Teradyne's Q2 2026 revenue doubled to $1.33B (+104%) on AI-driven compute and memory test demand, lifting operating margin to 32.9% and EPS to $2.38, though Q3 guidance of $1.2–1.3B points to a sequential dip.
Revenue
$1.3B
+103.9% YoY
Net income
$375M
+377.9% YoY
Diluted EPS
$2.38
+385.7% YoY
Operating margin
32.9%
Overview
Teradyne makes the machines that test computer chips before they ship, plus a smaller line of factory robots. In the second quarter of 2026 (the three months ended June 28, 2026), revenue roughly doubled to $1,329.0 million from $651.8 million a year earlier (+103.9%). It was the company's second record quarter in a row and came in above the top of its own Q2 guidance. The 10-Q says the reason plainly: Semiconductor Test revenue grew 128.1%, "driven primarily by higher sales in compute and memory related to artificial intelligence applications."
Profit grew faster than sales. GAAP net income attributable to Teradyne rose from $78.4 million to $374.5 million, and diluted EPS went from $0.49 to $2.38. GAAP ("generally accepted accounting principles") is the standard accounting rulebook. The main reason profit outgrew revenue is operating leverage: much of Teradyne's cost base (sales staff, administration, engineering) is fixed in the short run, so each extra dollar of revenue from AI chip testers dropped largely to profit.
Key metrics
Metric
Q2 2026
Q2 2025
YoY Change
Revenue
$1,329.0M
$651.8M
+103.9%
Gross margin
59.8%
57.2%
+2.6 pts
Operating income
$437.8M
$90.7M
+382.5%
Operating margin
32.9%
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Gross margin is the share of revenue left after the direct cost of making and servicing the products. Operating margin is the share left after running the whole business, before interest and tax. Non-GAAP EPS is Teradyne's own adjusted measure. It excludes acquired-intangible amortization, restructuring and a few other items. In this quarter it sat close to GAAP EPS, so the headline growth isn't coming from accounting adjustments.
What drove it: AI chips need more testing
Semiconductor Test brought in $1,121.8 million of the $1,329.0 million total (84%), and it accounted for $629.9 million of the $677.2 million total revenue increase. The segment has two main sub-lines.
System-on-a-Chip (SoC) test, $843.0 million (+112.6%). These testers check complex processors, including the large accelerator chips that go into AI data centers. Per the 10-Q, "continued investment by hyperscalers, vertically integrated producers, and customers in AI data center infrastructure supported the robust compute market revenue." Hyperscalers are the giant cloud operators.
Memory test, $212.3 million (+248.4%). This line grew fastest. Memory revenue "exceeded $200 million for the third consecutive quarter, reflecting strong demand for high bandwidth memory ('HBM') and DRAM test solutions supporting AI compute deployments, as well as renewed demand for NAND final test applications." HBM is stacked memory placed right next to an AI processor. It is harder to make than ordinary memory and needs more test time per chip.
The geographic mix supports this reading. Korea's share of revenue went from 7% to 20% and Taiwan's from 35% to 40%, while China fell from 16% to 12% and the US from 12% to 7%. Korea is home to the two largest HBM makers, and Taiwan is where most AI processors are manufactured and packaged. The 10-Q doesn't name those customers; the link is our inference from the regional split. The filing also warns that sales are "concentrated with a limited number of significant customers."
Segment profitability shows the operating leverage directly. Semiconductor Test's pre-tax income rose from $95.8 million to $427.3 million, or about 38% of the segment's revenue, up from about 19%. Gross margin rose 2.6 points, "primarily due to higher sales and product mix in Semiconductor Test."
The other two businesses
Robotics ($99.9M, +33.4%) makes collaborative robot arms (Universal Robots) and autonomous mobile robots (MiR). Growth came from "higher sales of collaborative robotic arms and autonomous mobile robots," and this was the fifth consecutive quarter of sequential growth. Electronics manufacturing and semiconductor customers are now the segment's largest end-market. Robotics still lost money: a $2.6 million pre-tax loss, much smaller than the $18.5 million loss a year earlier. The 10-Q credits higher volume and lower operating expenses after the early-2025 restructuring, which cut about 150 jobs.
Product Test ($107.2M, +26.0%) tests assembled electronics and defense systems. The increase "was driven by increased AI-related demand, combined with growth in Defense and Aerospace." On April 8, 2026, Teradyne formed MLTP, a joint venture that takes over MultiLane's test and measurement business. Teradyne paid about $157.8 million for a 75% stake. MLTP targets high-speed data-connection testing for AI data centers and reports within this segment, so some of Q2's segment growth is acquired rather than organic. The filing doesn't quantify how much.
Costs and the sequential picture
Operating expenses rose to $356.8 million from $282.3 million. Selling and administrative spending rose $34.7 million and engineering and development rose $37.9 million. Both increases were "primarily driven by strategic investments in Semiconductor Test and from higher variable compensation across all segments." Because revenue doubled, these costs still fell as a share of sales: selling and administrative went from 24.2% to 14.5% of revenue, and engineering from 18.2% to 11.8%.
Compared with the previous quarter the picture is less clean. Revenue rose 3.6% from Q1 2026's $1,282.5 million, but operating income fell from $473.0 million to $437.8 million because operating expenses grew 15.9% quarter-on-quarter. As a result, the operating margin dropped from about 36.9% in Q1 to 32.9% in Q2, and GAAP EPS declined from $2.53 to $2.38. Management says it is "committed to judicious additional investments today, which we believe are required to continue growing our business in 2027." The compressing margin is the result of that choice, not of weaker demand.
The effective tax rate rose to 15.1% from 12.7% because of lower tax-credit benefits, so the pre-tax gain was slightly larger than the net income figure shows.
Cash and balance sheet
Operating cash flow was $469.1 million in the quarter, up from $182.1 million, and capital spending was $90.7 million. Receivables grew by $302.2 million over the first half, a normal side effect of rapidly rising sales. Teradyne repaid the $200 million of short-term debt it carried at year-end 2025. It ended June with $349.5 million of cash plus $167.6 million of marketable securities and no borrowings. In the first half it returned $114.9 million to shareholders: $74.2 million in buybacks at an average $341.89 per share and $40.7 million in dividends. The quarterly dividend rose to $0.13 per share from $0.12.
Takeaway: AI more than doubled Teradyne's chip-test business in a year, and the biggest jump was in memory test (+248%). HBM makers need far more test capacity per chip, which puts a second source of AI demand alongside AI processors. That lifted the operating margin from 13.9% to 32.9%. Q2 already showed the ceiling on that leverage, though: expenses grew faster than revenue from Q1, and the Q3 guidance calls for lower sales.
Outlook
Management's guidance for Q3 2026 (from the July 28, 2026 earnings release):
Revenue of $1,200–1,300 million. The $1,250 million midpoint is about 6% below Q2 but still nearly double the roughly $669 million Teradyne averaged per quarter in the first half of 2025.
GAAP EPS of $1.79–2.09, compared with $2.38 in Q2. Non-GAAP EPS of $1.85–2.15.
CEO Greg Smith: "our Q3 guidance reflects robust AI-related demand. Looking further ahead, rapid increase in wafer fab equipment investment sets the stage for continued growth in 2027 and beyond." Wafer fab equipment means spending on chip factories, which eventually feeds demand for more testers.
Our read. At the midpoint, the guidance implies EPS falling more than revenue: about 18% lower EPS on about 6% lower revenue. That is consistent with an expense base that keeps growing while sales come off a record. Test equipment has historically been a lumpy, order-driven business, and a few large customers dominate Teradyne's sales, so quarter-to-quarter swings of this size are normal and don't by themselves signal a turn. The main things to watch are whether memory test stays above $200 million a quarter as HBM production ramps, whether the extra engineering and sales spending shows up as 2027 revenue as management expects, and whether Robotics can reach breakeven now that it is growing again. Teradyne has not filed its full-year 2026 results or its Q3 10-Q yet, so this analysis covers the first half only.