TER Q1 Earnings Call: Management Highlights Transitory Mobile Strength, Cautious Outlook Amid Trade Uncertainty

Semiconductor testing company Teradyne (NASDAQ: TER) met Wall Street’s revenue expectations in Q1 CY2025, with sales up 14.3% year on year to $685.7 million. On the other hand, next quarter’s revenue guidance of $645 million was less impressive, coming in 0.5% below analysts’ estimates. Its non-GAAP profit of $0.75 per share was 21.7% above analysts’ consensus estimates.

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StockStory’s Take

Teradyne’s first quarter results were shaped by a mix of transitory demand in the mobile sector and ongoing strength in semiconductor testing for AI applications. CEO Greg Smith pointed to elevated orders for system-on-chip (SoC) testers in mobile, driven more by supply chain transitions at customers than by an underlying recovery in mobile devices. Additionally, the company reported record utilization of its Ultra Flex platforms for AI accelerator testing, marking a milestone for its compute-focused business. Management also cited new customer wins in high bandwidth memory (HBM) testing and initial adoption of its Titan-HP system for AI system-level testing as notable contributors to the quarter’s performance.

Looking ahead, Teradyne’s forward guidance is clouded by heightened uncertainty in customer spending, largely tied to international trade policy and new tariffs. Smith characterized visibility beyond the next quarter as limited, cautioning that many customers in mobile, automotive, and industrial markets are delaying capital investments until the implications of tariffs become clearer. While the company continues to invest in strategic growth areas such as robotics and silicon photonics, CFO Sanjay Mehta emphasized that spending controls and a flexible operating model are being prioritized to manage through this period of uncertainty.

Key Insights from Management’s Remarks

Teradyne’s management attributed first quarter performance to a combination of temporary mobile demand and ongoing progress in high-value semiconductor test markets. Updates on robotics and progress in system-level testing for AI were emphasized.

• Transitory Mobile Demand: Management noted that SoC tester sales for mobile customers were elevated due to supply chain transitions, not a sustained recovery in mobile device demand. This temporary dynamic was described as unlikely to persist into future quarters.
• AI Accelerator and Compute Test Growth: The company cited record loading of Ultra Flex and Ultra Flex Plus testers for AI accelerators, reflecting demand from hyperscale data centers and emerging AI applications. Initial revenue from the Titan-HP system-level test for AI accelerators was recorded, with management viewing this as a strategic entry point into next-generation system-level testing.
• Major HBM4 Memory Win: Teradyne secured a performance test contract for HBM4 memory with a leading DRAM manufacturer, marking its first wafer sort win at this customer. Management described this as a significant milestone for the memory segment, with shipments expected to begin in the second half of the year.
• Robotics Reorganization and Large Order: The robotics division underwent a structural consolidation of sales, marketing, and service teams. The team landed its largest-ever order from a global automotive manufacturer, with shipments of both autonomous mobile robots (AMRs) and collaborative robot arms (cobots) spread across the first half of the year.
• Strategic Moves in Silicon Photonics: Teradyne continues to pursue a leadership position in silicon photonics test, with the acquisition of Quantifi Photonics expected to close in the second quarter. Management believes this will position the company to address future high-performance computing test requirements.

Drivers of Future Performance

Management’s near-term outlook is shaped by uncertainty in end-market demand, especially as customers respond to trade policy developments and tariffs. The company is focusing on expense management while continuing critical investments in growth areas.

• Trade Policy and Tariff Uncertainty: Management highlighted that evolving international trade policies and new tariffs are causing customers, particularly in automotive and industrial sectors, to delay capital purchases. This uncertainty limits visibility beyond the next quarter and could impact demand for testing equipment.
• Product Mix and Margin Management: The company expects gross margins to fluctuate within a narrow range, driven by changes in product mix and volume. Management is prioritizing investments in semiconductor test and go-to-market engineering, while operating expenses remain flexible based on revenue trends.
• Continued Strategic Investment: Despite near-term headwinds, Teradyne is maintaining investments in areas such as robotics automation, silicon photonics, and system-level test platforms for AI. Management believes these areas will be key to long-term growth as industry trends toward AI, electrification, and advanced manufacturing continue.

Top Analyst Questions

• Krish Sankar (TD Cowen): Asked about the nature of order pushouts and pull-ins related to tariffs. Management clarified that pushouts are concentrated in automotive and industrial, with little evidence of accelerated demand in other segments.
• C.J. Muse (Cantor Fitzgerald): Sought guidance on gross margin and operating expenses for the full year. CFO Sanjay Mehta declined to provide a full-year forecast due to uncertainty, but noted margins would likely remain in a narrow range absent major mix changes.
• Timothy Arcuri (UBS): Inquired about the timing and impact of the large robotics order from an automotive customer. Management confirmed shipments are occurring through the first and second quarters, not extending into the latter half of the year.
• Priyanka Thapa (JPMorgan): Asked if tariffs were causing customers to switch to non-U.S. competitors. CEO Greg Smith stated there was no evidence of customer defection due to tariffs, and competitive positioning remained stable.
• Shane Brett (Morgan Stanley): Questioned what would drive renewed demand for NAND memory testing. Management pointed to potential increases in mobile phone volumes, adoption of new interface standards, and rising storage needs for AI-enabled devices as key drivers.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team will be monitoring (1) whether demand for Teradyne’s semiconductor test equipment stabilizes or improves as customers gain clarity on trade policy and tariffs; (2) progress on the integration of the Quantifi Photonics acquisition and its impact on silicon photonics test market share; and (3) continued adoption of system-level test solutions for AI accelerators. Developments in robotics orders and execution on restructuring initiatives will also be important drivers of future performance.

Teradyne currently trades at a forward P/E ratio of 21.5×. In the wake of earnings, is it a buy or sell? See for yourself in our free research report.

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