Teradyne TER shares have lost 10.5% year to date, underperforming the Zacks Computer & Technology sector’s appreciation of 2.1% and the Zacks Electronics - Miscellaneous Products industry’s return of 5.4%.

The fall in Teradyne’s share price can be attributed to soft first-quarter 2025 guidance. The company now expects sales between $660 million and $700 million, which reflects a sequential decline. Although the Semiconductor Test outlook remains strong, the Robotics forecast is seasonably soft as the company operates in a difficult, low-visibility industrial spending environment.

TER reported fourth-quarter 2024 revenues of $753 million, which increased 12.2% year over year and beat the Zacks Consensus Estimate by 1.65%. Earnings of 95 cents per share surpassed the consensus mark by 5.56% and increased 20.3% year over year.

The Zacks Consensus Estimate for first-quarter 2025 earnings is currently pegged at 61 cents per share, down 3 cents in the past 30 days and indicating 19.61% growth over the year-ago quarter’s reported figure. The consensus mark for revenues is pegged at $683.08 million, suggesting 13.88% year-over-year growth.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

On a trailing 12-month basis, TER shares have returned 14%, underperforming the broader sector’s appreciation of 24.6%.

TER Stock’s Performance

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Expanding AI Business to Help TER Shares Recover in 2025

Teradyne’s SOC and memory test revenues increased 17% year over year in 2024 driven by strong demand for AI accelerator ASICs, networking and High Bandwidth Memory ("HBM").  

Teradyne expects the SOC Total Addressable Market to grow roughly 7% year over year in 2025, driven by strong demand for AI Compute, and recovery in Mobile, Automotive and Industrial domains in the second half of the year. The addition of system-level test insertions for AI Compute both in the Cloud and at the Edge offers an additional growth opportunity for Teradyne.

TER expects the HBM device end market to remain strong through 2025, driven by AI compute demand for HBM. The company expects HBM demand to soften and expects the entire Memory test market to be flattish in 2025. 

Power semiconductor devices offer long-term opportunities for Teradyne as the transition to electric vehicles (EVs) accelerates and the demand for more efficient power generation, storage and distribution. The Infineon IFNNY partnership agreement, under which TER is acquiring the former’s internal tester development team in Regensburg, Germany, is expected to accelerate Teradyne’s footprint in the power semiconductor space. 

Accelerating the deployment of AI into mobile and automobile applications, particularly Edge devices, bodes well for Teradyne’s midterm prospects. The company expects to grow from $2.8 billion in revenues in 2024 to $5 billion in 2028, implying a CAGR between 12% and 18% over the 2024-2028 timeframe. Earnings are expected to grow from $3.22 per share in 2024 to $8.25 per share in 2028, implying a CAGR between 21% and 31% over the 2024-2028 timeframe.

Weak Wireless, System & Robotics Hurt TER’s Prospects

Teradyne’s System and Wireless Test businesses continue to suffer from weak end-market conditions. On a combined basis, the System Test and Wireless Test businesses revenues fell 4% year over year in 2024. 

Teradyne expects the Wireless Test business to return to growth in 2025. The company secured 74 out of 80 tracked WiFi 7 design win opportunities in 2024.

Industrial automation end-market remains weak. Teradyne ended 2024 down slightly for Universal Robots (UR) and roughly flat for Mobile Industrial Robots (MiR). 

Teradyne combined UR and MiR operations into a unified robotics operation group in 2024. The company is contemplating selling the full UR and MiR product lines through partners and plans to serve customers better with a single customer service organization. The restructuring is expected to increase the efficiency of the Robotics division.

However, Robotics’ breakeven revenues are expected to decline from $440 million in 2024 to $365 million in 2025.

Teradyne Shares Trade at a Premium

TER stock is overvalued, as suggested by the Value Score of D. 

TER stock is trading at a forward 12-month P/E of 27.81X compared with the broader sector’s 26.88X.

Price/Earnings (F12M)

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Teradyne shares are trading below the 50-day and 200-day moving averages, indicating a bearish trend.

TER Trades Below 50-day & 200-day SMA

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What Should Investors Do With TER Shares?

Teradyne is benefiting from its robust and diversified portfolio. Improving memory and compute outlook driven by the positive impact of AI-driven applications on test demand is expected to drive top-line growth despite weakness in mobile and industrial end-markets. 

However, weakness in Robotics is a concern, along with softness in the System and Wireless businesses. This, along with a stretched valuation, is a risky bet for investors.

Teradyne currently carries Zacks Rank #3 (Hold), which implies investors should wait for better entry points in the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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