Ladies and gentlemen, good morning, and welcome to the Teradyne Fourth Quarter and Full Year 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, Vice President 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, Michelle Turner. Following our opening remarks, we'll provide details of our performance for the fourth quarter and full year of 2025, our outlook for the first quarter of 2026 and our new target earnings model. The press release containing our fourth quarter results was issued last evening. We are providing slides as well as a copy of this earnings script on the Teradyne investor website that may be helpful in following the discussion. 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. 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, where available on the Investor page of our website. Looking ahead between now and our next earnings call, Teradyne expects to participate in technology or industrial-focused investor conferences hosted by Citi, Susquehanna, Morgan Stanley, and Cantor. Our quiet period will begin at the close of business on March 13, 2026. Following Greg and Michelle's comments this morning, we'll open up the call for questions. This call is scheduled for 1 hour. Greg?

Thanks, Amy, and thank you all for joining us today. I will begin with a summary of our fourth quarter and full year 2025 results, along with some insights regarding our initial outlook for 2026 and our new target earnings model. Teradyne experienced a robust fourth quarter, achieving 41% sequential revenue growth and over 100% non-GAAP earnings growth. Both revenue and EPS exceeded our high guidance as the trends we mentioned earlier persisted through the year-end. Our Semiconductor Test, Product Test, and Robotics sectors all showed double-digit sequential growth. A notable trend was the rise in AI-driven revenue during the second half of 2025, particularly in compute and memory, while the rapid expansion of cloud and edge AI also increased demand for power management, SLT, HDD, ICT, and optical test. This aligns with the AI, verticalization, and electrification themes we've highlighted in previous calls. In Q3, AI demand accounted for 40% to 50% of our revenue, and in Q4, it rose to over 60%. Looking ahead to Q1 of 2026, we anticipate that AI applications will drive upwards of 70% of our revenue. Now, Michelle will provide more detailed information about the quarterly results and trends. I would like to give you some insights into Teradyne's businesses for the full year. Starting with the Product Test group, we achieved an overall revenue growth of 8% in 2025, thanks to strong performance in defense and aerospace. We successfully integrated Quantifi Photonics into this segment, including training the sales team for LitePoint and Production Board Test regarding the Quantifi product line. We expect all our business lines in this group to grow in 2026. In Robotics, we enjoyed three consecutive quarters of growth beginning in Q2 of 2025. As previously discussed, we are optimistic about the potential for creating value in physical AI and advanced robotics, and our strategy has focused on segments, customers, and technologies with the highest growth potential. For all of 2025, the Semiconductor Test Group achieved a 19% year-over-year growth. SoC test revenue grew 23% year-over-year, largely driven by networking and VIP compute, while memory test revenue saw slight increases in a mostly flat memory test market, benefiting from continued market share gains in HBM and DRAM final tests. We believe we maintained around 50% market share in the VIP compute market in 2025. This segment remains highly concentrated, leading to revenue variability in 2025 and complicating future forecasts for VIP share. Our full-year financial results indicate a successful shift toward AI-driven demand in high-performance computing. In 2020 and 2021, our revenue heavily relied on mobile, particularly in SoC, memory, and wireless testing. However, by 2025, compute became the largest portion of our revenue, experiencing a 90% year-over-year growth. This increase is largely due to our strategic decisions and investments made in prior years. Our traditionally strong networking business has been expanding due to the increased density of network connections in AI data centers and the growing complexity of networking components. Our alignment of product roadmaps and customer-facing teams to VIP and merchant computing customers has enabled us to secure valuable new design wins. Despite gaining in compute and memory, we believe that a diverse revenue mix is Teradyne's long-term advantage. In 2023, roughly 10% of our SoC product revenue was from compute, with 50% from auto/industrial, and 40% from mobile. By 2025, nearly 50% came from compute, with auto/industrial and mobile each making up about a quarter. This balance helps mitigate risks in our target earnings model. The SoC total addressable market reached historic highs in 2025, nearly 60% larger than in 2024. Looking ahead, we expect this market to grow significantly in the midterm, driven by sustained data center expansion and the rise of Edge AI. Forecasting growth rates will be challenging due to high concentration and unpredictable product ramp-ups, as a large socket migration across year boundaries could greatly impact year-over-year growth. While this uncertainty complicates predicting the 2026 SoC total addressable market, we are forecasting strong year-over-year TAM growth. At the segment level, we anticipate significant growth in compute due to AI, moderate recovery in auto/industrial, and uncertainty in the mobile market. Although we expect device complexity to increase, there are concerns about volume, product mix, and capital efficiency. Overall, we believe we can gain market share in SoC testing within a much larger market. Moving on to memory, the overall memory total addressable market declined about 4% from 2024, but we managed to gain some market share. A positive aspect of the memory test market was the demand from AI compute for both HBM and DRAM. Historically, the memory test market was evenly split between FLASH and DRAM, but by 2025, DRAM and HBM accounted for nearly 90% of the memory TAM, and we expect this trend to continue into 2026. We anticipate a strong resurgence in the memory market in 2026, with low double-digit TAM growth compared to 2025, driven by continued strength in HBM and DRAM, and we expect to sustain incremental share gains. Our IST business experienced over 50% growth from 2024 to 2025. Historically, this segment has shown high customer concentration, primarily serving the HDD and mobile SLT markets. However, this began changing in 2025, as we secured a new customer in mobile SLT in 2024, which ramped up strongly in 2025. In addition, we entered the compute SLT market and secured business with two customers in that segment. Late in 2025, we also received orders from a new customer in HDD, which is set to ramp in 2026. All of this positions us for continued strong revenue growth from IST in 2026 and beyond. Michelle will delve into our target earnings model in greater detail. I want to highlight the fundamental drivers of that model. As we look to the future, we had to address two critical questions. The first is whether the markets we participate in are positioned for growth. We firmly believe the answer is yes, particularly with AI data centers as the primary market driver. Our product lines cater to this market comprehensively, from testing compute devices to assembling server trays, to automating operations in AI data centers. Beyond AI data centers, segments where Teradyne has a strong presence are set for recovery. Auto/industrial market growth will be long-term, linked to trends like Edge AI, EVs, and advanced data center power management. The mobile sector is expected to see substantial increases in complexity as demand for improved compute capabilities for running inference on large language models rises. Additionally, physical AI continues to expand the applications of advanced robotics, a trend we believe will gain momentum. The second question is whether Teradyne is well-positioned to increase market share in our sectors. The evidence from 2025 suggests we are indeed positioned well. We have gained share in HBM and DRAM, maintained strong positions in networking, expanded notable new VIP sockets, and achieved leadership in silicon photonics device testing while competing for a share of the merchant GPU market. We gained new segments and customers in our IST group across both storage test and system-level testing of compute devices. Furthermore, Teradyne's involvement in the growing AI data center market extends beyond device testing. Our Production Board Test division handles testing for server trays housing these devices, and our Quantifi Photonics instruments evaluate silicon photonics from device to rack. In keeping with our strategy to cover the entire process from wafer to data center, we recently announced a joint venture with MultiLane, a global leader in high-speed I/O and data center interconnect test solutions. This venture, named MultiLane Test Products, is being created to meet the growing demand in AI data centers. Following the closure of this transaction, expected in the first half of this year, we will become the majority owner of the JV while MultiLane retains a minority stake. In Robotics, we have established a top-tier platform for physical AI applications applicable across various industry verticals, and we have incorporated AI capabilities into our AMR products. Notably, we have begun to scale a significant AI-driven application in e-commerce on a global scale. To sum up, Teradyne is well-positioned to achieve growth that outpaces the market in sectors anticipated to expand significantly over the next few years. We foresee the ATE total addressable market reaching between $12 billion and $14 billion, up from approximately $9 billion in 2025. Based on our long-term model, we expect Teradyne to attain nearly double the revenue of 2025 and 2.5 times the earnings per share. With that, I will hand the call over to Michelle Turner, our Chief Financial Officer, and welcome her to her first Teradyne earnings call. Michelle, it's your turn.

Thank you, Greg, and good morning, everyone. I'm thrilled to have joined the Teradyne team and look forward to the value-creating opportunities ahead. Today, I will cover our fourth quarter and full year 2025 financial results, then I will share our Q1 2026 outlook. And then finally, I will discuss our new target earnings model. Now on to Q4. Fourth quarter sales were $1.083 billion with non-GAAP EPS of $1.80, both above the high end of our guidance range. Fourth quarter sales were the highest revenue quarter of 2025 and our second highest quarter in history, only $3 million below our record during the mobile boom of 2021. Semi Test revenue was $883 million, fueled by AI compute and memory demand. Within Semi Test, SoC revenue was $647 million, up 47% quarter-on-quarter. And memory revenue was $206 million, up 61% quarter-on-quarter, marking a record sales quarter for our memory business. The Product Test Group at $110 million grew double digits sequentially and year-on-year, driven by strong defense and aerospace demand. Robotics revenue of $89 million grew for the third consecutive quarter and was up 19% from Q3. In Q4, greater than 5% of our Robotics revenue was driven by a large e-commerce customer. Moving on to bottom line. Non-GAAP gross margins were 57.2%, aligned with our guidance range, driven by Semi Test AI demand strength, offset primarily by lower product test group margins and robotics mix and an inventory write-down on legacy products. Non-GAAP operating expenses were $306 million, and the non-GAAP operating profit rate was 29% in the quarter. Non-GAAP operating profit dollars in the quarter roughly doubled to $314 million in comparison to both prior quarter and prior year. We generated $219 million in free cash flow and returned $204 million to our shareholders through share repurchases and dividends. Our tax rate for the quarter, excluding discrete items, was 10.6%, and 10.3% on a non-GAAP and GAAP basis, respectively. Overall, fourth quarter results were strong across the portfolio. Now turning to full year results. Our revenue was $3.2 billion, up 13% from prior year. At the beginning of the year, our SoC revenue was equally divided across our major end markets of compute, mobility, and auto and industrial. Exiting the year, fueled by strong AI-driven demand, compute is now the largest part of our SoC portfolio, eclipsing our historical stronghold of mobile. From an overall portfolio perspective, Semi Test now represents close to 80% of our enterprise sales, an increase from the low 70s over the last few years. From a customer perspective, I'd like to remind you about a characteristic of our business model. We typically have a specifying customer who chooses platforms and drives demand and a purchasing customer who actually places the order and receives the equipment. In different cases, the specifying and purchasing customers have more influence in the purchase decision. In 2025, we had two greater than 10% specifying customers and one greater than 10% purchasing customer. Gross margin for the year was 58.3%, OpEx was $1.2 billion and operating profit was 22%. Non-GAAP EPS was $3.96. We generated $450 million in free cash flow and returned $785 million or 174% of free cash flow to our shareholders through share repurchases and dividends. We ended 2025 with $448 million of cash and marketable securities. Our tax rate for the full year, excluding discrete items, was 12.8% and 12.6% on a non-GAAP and GAAP basis, respectively. Now to our outlook for Q1. Since our October call, we've continued to see demand across our group strengthen. Q1 sales are expected to be between $1.15 billion and $1.25 billion, which would be a new quarterly record, driven by all things AI. The midpoint of this revenue range is 11% growth from an already strong Q4 and 75% growth from the same period in 2025. Non-GAAP EPS is in the range of $1.89 to $2.25 on 158 million diluted shares. From a margin perspective, we expect first quarter gross margins to be in the range of 58.5% to 59.5%, up 180 basis points at the midpoint of the guidance quarter-over-quarter. OpEx is expected to increase 6% from Q4 and run at approximately 26% to 28% of first quarter sales. The non-GAAP operating profit rate at the midpoint of our first quarter guidance is 32%. With the strong start to the year, I want to take a minute to talk about our historical sales patterns and how this is a classic example of history not necessarily indicative of the future. Many of you who have been following us for a while know historically, we've experienced what we call lumpy Q2 or Q3 revenue trends tied to mobile demand and product life cycles. From 2020 to 2024, we consistently delivered the majority of our sales in second and third quarter. 2025 broke this pattern. Q4 represented our largest quarter of the year. As our compute and memory portfolios continue to grow, our revenue will continue to be lumpy yet follow a less predictable pattern. While 2025 sales were 40% in the first half and 60% in the second half, based on what we know today, we expect 2026 sales to be in the inverse. Before I walk through our new target earnings model, a few comments on our recently announced MultiLane joint venture. As Greg mentioned, we expect to close the joint venture in Q2 '26. For your modeling purposes, the results of this business will be consolidated into the results of our Product Test Group, and our EPS will reflect our share of the results of this business. We will disclose the net income attributable to the noncontrolling interest as a new line item on our income statement. We expect this deal to be accretive in 2026 with a de minimis impact to EPS. Now moving on to our new target earnings model. Rather than anchoring our earnings model to a specific future year, as we've done historically, this year, we are framing it around what our P&L looks like at an ATE TAM of $12 billion to $14 billion, which we believe is achievable within this midterm. This approach better reflects the inherent lumpiness in both compute and memory demand where program timing and customer buying patterns can shift revenue across the quarter and year boundaries. So at an ATE TAM of $12 billion to $14 billion, our target model assumes roughly $6 billion of revenue. At this scale, we expect gross margins between 59% and 61%, a point higher at the high end versus our prior model. We anticipate OpEx of 27% to 29% of revenue, reflecting operating leverage and the benefits of scale. This results in an operating profit of 30% to 34% and non-GAAP EPS of $9.50 to $11. We expect this growth over the midterm to be proportional across each of our groups. From a Semi Test Group perspective, we expect to grow our revenue greater than the overall ATE market growth rate, reflecting our expectations of share gains. This growth is driven by continued strength in AI compute and memory as well as anticipated recovery in auto/industrial and mobile. Our mobile assumptions reflect recovery but not a return to the 2021 peak. We also expect growth in IST tied to wins in SLT for compute as well as HDD. From a Product Test Group perspective, we expect growth across the portfolio tied to compute, Defense, Photonics, high-speed Internet data and data centers. From a Robotics Group perspective, we expect growth tied to physical AI, expanding SAM, reducing implementation complexity and continued persistent labor shortages. Our strategic pivot towards large accounts, along with a sharper focus on e-commerce, logistics, semiconductor and electronics verticals is expected to further support growth. This new target earnings model is reflective of our conviction in the growth potential of the ATE TAM driven by all things AI even at today's unprecedented levels. Moving from a date-driven earnings model to an evergreen one reflects this conviction while also recognizing a lack of precision in terms of which year this comes to fruition. Now turning to capital allocation. Our strategy remains consistent to maintain cash reserves that enable us to run the business and have dry powder for M&A. For reference, from 2015 to 2025, we returned over $5.4 billion to shareholders through share repurchases and dividends, which is roughly 100% of free cash flow. We will remain opportunistic around value-creating inorganic opportunities as well as share buybacks. So summing up, exiting 2025, we are encouraged by the strength of the business. Our overall company revenues grew 13% year-on-year, and our SoC and memory contributed 17% year-over-year, helping to achieve a 23% increase in our EPS to $3.96. We are making strategic investments to drive competitive advantages and gain market share in the Semi Test and Product Test Groups. We remain focused on large accounts and attractive verticals to drive sustainable growth in Robotics. We entered 2026 feeling good about the year ahead. With that, I'll turn the call back to the operator for questions.

We will take our first question from C.J. Muse with Cantor Fitzgerald.

I guess wanted to focus near term and then a longer-term question. On the near term, can you kind of help us understand how to better think about calendar '26? I heard you talk about kind of the inverse of that 58%, 42% we saw in calendar '25. But curious how to think about perhaps the overall revenue growth rate or thinking about June so we can size it. Will you grow above the high end of kind of the revenue target range of 25%? Or any help would be great.

Thanks for the question. This is Michelle. So I'll give some color commentary. I know this is going to be of interest to everyone who's listening in. So a couple of things I would reference in terms of this year versus past year. One, we are entering the year with a healthy backlog. And so we're excited by that. That's a positive when you think about our positioning for 2026. So we have better fidelity than we did, say, the same period last year. And then the other thing I would highlight is we typically, for those that follow the Teradyne story, we talk about having like 13 weeks of demand kind of insights from a forecast perspective. I would say we have better insights this year to first half. And so that's a positive from an overall 2026 perspective. I do want to balance this, however, with kind of what I talked about in my opening remarks and really emphasize the lumpiness of this new sales pattern. So I want to caution us against kind of a linearity trend assumptions with the recognition that we could see things move between quarters and between years as we recognize some of these ordering patterns in this kind of new AI infrastructure build-out environment.

Yes. C.J., I'll add one thought here. This is Greg. The run rate that we have in Q1 is like we have a fair amount of strength in Q1. We don't have great visibility into the second half. So we're a little bit cautious that we don't want people to sort of take that and run with it for the full year. We expect that we're in kind of a 2-, 3-quarter surge that may lead to a shorter period of digestion afterward.

Great. Very helpful. And then, Greg, longer-term question, implicit in your new target model is a vision for your share of the ATE to grow from about 25% to 46%. So would love to hear kind of your high-level thoughts on what the key drivers are behind that.

So right now, in our model, our sort of $12 billion to $14 billion TAM model with us at $6 billion, that actually is moderated from that 46% level just a little bit. And that reflects – in that model, we expect that the compute TAM is going to continue to grow. We're going to be gaining share in the compute space, but we're coming from a much lower share position. So I think we are – like thinking about it from a long-term model perspective, we expect to gain share in compute. We expect the mobile market to probably get to maybe 1.5 times the size that it is now, and we maintain the share that we have. Auto and industrial, probably the same kind of proportional gain in terms of the TAM size, and we'd maintain and then in memory, it's going to have incremental growth through this midterm. And right now, we feel like – if you look back a few years, there were multiple parts of the memory market where we were not even present. Now we feel like we are in most of the segments for most of the customers. And so we are in a position to sort of split the share and ride the trends in the markets. Does that help?

Our next question comes from Timothy Arcuri with UBS.

Greg, I want to approach the last question from a different perspective. If I consider your new model and what you've indicated about the growth in Robotics, along with the growth in systems test and product test, it appears that the Semi Test share would return to the high 30s, which is similar to where it was from 2022 to 2025. This doesn't suggest a significant share gain. While it has improved from the sub-30% level in 2025, it doesn't indicate much change in share from 2022 to 2024. Could you provide more clarification? Is my calculation incorrect? Is the Semi Test number assumed to have a share higher than that? It seems that it is not much higher than it has been in the past few years.

I think the – in order to get to the numbers that you have that you probably have slightly more aggressive growth expectations for the Robotics and the Product Test Group. So we're kind of thinking across this midterm that the proportion, sort of the 80-10-10 proportions are going to be roughly the same. And so – and by my math, we are in the low 40s per share in ATE. And remember that like the IST stuff is in our revenue, but it's not in the ATE TAM. That's in a separate segment.

Can you break down the total addressable market for SoC in 2025, which is $7.2 billion, into categories such as compute, mobile, and automotive? Additionally, you've mentioned the size of the VIP total addressable market within compute before. Could you provide an estimate of how substantial that will be in 2025?

So in 2025, the TAM broke down roughly – we think it's – and this is subject to us sort of totaling up the final numbers, which will come in over the next couple of months from third-party sources. But our expectation was that compute was in the neighborhood of $5 billion for the year. Mobility in about $1 billion; auto industrial just under $1 billion and service was in the $700 million range. For memory, overall, we think that the TAM was just under $1.4 billion and $1.2 billion of that was DRAM. The rest was FLASH.

And Greg, of the compute portion, how much is VIP, sorry?

I think it's just over $600.

We will move next with Mehdi Hosseini with SIG.

Just one additional follow-up on the SoC TAM. Greg, you highlighted market share of around 50% for custom ASICs back in 2025. How do you see that evolving, especially given the increased new products coming out? It is my expectation that the concentration is actually going to get broaden out and more custom ASIC coming out? And would that enable you to increase market share about 50%? And I have a follow-up.

In 2025, we anticipate that our market share will be approximately 50% of VIP compute. Looking ahead, we believe this share may fluctuate. The nature of this market is such that no share position is secure. We are competing for sockets that we do not currently occupy and are also facing competition for those we do hold. This applies to both high-volume products and those still in development. I am somewhat cautious about estimating the total addressable market for ASIC programs that have not yet reached volume, as hyperscalers typically compare their own ASIC performance against commercially available options. They only commit to full-scale production of their ASICs if they observe a significant advantage in metrics such as tokens per watt. Therefore, while I believe we can maintain a 50% share in the long term, I expect considerable variability in this number from quarter to quarter and even year to year, depending on the timing of different product ramps, which will likely cause fluctuations in our market share.

That's fair. And then for the entire team, as we look at your $6 billion near-term revenue target, given your revised ATE market, it was only 6, 9 months ago that we were contemplating if your revenues would increase above a couple of billion. And now there's a new target. And what I wanted to figure out what the question is, what is the sensitivity to that ATE and the $6 billion revenue target? Is that a baseline assumption? Is that a kind of average of awards than a best-case scenario? And any thoughts around how you came up with the ATE and $6 billion revenue target will be very helpful.

I believe we have a well-rounded estimate of around $6 billion, but there are both risks and opportunities surrounding this figure. The primary uncertainty is the rate of market growth and how long it will take to reach this total addressable market size. From my experience, I’ve observed situations where initial optimistic forecasts are disrupted by external factors. That’s why we’re considering a flexible approach, as these external conditions influencing the market are unpredictable. Another key factor is our position in the automated test equipment market, which is closely linked to the computing sector. We feel confident about our potential to gain market share in this area, though it will take time. We have strong products and relationships with customers that should aid in increasing our share from our current standing. Additionally, I have confidence in our $6 billion forecast due to our activities beyond core automated test equipment and computing. We anticipate growth in the mobile sector alongside market recovery driven by increased complexity. Our acquisition of the power group from Infineon positions us well in the industrial and automotive markets, targeting the wide bandgap power segment. Our IST business has a diverse customer base that can support sustainable revenue growth in the near term. We also have a significant customer in the robotics field that could further drive growth. Overall, I believe we have a solid plan moving forward, which helps mitigate risks associated with our revenue expectations.

Our next question comes from Krish Sankar with TD Cowen.

Congrats on the great results and guidance. I know you can't get into specifics. I'm just kind of curious on the GPU test side, which is a growth opportunity for you. What is the realistic market share expectation for this year? And how high can that go over the next 3 years or so? And can that parlay into ASIC market share, too? And then I had a quick follow-up.

Okay. Let me provide a quick update on the project. We're making significant progress and anticipate achieving production qualification. The qualification process is quite complex and costly, making it difficult to specify an exact release date, but we are very confident about our prospects. Once qualification is obtained, I believe we will gradually increase our market share for these devices over the next few years. I want to clarify that our guidance for the first quarter does not include any revenue from merchant GPUs, which we expect will have an impact more in the second half of 2026. We anticipate this will contribute a considerable amount of revenue, but the initial market share in the accounts we secured will be modest, in single digits. Over time, based on our experience in similar competitive situations, we've usually seen vendors settle into a balanced share between 30% and 70%. This is not to suggest our maximum share is capped at 30%, as it will take time to reach that level, and we will be competing directly on who secures what share.

Got it. Very helpful. And then just a quick follow-up. I understand you don't want to give a full year outlook and first half weighted for this year. Is it because of conservatism? I'm just curious because given that mobile is less, I would expect no seasonality anymore. So I'm just curious why do you think it's still first half weighted besides visibility and conservatism?

So I'll give Michelle a chance to comment. I would say that part of it is because major programs that we're a part of are first half loaded. And so the demand that we can map for the full year is definitely more concentrated in the first half than the second half. But there's also an element of we don't know about the second half that there are a lot of irons in the fire that could result in second half growth, but we can't pin that down enough to sort of give a confident forecast for where the full year will be. I don't know, Michelle, do you want to add anything on there?

No, I think you summed it up well, Greg. I think the only other thing I would add is in comparison to previous years, coming into '26, we have really strong backlog, which is giving us better fidelity and insights into the first half.

Our next question comes from Jim Schneider with Goldman Sachs.

Could you clarify something for me? I might have missed it, so I apologize. As we look ahead to 2026, could you provide some insight based on what you've said about visibility in the first half and the uncertainties in the second half? Specifically, how should we think about Q2 in relation to Q1? Should we expect a flat trajectory as a reasonable starting point on a sequential basis? Additionally, can you give us a rough estimate, even if it's a broad range, of where you see the ATE total addressable market landing in 2026?

From a Q2 perspective, we're not providing a second-quarter guidance. I want to emphasize that we have better visibility for the first half, and I anticipate that 2026 will be the reverse of 2025, with about 60% of our sales occurring in the first half. We will provide an update as we approach Q2. Thank you.

So on the ATE TAM for 2026, what we talked about in our prepared remarks was robust growth from 2025. And the reason that we're using adjectives versus numbers is that it comes down to a really wide range essentially based on the uncertainty in the second half. So like if you wanted to put a big wide range around it, it would be like 20% to 40% growth for the year, but we don't know where in that range it would land.

Understood. That is helpful. And then maybe just as a follow-up, it was referred to before, and I think you've talked about, I think, to paraphrase, many ways to get to the target model, assuming that not everything happens perfectly, even if the endpoint is uncertain. But as you think about that model, is that what you think could be a mid-cycle model in a couple of three years' time, whereas that would kind of incorporate a lot of cyclical ups and downs once we get past this kind of period of very explosive growth?

Yes. When we were creating a model fixed to a specific year, we had several caveats about averaging out the cycle and considering long-term growth trends, which ultimately didn’t prove very helpful. So, we decided to illustrate what Teradyne might look like at $6 billion. To reach that revenue level, we believe we need an ATE total addressable market of between $12 billion and $14 billion. From there, our business model expectations—including necessary investments and anticipated margins—are structured. I think this model is attainable in the coming years, but whether 'a few years' means a short or longer time frame will depend on how quickly the ATE total addressable market grows, which is influenced by the ongoing pace of data center expansions. The projections for silicon in data centers are astonishing, with estimates showing around 60% more silicon revenue from 2024 to 2025, and over 100% year-on-year growth looking towards 2026. Whether that growth can continue from 2026 to 2027 or if it will slow down is crucial in determining how quickly we can reach that $6 billion target.

We will move next with Brian Chin with Stifel.

Maybe to start with, Greg, I was wondering if you could outline maybe a few catalysts for GPU share gain over the next few years in terms of Teradyne's platform differentiation, higher device power and complexity and maybe the addition of new test insertions.

Yes. So the addition of new test insertions, I think, is a catalyst for TAM growth more than a catalyst for share growth. So as these new insertions come in, we will have an opportunity to compete for them. And the same thing is as the merchant GPU market has more specialized chiplets per device, I think there's more shots on goal, more higher quality requirements for the test at the chiplet level. So there's a bunch of things that I think are accelerating the compute TAM. Now in terms of compute share, there are a number of things that I think our customers like about our product. The first and most obvious is that they believe that we have a more resilient supply chain that we're able to respond to demand with generally shorter lead times. And that's an important thing when their demands are somewhat unpredictable. The second is that it's actually a better tester. We have very good reliability in production circumstances. We have good uptime. The OSATs like it a lot. So they are helping to advocate for that as a choice. And we also have a next generation of instruments that is in beta test now, which will significantly increase the amount of power available to the devices and very importantly, the amount of memory for the test programs and the test patterns that these devices are going to need. The last is that I think our tester has better capabilities to allow these devices to be tested in the same way that they're used in the server in a mission mode. And that requires a pretty sophisticated, almost like building a server into the tester itself. So I think we have some advantages that allow us to achieve higher coverage, essentially moving defect detection as far to the left as possible.

Great. That's really helpful. And then I think in the prepared remarks, you mentioned a new HDD customer. Is that an example of your test platform outperforming their internal tester? I guess, how much growth do you expect from HDD test in '26 and off of what revenue base in '25? And then kind of the last part of that, more broadly, are there other historical instances of semiconductor logic and DRAM IDMs using captive test platforms? And are we at the point there where complexity in semi test really compels those companies also to use external platforms?

Yes. In HDD, this situation involves commercial testing complementing in-house testing rather than completely replacing it. It provides customers with an effective way to build capacity. We are excited about this change, as we have been working towards it for several years. From a revenue standpoint, we do not separate HDD revenue from other revenue within the IST Group, but I can share that our HDD revenue is expected to double between 2025 and 2026. Regarding your second question about other captive strategies in the semiconductor ATE space, currently there is one major player in SoC and one in memory that utilize captive ATE strategies. Long-term, the memory approach seems more stable, while the SoC strategy is likely to evolve in the coming years due to an increasing number of customers in foundry that desire commercial platforms.

We will move next with Samik Chatterjee with JPMorgan.

Greg, maybe if I can just change gears here and ask you about the mobile SoC TAM. And in your prepared remarks, I think you did say you're expecting it to be about 1.5x the current TAM in your target model. I mean is that sort of all driven by the complexity? Or are you thinking about some sort of volume tailwinds as well? And then you did mention near term, there being sort of a capital efficiency of customers that may be making you a bit more cautious. If you can explain that like what you're seeing on that front, that will be helpful. I have a quick follow-up.

Sure. We want to emphasize that in a $12 billion to $14 billion TAM model, we do not expect the mobile TAM to return to its previous peak. A reasonable estimate would be around halfway between its current level and the former peak. In terms of what could drive that, it's primarily about complexity, as smartphone unit sales have been stable within a narrow range. There is a possibility that a new compelling form factor or highly appealing AI features could lead to increased refresh rates, but this has not occurred in the last four to five years. We are projecting relatively steady unit volumes alongside greater complexity across our product line. Our caution stems from the certainty of complexity growth, as more complexity will necessitate more testers. However, there is a sizable fleet of testers already in place for mobile, and many components from various vendors can utilize similar tester configurations. By strategically managing the use of this fleet, they can optimize year-round utilization, which may help limit the need for additional capacity. In contrast, back in 2020 and 2021, there was a smaller installed base with fewer SKUs being tested, and many were rapidly introduced, which drove significantly higher TAMs.

Okay. And maybe just for my follow-up, going back to the AI compute side. I mean you did mention that the VIP ASICs sort of was not launched already in production as the volumes are a bit tough to quantify at this point. But in terms of broadening of the customer base, given it's a very concentrated sort of purchasing from a few customers right now, as you look out to the medium term, particularly in terms of your target earnings model, do you see a broadening out of the customer base? Does that sort of reduce when you get to that target model, does that reduce the lumpiness in that kind of business just given higher visibility from a broader set of customers?

Yes. So in a $12 billion to $14 billion TAM, our expectation is that we would add additional logos in terms of VIP compute wins. But it's not like it's going to go from a very small number to dozens. It's more like four or five different programs. And what I expect to see the steady state in this market is that Teradyne and Advantest are going to be competing on a generational basis for new design wins. And those decisions are going to be made on the basis of the features of the tester, the reliability of the tester more than sort of incumbency as the thing that drives the selection.

Our next question comes from David Duley with Steelhead.

I guess the first one is, I think you mentioned three 10% customers. Could you talk about which segments they might be in or how large they might be? I know you probably don't want to give us the names, but if you could give us the names, that would be great as well.

So in the three 10% customers, as Michelle said, two of them were specifiers, one was a purchasing customer. The specifying customers, one was in the mobile space, one was in the compute space. And the purchasing customer does it all.

Okay. And relative size of how much above 10%? I guess I'm just trying to figure out customer concentration.

Roughly 10%. It's not substantially higher than that.

So each one around 10%, is that what you just said, I'm sorry?

Yes. Yes.

Okay. All right. Final question, I guess, is, Greg, I think you kind of mentioned when you look at all the pieces for 2026, the overall TAM growth, I guess, is going to be around 30%. I'm guessing that the SoC TAM grows faster than that and the memory TAM grows slower than that in 2026. If you could just comment on roughly the growth in each piece. And then if you said you're going to gain share in 2026, and that means, obviously, you're going to grow faster than 30%. Is that a fair assumption?

So no. The – yes. The – like in a range between 20% and 40%, you may arithmetically put that at the mean of 30%. We are not trying to communicate that at all. We are trying to communicate that we have – we don't have sufficient visibility into the second half to give a good TAM estimate for 2026. Your assumption around SoC growing faster and memory going slower, I think, is fair. I think that we are expecting that kind of a market where the compute TAM is already big, and it's going to grow a lot. The memory TAM is going to grow more incrementally. The – we believe that we are positioned for share gain, and that really depends to a certain extent around whether – like which segments of the TAM grow the most. So even if we gain share in compute, since our share position in compute is relatively lower, if the compute TAM grows a ton, then that could be dilutive to our overall share position, even though we're getting better in every segment that we serve. So that's the reason that I want to be cautious about that.

And we have time for one more question. We will move next with Vedvati Shrotre with Evercore.

I have a clarification regarding the GPU win. Does the GPU merchant win influence your performance in the second half compared to the first half? Additionally, in the new target model, are you factoring in contributions from the GPU wins?

So yes, a significant ramp associated with merchant GPU would have an impact in the second half. I'm not sure I caught the second part of your question.

Is that a part of your new target model as well?

Yes, I want to emphasize that the share in merchant GPU will gradually increase over the years. While it is included in the $6 billion model, we do not expect to achieve a dramatically high share in the merchant GPU market.

Understood. My second question is about Robotics. With the large e-commerce program starting to ramp up, does that mean there is a possibility that your revenues could grow in alignment with the robotics segment, exceeding the breakeven revenues for that business?

Yes, we are aiming for breakeven for Robotics this year. We believe that revenue from the large e-commerce customer is likely to triple between 2025 and 2026, and continue to grow significantly after 2026 as deployments expand to more facilities. This presents a strong opportunity. We expect to reach breakeven for that business in 2026, after which it should contribute positively.

And this concludes our Q&A session as well as the Teradyne Fourth Quarter and Full Year 2025 Earnings Call and Webcast. You may disconnect your line at this time. Have a wonderful day.