Teradyne (TER) Stock Falls 15% After Record Q1 Earnings Miss Guidance Targets

TLDR

• Teradyne posted record Q1 2026 revenue of $1.282 billion, up 87% year-over-year
• EPS of $2.56 beat forecasts by 23%, up 241% year-over-year
• Stock dropped ~15% as investors focused on Q2 guidance rather than the beat
• AI-related demand drove nearly 70% of total revenue; gross margin hit a record 60.9%
• Q2 guidance of $1.20B revenue and $2.00 EPS came in only slightly above estimates

Teradyne had what looked like a perfect quarter on paper. Record revenue, record margins, an EPS beat of over 23%. The market’s response? A 15% drop.

That gap between results and reaction tells the whole story here.

Q1 2026 revenue came in at $1.282 billion, up 87% year-over-year and ahead of the $1.19 billion consensus. EPS of $2.56 crushed the $2.08 forecast by a wide margin. Gross margin hit 60.9%, a company record. Operating income reached $480 million, representing a 37.5% margin.

Teradyne, Inc., TER

The Semiconductor Test segment crossed the billion-dollar quarterly revenue threshold for the first time. AI-related demand accounted for nearly 70% of total revenue, making it the clear engine behind the company’s growth.

Despite all of that, the stock fell 12.91% in after-hours trading Tuesday, and extended losses to around 18% in premarket Wednesday before settling near a 15% decline during regular trading.

Guidance Fell Short of Elevated Expectations

The issue wasn’t what happened in Q1. It was what’s expected in Q2.

Teradyne guided for Q2 revenue of approximately $1.20 billion and EPS of around $2.00 at the midpoint. That came in just slightly above Wall Street estimates — not the kind of beat investors were pricing in after a blockbuster quarter.

Gross margin guidance also raised eyebrows. The implied Q2 gross margin of around 57.5% would represent a drop of roughly 350 basis points from Q1’s record level. UBS analysts noted this was “a bit odd unless something exogenous is at play,” though they dismissed an Apple-driven explanation as unlikely given revenue guidance wasn’t meaningfully higher.

Valuation Under the Microscope

Teradyne trades at a P/E ratio of 109.78 and a PEG ratio of 23.77. Those are premium numbers by any measure, and they leave little room for anything short of flawless execution and guidance.

InvestingPro flagged the stock as overvalued relative to its Fair Value estimate ahead of earnings.

Despite the selloff, UBS kept its Buy rating and $440 price target. Analyst Timothy Arcuri urged investors to “zoom out and look at the big picture,” arguing that rising test intensity across the chip industry should drive the semiconductor test Total Addressable Market considerably higher in the coming years.

Arcuri also pushed back on the market share obsession that tends to dominate Teradyne coverage, calling it “probably too myopic” given the expanding revenue base across semiconductors broadly.

Teradyne’s 52-week high stands at $422.11. The stock was trading around $325 Wednesday, down from that peak.

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