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Teradyne

TER · Nasdaq

Over half of gross profit now reaches operating income

Operating expenses rose 21.5% while revenue rose 69.8%, so 52.1% of gross profit reached operating income, against 32.3% a year earlier.

Q3 FY2026, the quarter to Sep 27, 2026 · 10-Q filed Oct 30, 2026

Q3 FY2026 · revenue
$1.3B+69.8% on the year
Operating margin
30.8%
Net income
$342.4M
Free cash flow, quarter
$227.3M

Largest source of revenue: Product, 89.1% of the total.

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Where Teradyne's money goes

Tap the picture to explore the flow: levels, scale, every line and its figures.
Key insights · Q3 FY2026
  1. 01

    Over half of gross profit now reaches operating income

    Operating expenses rose 21.5% while revenue rose 69.8%, so 52.1% of gross profit reached operating income, against 32.3% a year earlier.

    Why it matters

    Gross profit was $771.3M against $449.3M a year earlier, and total operating expenses were $369.3M against $304.0M. Operating income rose 176.6% to $402.0M from $145.3M. Gross margin barely moved, 59.06% against 58.4%, so almost all of the gain came below the gross profit line: operating margin reached 30.78%, up 11.89 points.1

    Engineering and development rose 30.7% to $163.1M and selling and administrative rose 17.6% to $199.0M, both far slower than revenue. Engineering fell to 12.5% of revenue from 16.2%, and selling and administrative to 15.2% from 22.0%. The filing attributes both increases to "strategic investments in Semiconductor Test and from higher variable compensation across all segments."1

    AnalysisThis is operating leverage in a test-equipment business. The engineering and sales base is largely set before the orders arrive, so when volume jumps most of the extra gross profit falls through to operating income. The same arithmetic runs in reverse in a downturn, which is why operating margin, not gross margin, carries the cycle.

    Below the operating line the gain widened a little. Net income attributable to Teradyne rose 186.4% to $342.4M, helped by an effective tax rate of 14.8% against 15.8% a year earlier and a $3.3M contribution from the Technoprobe stake against a $5.2M loss. Diluted earnings per share were $2.17, against $0.75.1

  2. 02

    One quarter earned 62% of fiscal 2025's operating income

    Third-quarter operating income of $402.0M equals 61.8% of the $650.1M earned in all of fiscal 2025, on revenue equal to 40.9% of that year's.

    Why it matters

    Revenue of $1.31B in the quarter compares with $3.19B for fiscal 2025 as a whole, 40.9%. Operating income of $402.0M compares with $650.1M for that full year, 61.8%, and net income of $342.4M with $554.0M, also 61.8%. Profit ran ahead of revenue because the quarter's operating margin of 30.8% was far above fiscal 2025's 20.4%.1

    The last cycle gives a yardstick. At the fiscal 2021 peak Teradyne earned operating income of $1,200.7M on revenue of $3.70B, an operating margin of 32.4%. At the fiscal 2023 trough revenue was $2.68B and operating margin 18.7%. This quarter's 30.8% sits close to the 2021 peak margin, and the first quarter of 2026, at 36.9%, was above it.1

    AnalysisThe annual history shows how fast this business moves between those levels: revenue went from the fiscal 2021 peak to the fiscal 2023 trough in two years. A quarter at this scale says where the cycle stands now, not how long it lasts.

  3. 03

    Operating margin stepped down each quarter at level revenue

    Revenue held between $1.28B and $1.33B this year, but operating margin went from 36.9% to 32.9% to 30.8% as spending grew.

    Why it matters

    Revenue was $1.28B in the first quarter, $1.33B in the second and $1.31B in the third. Operating income went from $473.0M to $437.8M to $402.0M, so the third quarter earned 85.0% of the first quarter's operating income on slightly more revenue. Gross margin eased far less: 60.9%, then 59.8%, then 59.1%.1

    Management says it is "committed to reinvesting in the business, particularly in research and development." Engineering and development spending was $163.1M in the quarter, 30.7% higher than a year earlier, and the filing attributes the rise to "strategic investments in Semiconductor Test" and higher variable compensation.1

    AnalysisSo far the slide reads as chosen spending rather than lost pricing, because gross margin has moved much less than operating margin. That reading would weaken if gross margin kept easing, or if revenue fell while the expense base stayed at its new level.

  4. 04

    Cash trails profit as the upswing absorbs working capital

    Free cash flow of $227.3M was 66.4% of net income of $342.4M, while the filing shows receivables, inventory and supplier prepayments rising with orders.

    Why it matters

    Operating cash flow was $313.6M, 0.92 times net income. Capital spending was $86.3M against $46.7M a year earlier, and absorbed 27.5% of operating cash flow against 95.2% a year earlier. Free cash flow was $227.3M, 17.4% of revenue, against an operating margin of 30.8%. A year earlier free cash flow was $2.36M, 2.0% of that quarter's net income.1

    Cash conversion swings from quarter to quarter. Operating cash flow was 66.5% of net income in the first quarter of 2026 and 125.3% in the second. Over the nine months the filing says cash went into higher accounts receivable, prepayments and other assets, and inventories, partly offset by higher accounts payable and other liabilities.1

    AnalysisIn a model that relies on contract manufacturers, suppliers are paid and often prepaid before customers settle, so cash lags profit while orders climb and can run ahead of it when growth settles. With capital spending modest beside operating cash flow, the gap is mostly working capital, not new factories.

Sources

  1. 1.Teradyne 10-Q for the period to 2026-09-27 (the filing), Oct 30, 2026, read Nov 2, 2026

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Business performance

Growth, profit and margin

Revenue went from $1.1B in FY2008 to $3.2B in FY2025, the operating margin from -34.4% to 20.4%, over 17 years.

  • Revenue$3.2B
  • Operating income$650.1M
  • Operating margin20.4%
Period
Q3 FY2026
Revenue
$1.3B
Operating income
$402.0M
Operating margin
30.8%
Net income
$342.4M
Free cash flow
$227.3M
Business performance

Does the profit turn into cash?

Q3 FY2026: free cash flow of $227.3M against net income of $342.4M in the quarter.

  • Operating cash flow$674.4M
  • Capital expenditure$224.0M
  • Free cash flow$450.4M
  • Net income$554.0M

Capital expenditure is drawn below the axis as cash out. Cash conversion is operating cash flow over net income, shown in the tooltip for years with a profit.

Financial data and sources

How the revenue mix has shifted

Each breakdown the filing reports, as shares of revenue, for every period it restates.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS. The filing restates this breakdown for 1 period.

Click a member to isolate it across the years shown.

The figures

Margins, cash and growth for the period, each with what it was computed from.

Gross margin
59.1%
Source10-Q, Derived from Gross profit and Total revenues in the 10-Q filed 2026-10-30
Operating margin
30.8%
Source10-Q, Derived from Income from operations and Total revenues in the 10-Q filed 2026-10-30
Net margin
26.2%
Source10-Q, Derived from Net income attributable to Teradyne and Total revenues in the 10-Q filed 2026-10-30
Free cash flow, quarter
$227.3M
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-10-30
Free cash flow margin, quarter
17.4%
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-10-30
Cash conversion, quarter
0.92x
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-10-30
Capital spending, quarter
6.6%
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-10-30
Revenue growth
+69.8%
From the record's own history, against the prior year.

Where revenue comes from

Every breakdown the filing reports for the period, with each item's share.

Revenue streams

Product$1.2B89.1%
Service$141.8M10.9%

Source10-Q, us-gaap:Revenues, as reported in the 10-Q filed 2026-10-30

Segments

Semiconductor Test$1.1B82.1%
Product Test$138.1M10.6%
Robotics$95.8M7.3%

Source10-Q, us-gaap:Revenues, as reported in the 10-Q filed 2026-10-30

Geographic markets

Asia Pacific$1.1B85.6%
Americas$123.2M9.4%
Europe, Middle East and Africa$64.5M4.9%

Source10-Q, us-gaap:Revenues, as reported in the 10-Q filed 2026-10-30

BusinessAcquisition

System on-a-Chip$676.5M51.8%
Memory$300.8M23.0%
IST$94.7M7.3%

These items do not sum to total revenue; the filing states them beside it. Source10-Q, us-gaap:Revenues, as reported in the 10-Q filed 2026-10-30

TimingOfTransferOfGoodOrService

Point in Time$1.2B91.4%
Over Time$112.0M8.6%

Source10-Q, us-gaap:Revenues, as reported in the 10-Q filed 2026-10-30

ConsolidationItems

Operating Segments$1.3B100.0%
Corporate And Eliminations$00.0%

Source10-Q, us-gaap:Revenues, as reported in the 10-Q filed 2026-10-30

What it costs

The cost lines beneath operating income, each as a share of revenue, then the operating result.

Costs are reported by function: what it cost to make what was sold, then the expenses of selling, developing and administering.

Cost lineQ3 FY2026Of revenueSource
Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below)$534.7M40.9%Source10-Q, us-gaap:CostOfGoodsAndServicesSold, as reported in the 10-Q filed 2026-10-30
Income from operations$402.0M30.8%Source10-Q, us-gaap:OperatingIncomeLoss, as reported in the 10-Q filed 2026-10-30

The statements, as filed

The income statement, cash flow statement and balance sheet in the company's own order and words. Every line links to the filing.

Income statement27 lines, as presented in the 10-Q
LineQ3 FY2026A year earlierChangeOf revenueSource
Revenues:
Total revenues$1.31B$769.2M+70%100%Source10-Q, us-gaap:Revenues, as reported in the 10-Q filed 2026-10-30
Product$1.16B$632.1M+84%89.1%Source10-Q, us-gaap:Revenues [us-gaap:ProductMember], as reported in the 10-Q filed 2026-10-30
Service$141.8M$137.1M+3.4%10.9%Source10-Q, us-gaap:Revenues [us-gaap:ServiceMember], as reported in the 10-Q filed 2026-10-30
Cost of revenues:
Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below)$534.7M$319.9M+67%40.9%Source10-Q, us-gaap:CostOfGoodsAndServicesSold, as reported in the 10-Q filed 2026-10-30
Product$485.1M$270.6M+79%37.1%Source10-Q, us-gaap:CostOfGoodsAndServicesSold [us-gaap:ProductMember], as reported in the 10-Q filed 2026-10-30
Service$49.6M$49.3M+0.6%3.8%Source10-Q, us-gaap:CostOfGoodsAndServicesSold [us-gaap:ServiceMember], as reported in the 10-Q filed 2026-10-30
Income Statement
Gross profit$771.3M$449.3M+72%59.1%Source10-Q, us-gaap:GrossProfit, as reported in the 10-Q filed 2026-10-30
Operating expenses:
Selling and administrative$199.0M$169.1M+18%15.2%Source10-Q, us-gaap:SellingGeneralAndAdministrativeExpense, as reported in the 10-Q filed 2026-10-30
Engineering and development$163.1M$124.8M+31%12.5%Source10-Q, us-gaap:ResearchAndDevelopmentExpenseExcludingAcquiredInProcessCost, as reported in the 10-Q filed 2026-10-30
Acquired intangible assets amortization$5.3M$3.5M+51%0.4%Source10-Q, us-gaap:AmortizationOfIntangibleAssets, as reported in the 10-Q filed 2026-10-30
Restructuring and other$2.0M$6.6M-70%0.2%Source10-Q, us-gaap:RestructuringSettlementAndImpairmentProvisions, as reported in the 10-Q filed 2026-10-30
Total operating expenses$369.3M$304.0M+21%28.3%Source10-Q, us-gaap:OperatingExpenses, as reported in the 10-Q filed 2026-10-30
Income Statement
Income from operations$402.0M$145.3M+177%30.8%Source10-Q, us-gaap:OperatingIncomeLoss, as reported in the 10-Q filed 2026-10-30
Non-operating (income) expense:
Interest income (shown as a deduction)($3.3M)$3.2M+4.7%0.3%Source10-Q, us-gaap:InvestmentIncomeInterest, as reported in the 10-Q filed 2026-10-30
Interest expense$868.0K$1.3M-34%0.1%Source10-Q, us-gaap:InterestExpense, as reported in the 10-Q filed 2026-10-30
Other (income) expense, net (shown as a deduction)(-$150.0K)$915.0K0.0%Source10-Q, us-gaap:OtherNonoperatingIncomeExpense, as reported in the 10-Q filed 2026-10-30
Income Statement
Income before income taxes and equity in net earnings of affiliate$404.3M$148.1M+173%31.0%Source10-Q, us-gaap:IncomeLossFromContinuingOperationsBeforeIncomeTaxesMinorityInterestAndIncomeLossFromEquityMethodInvestments, as reported in the 10-Q filed 2026-10-30
Income tax provision$59.8M$23.3M+156%4.6%Source10-Q, us-gaap:IncomeTaxExpenseBenefit, as reported in the 10-Q filed 2026-10-30
Income before equity in net earnings of affiliate$344.5M$124.8M+176%26.4%Source10-Q, ter:IncomeLossFromContinuingOperationsBeforeEquityNetEarningsOfAffiliate, as reported in the 10-Q filed 2026-10-30
Equity in net earnings of affiliate$3.3M-$5.2M0.3%Source10-Q, us-gaap:IncomeLossFromEquityMethodInvestments, as reported in the 10-Q filed 2026-10-30
Consolidated net income$347.7M$119.6M+191%26.6%Source10-Q, us-gaap:ProfitLoss, as reported in the 10-Q filed 2026-10-30
Less: Net income attributable to noncontrolling interests$5.3M$00.4%Source10-Q, us-gaap:NetIncomeLossAttributableToNoncontrollingInterest, as reported in the 10-Q filed 2026-10-30
Net income attributable to Teradyne$342.4M$119.6M+186%26.2%Source10-Q, us-gaap:NetIncomeLoss, as reported in the 10-Q filed 2026-10-30
Earnings per common share attributable to Teradyne:
Basic$2$1+192%0.0%Source10-Q, us-gaap:EarningsPerShareBasic, as reported in the 10-Q filed 2026-10-30
Diluted$2$1+189%0.0%Source10-Q, us-gaap:EarningsPerShareDiluted, as reported in the 10-Q filed 2026-10-30
Income Statement
Weighted average common shares—basic156,262,000158,595,000-1.5%Source10-Q, us-gaap:WeightedAverageNumberOfSharesOutstandingBasic, as reported in the 10-Q filed 2026-10-30
Weighted average common shares—diluted157,502,000159,097,000-1.0%Source10-Q, us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding, as reported in the 10-Q filed 2026-10-30
Cash flow statement3 lines, as presented in the 10-Q

Year to date, as a quarterly filing reports it.

LineQ3 FY2026A year earlierChangeSource
Cash flows from operating activities:
Consolidated net income$347.7M$119.6M+191%Source10-Q, us-gaap:ProfitLoss, as reported in the 10-Q filed 2026-10-30
Adjustments to reconcile consolidated net income from operations to net cash provided by operating activities:
Equity in net earnings of affiliate (shown as a deduction)($3.3M)-$5.2MSource10-Q, us-gaap:IncomeLossFromEquityMethodInvestments, as reported in the 10-Q filed 2026-10-30
Statement of Cash Flows
Cash and cash equivalents at end of period$460.7M$272.7M+69%Source10-Q, us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents, as reported in the 10-Q filed 2026-10-30
Balance sheet38 lines, as presented in the 10-Q
LineQ3 FY2026A year earlierChangeSource
Current assets:
Cash and cash equivalents$460.7MSource10-Q, us-gaap:CashAndCashEquivalentsAtCarryingValue, as reported in the 10-Q filed 2026-10-30
Marketable securities$5.8MSource10-Q, ter:AvailableForSaleDebtAndEquitySecuritiesCurrent, as reported in the 10-Q filed 2026-10-30
Accounts receivable, less allowance for credit losses of $2,773 and $2,410 at September 27, 2026 and December 31, 2025, respectively$1.11BSource10-Q, us-gaap:AccountsReceivableNetCurrent, as reported in the 10-Q filed 2026-10-30
Inventories, net$575.0MSource10-Q, us-gaap:InventoryNet, as reported in the 10-Q filed 2026-10-30
Prepayments$613.7MSource10-Q, us-gaap:PrepaidExpenseCurrent, as reported in the 10-Q filed 2026-10-30
Other current assets$24.2MSource10-Q, us-gaap:OtherAssetsCurrent, as reported in the 10-Q filed 2026-10-30
Total current assets$2.79BSource10-Q, us-gaap:AssetsCurrent, as reported in the 10-Q filed 2026-10-30
Assets
Property, plant and equipment, net$679.6MSource10-Q, us-gaap:PropertyPlantAndEquipmentNet, as reported in the 10-Q filed 2026-10-30
Operating lease right-of-use assets, net$121.7MSource10-Q, us-gaap:OperatingLeaseRightOfUseAsset, as reported in the 10-Q filed 2026-10-30
Marketable securities$158.3MSource10-Q, ter:AvailableForSaleDebtAndEquitySecuritiesNonCurrent, as reported in the 10-Q filed 2026-10-30
Deferred tax assets$311.1MSource10-Q, us-gaap:DeferredIncomeTaxAssetsNet, as reported in the 10-Q filed 2026-10-30
Retirement plans assets$12.2MSource10-Q, us-gaap:DefinedBenefitPlanAssetsForPlanBenefitsNoncurrent, as reported in the 10-Q filed 2026-10-30
Equity method investment$518.6M$538.0M-3.6%Source10-Q, us-gaap:EquityMethodInvestments, as reported in the 10-Q filed 2026-10-30
Other assets$97.1MSource10-Q, us-gaap:OtherAssetsNoncurrent, as reported in the 10-Q filed 2026-10-30
Acquired intangible assets, net$96.7MSource10-Q, us-gaap:IntangibleAssetsNetExcludingGoodwill, as reported in the 10-Q filed 2026-10-30
Goodwill$663.8MSource10-Q, us-gaap:Goodwill, as reported in the 10-Q filed 2026-10-30
Total assets$5.45B$3.96B+37%Source10-Q, us-gaap:Assets, as reported in the 10-Q filed 2026-10-30
Current liabilities:
Accounts payable$517.0MSource10-Q, us-gaap:AccountsPayableCurrent, as reported in the 10-Q filed 2026-10-30
Accrued employees' compensation and withholdings$261.3MSource10-Q, us-gaap:EmployeeRelatedLiabilitiesCurrent, as reported in the 10-Q filed 2026-10-30
Deferred revenue and customer advances$211.7MSource10-Q, ter:DeferredRevenueAndCustomerAdvancesCurrent, as reported in the 10-Q filed 2026-10-30
Other accrued liabilities$146.3MSource10-Q, us-gaap:OtherAccruedLiabilitiesCurrent, as reported in the 10-Q filed 2026-10-30
Operating lease liabilities$17.1MSource10-Q, us-gaap:OperatingLeaseLiabilityCurrent, as reported in the 10-Q filed 2026-10-30
Short-term debt$0Source10-Q, us-gaap:ShortTermBorrowings, as reported in the 10-Q filed 2026-10-30
Income taxes payable$188.1MSource10-Q, us-gaap:AccruedIncomeTaxesCurrent, as reported in the 10-Q filed 2026-10-30
Total current liabilities$1.34BSource10-Q, us-gaap:LiabilitiesCurrent, as reported in the 10-Q filed 2026-10-30
Liabilities
Retirement plans liabilities$152.9MSource10-Q, us-gaap:PensionAndOtherPostretirementDefinedBenefitPlansLiabilitiesNoncurrent, as reported in the 10-Q filed 2026-10-30
Long-term deferred revenue and customer advances$58.3MSource10-Q, us-gaap:DeferredRevenueNoncurrent, as reported in the 10-Q filed 2026-10-30
Deferred tax liabilities$10.8MSource10-Q, us-gaap:DeferredTaxAndOtherLiabilitiesNoncurrent, as reported in the 10-Q filed 2026-10-30
Long-term other accrued liabilities$28.6MSource10-Q, us-gaap:OtherAccruedLiabilitiesNoncurrent, as reported in the 10-Q filed 2026-10-30
Long-term operating lease liabilities$120.1MSource10-Q, us-gaap:OperatingLeaseLiabilityNoncurrent, as reported in the 10-Q filed 2026-10-30
Total liabilities$1.71BSource10-Q, us-gaap:Liabilities, as reported in the 10-Q filed 2026-10-30
Redeemable noncontrolling interests$49.1MSource10-Q, us-gaap:RedeemableNoncontrollingInterestEquityCarryingAmount, as reported in the 10-Q filed 2026-10-30
Equity
Common stock, $0.125 par value, 1,000,000 shares authorized; 156,150 and 156,088 shares issued and outstanding at September 27, 2026, and December 31, 2025, respectively$19.5MSource10-Q, us-gaap:CommonStockValue, as reported in the 10-Q filed 2026-10-30
Additional paid-in capital$2.04BSource10-Q, us-gaap:AdditionalPaidInCapitalCommonStock, as reported in the 10-Q filed 2026-10-30
Accumulated other comprehensive (loss) gain$5.5MSource10-Q, us-gaap:AccumulatedOtherComprehensiveIncomeLossNetOfTax, as reported in the 10-Q filed 2026-10-30
Retained earnings$1.62BSource10-Q, us-gaap:RetainedEarningsAccumulatedDeficit, as reported in the 10-Q filed 2026-10-30
Total Teradyne shareholders' equity$3.69BSource10-Q, us-gaap:StockholdersEquity, as reported in the 10-Q filed 2026-10-30
Statement of Financial Position
Total liabilities, redeemable noncontrolling interests, and equity$5.45BSource10-Q, us-gaap:LiabilitiesAndStockholdersEquity, as reported in the 10-Q filed 2026-10-30

About this data

Source
Teradyne 10-Q, accession 0001193125-26-441091, filed Oct 30, 2026, read on Nov 2, 2026.
History
From the SEC's XBRL company facts, the value from the latest filing that stated each period.
Reading
Paragraphs marked Analysis are CXProWealth's reading; everything else is the filing's own numbers and words, or a cited source.
Version
methodology business-lens-1.0 · schema 1.2.0 · run business-lens-2026-11-02
Edge and risks

What holds Teradyne's model up, and what could bend it

Competitive edge

  • Gross margin barely moves between peak and trough

    Gross margin was 59.6% at the fiscal 2021 peak, held close to that level through the fiscal 2023 trough, and is 59.06% this quarter.

    The detail

    Fiscal 2021 gross profit was $2,206.7M on revenue of $3.70B, 59.6%. In fiscal 2023 revenue fell to $2.68B and gross profit to $1,536.7M, so gross margin stayed within a few points of the peak while operating margin fell from 32.4% to 18.7%. This quarter gross profit was $771.3M on $1.31B, 59.06%, up 0.65 points, which the filing attributes to "higher sales and product mix."1

    AnalysisA tester sits at the end of a chipmaker's line, and once a platform is qualified the customer's test programs are written for it, which makes it costly to replace. That switching cost is the likeliest reason pricing held when volume fell.

  • Compute and memory testers carry the AI build-out

    System-on-a-chip test at $676.5M and memory test at $300.8M were 51.8% and 23.0% of revenue, the lines the filing ties to AI demand.

    The detail

    Semiconductor Test revenue was $1,072.0M, 82.1% of the total, and the filing attributes its rise to "higher sales in memory and compute related to artificial intelligence applications." Memory test was 28.1% of the segment's revenue and the filing calls it a record. Product Test, at $138.1M, also cites "increased AI-related demand."1

    After the quarter Teradyne agreed to take a minority stake in FormFactor and to build joint solutions combining its test platforms with FormFactor's probe, contactor and interface technologies, aimed at silicon photonics, high-performance compute, advanced packaging and high-bandwidth memory.1

    AnalysisTest time rises with chip complexity: more transistors, stacked memory layers and high-speed links mean more time on a tester for each device. That lets test demand grow faster than chip unit volumes when the mix shifts toward AI accelerators and high-bandwidth memory.

  • Service revenue grows steadily beneath the hardware swings

    Service revenue of $141.8M rose 3.4% while products rose 84.2%, and its costs were 35.0% of revenue against 41.7% for products.

    The detail

    Services were $141.8M, 10.9% of revenue, down 6.97 points only because product revenue grew so much faster. Cost of services was $49.6M, 35.0% of service revenue; cost of products was $485.1M, 41.7% of product revenue. Revenue recognized over time, which includes maintenance, extended warranties and support, was $112.0M, 8.6% of the total.1

    AnalysisEvery tester in the field needs support for years after the sale, so service follows the installed base rather than this year's orders. It cushions a downturn but is too small to carry the business on its own.

What to watch

  • A few customers in Asia set most demand

    Customer sites in Asia Pacific took $1,118.3M, 85.6% of revenue, and the filing says a limited number of customers buy most test equipment.

    The detail

    The filing says sales of its test products "will continue to be concentrated with a limited number of significant customers for the foreseeable future," and that a few customers drive demand directly and through their supply partners. Asia Pacific sites took 85.6% of revenue, against $123.2M (9.4%) in the Americas and $64.5M (4.9%) in Europe, the Middle East and Africa.1

    AnalysisWhen a handful of buyers are adding AI compute and memory capacity at the same time, their spending plans tend to move together, so a pause by one or two can move a whole quarter. Concentration amplifies the cycle rather than creating it.

  • Supplier commitments could turn into charges in a slowdown

    Teradyne prepays suppliers and gives some minimum purchase guarantees, and the filing says it re-evaluates them for charges as demand decreases.

    The detail

    To secure supply, Teradyne holds purchase commitments for components and materials and gives some vendors minimum purchase guarantees. The filing says that "as the market demand decreases, Teradyne re-evaluates these guarantees and determines what charges, if any, should be recorded." Inventories, receivables and prepayments to contract manufacturers and suppliers all rose over the nine months.1

    AnalysisThese are the balances that turn into write-downs when a test-equipment cycle turns. How fast they grow relative to revenue in the coming quarters is one of the clearest early reads on where the cycle stands.

  • Trade controls already limit where Teradyne competes

    The filing says compliance with export controls and sanctions has limited its ability to compete in certain regions, and future rules could bring material costs.

    The detail

    Teradyne is subject to tariffs, trade sanctions, embargoes, import-export controls and technology transfer restrictions. The filing says compliance "has limited our ability to compete in certain regions," that its compliance program may not catch every violation, and that changes in law or government policy "could lead to material costs."1

    AnalysisWith most revenue at customer sites in Asia and China among its largest customer locations, rule changes on chip-equipment exports land directly on the demand Teradyne is allowed to serve.

Sources

  1. 1.Teradyne 10-Q for the period to 2026-09-27 (the filing), Oct 30, 2026, read Nov 2, 2026
Go deeper

Teradyne, further in

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What could change the outlook

What Teradyne's numbers depend on from here, read from the filing: the conditions behind this period's margins and growth, and where a change would show first.

  • What this level of profit depends on from here

    Which customers, chip types and spending plans the quarter rests on, and the signs in the filing that would show the upswing broadening or fading.

  • Reinvestment or erosion: reading this year's margin slide

    How to tell engineering spending that builds the next tester platform from costs that simply outgrow revenue, and which lines show the difference first.

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Questions to start with
  • Why did Teradyne's operating margin fall from 36.9% to 30.8% across this year while its revenue stayed about level?
  • How much of Teradyne's growth depends on memory and compute testers for AI, and what would broaden that demand?
  • Why did Teradyne's free cash flow trail its net income this quarter, and when does that gap usually close in a test-equipment upswing?

Business Lens describes Teradyne from its own filings with the SEC. It is not a view on its shares, a target, or advice to buy, sell or hold anything; figures are as filed and may be restated by the company later. The filing, the dates and the version are under the financial data above.