TERADYNE, INC. (TER): what the price assumes
In the published model solve dated 2026-Q2, anchored at $356.00, TERADYNE, INC. (TER) is priced for today's economics sustained for ~7.7 years. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-11.
Generated: 2026-08-30 · Exported: 2026-08-31 · Source: https://boothcheck.com/report/TER
Headline
| Field | Value |
|---|---|
| Ticker | TER |
| Company | TERADYNE, INC. |
| Sector / Industry | Technology / Scientific Instruments |
| Current price | $356.00/sh |
| Composition | Products 83% / Services 17% |
What The Price Assumes (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin (value-band context) | 32.7% |
| Operating margin today | 30.2% |
| Margin expansion (value-band) | +2.5pp |
| Must persist for | 7.7y |
| Multiple paid | 40x operating income |
The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.
Solve inputs: computed at a 13.3% cost of capital; growth searched up to the 41% self-funding ceiling.
How unusual the bet is: within-range (limited comparison data)
| Reference | Value |
|---|---|
| vs own history | +1.21σ |
| cohort percentile (of 188 peers) | 71 |
Valuation X-Ray
Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 4.48x | 5 | expensive |
| Earnings | 6.03x | 5 | expensive |
| Relative | 2.69x | 2 | expensive |
| Growth | 0.74x | 3 | justifies |
Families that justify the price: Growth Families that call it expensive: Asset, Earnings, Relative
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 9.2%); the inversion above states its own rate.
Per-Model Detail (n=15)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $307.24 | 1.16x | yes | FCF base $1.1B, growth 25% (input: historical growth), terminal g 4.0%, WACC 9.2%, 7yr projection |
| DCF Exit Multiple | Growth | $479.43 | 0.74x | yes | Exit EV/EBITDA: 34.6x / 37.6x / 40.6x (bear / base = today's held flat / bull), 7yr |
| Relative Valuation | Relative | — | — | no | P/E 27.12x (blended: static sector reference 18x + trailing (TTM) 48x), scenarios: 21.7x / 27.1x / 32.5x (bear / base = reference held flat / bull), EV/EBITDA 19.69x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $79.54 | 4.48x | yes | BV/sh $21.99, ROE (TTM) 33.5%, ke 9.3% |
| Two-Stage Excess Return | Asset | $159.76 | 2.23x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $595.10 | 0.60x | yes | Rev $4.5B, growth 30% (input: historical growth; tapered), Terminal P/S: 9.6x / 12.0x / 14.4x (bear / base = today's held flat / bull, cap 12x) |
| Peter Lynch Fair Value | Relative | $87.36 | 4.08x | yes | EPS $7.28, growth 2% (input: historical EPS growth), PEG=25.24 (Overvalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $58.99 | 6.03x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.84B × (1−15%) / WACC 9.2% → EPV (no growth) |
| Residual Income | Asset | $123.21 | 2.89x | yes | BV $21.99 + 5yr PV of (ROE (TTM) 33.5% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $60.01 | 5.93x | yes | √(22.5 × EPS $7.28 × BVPS $21.99) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | — | — | no | EBITDA $1.48B × sector EV/EBITDA 12.0x |
| FCF Yield | Earnings | $54.74 | 6.50x | yes | FCF $799.9M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $49.63 | 7.17x | yes | SBC-adj FCF $0.73B (FCF $0.80B − SBC $0.07B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $234.90 | 1.52x | yes | EPS $7.28 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $25.25 | 14.10x | yes | BV $21.99 × (ROIC 10.5% / WACC 9.2%) |
| P/Sales Sector | Relative | — | — | no | Revenue $4.46B × sector P/S 2.5x |
| PEG Fair Value | Relative | $273.00 | 1.30x | yes | EPS $7.28 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x |
| Earnings Yield | Earnings | $78.70 | 4.52x | yes | EPS $7.28 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Economic-Unit Decomposition (Sum Of The Parts)
One or more material disclosed units has unresolved economics. Unknown/general is not evidence of homogeneity: segment SOTP is primary but incomplete, consolidated cash flow may remain only a secondary cross-check when every unit shares an enterprise basis, and one sector multiple or target margin is withheld.
| Unit | Role | Valuation basis | Revenue | Reported profit | Value evidence | Status |
|---|---|---|---|---|---|---|
| Semiconductor Test | operating | enterprise | $2.5b | $700.7m operating-income | withheld | unresolved no unit value |
| Robotics | operating | enterprise | $308.3m | -$99.4m operating-income | withheld | unresolved no unit value |
| Product Test | operating | enterprise | $358.0m | $60.7m operating-income | withheld | unresolved no unit value |
No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.
Solvency
| Field | Value |
|---|---|
| Net cash | $349.5m |
| Net debt / NOPAT (after-tax) | -0.30x (net cash) |
| Net debt / operating income (pre-tax) | -0.26x (net cash) |
| Interest coverage | 118.8x |
| Share count CAGR (buyback) | -2.0% |
| Burning cash | no |
Bullet Takeaways
- Teradyne makes the automatic test equipment that verifies semiconductors work, and the AI buildout has become its dominant driver: AI-related demand was nearly 70% of Q1 2026 revenue, up from about 60% the prior quarter.
- The biggest risk is that this is a cyclical business priced for a permanent boom: at a P/E of 66 no valuation method except forward growth reaches the price, and semiconductor test demand has historically swung hard.
- Watch memory-test momentum (HBM and DRAM for AI) and the long-term model management reiterated of $6 billion revenue and $9.50 to $11.00 EPS.
Bull Case
What the market is pricing here is a structural shift in Teradyne's end demand, and the recent fundamentals show why. For years semiconductor test was a mature, cyclical business tied to consumer electronics and mobile. Now the AI compute buildout has become the driver: AI-related demand was nearly 70% of Q1 2026 revenue, up from about 60% the prior quarter, and it is showing up in the numbers as a step-change, not a wobble. Quarterly revenue rose 87% year over year to $1.28 billion, and operating margin expanded from 13.9% to 36.9% over the last four quarters as the higher-value AI test work carried the mix upward. The market is paying for a business that is being repriced from cyclical component supplier to essential AI-infrastructure toll.
The technology position backs the demand. Teradyne's Semiconductor Test segment (the FY2025 10-K describes it as "the design, manufacturing and marketing of semiconductor test products and services inclusive of storage and system level test products") generated $1,111 million of the quarter's revenue, and memory revenue of $203 million held near a record on robust HBM and DRAM demand, the exact memory types AI accelerators consume. Management noted memory test demand is even stronger than it expected in January, with the newest Magnum 7 tester generation ramping. Testing gets harder and more valuable as chips get more complex, and AI chips are the most complex yet.
The balance sheet and optionality complete the case. Teradyne carries net cash with an Altman score of 7.87, so it can invest through any downturn, and it holds a robotics business (collaborative arms and autonomous mobile robots) that is a separate call option on factory automation. Management reiterated a long-term model of $6 billion in revenue and $9.50 to $11.00 in EPS. Free cash flow funds a growing dividend and $550 million of trailing buybacks. The bull case is that AI has structurally raised the floor under semiconductor test, and Teradyne is the purest large-cap way to own that.
Bear Case
Look at how Teradyne is spending its cash against where its earnings sit in the cycle, and a capital-allocation question surfaces. The company repurchased $550 million of stock over the trailing year, buying its own shares at a price of roughly 66 times earnings while its profitability is running at what may be a cyclical peak. Retiring stock at that multiple, funded by earnings inflated by an AI-demand surge that took AI to nearly 70% of revenue, is the kind of buyback that destroys value if the cycle mean-reverts: the company pays a premium price for shares today and the earnings that justified the premium fade tomorrow. Management is signaling confidence, but confidence expressed through buybacks at peak multiples is a bet shareholders are underwriting whether they chose it or not.
The concentration underneath the boom is real. The FY2025 10-K discloses that in 2025 the company had "two customers who specified greater than 10% of our consolidated revenues and one additional customer who directly purchased more than 10%", and that "significant customers decided to stop buying and using our products with limited advance notice" is a named risk. Test-equipment orders are lumpy and can be cut fast when a chipmaker pauses capacity. Add geographic exposure: 89% of 2025 sales were outside the United States, and the 10-K flags U.S. export-control regulations "restricting transactions with certain customers in China", a policy variable entirely outside the company's control that bears directly on its largest region.
The valuation prices none of this cyclicality in. Only the forward-growth method reaches today's price; the asset, earnings-power, and peer-multiple lenses all read it as richly valued, the first two at seven times what they support. Inverting the price, the market is paying about 66x company-wide operating income and implicitly assuming growth held near the self-funding ceiling for close to 19 years, a persistence only about 11% of comparable fast-growers managed for even a decade. Semiconductor test is one of the most cyclical corners of technology, and the current earnings reflect an AI-driven high. Buying back stock into that high, at that multiple, is the capital-allocation decision the bear would question most.
Valuation
Teradyne's price is a growth bet that no other method endorses. At $359.61 (July 11, 2026), only the forward-growth method reaches the price; the asset-based and earnings-power lenses read the stock at roughly seven times what they support, and even the peer-multiple lens sits well below the price. When only the growth frame reaches it, the market is paying a durability premium the static methods cannot capture, a bet that the AI-driven surge in semiconductor test is a lasting re-rating rather than a cyclical spike. That premium is the entire valuation, and the honest read is that it is elevated: above what the fundamentals comfortably support.
Inverting the price shows how demanding the bet is. The market is paying about 66x company-wide operating income and, in effect, assuming Teradyne holds growth near its self-funding ceiling for roughly 19 years. Only about 11% of comparable fast-growers sustained that pace for even ten. The two operating-income bases in the data (a record basis near $830 million and an EDGAR trailing basis near $1.0 billion, about 17% apart) both reflect the recent margin surge, from 13.9% to 36.9% operating margin over four quarters, which is itself the cyclical signal: current profitability is running well above the business's historical norm, so any method anchored on trailing earnings is anchored on a high.
Solvency is a non-issue and it clarifies the nature of the bet. The balance sheet is net cash, so there is no financial pressure on the way to whatever the cycle delivers, and free cash flow funds the dividend and the buyback. That means the valuation question is purely about durability: is AI-related test demand, now nearly 70% of revenue, a permanent new floor, or is it a cyclical peak that will normalize like every prior semiconductor test cycle? The price answers permanent, with 19 years of conviction. The methods, and the history of the industry, counsel that the floor is probably lower than the current run rate suggests.
Catalysts
Q1 2026 was a record quarter driven by AI. Teradyne reported revenue of $1,282 million ($1,111 million Semiconductor Test, $91 million Robotics, $80 million Product Test) and GAAP net income of $398.9 million, or $2.53 per diluted share. AI-related demand represented nearly 70% of revenue, up from about 60% in Q4 2025, spanning both compute and memory. Memory revenue of $203 million held near a record on robust HBM and DRAM demand, with the newest Magnum 7 memory tester ramping and management describing memory test demand as even stronger than its January view.
Guidance framed continued strength with a wider range. For Q2 2026 Teradyne guided revenue of $1.15 billion to $1.25 billion and non-GAAP EPS of $1.86 to $2.15, and reiterated its long-term model of $6 billion in revenue and $9.50 to $11.00 in EPS. The items to watch are whether AI compute and memory test demand sustains at these levels or shows the lumpiness typical of test-equipment orders, the trajectory of the smaller robotics segment as a separate automation option, and U.S. export-control developments affecting sales to China given that 89% of revenue is international. The Q2 2026 report is the next checkpoint on whether the AI-driven demand is holding.
Peer Cohorts (Per Segment, With Filing Citations)
Semiconductor Test (reported)
- COHU (COHU INC)
- FY2025 10-K: …relatively small in terms of worldwide market size compared to other segments of the semiconductor equipment industry, has several participants resulting in intense competitive pricing pressures. In addition, there are emerging companies that provide or may provide innovative technology incorporated in products that…
- FY2025 10-K: …solutions, and software analytics to optimize semiconductor manufacturing yield and productivity. We offer a comprehensive suite of equipment, interface solutions, software, spares and services designed to address the evolving requirements of global semiconductor manufacturers. Our products support customers across…
- FORM (FormFactor, Inc.)
- FY2025 10-K: …to our customers' unique wafer and chip designs by modifying and adapting our standard product architectures to meet each customer's specific wafer layouts, chip layouts, and electrical test requirements. We offer probe cards to test a wide range of semiconductor device types, including logic system-on-chip (SoC)…
- FY2025 10-K: …services at the time of sale, we offer services to enable our customers to maintain and more effectively utilize our products and to enhance our customer relationships. Our applications engineers assist our customers in test methodologies to make advanced measurements during process and product development, and…
- AEHR (AEHR TEST SYSTEMS)
- FY2025 10-K: -power reliability burn-in, and the Echo series for low-power and high parallelism testing. The Sonoma line, with its ultra-high-power capabilities, is specifically designed to address the reliability and burn-in needs of the burgeoning demand for AI accelerators, GPUs, HPC processors, and devices that can reach…
- FY2025 10-K: …resources than us. Our FOX wafer-level and singulated die/module test and burn in systems and packaged part burn-in systems face competition from larger systems manufacturers that have significant technological know-how and manufacturing capability. Some users of our systems, such as independent test labs, build…
- KLAC (KLA CORPORATION)
- FY2025 10-K: …Process; and PCB and Component Inspection. Semiconductor Process Control The Semiconductor Process Control segment offers a comprehensive portfolio of inspection, metrology and data analytics products, and related services, which helps IC manufacturers achieve target yield throughout the entire semiconductor…
- FY2025 10-K: …including manufacturers of microelectromechanical systems ("MEMS"), radio frequency ("RF") communication semiconductors, and power semiconductors for automotive and industrial applications. Within the PCB and Component Inspection segment, we enable electronic device manufacturers to inspect, test and measure PCBs, IC…
- ONTO (ONTO INNOVATION INC.)
- FY2025 10-K: …to complex measurement and process problems. We believe that customer service and technical support for our systems are crucial factors that distinguish us from our competitors and are essential to building and maintaining close, long-term relationships with our customers. We generally provide a warranty for our…
- FY2025 10-K: …Ushio, Canon, GigaVis Co. Ltd. and PDF Solutions. Each of our products also competes with products that use different metrology, inspection or lithography techniques. Some of our competitors have greater financial, engineering, manufacturing and marketing resources, broader product offerings and service capabilities…
- NVMI (NOVA LTD.)
- FY2025 20-F: …manufactures to overcome new challenges in dimensions, materials and chemical engineering. The Semiconductor Market - Update According to Gartner forecasts, semiconductor revenues are expected to grow by 33% in 2026, following a growth of 21% in 2025. WFE (Wafer Fab Equipment) is expected to grow by 12% in 2026,…
- FY2025 20-F: …regarding our sales by major customers as percentage of our total sales, see Note 16 to our consolidated financial statements contained elsewhere in this Annual Report. Our inability to significantly reduce spending during a protracted slowdown in the semiconductor industry could reduce our prospects of achieving…
Robotics / Product Test (reported)
- KLAC (KLA CORPORATION)
- FY2025 10-K: …Process; and PCB and Component Inspection. Semiconductor Process Control The Semiconductor Process Control segment offers a comprehensive portfolio of inspection, metrology and data analytics products, and related services, which helps IC manufacturers achieve target yield throughout the entire semiconductor…
- FY2025 10-K: S™ F26x, ICOS™ Tx Series, Zeta™-5xx/6xx. Services Our service programs enable our customers in all business sectors to maintain the high performance and productivity of our products through a flexible array of service options. Whether a manufacturing site is producing wafers, reticles, ICs or PCB products, our highly…
- ONTO (ONTO INNOVATION INC.)
- FY2025 10-K: …Ushio, Canon, GigaVis Co. Ltd. and PDF Solutions. Each of our products also competes with products that use different metrology, inspection or lithography techniques. Some of our competitors have greater financial, engineering, manufacturing and marketing resources, broader product offerings and service capabilities…
- FY2025 10-K: …inspection product line to customers in support of advanced packaging needs for chips used in AI applications, partially offset by an increase in metrology product line units shipped to customers in Advanced Nodes and units shipped to Semilab USA customers in SiC specialty devices. Parts and services revenue is…
- NVMI (NOVA LTD.)
- FY2025 20-F: …for advanced applications, which require dimensional, material and chemical metrology. • Grow our production facilities and offices footprint to meet semiconductor demand and our strategic plans and continue to develop modern and streamlined core business processes through new ERP and Service CRM infrastructure. •…
- FY2025 20-F: …and materials properties in these 3D structures. • Faster Time to Market. The accelerating rate of obsolescence of technology and the faster ramp to yield required by customers makes early achievement of high manufacturing yields a critical component of profitability and metrology has a critical role in achieving…
- CAMT (CAMTEK LTD)
- FY2025 20-F: Approximately 50% of our revenues are generated from products supporting the production of artificial intelligence (" AI ") applications, and significant portion of our growth expected in the coming few years is derived from such products. We have experienced increased demand for inspection and metrology systems as…
- FY2025 20-F: …Our Markets - Fluctuations in currency exchange rates may result in additional expenses being recorded or in the prices of our products becoming less competitive and thus may have negative impact on our profitability " above. C. Research and Development, Patents and Licenses. We believe that intensive R&D is…
- COHU (COHU INC)
- FY2025 10-K: …solutions, and software analytics to optimize semiconductor manufacturing yield and productivity. We offer a comprehensive suite of equipment, interface solutions, software, spares and services designed to address the evolving requirements of global semiconductor manufacturers. Our products support customers across…
- FY2025 10-K: …skills and relevant industry experience to serve in these positions and it may become increasingly difficult for us to hire personnel over time. In order to attract and retain executives and other key employees, we must provide a competitive compensation package, including cash and stock-based compensation, along…
- FORM (FormFactor, Inc.)
- FY2025 10-K: …vacuum probing, cryogenic probing, high-pressure probing, photonics testing, and a variety of other specialized applications. We are collaborating with certain customers to transition from the lab to the fab with co-packaged optics, which is poised to revolutionize chip-to-chip communication in the data center by…
- FY2025 10-K: …to further these goals. As of December 27, 2025, we operate in two reportable segments consisting of the Probe Cards segment and the Systems segment. Sales of our probe cards and analytical probes are included in the Probe Cards segment, while sales of our probe stations, thermal systems and cryogenic systems are…
- AEHR (AEHR TEST SYSTEMS)
- FY2025 10-K: …leading-edge technologies, we have encountered reliability, design and manufacturing issues as we begin volume production and initial installations of certain products at customer sites. Some of these issues in the past have been related to components and subsystems supplied to us by third parties who have in some…
- FY2025 10-K: …service resources in China and South Korea, and has established a network of distributors and sales representatives in certain key parts of the world. See "Revenue Recognition" in Item 7 under "Management's Discussion and Analysis of Financial Condition and Results of Operations" for a further discussion of the…
- MKSI (MKS INC)
- FY2025 10-K: …products is cyclical and highly competitive. Principal competitive factors include product quality, performance and price, historical customer relationships, breadth of product line, ease of use, manufacturing capabilities and responsiveness, and customer service and support. Although we believe that we compete…
- FY2025 10-K: …Electric Corporation. 9 In MSD, Element Solutions Inc., Qnity Electronics, Inc., Uyemura, JCU International, Inc. and Okuno Chemical Industries Co., Ltd. offer products that compete with our chemistry products. Schmid Group, Process Automation International Limited, Top Creation Machines Co., Ltd., Universal Circuit…
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.
Sources
Q1 2026 earnings release · Q1 2026 earnings call · FY2025 10-K