Teradyne (TER) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue reached $737 million, at the high end of guidance, up 4.8%–5% year-over-year, driven by strong AI-related demand in compute and memory test markets, with record HBM DRAM revenue and robust Robotics growth.

• SemiTest business outperformed, with memory segment achieving record-high revenue due to HBM demand; Robotics grew 8% year-to-date and 3% year-over-year, outperforming peers and gaining traction in heavy payload and OEM channels.

• Strategic actions included a $524.1M Technoprobe investment for a 10% stake and the sale of the Device Interface Solutions business for $85M, resulting in a $57.5M pre-tax gain.

• Company expects approximately 5% total revenue growth for 2024, up from prior low single-digit guidance, with acceleration expected in 2025.

• Revenue concentration remains high among a few significant customers, especially in test products.

Financial highlights

• Q3 2024 sales reached $737 million, up from $703.7M in Q3 2023 and $730M in Q2 2024; non-GAAP EPS was $0.90, above guidance, and GAAP EPS was $0.89.

• Non-GAAP gross margin was 59.7%, exceeding guidance; GAAP gross margin was 59.2%.

• Non-GAAP operating profit was $165M (22.4% of sales); GAAP operating income was $152.1M (20.6% margin).

• Free cash flow was $114M; cash and marketable securities at quarter end totaled $677.6M.

• Dividend payout in Q3 2024 was $20M; share repurchases totaled $24.7M–$25M.

Outlook and guidance

• Q4 2024 sales expected between $710M and $760M; non-GAAP EPS guidance of $0.80–$0.97; GAAP EPS $0.73–$0.91.

• 2024 revenue growth forecast at ~5% at midpoint, or ~7% excluding DIS divestiture; revenue growth across all businesses expected to accelerate in 2025.

• Robotics growth for 2024 expected between 5%–10%, targeting 15%–20% above peer group.

• SOC TAM for 2024 expected at ~$4.2B; Compute TAM raised to $1.8B, Memory Test TAM to $1.4B; VIP channel TAM estimated at ~$300M.

• Q1 2025 revenue anticipated to be 5%–10% lower quarter-over-quarter, with slightly lower gross margin.