Teradyne (TER) Citi’s 2025 Global Technology, Media and Telecommunications Conference summary

Market trends and outlook

• Compute segment remains strong, driven by AI and custom ASICs at hyperscalers, with project-based shipment lumpiness expected in Q3 and Q4.

• Mobility experienced a first-half lull due to supply chain transitions, not end-market demand, with recovery signals expected by March-April.

• Auto and industrial segments are in a persistent lull, with no significant change in demand.

• Memory market is robust, especially for HBM testers, with a strong second half anticipated and share gains expected in 2025.

• AI, electrification, and verticalization are identified as key long-term growth drivers across segments.

Strategic initiatives and product innovation

• UltraFLEXplus tester is purpose-built for high-performance compute, aiming to compete in the merchant GPU market with qualification outcomes expected in 2026.

• Magnum 7H memory tester offers high throughput and flexibility, supporting both HBM3E and HBM4, providing economic benefits and competitive differentiation.

• Focus on solving complex customer problems has historically enabled significant market share gains, especially in memory.

• Strategy targets winning 50% of new VIPs in compute, with current performance meeting this goal.

• Robotics strategy pivoted to focus on large accounts, OEMs, and new product introductions, with large-scale adoption expected to ramp in the second half of 2026.

Financial performance and capital allocation

• Gross margin target remains at 59%-60%, with actuals fluctuating due to product and customer mix, and supply chain investments.

• Outsourced manufacturing model provides operational flexibility and some gross margin upside as scale increases.

• Recent restructuring in robotics reduced operating expenses by 15%, but break-even is not expected this year due to market weakness.

• M&A strategy prioritizes technical capability acquisitions, with recent activity in silicon photonics to address AI-driven demand cycles.

• Balanced capital allocation includes M&A, share buybacks, and dividends, with ongoing evaluation of opportunities.