well as how are you thinking about from here beyond your one very large customer?

Total 115 for the year. Is that, like, a—you know—reasonable TAM number for the year?

Far off both Paradigm and Advent tests were about the 2025 Tam when it was April. Um,

Greg Smith: I don't think the numbers that Advantest gave are absurd, but I don't feel confident enough in our forecasts to share them.

Like, so—so make that the big asterisk on this answer, you know, that like, um,

Speaker #5: Yeah. So first on GPU, what we've said previously, I think is the way it is going to is tending to play out that the first project is the hard the test platform and underlying libraries that support the testing.

Because a lot changed last year, and it's— and the TAM strengthened significantly from the April view through the full-year view.

Timothy Arcuri: Okay, great. Thank you.

Operator: Thank you. We'll take our next question from C.J. Muse of Cantor Fitzgerald. Please go ahead, your line is open.

C.J. Muse: Yeah, good morning. Thank you for taking the question. I guess first question, and again, congrats on your first merchant GPU win. Curious, you know, how to think about the follow-through there. What kinda are the steps to try to ascertain greater percentage penetration there? As well as, you know, how are you thinking about custom ASICs from here beyond your one very large customer?

Speaker #5: So that part of this project is behind us and we are into the phase where that initial qualifying part can go into production. The next phase is what you could call the fast follower phase.

Now for 2026, there's three—you know, just at a logical level, there are three possible things. One is that people have overcorrected in terms of estimating. The second is people have gotten the TAM exactly right. Or it could follow the same pattern that it followed in 2025. Um, I would say that, you know, like we are not—

Speaker #5: So we're going to begin working on projects that are earlier in their life cycle and that we will be able to complete more quickly than the first qualification project.

Greg Smith: First on GPU, what we've said previously, I think is the way it is tending to play out, that the first project is the hardest project because it involves qualifying the test platform and converting all of the underlying libraries that support the testing. That part of this project is behind us, and we are into the phase where that initial qualifying part can go into production. The next phase is what you could call the fast follower phase. We're going to begin working on projects that are earlier in their life cycle, and that we will be able to complete more quickly than the first qualification project. Those are projects that probably have a timeline where we would be releasing into production late in this year.

Speaker #5: So those are projects that probably have a timeline that would be releasing into production. So whether that capacity ramp starts to hit at the end of 26 or into 27 is an open question.

Okay, great. Thank you.

Thank you, we'll take our next question. From TJ. M of cantoris jerrold. Please go ahead. Your line is open.

Speaker #5: And the thing that I want to caution is like the long-term view, we expect that dual source customers 70% range. It's going to take us a few years to get there because there are so many different part types, so many different SKUs that as an incumbent platform, there's a lot of flexibility about what like if you need capacity for you have the solution for it on the incumbent platform.

Yeah, good morning. Thank you for taking the question, I guess. First question, and, and again, congrats on your First Merchants GPU and curious. Um, you know, how to think about the follow through there. Um, what? Um, kind of are there steps, um, to try to ascertain, uh, greater percentage, uh, penetration there, uh, as well as, you know, how you're thinking about, uh, customer base, uh, from here, beyond your your 1, very large customer

Speaker #5: So during the fast follower, we're really competing on the basis of differentiation of the platform and the ability to serve spot demand more than our competition.

Greg Smith: Whether that capacity ramp starts to hit at the end of 2026 or into 2027 is an open question. The thing that I wanna caution is, you know, like the long-term view. Over the midterm, we expect that a dual source customer is gonna be managing share in that 30% to 70% range. It's gonna take us a few years to get there because there are so many different part types, so many different SKUs that, as an incumbent platform, there's a lot of flexibility about what, you know, like if you need capacity for a particular device, you know that you have the solution for it on the incumbent platform. During the fast follower, we're really competing on the basis of Differentiation of the platform and an ability to serve spot demand more quickly than our competition.

Speaker #5: So we're trying to be very responsive. We're trying to get as many SKUs converted over to our platform as possible. But I would expect it's going to take like it's going to take us a few years to get from the sort of entering that 30% range very helpful.

Speaker #3: And then maybe a question on gross margins. You're taking it down to here and historically the business has not been fixed cost. It's been much more precisely driving that down.

Yeah. So um, first on GPU, uh, what what we've said, previously I think is the way it is gonna is tending to play out that the first project is the hardest project because it involves qualifying the test platform and converting all of the underlying libraries that support the testing. So that, that part of this project is behind us and we are into the phase where that initial qualifying part can go into production. The next phase is, um, what you could call the fast follower phase. So, um, we're going to begin working on projects that are earlier in their life cycle and that we will be able to complete more quickly than the first project, the first qualification project. So um those are projects that probably have a top.

Speaker #3: The second half of the year. Thank you.

Speaker #5: Hang on. I'd like my colleagues have reminded me that I neglected the second half of your question about custom ASICs. So we'll take your question right after.

Greg Smith: We're trying to be very responsive. We're trying to get as many SKUs converted over to our platform as possible. I would expect it's gonna take us a few years to get from low single digits in 2026 to sort of entering that 30% to 70% range over the midterm.

Speaker #5: I just want to hit the custom ASICs. So right now there are two hyperscaler programs to compute hyperscaler programs that are at scale. If you include like edge automotive, there are three hyperscalers that are at commercial scale.

C.J. Muse: Very helpful. Maybe a question on gross margins. You're taking a downtick here, and historically the business has not been fixed cost. It's been much more product cycle driven. Curious, you know, what is precisely driving that downtick in June, and how should we be thinking about modeling H2 of the year? Thank you.

Speaker #5: We are actively competing for parts that have not yet ramped and also for dual source status against the hyperscalers that have our time that would be more but stay tuned for news of that as we go on.

Timeline where we would be releasing into production late in this year. Um, and so, uh, whether that capacity ramp starts to hit at the end of 26 or into, 27 is an open question. And the, the thing that I want to caution is, you know, like the the long-term view over the midterm, we expect that a dual Source customer is going to be managing share in that 30 to 70% range. It's going to take us a few years to get there because there are so many different part types. So many different skus that, um, as an incumbent platform, there's a lot of flexibility about what, you know, like, if you need capacity for a particular device, you know, that you have the solution for it on the incumbent platform. So during the fast follower, we're really competing on the basis of um,

Greg Smith: Hang on. I'd like my colleagues have reminded me that I neglected the second half of your question about custom ASICs. We'll take your gross margin question right after. I just wanna hit the custom ASICs. Right now there are two hyperscaler programs, two compute hyperscaler programs that are at scale. If you include like edge automotive, there are three hyperscalers that are at commercial scale and driving tons of volume for us or our competitor. We are actively competing for parts that have not yet ramped and also for dual source status against the hyperscalers that have already ramped. The timing for that would be more 2027 than 2026. You know, stay tuned for news of that as we go on.

Speaker #5: And I'll pass it over to Michelle for the gross margin commentary.

Speaker #4: Well, I think technically now CJ has three questions now as a result of this, but we'll go yeah. So from a really strong one, so 60.9% again, another record for the company.

Differentiation of the platform and uh, an ability to serve spot demand more quickly than our competition. So uh, we're trying to be very responsive. We're trying to get as many skus, converted over to our platform as possible. But I would expect it's going to take, you know, like it's going to take us a few years to get from low single digits in.

26 to sort of entering that 30 to 70% range over the midterm.

Speaker #4: And there were several favorable factors coming into play simultaneously that drove this. One was related to the AI demand. So really strong 87% of our overall portfolio along with that.

Very helpful and and maybe a question on Gross margins, um, you're taking it down tick here and historically, the business has not been fixed. Cost has been much more, uh, product cycle driven. So curious, you know what is precisely driving that that downtick in June? And how should we be thinking about modeling the second half of the Year? Thank you.

Speaker #4: We also had favorable product mix and some benefit from some non-recurring operational benefits. So as you think about the shift from or the step down from Q1 into Q2 at the midpoint, about that is driven by the one operational benefits that we had.

Hang hang on, I'd like uh my my, my colleagues have reminded me that I neglected. The second half of your question about custom Asics so we'll we'll we'll take your gross margin question, right? After I just want to hit the custom Basics. So um, right now, there are, uh, 2

Greg Smith: I'll pass it over to Michelle for the gross margin commentary.

Speaker #4: And then you couple that with what we're seeing from a mixed perspective within Q2. This is somewhat of a normalization. The one thing I will highlight, however, is when you look at first half, overall margin will be around 7%.

Michelle Turner: Well, I think technically now CJ has three questions now as a result of this, but we'll go with it.

Greg Smith: That's my error.

Michelle Turner: Yeah. From a gross margin perspective, we did have a really strong Q1, 60.9%. Again, another record for the company. There were several favorable factors coming into play simultaneously that drove this. One was related to the AI demand, so really strong SemiTest volume, which was 87% of our overall portfolio within Q1. Along with that, we also had favorable product mix and some benefit from some non-reoccurring operational benefits. As you think about the shift from or the step down from Q1 into Q2, at the midpoint, that's about 240 basis points. About half of that is driven by the one-time non-reoccurring kind of operational benefits that we had. You couple that with what we're seeing from a mix perspective within Q2, this is somewhat of a normalization.

Speaker #4: This is at the range. So I think it's important to kind of keep in context that you should expect to see our margins move around a bit.

Speaker #4: They are lumpy like our revenue. We typically will see up to 400 basis points within a year. However, when you look within like 200 basis points, that's how I would think about it from a modeling perspective.

Speaker #3: Thank you.

Hyperscaler programs, 2 compute, hyperscale and programs that are at scale. If you include like Edge Automotive, there are 3 hyperscalers that are at at commercial scale and driving tons of volume for us or our competitor. Um, we are actively competing for parts that have not yet ramped and also for dual, so for dual Source status against, um, uh, the hyperscalers that have already ramped and, uh, the timing for that would be more, uh, 2027 than 2026, uh, but you know, stay tuned for news of that as we go on and not

Speaker #1: Thank you. We'll take our next question from Mehdi Husseini with Zig. Please go ahead. Your line is open.

Speaker #5: Yes. I also have two questions to do with how you have been managing quarterly guide and your performance. Has actually been exceeding on a consistent basis.

I'll pass it over to Michelle for uh, the gross margin commentary. Well, I think technically now, CJ has 3 questions. Now, as a result of this, but we'll go with it. But that's, that's my error.

Michelle Turner: The one thing I will highlight, however, is when you look at H1, overall margins will be at around 59.7%. This is at the low end of our target model range. I think it's important to kind of keep in context that you should expect to see our margins move around a bit. They are lumpy like our revenue. We typically will see up to 400 basis points within a year. However, when you look year on year, it's a much tighter range. It's within like 200 basis points. Some of this is noise just within the H1, is how I would think about it from a modeling perspective.

Speaker #5: And with that as a background, are you seeing a consistent rush order? You get the programs in line and the last month of the quarter becomes the source of upside.

Speaker #5: Or is there something fundamentally different in the follow-up?

Speaker #3: I'll start and Michelle, if you want to chime in with some additional color. When we sit down to do our guide, we try to give the very best in terms of opportunities that we see in the current quarter.

C.J. Muse: Thank you.

Operator: Thank you. We'll take our next question from Mehdi Hosseini with SIG. Please go ahead. Your line is open.

Mehdi Hosseini: Yes, thanks for taking my question. I also have two. The first one has to do with how you have been managing quarterly guide, and your performance has actually been exceeding on a consistent basis. With that as a background, my question to you is, are you seeing a consistent trend where late in the quarter you get the rush order, you get the programs in line, and the last month of the quarter becomes the source of upside? Or is there something fundamentally different in the way you communicate with The Street? I have a follow-up.

Speaker #3: And we are typically carrying some upside capacity that if we get quick turn orders that we that like if we can help improve customer satisfaction by serving orders within lead time and we are going to do that.

Speaker #3: So in a strengthening demand environment, we will tend to overperform. At the same time, we are like everyone else are working really hard to solve the supply chain capacity.

Benefit from some non-recurring operational benefits. So, as you think about the shift from, or the step down from Q1 into Q2 at the midpoint, that's about 240 basis points. About half of that is driven by the one-time, non-recurring kind of operational benefits that we had. And then you couple that with what we're seeing from a mix perspective within Q2, this is somewhat of a normalization. So, one thing I will highlight, however, is when you look at first half overall, margins will be at around 59.7%. This is at the low end of our target model range. And so I think it's important to kind of keep in context that you should expect to see our margins move around a bit. They are lumpy, like our revenue. We typically will see up to 400 basis points within a year. However, when you look year on year, it's a much tighter range—it's within like 200 basis points. So some of this is noise just within the first half. It's how I would think about it from a modeling perspective.

Thank you.

Thank you. We'll take our next question. From midi Heaney with Zig, please go ahead. Your line is open.

Greg Smith: I'll start, and Michelle, if you wanna chime in with some additional color. When we sit down to do our guide, we try to give the very best view in terms of balancing the risks and opportunities that we see in the current quarter. We are typically carrying some upside capacity that if we get quick turn orders that we, you know, like if we can help improve customer satisfaction by serving orders within lead time and we have the capacity to do it, we are going to do that. In a strengthening demand environment, we will tend to overperform. At the same time, we are, like everyone else, working really hard to solve the supply chain issues that come from ramping capacity.

Speaker #3: And so there are supply chain risks that our operations team does a great job solving, but when we go into the quarter, we don't know that we have a solution for all of those.

Speaker #3: Like minor level is we are still being quite cautious about robotics. That we are seeing much improved like improved and improved growth from that unit, but we don't want to get ahead of ourselves in terms of assuming that we are in like a bold new future there.

Yes, the thanks for taking my question, and I also have 2. The first 1 has to do with how you have been managing, uh, quarterly guide, um, and your performance has actually been exceeding on a consistent basis. Um, and with that the background, and my question to you is, um, I

You see the consistent Trend? Where late in the quarter you get the rush order, you get the programs in line and the the the the last month of the quarter becomes the the source of upside or is there something fundamentally different in the way you you communicate with the street and I have a follow up

Speaker #3: We want to make sure that we really understand exactly what our and like we're really happy about having four good on-track quarters in a row, but we are still quite careful in terms of predicting like higher rates of growth against that business until we get a little further down the road.

I'll I'll start and Michelle if you if you want to chime in with some additional color.

Sit down to do our guide. We

Greg Smith: There are, you know, supply chain risks that our operations team does a great job solving. When we go into the quarter, we don't know that we have a solution for all of those. The other thing that I'll say at a like minor level is we are still being quite cautious about robotics, that we are seeing much improved like improved predictability and improved growth from that unit. We don't want to get ahead of ourselves in terms of assuming that we are in like a bold new future there.

Speaker #4: Yeah. The only other thing I would add to that is variability. That's not just within Paradigm, but also with our customers. And so to the extent, for example, all the parts of a test cell are not coming together, they're not looking to take our testers and install them.

Speaker #4: There could be either upside or downside. So you'll see this sitting on our receivables at the end of Q1 where we shipped a lot of units that originally we had been told to kind of push out.

Speaker #4: So I think it's important to note that we're seeing variability not only but also some of the supply chain from a customer perspective.

Greg Smith: We wanna make sure that we really understand exactly what our funnel of opportunities looks like and our conversion rate. You know, like we're really happy about having four good on track quarters in a row, but we are still quite careful in terms of predicting like higher rates of growth against that business until we get a little bit further down the road.

a very best view in terms of balancing the risks and opportunities that we see in the current quarter. And uh, we are typically carrying some upside capacity that if we get, uh, quick turn orders that we that, you know, like if we can, uh, help improve customer satisfaction by serving orders, within lead time and we have the capacity to do it, we are going to do that. So in a strengthening demand environment, we will tend to to over-perform. Um, at the same time, we are like everyone else are uh, working really hard to solve the supply chain issues that come from ramping capacity. And so there are, you know, supply chain risks that our operations team does a great job solving

Speaker #3: And then since last earning conference call, agentic AI has become the new buzzword. And there are a number of existing and tokenized CPU. And my question to you is, given the fact that historically X86 has been more of a driving more of an in-house test solution and now you have a diversification of a layer of opportunity for you?

But when we go into the quarter, we don't know that we have a solution for all of those. The other thing that I'll say at a at a like minor level is we are

um,

Michelle Turner: Yeah, the only other thing I would add to that, to Greg's point about the supply chain variability, that's not just within Teradyne, but also with our customers. To the extent, for example, all the parts of a test cell are not coming together, they're not looking to take our testers and install them, there could be slips that happen within the quarter. That could be either upside or downside in terms of how it plays out within a particular week. You'll see this sitting on our receivables at the end of Q1, where we shipped a lot of units that originally we had been told to kind of push out. I think it's important to note that we're seeing variability not only on the order side, but also in terms of the supply chain from a customer's perspective.

Still being quite cautious about robotics that um we are seeing much improved uh like improved predictability and improved growth from that unit. But uh

Speaker #3: Was that already embedded in your longer-term forecast or is this something new and could potentially provide some upside?

Speaker #5: So I think potential upside than something that's in our plan. We are testing primarily ARM-based CPUs for data center applications. I think we have active design opportunities that I expect to be able to convert this space as well.

We don't want to uh, get ahead of ourselves in terms of assuming that we are in like a bold new future there. We want to make sure that we uh, really understand exactly what our funnel of opportunities looks like. And our conversion rate. And, you know, like we're we're really happy about having 4. Good on track quarters in a row, but we are still quite careful in terms of predicting. Uh like higher rates of growth against that business until we get a little bit further down the road.

Mehdi Hosseini: Got it. Thank you. Since the last earnings conference call, agentic AI has become the new buzzword, there are a number of existing and the new semiconductor companies that are trying to capitalize on tokenization and offer a new kind of a CPU. My question to you is, given the fact that historically x86 has been more of a driving more of an in-house test solution, and now you have a diversification of the CPU because of agentic AI, does that also add a new layer of opportunity for you? Was that already embedded in your longer term forecast, or is this something new and could potentially provide some upside?

Speaker #5: In addition to sort of new demand for CPU in agentic, there's also a big trend towards this optimizing data centers for a little bit in the prepared if you look at what NVIDIA is doing to try to decrease time to first token on inference.

Yes. And the only other thing I would add to that to, to Greg's point about the supply chain. Variability. That's not just within Paradigm, but also with our customers. And so, to the extent, for example, all the parts of a test cell are not coming together. They're not looking to take our testers and install them, there could be slips that happen within the quarter and so that could be either upside or downside in terms of how it plays out within a particular week and so

you'll see this sitting in our receivables at the end of q1 where we shipped a lot of units that originally we had been told to kind of push out so I think it's it's important to note that we're seeing variability, not only on the order side but also in terms of the supply chain from a customer perspective

Speaker #5: And other players are doing, I think we have reasonable to those types of devices as well. So as things shift towards more inference and more agentic, then I think we have potential long-term upside.

Greg Smith: I think of it more as providing potential upside than something that's in our plan. We are testing primarily Arm-based CPUs for data center applications. I think we have active design-in opportunities that I expect to be able to convert in this space as well. I would add that in addition to sort of new demand for CPU in agentic, there's also a big trend towards this optimizing data centers for inference at scale. I talked about that a little bit in the prepared remarks that, you know, if you look at what NVIDIA is doing to try to decrease time to first token on inference and other players are doing, I think we have reasonable exposure to those types of devices as well.

Speaker #3: Okay. Great. Thank you.

Speaker #1: Thank you. Please go ahead. Your line is open.

Speaker #6: Next question is on networking. Regarding CPU and silicon photonics, can you talk about where you stand in terms of share now and how you anticipate your share tracking?

Speaker #6: I'm asking as your competitor announced that they received their first high-volume

Speaker #3: Hi. Thanks for the question. So our best guess so far in 2026 that share is quite balanced between us and our competitor. And I think the like the only difference is large orders or multiple orders.

Become the new buzzword and and there are a number of existing and a new semiconductor companies that are trying to capitalize on tokenization and offer a new kind of a CPU. And my question to you is, um, given the fact that historically x86 has been more of a driving more of a in-house test solution and now you have a diversification of a CPU because of AI does that also, um, add a new, um, layer of opportunity for you was that already embedded in your longer term forecast, or is it something new and, and, and could potentially provide some upside

Speaker #3: And that's where we think things are right now. As but it's really early days. That right now there is there are very few that are trying to ramp CEO production and the share split right now is mostly around which test insertion is being done by what companies.

Greg Smith: As things shift towards more inference and more agentic, then I think we have potential long-term upside.

Mehdi Hosseini: Okay, great. Thank you.

Operator: Thank you. We'll take our next question from Shane Prewitt, Morgan Stanley. Please go ahead, your line is open.

So I think I, I think of it more as, uh, providing potential upside than something that's in our plan that, um, we we are testing. Uh, primarily arm-based, uh, CPUs for data center applications. Um, I think we have, uh, active design and opportunities that I expect to be able to convert in this space as well. Um, I would add that in addition to sort of new demand for CPU in a genetic. There's also a big Trend towards this. Um uh,

Shane Prewitt: Thank you for letting me ask a question. My first question is on networking. Regarding CPO and silicon photonics, can you talk about where you stand in terms of share now and how you anticipate your share tracking? I'm asking as your competitor announced that they received their first high-volume ATE order for silicon photonics. Thank you.

Shane Brett: Thank you for letting me ask a question. My first question is on networking. Regarding CPO and silicon photonics, can you talk about where you stand in terms of share now and how you anticipate your share tracking? I'm asking as your competitor announced that they received their first high-volume ATE order for silicon photonics. Thank you.

Speaker #3: And so our strength is primarily in the insertion too where you're actually connecting electrically to a compound wafer on the top for electrical and looking at light down in the bottom.

Optimizing data centers for inference at scale. I talked about that a little bit in the prepared remarks that

Greg Smith: Hi. Thanks for the question. Our best guess so far in 2026, that share is quite balanced between us and our competitor. I think the, like, the only difference is whether we are talking about single large orders or multiple smaller orders. I think share is kind of balanced, and that's where we think things are right now. It's really early days that, right now there is, you know, there are very few end customers that are trying to ramp CPO into production, and the share split right now is mostly around which test insertion is being done by what companies.

Speaker #3: We are in the process of releasing solutions for that in production. And we are working with partners to do that. So it's really kind of a partnership involving foundry and customer by contact and Paradigm we're working that with a team in Taiwan, Israel, Germany, North America, the two greatest technology production.

Um, you know, uh, if you look at what Nvidia is doing to try to um decrease time to First token on inference and uh, other players are doing, I think we have reasonable exposure to those types of devices as well. So, as things shift towards more inference and more agentic, then I think we have potential long-term upside.

Okay, great. Thank you.

Thank you. We'll take our next question from Shane. Brett Morgan Stanley. Please go ahead. Your line is open.

Speaker #3: This is a very important market and as like what the way we see this happening is that in 2027 this is primarily going to be associated with scale-out networking.

Thank you for letting me ask a question. Uh, my first question is on networking regarding CPU and silicon photonics, can you talk about where you stand in terms of share now and how you anticipate your share tracking? Um, I'm asking as your competitor announced that they received their first high volume at order for southern photonics. Thank you.

Uh hi. Uh, thanks for the question. So um, our best guess.

Speaker #3: The scale-up networking over a longer period of time like 28, 29. And we are going to be rapidly changing the efficiency of test at all four insertions.

Greg Smith: Our strength is primarily in insertion two, where you're actually connecting electrically to a compound, a wafer, on the top for electrical and looking at light down on the bottom. We are in the process of releasing solutions for that in production. We, you know, we are working with partners to do that. It's really kind of a four-way partnership involving foundry, end customer, light contact, and Teradyne. We're working that with a team in Taiwan, Israel, Germany, North America to bring this technology to production. We think that it's a, you know, this is a very important market. The way we see this happening is that in 2027, this is primarily gonna be associated with scale-out kind of networking.

Speaker #3: And the balance of where things are going to be across is really going to be driven by the end economics. So if they are finding a lot of faults at a particular level, they will keep doing that test.

So far in 2026, that share is quite balanced between us and our competitor. And I think the only difference is whether we're talking about single large orders or multiple smaller orders, but I think share is kind of balanced, and that's where we think.

Things are right now. Um,

Speaker #3: If they have very high yield, they will limit that. But I personally think efficiency is going to go up by like a factor of 10 over the next couple of years.

Speaker #3: And despite the fact that that efficiency is going to get that much higher, I think that this is still going to be 300 to 700 million.

Speaker #3: Into this midterm.

Speaker #6: And for my follow-up, what are your auto industrial customers talked about a bit of a tester shortage on their earnings call? And Ron's listening to that, my interpretation was, oh, there may be a fight among customers to get in the queue at Paradigm.

Greg Smith: The scale-up networking is likely to be even higher volume, but over a longer period of time, like 2028, 2029. We are going to be rapidly changing the efficiency of tests at all 4 insertions. The balance of where things are gonna be done across those 4 insertions is really going to be driven by the end economics, you know. If they are finding a lot of faults at a particular level, they will keep doing that test. If they have very high yields, then they will look to see if they can eliminate that. I, like, personally, I think efficiency is gonna go up by like a factor of 10 over the next couple of years.

Speaker #6: Just where do we stand and how much capacity are we looking to expand over the next year or so? Thank you.

Speaker #5: So if that customer is having trouble getting testers, they're obviously not buying them from Paradigm. That we are able to serve the demand that we have.

As but it's really early days that um right now there is, you know, there are very few end customers that are trying to ramp CPO into production and the share split right now is mostly around which test insertion is being done by what companies. And so our strength is primarily in the insertion too where uh the where you're actually connecting electrically to a compound wafer uh on the top for electrical and looking at light down in the bottom, we are in the process of releasing solutions for that in production. Um, and we, you know, we are working with a Partners to do that. Uh, so it's really kind of a 4-way, partnership involving Foundry, and customer, buy contact and Paradigm. We're working that.

Speaker #5: Our capacity has ramped rapidly. We're we have multiple contract manufacturing partners that are enabling our production. So we were surprised by that. We for this particular end customer, we have a very good relationship.

With a team in Taiwan Israel, uh, Germany, North America, um, to to uh, bring this technology to production. Uh, we think that it's a, you know, this is a very important market and as, uh, like what the, the way we see this happening is that in 27, this is primarily going to be associated with scale out kind of networking. Um, the

Speaker #5: And for the parts of their business that they need in the lead time that they need it. So I think this is a reason that more and more customers are really looking at supply chain resilience all the way back to their test equipment capital supplier.

Greg Smith: Despite the fact that that efficiency is gonna get that much higher, I think that this is still gonna be $300 to 700 million worth of equipment once you get a few years into this midterm.

Shane Prewitt: Thank you. That's really insightful. For my follow-up, one of your auto industrial customers talked about a bit of a tester shortage on their earnings call. When I was listening to that, my interpretation was, Oh, there may be a fight among customers to get in the queue at Teradyne. Just where do we stand right now in terms of capacity and utilization, and how much capacity are we looking to expand over the next year or so? Thank you.

Shane Brett: Thank you. That's really insightful. For my follow-up, one of your auto industrial customers talked about a bit of a tester shortage on their earnings call. When I was listening to that, my interpretation was, Oh, there may be a fight among customers to get in the queue at Teradyne. Just where do we stand right now in terms of capacity and utilization, and how much capacity are we looking to expand over the next year or so? Thank you.

Speaker #5: And that kind of strategy isn't something that's just solved by increasing capacity. That what customers really need is to be able to get the capacity that they need when they need it for the parts that they are ramping.

Speaker #5: And you don't know how that demand is going to overlap as the supply. So I think it's I think that the demand here is that for high-volume devices, we're going to increasingly see this trend towards multiple sourcing of test equipment.

Will keep doing that test. If they have very high yields, then they will look to see if they can eliminate that. But

Greg Smith: If that customer is having trouble getting testers, they're obviously not buying them from Teradyne. We are able to serve the demand that we have. Our capacity has ramped rapidly, where we have multiple contract manufacturing partners that are enabling our production. We were surprised by that. We, you know, for this particular end customer, we have a very good relationship, and for the parts of their business that we serve, we're able to deliver the testers that they need in the lead time that they need it. I think this is another reason that more and more customers are really looking at supply chain resilience all the way back to their test equipment capital supplier. That kind of strategy isn't something that is just solved by increasing capacity.

I like personally, I think.

uh, efficiency is going to go up by like a

Speaker #5: And overall, I see that as a real positive for Paradigm.

factor of 10 over the next couple of years. And despite the fact that that efficiency is going to get that much higher, I think that this is still going to be 300 to 700 million dollars worth of equipment once you get a few years into this midterm.

Speaker #6: Great. Thank you very much.

Speaker #1: Thank you. Next question from Christian Carr with TD Cowan. Please go ahead. Your line is open.

Speaker #3: Yeah. Hi. Thanks for taking my question. Actually, the first one on the silicon photonics, Michelle or Greg, you spoke about the 300 to 700 million dollar opportunity.

Speaker #3: How is the market this year? Is it like 10 this year? And along the same path is high contact being acquired by Chinese entity and issuer.

Thank you, that's really insightful and for my follow-up. Um 1 of your auto industrial customers talked about a bit of a tester shortage on their earnings call and where I was listening to that, my interpretation was, oh, there may be a fight among customers to get in the queue at Paradigm. Just where do we stand right now? In terms of capacity and utilization? And how much capacity are we looking to expand over the next year? So thank you.

so if if that customer is having trouble getting testers, they're obviously not buying them from Pteranodon

Speaker #3: Is it a non-issue for you? And then I had a quick follow-up.

Speaker #5: Yeah. So this year we're probably looking at silicon photonics around 100-ish. But it's pretty early days. With regards to high contact, high contact has been an independently operated unit of a Chinese corporation since 2021, I think.

Greg Smith: That, what customers really need is to be able to get the capacity that they need when they need it for the parts that they are ramping. You don't know how that demand is gonna overlap at as a supplier. You know, I think the trend in the future is that for high volume devices, we're going to increasingly see this trend towards multiple sourcing of test equipment. Overall, I see that as a real positive for Teradyne.

Speaker #5: This is not a new thing. It is and our relationship with high contact is with both the unit, which is in Germany, and also the Chinese company that's a part of Robotechnica.

Um, that we are able to serve the demand that we have our capacity has ramped rapidly where, uh, we have multiple, uh, contract manufacturing partners that are enabling our production. Uh, so we were surprised by that. We, you know, for this particular End customer, we have a very good relationship and for the the parts of their business that we serve, we're able to deliver the testers that they need in the lead time that they need it. So I think this is another reason that, um,

Shane Prewitt: Great. Thank you very much.

Shane Brett: Great. Thank you very much.

Operator: Thank you. We'll take our next question from Krish Sankar with TD Cowen. Please go ahead, your line is open.

Speaker #5: We have a great relationship with the CEO there. And they are one of the absolute world-class providers of active alignment for silicon photonics assembly and for test.

Krish Sankar: Yeah, hi. Thanks for taking my question. I have two of them. First one on the silicon photonics. Michelle or Greg, you spoke about the $300 to $700 million opportunity. I understand it's a midterm. How big is the market this year? Is this like tens of millions of dollars this year? Along the same path, is the ficonTEC being acquired by Chinese entity an issue or is it a non-issue for you? I had a quick follow-up.

Speaker #5: That there are a lot of partners that you need to do when you're building silicon phonics, one of the most difficult is achieving alignment in the assembly process for electro-optic modules or for CPOs.

Greg Smith: Yeah. This year we're probably looking at silicon photonics right around 100-ish, you know, maybe a little bit less, maybe a little bit more. It's substantial, but it's, you know, pretty early days. With regards to ficonTEC has been an independently operated unit of a Chinese corporation since 2021, I think. I mean, this is not a new thing. You know, our relationship with ficonTEC is with both the unit, which is in Germany, and also the Chinese company that it's a part of, RoboTechnik. We have a great relationship with the CEO there. You know, they are one of the absolute world-class providers of active alignment for silicon photonics assembly and for test.

Speaker #5: And high contact is like one of the world leaders in that technology and they are working to build their business in semiconductor capital equipment, like the test part of it.

More and more customers are really looking at supply chain. Resilience all the way back to their test equipment, Capital supplier. And that kind of, uh, strategy isn't something that is just solved by increasing capacity. That, uh, what customers really need is to be able to get the capacity that they need when they need it for the parts that they are ramping. And, uh, you don't know how that demand is going to overlap, um, as a supplier. So, uh, I think it's, uh, you know, I think the the, the trend in the future is that for high volume devices. We're going to increase, uh, this trend towards multiple sourcing of test equipment and overall, I see that as a real positive for Turan.

Great, thank you very much.

Thank you. We'll take our next question from Chris sangare with TD calan. Please go ahead. Your line is open

Speaker #5: And that is something that is a high priority for us, high priority for them. And I think that the press report that came out by high contact and we don't see any evidence on the ground that it's at all true.

Speaker #3: Greg, that's very helpful. Thanks for that. And a quick follow-up from Michelle. I know you gave some visually thinking. Typically start rebounding? Is it fair to assume that's a huge tailwind for your gross margin given this legacy Eagle testers are pretty high margins?

Yeah, hi, thanks for taking my question. I 2 of them. First of all, the Silicon photonics, Michelle or Greg, you spoke about the 300 to 700 million dollar opportunity. I, I listened to the midterm. How big is the market this year? Is this like, tens of millions of dollars this year and, uh, along the same path is the fee contact being acquired, by China's Chinese entity, and issue, or is it a non-issue for you? And then, at a quick follow-up.

Yeah, so, um, this year we're probably looking at silicon photonics.

Speaker #7: When you think about kind of our four-year expectations and what's really going to influence the end result, even over the midterm, right? So we've given a target model of 59 to 61 percent.

Greg Smith: That there are a lot of hard things that you need to do when you're building silicon photonics. One of the most difficult is achieving alignment in the assembly process for electro optic modules or for CPOs. ficonTEC is like one of the world leaders in that technology, and they are working to build their business in semiconductor capital equipment, you know, like the test part of it. You know, that is something that is a high priority for us, high priority for them. I think that the press reports that came out like they've been refuted by ficonTEC, and we don't see any evidence on the ground that it's at all true.

Speaker #7: We're sitting at 60.9 in Q1. We expect the first to be about 57. I still think that that's within the range. And it's not going to be the biggest winger.

Right around 100, you know, maybe a little bit less maybe a little bit more, it's substantial. But it's, uh, you know, it's pretty early days, um, with regards to fi contact, fi contact has been a independently operated unit of a Chinese Corporation since 2021. I think, I mean, this is not a new thing. Um, it is and, uh, you know, our relationship with Fi contact is, uh, with both the unit which is in Germany and also,

Speaker #7: In terms of our overall margin portfolio, I'm just going to go back to just the tightness in our overall margins. Within 200 basis points, year on year.

The the Chinese company that it's a part of Robo Technic, we have a great relationship with the, with the CEO there. Um, and you know, they are 1 of the

Speaker #7: So back to that a little bit. I do think to the overall portfolio, I would say no in terms of the significance.

Speaker #5: Yeah. I mean, over the years, we've seen most of our product lines converging towards similar margins. And so it's not to see even if we saw us like a significant increase in the percentage of total revenue that's coming from auto and industrial I don't think we'd see that as a big mover.

Krish Sankar: Great. That's very helpful. Thanks for that. A quick follow-up for Michelle. I know you gave some color on how to think about gross margins, but just visually thinking, you know, as auto analog industrials typically starts rebounding, is it fair to assume that's a huge tailwind for your gross margins given those legacy Eagle Test testers are pretty high margins?

Absolute world class providers of active alignment for silicon, photonics assembly and for tests that there are a lot of hard things that you need to do. When you're building silicon photonics 1 of the most difficult is achieving alignment in the assembly process for Electro. Optic, modules, or for cpos and buy contact is a, is, is like 1 of the world leaders in that technology and they are working to

Michelle Turner: I think the short answer is no. When you think about kind of our full year expectations and what's really going to influence the end result even over the midterm, right? We've given a target model of 59% to 61%. We're sitting at 60.9% in Q1. We expect H1 to be about 59.7%. I still think that that's within the range. When you think about auto and industrial, it's not going to be the biggest swinger in terms of our overall margin portfolio. I'm just going to go back to just the tightness in our overall margins within, you know, 200 basis points year on year. When you use the words like huge or significant, I probably react to that a little bit.

Speaker #5: Now the other thing to remember is that one of the things that goes into auto and industrial is ADAS. And so if you squint at an ADAS tester, it looks a hell of a lot like a VIP compute tester.

Speaker #5: So because just because things are aggregating into particular markets, it doesn't necessarily reflect the platform that's being sold.

Build their business, in semiconductor Capital Equipment, you know, like the the, the test part of it and, you know, that is something that is a high priority for us, high priority for them. And I think that the, the Press reports that came out are like, they've been refuted by fi contact and we don't see any evidence on the ground that it's at all true.

Speaker #3: Got it. Thank you very much. Super helpful.

Speaker #1: Thank you. We'll take our next question from Vivek Arya with Bank of America Securities. Please go ahead. Your line is open.

Want to think about gross margins, but just visually thinking, you know, ask or to analog Industrials.

Speaker #8: Thanks for taking my question. When we look at the last number of queues across training and inferences, it's going up. So I'm curious, what is the gating factor to getting to that, let's say, whatever, 20, 30 percent market share?

Technically starts rebounding. Is it fair to assume that's a huge Tailwind for your gross margin given those Legacy Eagle test testers are pretty high margins.

Michelle Turner: I do think it can be somewhat of a tailwind, but just given the size of it to the overall portfolio, I would say no in terms of the significance.

So, I think the short answer is no.

Greg Smith: Yeah, I mean, over the years we've seen most of our product lines converging towards similar margins. You know, I would not expect to see even if we saw a, like, a significant increase in the percentage of total revenue that's coming from auto and industrial, I don't think we'd see that as a big mover. The other thing to remember is that one of the things that goes into auto and industrial is ADAS. If you squint at an ADAS tester, it looks a hell of a lot like a VIP compute tester. You know, just because things are aggregating into particular end markets, it doesn't necessarily reflect the platform that's being sold to serve it.

Speaker #8: What is your assumption in your six billion dollar?

Speaker #5: So let me start at the beginning. So the thing that is setting the timeline to get to, say, 25% share is how efficiently we execute our fast follower strategy.

Speaker #5: How fast we can bring up test programs and test solutions for devices that are early enough in their life cycle that we capture a significant portion of the brand.

Speaker #5: So that ultimately is the limitation as time goes on. The ultimate phase of fast follower is something that I've referred to as tester agnostic development.

Krish Sankar: Got it. Thank you very much. Super helpful.

Influence the in results even over the midterm, right? So we've given, um, a Target model of 59 to 61%, we're sitting at 60.9%, to be about 597. I still think that that's within the range and auto and, and when you think about Auto Land industrial, it's not going to be the biggest swinger, um, in terms of our overall margin portfolio. I'm just going to go back to just the tightness in our overall margins within, you know, 200 basis points year on year. So, when you use the words like, huge or significant, I probably react to that a little bit. I do think it's, it can be somewhat of a tail end, but just given the size of it to the overall portfolio. I would say no in terms of the significance. Yeah, I mean, over over over the years. We've seen most of our product lines converging towards similar margins. Um, and you know, so it's, uh,

Operator: Thank you. We'll take our next question from Vivek Arya with Bank of America Securities.

I would not expect to see even if even if we saw us like

Speaker #5: So what most customers are talking about in this case is that they really want to develop their test solutions against a think of it as like a virtual test system.

Vivek Arya: Thanks for taking my questions. Greg, on the GPU engagement, when we look at the large customer, the demand is clearly increasing. You know, the number of queues across training and inferences is going up. I'm curious, what is the gating factor to getting to that, you know, let's say, whatever, 20%, 30% market share? What is your share assumed in your $6 billion target model?

Speaker #5: And by flicking a switch in software that they can target that towards our platform or towards another platform. When we get to that, then we're going to be in a world where it's much more differentiation on throughput and performance and availability than incumbency.

Greg Smith: Let me start at the beginning. The thing that is setting the timeline to get to, say, 25% share of GPU is how efficiently we execute our fast follower strategy. How fast we can bring up test programs and test solutions for devices that are early enough in their life cycle that we capture a significant portion of the ramp. You know, that ultimately is the limitation. As time goes on, the ultimate phase of fast follower is something that I've referred to as tester-agnostic development. What many of our customers are talking about in this space is that they really want to develop their test solutions against a like think of it as like a virtual test system. By flicking a switch in software, they can target that towards our platform or towards another platform.

a significant increase in the percentage of total revenue that's coming from Auto and Industrial. I don't think we'd see that as a big mover. Now the other thing to remember is that 1 of the things that goes into Auto and Industrial is Adas. And so if you if you squint at an Adas tester it looks a hell of a lot like a VIP compute tester. You know. So the the because just because things are aggregating into particular end markets, it doesn't necessarily reflect the platform that's being sold to serve it.

Speaker #5: And I think that we have certain advantages around test coverage for elements of the device. I think we have certain advantages in terms of the platform reliability.

Got it. Thank you very much. Super helpful.

Thank you. We'll take our next question from Rebecca. Are you with Bank of America security?

Please go ahead. Your line is open.

Speaker #5: I certainly think that we have some advantages in terms of responsiveness to demand. So and what we've seen, one of the reasons that we feel like we know what we're talking about here is that this is basically the world that we live in in high-performance memory.

Speaker #5: That we were later to market than our competitor when it came to HBM performance testing. But once we released a platform that delivered better dynamics and better performance, then we began to see significant share gains because the customer can choose which platform they're going to buy.

Uh, thanks for taking my questions, um, Greg on the GPU engagement. Um, when we look at the last customer, the demand is clearly increasing. Um, you know, the number of uh cues across training and inference is, is going up. Um, so I'm curious, what is the gating factor to getting to that, you know, let's say whatever, 20 30%, um, you know, market share, uh, what what is your your share this? Uh, assumed in your 6 billion dollar, uh, Target Model?

um,

so,

Speaker #5: And we were able to capture that. As the AI accelerator world migrates more towards the data where there are solutions existing on both platforms, then we think that we can compete on being able to get them the capacity that they need and getting the most parts out of each test cell because at the end of the day, it's like the limitations are turning into things like floor space and number of performers and handlers that they can buy.

Let me start at the beginning. So the the thing that is setting the timeline to get to say 25% share of GPU is um, how efficiently we execute our fast, follower strategy, how fast we can, um,

Greg Smith: When we get to that, then we're gonna be in a world where it's much more about the differentiation on throughput and performance and availability than incumbency. You know, I think that we have certain advantages around test coverage for elements of the device. I think we have some advantages in terms of platform reliability. I certainly think that we have some advantages in terms of responsiveness to demand. What we've seen, one of the reasons that we feel like we know what we're talking about here is that this is basically the world that we live in in high-performance memory. You know, we were later to market than our competitor when it came to HBM performance testing.

Speaker #5: So having very productive test equipment is a potent advantage.

Speaker #8: And in terms of the part of the six billion, I think that we are looking at we can get to this in the fast follower phase of this where we're just doing specific part conversions.

Speaker #8: And I think we would only need kind of low double-digit share in order for us to hit our mark. I want to follow. I just wanted to get back to the question.

Bring up test programs and test solutions for devices that are early enough in their life cycle that we capture a significant portion of the ramp. So, you know, that that that ultimately is the limitation as time goes on the ultimate phase of fast. Follower is something that I've referred to as tester agnostic development. So What mo many of our customers are talking about in this space is that they really want to develop their test Solutions against a, uh, like think of it as like a virtual test system and by flicking a switch in software that they can Target that towards our platform or towards another platform. When we get to that, then we are going to be in a world where it's much more about the differentiation on throughput and performance and availability, then incumbency.

Greg Smith: Once we released a platform that delivered better economics and better performance, we began to see significant share gains. The customer can choose which platform they're going to buy, we were able to capture that. As the AI accelerator world migrates more towards this idea where there are solutions existent on both platforms, we think that we can compete on being able to get them the capacity that they need and getting the most parts out of each test cell. At the end of the day, it's like the limitations are turning into things like floor space and number of probers and handlers that they can buy. Having very productive test equipment is a potent advantage.

Speaker #8: Over a 20% of your sales. But when we look at any other semiconductor company involved in AI, Logic or networking or memory, right, even the semicap front end players, they all consistently.

Speaker #8: Why is that not translating into stronger visibility for the testing part, right? Because you guys are an important part of that supply chain also.

Speaker #8: So how come everyone else has great visibility? From the testing side, the point that Michelle made is really important that the lead time for a tester is on the order of the same as the lead time for the actual paper front end equipment.

Vivek Arya: And, and-

Greg Smith: Now in terms of the part of the $6 billion, I think that we are looking at. Like we can get to this, our model, in the fast follower phase of this, where we are just doing specific part conversions, and I think we would only need kinda low double-digit share in order for us to hit our model.

Speaker #8: And these are customers are rapidly trying to build out capacity to be able to support all of the phases of production. And so where like these customers are definitely leaning hard into producing and creating capacity to increase the number of wafers that go through.

Performance. Then we began to see significant share gains because the customer can choose which platform they're going to buy.

To capture that.

Speaker #8: But until they actually are seeing the wafers go through, they are holding back on the orders for the equipment. We definitely are working against a long-term plan around capacity expansion for our products.

Vivek Arya: If I may follow up, I just wanted to get back to this visibility question. You know, AI is over 70% of your sales, but when we look at any other semiconductor company involved in AI, you know, logic or networking or memory, right, even the semi cap front-end players, they all claim to have great visibility, not just for this year, you know, consistent sequential growth, and then visibility even in 2027. I'm curious, why is that not translating into stronger visibility for the testing part? Right? Because you guys are a important part of that supply chain also. How come everyone else has great visibility and confidence, but we are not hearing that, right, from the testing side as much? Thank you.

The AI accelerator world migrates more towards this idea where there are solutions existing on both platforms. Then we think that we can compete on being able to get them the capacity that they need and getting the most parts out of each test cell, because at the end of the day, it's like the limitations are turning into things like floor space and number of prober's and handlers that they can buy. So having very productive test equipment is a potent advantage.

And now, in terms of the, the—

Speaker #8: We have an idea of our think of it as like a strategic forecast that we're working against, but that's very, very different from the level of commitment that we get from customers around.

I think that we are, uh,

Speaker #8: And since the testers are sold for particular devices and particular device ramps, those ramps can move significantly if you have an issue with if it's an ASIC, if the first silicon doesn't work, then that can inject a two-quarter delay in a ramp.

Looking at it, I don't think we need to be much. We, like, we can get to this—our model—in the fast follower phase of this, where we're just doing specific part conversions. And I think we would only need kind of low double-digit share in order for us to hit our model.

Greg Smith: I think the point that Michelle made is really important, that the lead time for a tester is on the order of the same as the lead time for the actual wafer, not the wafer front-end equipment. Our customers are rapidly trying to build out capacity to be able to support all of the phases of production. Where, you know, like, at the end of the day, these customers are definitely leaning hard into creating the front-end capacity to increase the number of wafers that go through. Until they actually are seeing the wafers go through, they are holding back on the orders for the test equipment. I mean, we definitely are working against a, you know, a long-term plan around capacity expansion for our products.

Speaker #8: That would have a meaningful effect on the timing of our growth. It wouldn't have a meaningful effect on the long-term growth. So I think a front end is less lumpy, but growth in the front end inevitably leads to growth in the back end.

Speaker #8: It's just uncertain in the timing. Thank you.

Speaker #1: Thank you. We'll take our next question from.

And someone I follow up. I just wanted to get back to this visibility. Uh question. You know, AI is over 70% of your sales but when we look at any other uh, Semiconductor Company involved in AI, you know, logic or networking or memory, um, right even the semi cap, uh, front end, uh, players. They all claim to have great visibility, not just for this year, you know, consistent sequential growth, and then visibility even in 2027 and I'm curious. Why is that not translating into stronger visibility for the testing part? Um, right because you guys are important part of that supply chain also. So how come everyone else? Has great visibility and confidence, but we are not hearing that right from? From the testing side as much. Thank you.

Speaker #8: Relative to the CPU opportunity, I think you did a good job kind of outlining where you believe the market is going. Just kind of two follow-ups on that.

Speaker #8: One is, could you maybe level set us for where you expect your CPO revenue to land in terms of you talked about kind of to pull off some of the second insertion solutions.

Greg Smith: We have an idea of our, think of it as like a strategic forecast that we're working against, but that's very, very different from the level of commitment that we get from our customers around what they'll buy and when. Since the, like, testers are sold for particular devices and particular device ramps, those ramps can move significantly if you have an issue with, you know, like, if it's an ASIC, if the first silicon doesn't work, then that can inject a two-quarter delay in a ramp. That would have a meaningful effect on the timing of our growth. It wouldn't have a meaningful effect on the long-term growth that we'll achieve. I think the front end is less lumpy, but growth in the front end inevitably leads to growth in the back end. It's just uncertain in the timing.

Speaker #8: Do you have any kind of plans or thoughts about how you might integrate that a little bit more under one roof in some way or another?

So I think that the, the point that um, Michelle made is really important that, um, the lead time for a tester is on the order of the same as the lead time for the actual wafer, not the wafer front end equipment. And, uh, these are our customers are rapidly trying to build out capacity to be able to support all of the phases of production. And so,

Speaker #8: So I don't think we're disclosing our expectations for 2026 revenue. Mainly because there's so much uncertainty about where in the test flow the investment will go.

Speaker #8: So will they lean harder into insertion two or insertion one? There's a lot of noise on that data right now. The four-way partnership is actually that's kind of the way the world works normally.

Speaker #8: That if you think about non-CPO devices, there's a fabless. There's a handler or prober provider, and there's a tester provider. And there's a probe card provider.

Vivek Arya: Thank you.

Operator: Thank you. We'll take our next question from James Schneider with Goldman Sachs. Please go ahead, your line is open.

Speaker #8: There's like there are a lot of there's a whole ecosystem that maybe does work. And we are a real strong advocate of this open ecosystem long term.

Where, you know, like at the end of the day, uh, these customers are definitely leaning hard into produce into creating the front-end capacity, to increase the number of Wafers that go through. But until they actually are seeing the Wafers go through, they are holding back on the orders for the test equipment. I mean, we, we definitely are working against a uh, you know, a long-term plan around capacity expansion for our products. We have an idea of our think of it as like a, uh, strategic forecast that we're working against. But that's very, very different from the level of commitment that we get from our customers around, what they'll buy and when. And since the like testers are sold for particular devices, and particular, device ramps, those ramps can move significantly. If you

James Schneider: Good morning. Thanks for taking my question. Relative to the CPO opportunity, I think you did a good job kind of outlining where you believe the market is going. Just kind of two follow-ups on that. One is, could you maybe level set us for where you expect your CPO revenue to land in terms of a range for this year, 2026? Then you talked about kind of a four-way kind of tie-up for to pull off some of the second insertion solutions. Do you have any kind of plans or thoughts about how you might integrate that a little bit more under one roof in some way or another?

you have an issue with um, you know, like if it's an Asic,

Speaker #8: We think that that's what our customers want, and it's how we want to try and work. And we also want to make sure that all of the providers in this space, for probers, handlers, whatever, they feel like we are being like that we're not showing favorites.

if if the the first silicon doesn't work then that can inject a 2 quarter delay. In a ramp, that would have a meaningful effect on the timing of our growth. It wouldn't have a meaningful effect on the long term growth that will achieve. So I think the front end is less lumpy but growth in the front end.

Speaker #8: So what we're really trying to do is we're trying to lean hard into helping fight contact, build their capability in the semiconductor equipment space.

Inevitably leads to growth in the backend. It's just uncertain in the timing.

Thank you.

Greg Smith: I don't think we're publicly disclosing our expectations for 2026 revenue, mainly because there's so much uncertainty about where in the test flow the investment will go, you know? Will they lean harder into insertion 2 or insertion 1 or insertion 3? There's a lot of noise on that data right now, so we're not trying to make a prediction. The four-way partnership is actually, that's kind of the way the world works normally. You know, that if you think about non-CPO devices, there's a fabulous specifier, there's a foundry, there's an OSAT, there's a handler or prober provider, and there's a tester provider, and there's a probe card provider. There's, like, there are a lot of, there's a whole ecosystem that makes these test cells work.

Speaker #8: But we're acknowledging that they are the world experts in active alignment. So there are great companies. They know what they're doing. We want to help stand them up to be a great member of this ecosystem versus trying to integrate them closer.

Thank you. We'll take our next question from Jim Schneider. With Goldman Sachs, please go ahead. Your line is open.

Speaker #8: That's helpful. And just as a follow-up for Michelle, everybody else are kind of turning out very well and seems like you will indeed probably get to your model at some point.

Speaker #8: Just from a philosophical standpoint, from an OPEX perspective to the extent you do tend to grow on a multi-year basis, you tend to believe you could actually under plan to devote more OPEX resources to R&D over time.

Good morning. Thanks for taking my question. Uh, relative to the CPU opportunity. I think you did a good job, kind of outlining where you believe the market is going. Just kind of to follow up on that. 1 is, uh, could you maybe level set us for where you expect your CPO Revenue to land in terms of a range for this year 2026? And then, you talked about kind of a 4-way, kind of tie up for, uh, to, to pull off some of the second insertion Solutions. Do you have any kind of plans or thoughts about how you might integrate that, uh, a little bit more under under 1 roof, uh, in in some way or another?

Speaker #8: Thank you.

Speaker #2: So the answer is yes. And so we've historically talked about growing OPEX at 50% or investing back in the business, particularly in pain points in our kind of wafer to data center strategy.

Greg Smith: We are a real strong advocate of this open ecosystem long term. We think that that's what our customers want, and it's how we want to try and work. We also want to make sure that all of the providers in this space, you know, for probers, handlers, whatever, that they feel like we are being that we are treating people alike, that we are not showing favorites. What we are really trying to do is we are trying to lean hard into helping ficonTEC build their capability in the semiconductor test equipment space. We are acknowledging that they are the world experts in active alignment, you know. They are a great company. They know what they are doing. We want to help stand them up to be a great member of this ecosystem versus trying to integrate them.

Revenue—uh, mainly because there's so much uncertainty about where in the test flow the investment will go, you know, so will they lean harder into Insertion 2, or Insertion 1, or Insertion 3. So there's a lot of noise on that data right now, so we're not trying to make a prediction. Um, the

Speaker #2: There's lots of opportunities for us to help our customers. So we're going to look for those opportunities to reinvest back in the business, which will impact the short term, however, in the current year in such a translation to play out within 2026.

4-way.

Kind of the way the world works. Normally, you know that if you think about, uh, non-CPO devices, uh, there's a fabless specific—

buyer, there's a

Speaker #2: But definitely over the midterm and the longer term, that's the aspiration that we would be driving to.

Speaker #5: Yeah, the only color that I'd add to that is there's such a high rate of technology change in this market. And so many interesting opportunities.

Speaker #5: Like there is a ton of waste due to yield issues and quality escapes. It's kind of a perfect environment for a company that is delivering something to help other companies get high quality.

James Schneider: That's helpful. Then just as a follow-up for Michelle, you know, clearly the growth and margins and everything else are kind of turning out very well, and seems like you will indeed probably get to your model at some point. Just from a philosophical standpoint, from an OpEx perspective, to the extent you do tend to grow on a multi-year basis a lot stronger, would you tend to believe that you could actually under-punch the OpEx intensity, or would you, do you plan to devote more OpEx resources to R&D over time? Thank you.

Speaker #5: So we are like for a while we were in a world where the marginal utility of additional R&D spend was not that great. Like if you look at a few years, now we have just a really long list of great things that we can invest in that will drive long-term revenue growth.

Boundary. There's an osat. There's a, um, there's a Handler or prober provider and there's a tester provider, um, and there's a probe card provider. There's like there are a lot of their, there's a whole ecosystem that makes these tests cells work and we are a real strong advocate of this open ecosystem, long term. We think that that's what our customers want. And it's how we want to try and work and we also want to make sure that all of the providers in this space, you know, for Proverbs handlers, whatever that they feel like we are uh, being uh, that we're treating people alike that we're not showing favorites. So, what we're really trying to do is we're trying to lean hard into helping fight contact, build their capability in

Speaker #5: So we're going to do our very best to constrain the growth of our G&A. We're going to do the very best that we can to manage the growth so that most of that is customer, technical investment, and we're going to lean into R&D because it's a target-rich environment.

Michelle Turner: The answer is yes. You know, we've historically talked about growing OpEx at 50% of revenue, and we still believe in that model. We believe in investing back in the business, particularly in today's environment. As we think about the pain points in our kind of wafer to data center strategy, there's lots of opportunities for us to help our customers. We're gonna look for those opportunities to reinvest back in the business, which will impact OpEx. When we think about the short term, however, in the current year, in such a hyper-growth mode, we wouldn't expect that same translation to play out within 2026. Definitely over the midterm and the longer term, that's the aspiration that we would be driving to.

The semiconductor test equipment space, um, but we're acknowledging that they are the world experts in active alignment, you know? So, uh, there are, there are great company. They know what they're doing, we want to help stand them up. To be a great member of this ecosystem versus trying to integrate them closely.

Speaker #8: Thank you.

Speaker #1: Thank you. For any additional or closing remarks.

Speaker #5: Thank you, operator. So thanks everyone for joining the call. We are really looking forward to Q2, another really strong quarter. And I just want to reiterate, thanks to the team around the Q1.

That's helpful. And then just as follow up for Michelle, you know, clearly the the growth and margins and everything else are kind of turning out very well and seems like you will indeed, probably get to your your model at some point. Just from a philosophical standpoint from an Opex perspective to the extent, you do tend to grow on a multi-year basis, a lot stronger. Uh, would you tend to believe that you could actually under punch uh the Opex intensity or would you would you plan to devote more Opex resources to R&D over the over time? Thank you.

Greg Smith: Yeah, the only color that I'd add to that is there is such a high rate of technology change in this end market and so many interesting opportunities. Like, there is a ton of waste due to yield issues and quality escapes. It's kind of a perfect environment for a company that is delivering something to help other companies get to high quality. For a while, we were in a world where the marginal utility of additional R&D spend was not that great. Like, if you look back a few years. Now, we have just a really long list of great things that we can invest in that will drive long-term revenue growth. We're gonna, you know, we're gonna do our very best to constrain the growth of our G&A.

Speaker #5: It was we're calling 2026 the year of execution. And we are like hitting on all cylinders. The team is doing really, really well. And we appreciate you having interest in the company.

So the answer is yes, and so, you know, we've historically talked about growing up EX at 50% of revenue, and we still believe in that model. We believe in investing back in the business, particularly in today's environment, as we think about the pain points in our kind of wafer-to-Data Center strategy. There's lots of opportunities for us to help our customers. So we're going to look for those opportunities to reinvest back in the business, which will impact Opex when we think about the short term. However, in the current year, in such a hyper-growth mode, we wouldn't expect that same translation to play out within 2026, but definitely—

Greg Smith: We're gonna do the very best that we can to manage the growth of our sales and marketing so that most of that is customer-focused technical investments, and we're gonna lean into R&D because it's a target-rich environment.

Over the midterm and the longer term. That's the aspiration that we would be driving to. Yeah. The the only color that I'd add to that is, um, there is such a high rate of Technology change in this end market. And so many interesting opportunities like there is a ton of waste due to yield issues and uh, quality escapes, its kind of a perfect environment for a company that is delivering something to help other companies get to high quality. So, um, we are like,

James Schneider: Thank you.

Operator: Thank you. This concludes our Q&A session. I'd like to now turn it back to our presenters for any additional or closing remarks.

Greg Smith: Thank you, operator. Thanks everyone for joining the call. We are really looking forward to Q2, another really strong quarter. You know, I just wanna reiterate our thanks to the team around the performance for Q1. It was, you know, we're calling 2026 the year of execution, we are like hitting on all cylinders. The team is doing really, really well, we appreciate you having the interest in the company.

We were in a world where the like the marginal utility of additional R&D spend was not that great. Like, if you look back a few years now we have just a really long list of great things that we can invest in that will drive long-term Revenue growth. So we're going to, you know, we're going to do our very best to constrain the growth of our GNA. We're going to do the very best that we can to manage the growth of our sales and marketing. So that most of that is customer focused technical Investments and we're going to lean into R&D because it's a target-rich environment.

Thank you.

Operator: Thank you. This concludes today's Teradyne Q1 2026 earnings call and webcast. You may disconnect your line at this time. Have a wonderful day.

Thank you. This concludes our Q&A session. I would like to now turn it back to our presenters for any additional or closing remarks.

Calling 2026, the year of execution, and we are, uh, like hitting on all cylinders. The team is doing really, really well, and we appreciate you, uh, having the interest in the company.

Thank you. This concludes today's Teradyne first quarter 2026 earnings call and webcast. You may disconnect your line at this time, and have a wonderful day.

Q1 2026 Teradyne Inc Earnings Call

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