Ladies and gentlemen, good afternoon, and welcome to the Teradyne Third Quarter 2025 Earnings Conference Call. As a reminder, today's call is being recorded. I would now like to turn the call over to Amy McAndrews, VP of Corporate Relations for Teradyne. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to our discussion of Teradyne's most recent financial results. I'm joined this morning by our CEO, Greg Smith; and our CFO, Sanjay Mehta. Following our opening remarks, we'll provide details of our performance for the third quarter of 2025 and our outlook for the fourth quarter of 2025. The press release containing our third quarter results was issued last evening. The slides as well as a copy of this earnings script are available on the Investor page of the Teradyne website. Replays of this call will be available via the same page after the call ends. The matters that we discuss today will include forward-looking statements that involve risks that could cause Teradyne's results to differ materially from management's current expectations. We caution listeners not to place undue reliance on any forward-looking statements included in this presentation. We encourage you to review the safe harbor statement contained in the slides accompanying this presentation as well as the risk factors described in our annual report on Form 10-K for the fiscal year ended December 31, 2024, on file with the SEC. Additionally, these forward-looking statements are made only as of today, and we do not undertake any obligation to update forward-looking statements to reflect subsequent events or circumstances, except to the extent required by law. During today's call, we will refer to non-GAAP financial measures. We have posted additional information concerning these non-GAAP financial measures, including reconciliation to the most directly comparable GAAP financial measures available on the Investor page of our website. Looking ahead between now and our next earnings call, Teradyne expects to participate in the UBS Technology Investor Conference. Our quiet period will begin at the close of business on December 24, 2025. Following Greg and Sanjay's comments this morning, we'll open up the call for questions. This call is scheduled for 1 hour. Greg?

Thanks, Amy. Good morning, everyone, and thanks for joining us. Today, I'll discuss our third quarter results, talk a bit about what is driving the business in Q4 and provide a general update on conditions across our businesses. Sanjay will then provide more detail on our third quarter results and fourth quarter guidance. As you saw in the earnings release, we grew sequential revenue by 18% and non-GAAP EPS by 49% in the third quarter. This growth was driven by AI demand in semiconductor tests. Our other test businesses delivered on plan in the quarter. In Robotics, we continue a slow crawl up from our Q1 revenue trough in a challenging environment. The huge investments in cloud AI build-out drove our Q3 performance to the high end of our guidance range as our customers ramped production of a wide range of AI accelerator, networking, memory, and power devices. An example of this AI strength is in compute, where our view of the second half of 2025 revenue is more than 50% higher than our expectations just 3 months ago. Some of this increase comes from us responding to customer pull-in requests, and some is demand increases. As design, process, and packaging technologies for AI compute rapidly advanced, we expect that our growth will continue. Our UltraFLEXplus system has been architected from the ground up for high-performance processors and networking devices, which have demanding power, pin count, and test data requirements. As AI devices become more complex, the UltraFLEXplus architectural advantages become more valuable to potential customers by enabling fast test development times and high-efficiency volume production. Our focused investment in R&D is also yielding new differentiated capabilities for compute tests, some of which have already been announced in Q3. In memory, our Q3 memory test sales more than doubled from Q2 to $128 million, with the majority of those shipments supporting AI applications. In Q3, 75% of our memory revenue was driven by DRAM, nearly all of it from final tests of DRAM and HBM performance tests. 25% of revenue was from flash, mainly for cloud SSD, another segment being driven by AI data centers. Our Magnum 7H product is differentiated in HBM performance tests because it is a multi-generational product. It can cover the test needs of HBM3E and HBM4, and it provides upgrade headroom for HBM4E and HBM5. The Magnum 7H also supports HBM singulated stack performance tests. In Q2, we won a design in for this insertion. And in Q3, we began volume shipments. So at this point, Teradyne participates in all major test insertions for HBM, memory die wafer sort, post-stack wafer tests, and singulated stack tests. Our results in memory tests this year are especially satisfying in light of the composition and size of the memory TAM for 2025. Our best guess is that the total memory TAM for 2025 will be down low double digits, and the weakest part of this market is flash, our traditional strongest segment. Despite this, we expect our memory revenue will sustain at 2024 levels. AI-driven applications for power ICs were a bright spot in the auto industrial market segment. The Eagle Test platform has a leading position in the test of high-performance power conversion devices for data center applications. Volumes of these devices are forecast to grow over 50% between now and 2027. We expect the demand for VIP compute and networking to continue to grow significantly, and we have been investing in R&D, applications, sales, support, and manufacturing capacity for this expansion. This includes investments to win new VIP and merchant GPU customers. We're making good progress on new designs and opportunities and are cautiously optimistic about our potential success. But I would like to make it clear that our Q3 results and our Q4 guidance do not include any revenue from these types of new opportunities. For the deployed fleet of UltraFLEX and UltraFLEXplus testers, we see higher utilization and fewer system upgrades than in past quarters, which we believe means that customers are exhausting their inventory of underutilized systems. As a result, we now expect a more direct connection between inflection in end market demand and new system sales. Looking beyond AI and Semi Test, conditions in mobile and auto industrial remained somewhat weak. Now in our Integrated Systems division, our Q3 shipments were above plan as SLT customers accelerated deliveries for mobile processors and compute applications. We also saw increases in orders for both HDD and SLT systems. Now recall, lead times are generally measured in quarters for this business, so most of that order strength will translate into revenue in 2026 and beyond. In Robotics, we are growing slowly from our trough quarter in Q1 2025. If you go down 1 level of detail, we continue to see persistent weakness in our core indirect distribution channel as we expand our large customer and OEM channels. An important element of our robotics strategy is to establish UR cobots as the preferred platform for AI-driven work cell applications and to deliver superior performance for our AMRs by leveraging AI features. In the third quarter, over 8% of robotics sales were for AI-related products, up from 6% in Q2. Another element of our robotics strategy is to deliver value-added service to our installed base of over 100,000 robots. Service represented 14% of sales in Q3, up from 12% in Q2. As we noted in our July call, our Semi Test business has evolved to where the largest demand driver is AI data center investments rather than consumer end markets. We have aligned our R&D and go-to-market investments to capture the tremendous opportunities in test driven by this AI-related demand. Our investments are focused on extending our product performance advantages with innovative R&D, while also expanding our engineering teams to help customers develop and ramp production of these fantastically complex devices on Teradyne platforms. Sanjay will describe how these investments translate into OpEx, but as we're seeing, the returns are well worth the investment. Looking at Q4, we expect AI-related demand for compute, networking, and memory to be the primary engine of our growth, which reflects both industry trends and the result of our investments to align with those trends. Looking to the future, the long-term themes that we've highlighted in the past, AI, verticalization, and electrification remain firmly intact. As we enter 2026, we expect AI and verticalization will be the primary growth drivers. We've said before that the AI market is both highly concentrated and highly dynamic. The timing of any one project can affect the delivery schedule for hundreds of testers. This can swing quarterly results significantly. So with that understanding, let me offer a few high-level comments about how we're looking at 2026. At the company level, 2026 looks stronger today than it did 6 months ago, and all indications suggest solid growth from 2025. We anticipate that business conditions for mobile, auto industrial, and robotics will improve, but the timing and the intensity of that recovery is uncertain. But the real story in 2026 is AI and the investments that we have made to develop differentiated solutions in that space will drive our growth plan. I'd like to share a few specific examples. Massive investments in building data centers are translating into strong demand for UltraFLEXplus in VIP, compute, merchant compute, and networking. In the memory market, AI will drive growth in HBM, DRAM, and flash for SSD applications served by Magnum. Accelerated big growth in HDD is driving the demand for more HDD test. The deployment of AI-capable processors for mobile, client computing, and cloud AI is driving the demand for more system-level tests. We plan to give you a more detailed view as part of our model update in the January call. Now before I hand the call over to Sanjay, I would like to say a few words about the CFO transition that we announced last night. Michelle Turner will be our Chief Financial Officer effective November 3, 2025. She brings 30 years of financial and strategic leadership experience in the technology and manufacturing sectors, and she has a strong track record of driving growth, disciplined capital allocation, and operational efficiency. She is looking forward to getting to know all of you in the upcoming quarter. I'm excited to welcome Michelle to the Teradyne team. Now Sanjay has been Teradyne's CFO since 2019, and he has offered to stay on as an executive adviser to operations as we expand capacity in 2026. I want to thank Sanjay for his excellent leadership and contributions over the past 6 years, and I'm grateful that we will have the benefit of this guidance. With that, I'll turn the call over to Sanjay.

Thank you, Greg. Good morning, everyone. Today, I'll cover the financial summary of Q3 and provide our Q4 outlook. Now to Q3. Third quarter sales were $769 million, and non-GAAP EPS was $0.85, both near the high end of our guidance ranges. Non-GAAP gross margin was 58.5%, above our guidance range due to favorable mix. Non-GAAP operating expenses were $293 million, up sequentially and year-over-year on higher R&D, sales, and marketing investments tied to AI as well as increases in our variable compensation. Non-GAAP operating profit was 20.4%. Turning to our revenue breakdown in Q3. Semi Test revenue for the quarter was $606 million, with SoC revenue contributing $440 million, which was up 11% sequentially and 12% year-over-year. Memory revenue was $128 million, up 110% sequentially and down 15% year-over-year. Strength in SoC was driven by AI compute and AI-related power tests. Memory revenue more than doubled from Q2 on HBM and AI-related LPDDR demand. IST revenue was $38 million, up 9% sequentially, 46% year-over-year driven by strength in SLT shipments. In product test, Q3 revenue was $88 million, up 4% sequentially and 10% year-over-year, driven by growth in defense and aerospace. Now to Robotics. Revenue was $75 million, flat quarter-on-quarter and down year-over-year. In the quarter, UR contributed $62 million, and MiR contributed $13 million of revenue. As we noted in July, volume shipments to our large e-commerce customers are not expected to have a material impact on robotics revenue in 2025. Some other financial information in Q3. We had 2 customers that directly or indirectly drove more than 10% of our revenue in the third quarter. The tax rate, excluding discrete items for the quarter was 16% on a GAAP and non-GAAP basis. Our free cash flow was $2 million. Our net income was offset by our net working capital increases tied to accounts receivable and inventory, which reduced our free cash flow. Receivables growth was tied to increased sales, which were weighted to the second half of the quarter. Inventory growth was tied to the ramp in compute and memory driven by upcoming AI demand. CapEx of $47 million was reasonably consistent with Q2. We repurchased $246 million of shares in the quarter and paid $19 million in dividends. Through the end of the third quarter, we've returned $575 million or approximately 2.5 times our free cash flow through dividends and buybacks to shareholders during the year. We ended the quarter with $427 million in cash and marketable securities. Now a little more detail on OpEx and our balance sheet strategy to help you with your modeling. In the second half of 2025, we're continuing to lean into R&D and go-to-market investments for AI opportunities that we expect will drive revenue in 2026 and beyond. OpEx in the second half of 2025 is also increasing tied to our variable compensation linked to increasing financial performance. At the midpoint of our Q4 guidance, we'll have full-year revenue growth of 9% and OpEx growth of 7%. Long-term, we target OpEx growth at approximately half the rate of our revenue growth. In 2026 and longer term, as AI revenue blossoms, we expect to meet our OpEx target. Regarding the balance sheet, we expect to keep our cash and marketable securities at roughly $400 million while also continuing our balanced capital allocation strategy. In 2025, we saw an opportunity to accelerate buybacks in the short term to further enable shareholder value. At the operational level, we expect to exercise our credit lines more frequently as we did in Q3 and expect to in Q4. From a modeling perspective, this means the interest and other line of the P&L will reflect higher interest expense. You should expect to see a couple of million dollars of net interest expense per quarter while we utilize our revolver. Now turning to our outlook for Q4. Before discussing the details of Q4 guidance, I'd like to remind you of some of the commentary from our July call. Specifically, we noted that we had large projects expected to ramp, which straddled Q3, Q4, or Q4, Q1. As we move through the second half of 2025, we saw projects accelerate into Q3 and are now seeing projects accelerate into Q4. These projects are AI-driven. In Q3, we were able to meet early ramp demands. In Q4, we are seeing demand ramp significantly. We continue to expedite our supply chain, and we are accelerating production capacity growth at factories in multiple geographies to meet the demand. Now the details. Q4 sales are expected to be between $920 million and $1 billion. Fourth quarter gross margins are estimated at 57% to 58%. This includes some one-time supply costs in the quarter to meet accelerated demand. Turning to OpEx. Q4 OpEx is expected to run at 31% to 33% of fourth quarter sales. The non-GAAP operating profit rate at the midpoint of our fourth quarter guidance is 25.5%. The Q4 GAAP and non-GAAP tax rate is expected to be 14.5%. Q4 non-GAAP EPS is expected to be in the range of $1.20 to $1.46 on 157 million diluted shares. GAAP EPS is expected to be in the range of $1.12 to $1.39. Summing up on Q3 results and Q4 guidance. AI is growing across the economy, driving exceptionally strong semiconductor test demand in the second half of 2025. This is evident in our Q3 sales, profit performance, and our outlook for Q4. The acceleration of test demand in Q4 reflects customers' drive to pull AI projects in from Q1. We're optimistic about the AI-related market in 2026, but we also know shipments can be lumpy. Now to my final remarks. After 6-plus years at Teradyne, it's clear that Teradyne is well positioned for significant growth over the midterm. Many environmental challenges have occurred during my tenure such as significant government regulations, COVID, tariffs, CEO transition, along with the strategic pivot of investments to AI in 2022. Through all of these opportunities, we have strengthened the company's infrastructure and processes. Our operational resilience is significantly stronger as we have derisked our supply chain, started the journey of multiple factories in multiple geographies to enable significant growth rooted in AI. Strong management leads our diversified portfolio enabled through our variable business model, which has consistently delivered tremendous free cash flow through all of the changes and volatility we've experienced. Our balance sheet is strong with firepower to enable strategic investments, continue to deliver a balanced capital allocation, and strong returns for our shareholders. I've had the opportunity to make New England my home and built many lasting relationships here internally and externally. I've enjoyed working with our shareholders and all of you in the investment community. With that, I'll turn the call back to the operator to open up the line for questions and soon hand the keys over to Michelle.

We will now be taking questions from Teradyne's research analysts. Our first question will come from C.J. Muse with Cantor Fitzgerald.

Sanjay, congratulations. Looking at the short-term versus long-term, in the short term, there is about $150 million upside compared to consensus for December. I'm interested to know how much of that upside, compared to what you anticipated three months ago, is attributable to HBM, VIP, networking, SLT, or potentially other factors?

So CJ, it's Greg. When you look at Q4 it's really all in compute and memory is where the upside is coming from. If you look across the rest of the company, it's kind of not too different quarter-on-quarter, maybe a little bit stronger in our product test division and a little bit stronger in robotics. But the real story is in compute and memory. And I'd say it's kind of 2/3, 1/3 in terms of the like compute is kind of 2/3 of it, memory is about 1/3 of it, and HBM is really strongly represented in that memory up.

Very helpful. I have a longer-term question regarding the compute side. I'm interested in your thoughts on high-performance compute, particularly in relation to mobility reports suggesting that NVIDIA will be the lead customer for Feynman A16. How are you approaching compute intensity? What are your plans for increased test insertions? Also, how are you considering test time in a landscape where compute is driving the leading edge?

We are generally optimistic that as die sizes increase and the performance needed from devices rises, the test intensity will also need to increase. Additionally, chiplet-based designs are becoming more prevalent, and as we advance in creating complex multi-chip packages, the cost of scrap becomes significantly higher. This encourages an early shift towards increased testing intensity. Moreover, these chips are being utilized in data centers, often likened to one massive GPU. It is crucial for tens of thousands of nodes to function flawlessly throughout entire training sessions, as any latent defects during these processes can be detrimental. These factors lead us to believe that testing intensity in the compute sector will continue to grow over the next few years. In the compute domain, which has now become the primary driver for the semiconductor industry, strategies like dual sourcing that have been important in the mobile sector are increasingly critical for producers. The needs change significantly when you account for dominance in shipments, leading customers in this space to adopt dual sourcing throughout their supply chains. For us, coming from a lower share position and aiming to increase our market presence, this dual sourcing approach is beneficial.

Thank you, Greg. Appreciate it.

Greg, I want to double click on these structural changes that are happening at various test insertions. And I want to focus on wafer level test. How do you see your activity and design wins manifesting into increased penetration in this specific segment? And will the burn-in on a wafer level be part of those design wins? And I have a follow-up.

Yes. We definitely believe that SLT is essential for the late stages, as it helps prevent latent defects from entering the data centers. We see a positive impact from this. Additionally, new technologies like CoWoP are emerging, which involve building more complex modules that require thorough system testing and burn-in. We view this as an interconnected market between burn-in and SLT since burn-in is typically performed with devices fully operational rather than in a testing mode.

Okay. Maybe we could take this offline because there's so much technology. But when I look at your commentary that in your prepared remarks, none of the design wins have been embedded in your guide. I want to go back to your 2028 EPS target of $7 to $9.50. I imagine these design wins weren't factored in when you provided that target earlier this year. Would that be a fair statement? And how would you think about those targets in addition to the design wins that you highlighted in your prepared remarks?

Yes, we will provide an update in January regarding our long-term model. As we consider this, it's clear that while our ultimate destination remains largely unchanged, the market composition has evolved. We are confident in our ability to reach the long-term model we previously published, but we recognize that the business will rely significantly more on factors influenced by the data center expansion. This includes areas such as computing, networking, memory, and even power, which are now much more critical to our overall strategy than they were in our previous long-term outlook.

Greg, so I assume Semi Test is up something like $200 million in the guidance for December. So I'm just wondering if you can give us a sense. I know that this stuff is all pretty lumpy. But can you give us a sense like it seems like it's maybe evenly split between memory and SSD. Is that a fair just general number to kind of think about in terms of the composition of the growth in calendar Q4?

Yes. It's not evenly split; it's more like two-thirds compute and networking and one-third memory in the growth.

Sure. I think in Greg's prepared remarks, we talked about the key drivers going into 2026. And overall, we thought that the revenue would be up relative to 2025 tied to those drivers. And in my remarks, as well as Greg's, we talked about the acceleration of key projects that straddled Q3, Q4 and Q4, Q1 and the ones in Q1 kind of accelerating into Q4. And so overall, we do see demand accelerating. I will share that from a seasonality, maybe if that’s what you're getting to, is that the revenue mix has changed as we've noted in the second half, really tied to Semi Test driven by AI tied to compute and memory revenue. Historically, our business has been driven by the mobile launches where we've had significant demand in Q2 and Q3. Business is no longer driven by that. If it comes in, sure, we'll have tailwinds on that front. It's more driven by compute projects. And those are lumpy, and they're really tied to customer launches. So I think overall, what you'll see is a little different shaping in the way of seasonality for our business going forward. And we'll give you an update in the call in January.

This is Steven calling on behalf of Krish. Greg, first question for you related to the VIP customer demand as well as you mentioned of merchant GPU opportunities in the future. I guess first thing is in terms of the VIP customers, how much more expansion do you see in terms of the customer base from the larger CSPs and similarly for Tier 2 CSPs. Is there a direct relationship that you have also with those customers potentially? Or is that more of a foundry type relationship? And similar question for merchant GPUs, is that direct or more of a foundry type of testing relationship?

The VIP customer base is highly concentrated, with significant design activity and chip development, primarily driven by two customers. Each of the hyperscalers is running its own chip development programs, comparing them to merchant silicon. If merchant silicon offers better efficiency, they often don't increase their own silicon production. Currently, we see this market as concentrated and expect it to grow slowly due to the competitive landscape. As VIPs expand, hyperscalers are gaining more control over the supply chain, moving between aggregators, forming partnerships, and asserting more influence. The notion that aggregators or design partners dictate decisions will diminish over time, as we've observed with some VIP customers. In the merchant space, the specifier, not the foundry, takes precedence. Merchant GPU or CPU players determine the test platform, controlling all test programs and intellectual property. Our strategy to increase our share in merchant GPUs focuses on the specifiers rather than the broader supply chain.

Great. And just for my quick follow-up, for hard disk drives, just some of the strength that you mentioned there from the cloud demand, I was just curious like for System Test, like are you expecting strong double-digit growth in that segment for Q4 as well? Or could it be higher than that?

The process of adding capacity in hard disk drives takes time. The manufacturing of HDDs is complex and highly automated, leading to an increase in orders. There is a lot of optimism in the sector, but we anticipate a more significant impact in 2026 compared to 2025. For 2025, we do not expect to see substantial growth in the IST Group during Q4.

Let me ask a question in a bit more of a direct way. As of this moment, do you sort of expect SoC test to accelerate from this really strong December quarter into the first half where do you really kind of bake in a bit of seasonal decline or kind of a bit of conservatism into the March quarter?

I'll just reiterate some comments and maybe, Greg, if you want to add to it. The second half of the year of '25, we talked about straddling and we talked about the projects accelerating, and we're seeing that continue to accelerate. Of course, there's projects in the pipeline in Q1 and Q2 of 2026. It's just going to depend on how those projects go. Generally, we're seeing projects accelerate though.

I believe there are aspects that are transitional between quarters. Q4 marked a new peak for us in terms of capacity and shipping for our memory test and SoC products. We anticipate robust demand moving into 2026. However, as an analyst, it would likely be unwise to simply extrapolate the growth from Q3 to Q4. We are already at a relatively high level, and while we expect ongoing strength, the trends are quite variable and the timing remains unpredictable, particularly between Q1 and Q2 of next year.

I was wondering if you could maybe kind of return to your expectations for mobile SoC heading into next year, realizing that Q2 and Q3 are seasonally stronger quarters. Do you have any sense about what you might expect sort of directionally in terms of improvement next year? And maybe just remind us of the relative sort of either test time or content increase you expect moving to the N2 generation?

Jim, so mobile SoC has been at a pretty low level for the past couple of years. Looking forward to next year, we don't know. I think the honest answer is we don't know exactly how big it would be. We're optimistic that it should be bigger than it is this year, but we're unsure of the magnitude of that. And let me tell you the why. So there are 3 factors in terms of how big the mobile TAM is really going to be. One is the complexity of the part. And with N2 and with new packaging technologies like WMCM, we expect that the test intensity per part is going to be higher, like double digits kind of higher. The next factor is like yield. For new technologies, sometimes yield is lower. We do not count on that because there's been sort of a pattern of execution at very high yields for these kinds of products. So we are not expecting that to be a particular tailwind. The one that's really the most important factor right now is in unit volume that if there is a significant upward inflection in handset sales, people are refreshing phones because new phones are doing something interesting, then that not only drives the whole mobile processor space, but it also drives RF and PMIC and everything else. So I think the big X factor for us is whether we see an inflection in unit sales in 2026. If we do, it could be a strong year. If we don't, it would probably be just a modest improvement from where it is.

It's Sanjay. NAND is currently very low, particularly from a percentage perspective. I believe this is closely linked to growth in the mobile industry. If we observe that growth, then NAND will gain traction. However, at this moment, it is at a notably low level. On the other hand, we are seeing DRAM strengthen, especially within the HBM segment.

In the quarter, our business was comprised of 75% DRAM and 25% flash. If we compare this to our competitors, their shipments were even more heavily weighted towards DRAM. Looking ahead to 2026, there are a few developments expected in flash. We anticipate a protocol shift in the mobile market, which will likely lead to increased tester capacity purchases to accommodate these new standards. Additionally, there are indications of a rising demand for SSD capacity, particularly for AI data centers. Although we haven't yet seen this demand reflected in forecasts, we are hopeful that the market will show stronger performance in 2026 compared to 2025.

Yes. NAND is currently at a very low level, particularly in terms of percentage. I believe its growth will closely relate to advancements in the mobile industry. If we observe that growth, we can expect an increase. However, at this moment, it is at a notably low level. On the other hand, we see that DRAM is gaining strength, particularly in the HBM sector.

I was wondering if you could maybe kind of return to your expectations for mobile SoC heading into next year, realizing that Q2 and Q3 are seasonally stronger quarters. Do you have any sense about what you might expect sort of directionally in terms of improvement next year? And maybe just remind us of the relative sort of either test time or content increase you expect moving to the N2 generation?

Jim, so mobile SoC has been at a pretty low level for the past couple of years. Looking forward to next year, we don't know. I think the honest answer is we don't know exactly how big it would be. We're optimistic that it should be bigger than it is this year, but we're unsure of the magnitude of that. And let me tell you the why. So there are 3 factors in terms of how big the mobile TAM is really going to be. One is the complexity of the part. And with N2 and with new packaging technologies like WMCM, we expect that the test intensity per part is going to be higher, like double digits kind of higher. The next factor is like yield. For new technologies, sometimes yield is lower. We do not count on that because there's been sort of a pattern of execution at very high yields for these kinds of products. So we are not expecting that to be a particular tailwind. The one that's really the most important factor right now is in unit volume that if there is a significant upward inflection in handset sales, people are refreshing phones because new phones are doing something interesting, then that not only drives the whole mobile processor space, but it also drives RF and PMIC and everything else. So I think the big X factor for us is whether we see an inflection in unit sales in 2026. If we do, it could be a strong year. If we don't, it would probably be just a modest improvement from where it is.

NAND is currently at a very low level from a percentage standpoint. This is closely linked to growth in the mobile industry. If we observe that growth, we can expect an increase in NAND demand. At this moment, it is at a low point. On the other hand, we are seeing DRAM strengthen, particularly in the HBM segment.

In the quarter, our business was composed of 75% DRAM and 25% flash. Our competitors are even more heavily weighted towards their DRAM shipments. Looking ahead to 2026, there are a couple of developments expected in the flash market. One is a likely protocol shift in the mobile market, which will drive the purchase of additional tester capacity to support these new standards. The second factor is the potential increase in SSD capacity needed for AI data centers. Currently, there are indications in the end market suggesting a rising demand for SSDs. Although we haven't yet seen this reflected in increased forecasts, we remain optimistic that the market will be stronger in 2026 compared to 2025.

I guess, first, I had a clarification. You talked about strength in AI in Q4 coming from networking and hyperscalers and HBM. I'm assuming that you have not won any business on stand-alone GPUs yet, and that is not included in any of the guidance statements.

Yes, that's correct. Look, we're making good progress, but we have not included that in our guide, and there wasn't revenue for that in Q3. Thank you, operator. I'd like to offer a quick final thought. I mentioned in closing the July call that AI was having a profound and positive impact on Teradyne's business. I'm encouraged by how quickly we're seeing returns on our investments to pivot to AI. AI is the dominant driver of our business for the foreseeable future and will continue to align ourselves to the outsized opportunities that it offers. We've made great strides so far in 2025 and while our progress is not expected to be entirely linear, we're more excited than ever about our prospects for continued profitable growth in the years ahead. Thanks for joining us today, and I look forward to updating you on our progress in January. Thank you.

This concludes today's Teradyne third quarter 2025 earnings call and webcast. You may disconnect your line at this time. Have a wonderful day.