Teradyne Rises 9% in a Month: Here's Why the Stock is a Hold Now

Teradyne TER shares have appreciated 9.2% over the past month, outperforming the broader Zacks Computer and Technology sector’s growth of 8.3% but lagging the Zacks Electronics – Miscellaneous Products industry’s increase of 9.8%.

The outperformance in Teradyne’s shares can be attributed to solid first-quarter 2025 results, in which reported revenues ($686 million, up 14% year over year) were toward the higher end of the company’s guidance range ($660-$700 million). Both gross margin (60.6%) and earnings (75 cents, up 47.1% year over year) were above management’s expectations. Revenues and earnings beat the Zacks Consensus Estimates by 0.26% and 22.95%, respectively.

However, Teradyne offered conservative guidance due to a lack of visibility. The company expects sluggish business due to challenging macroeconomic conditions attributed to uncertainties of tariffs and volatility in end-market demand. TER expects higher tariffs to negatively impact demand in end-markets including mobile, automotive and industrial. Teradyne expects second-quarter 2025 revenues between $610 million and $680 million. Earnings are expected in the 41 to 64 cents per share range.

Teradyne has underperformed its industry peers, such as Flex FLEX, Greenland Technologies GTEC and Stardust Power SDST. Over the same time frame, shares of Flex, Greenland Technologies and Stardust Power have gained 21.1%, 31% and 19.4%, respectively.

Teradyne, Inc. Price and Consensus

Teradyne, Inc. price-consensus-chart | Teradyne, Inc. Quote

TER’s Earnings Estimate Revision Trend Goes Downward

The Zacks Consensus Estimate for second-quarter 2025 earnings is pegged at 54 cents per share, implying a steep 37.21% decline from the year-ago quarter’s reported figure. The earnings estimate figure has declined by three cents over the past 30 days.

The consensus mark for revenues is pegged at $646.05 million, suggesting a 11.49% decline from the year-ago quarter’s reported figure.

Weak Demand in Core Business Segments Hurts TER

Muted and inconsistent demand in key business segments weighs heavily on TER’s growth trajectory. In the Memory Test segment, inventory digestion of previously delivered High Bandwidth Memory (HBM) continues, causing a delay in new demand. Memory revenues were $109 million, flat year over year, in the first quarter of 2025 and are expected to decline in the near future due to sluggish demand.

While some improvement was recently seen in the Mobile segment, it was driven by supply chain transitions. Teradyne expects demand to remain subdued as phone unit volumes are down.

The Production Board Test segment is suffering due to muted demand in the auto industry and delayed programs in the aerospace and defence space. The uncertain macro environment continues to pressurise demand across both industrial and automotive markets.

SLT and HBM4 Solutions Provide a Positive Outlook

In the AI accelerator and mobile device segments, System Level Test (SLT) is expected to be a major growth driver. SLT enables testing of AI chips under real workloads and thus proves more efficient than traditional wafer-level tests. TER’s Titan HP is being used in production testing and offers high precision and thermal control. Such efficient solutions make SLT essential with the launch of 2-nanometer chips.

TER’s SLT solution is being widely accepted among AI accelerator companies and smartphone manufacturers, which reflects OEM confidence and a promising future. Teradyne’s VIP TAM for 2026 is expected to be $600 million, and SLT is expected to contribute 10-30% of this TAM, i.e., $60-180 million for 2026.

HBM4’s adoption is rapidly increasing in AI compute and data centre workload space as it enables superior bandwidth and performance efficiency. Due to a rise in chip complexity, post-stack wafer-level performance testing has become essential to validate memory behaviour, especially under real-world conditions. Teradyne’s advanced semi-test solutions are designed to deal with such emerging test requirements.

The company’s HBM4 has been recently adopted by a leading DRAM manufacturer, reinforcing its capabilities and consumer confidence. As AI and data centre workloads adopt HBM4, it opens a high-value and fast-growing test market for Teradyne.

Zacks Rank

Teradyne's test solution-driven portfolio is continuously contributing to its growth prospects and driving top-line growth. However, the company is suffering from weak demand, tariff challenges, and uncertain macroeconomic conditions impacting its core business segments.

Teradyne carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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