Semiconductor testing company Teradyne (TER.US) reported fiscal 2025 fourth-quarter results that surpassed expectations. Q4 revenue increased by 43.9% year-over-year to $1.08 billion, exceeding analyst estimates of $975.6 million (a beat of 11%). Its non-GAAP earnings per share were $1.80, higher than the consensus estimate of $1.38. Semiconductor Test was the company's largest business segment, generating revenue of $883 million this quarter, while Production Test and Robotics contributed $110 million and $89 million, respectively. Adjusted operating profit was $314 million, surpassing the analyst forecast of $249.8 million (resulting in an adjusted margin of 29%). The operating profit margin was 27.1%, up from 20.4% in the same period last year. The free cash flow margin was 20.2%, lower than the 29.9% recorded a year earlier. For the full fiscal year 2025, Teradyne's revenue was $3.19 billion, a 13% increase from 2024, with adjusted EPS of $3.96 compared to $3.22 in the prior year. In the fourth quarter, Teradyne's Days of Inventory Outstanding (DIO) was 74 days, down from 104 days in the previous quarter and 15 days below its five-year average. Currently, these figures indicate signs of healthy inventory levels. DIO is a crucial metric for chipmakers as it reflects the capital intensity of the business and the cyclical fluctuations in semiconductor supply and demand. In a tight supply environment, inventory tends to remain stable, allowing chipmakers to exercise pricing power. Conversely, a sustained rise in DIO may signal weak demand, and if inventory continues to build, companies might be forced to reduce production. Looking ahead, Teradyne provided a revenue guidance mid-point of $1.2 billion for the first quarter of 2026, significantly higher than the analyst consensus of $954 million. The mid-point for adjusted EPS guidance in Q1 2026 is $2.07, well above the analyst estimate of $1.25. Teradyne is a US-based supplier of automated test equipment for semiconductors and other technologies and devices, with customers including most major chip manufacturers. Teradyne's annualized revenue growth rate over the past two years is 9.2%, higher than its five-year average, indicating a recent acceleration in demand. Analysts and market commentary highlight the surge in demand for testing AI chips as a catalyst for increased semiconductor test volumes and revenue growth, reinforcing investor confidence in the persistence of AI-related tailwinds. Looking forward, sell-side analysts project revenue growth of 21.8% over the next 12 months, an improvement compared to the past two years. This forecast is notable, suggesting that its new products and services will drive revenue expansion. Teradyne CEO Greg Smith stated, "Our fourth-quarter results exceeded the high end of our expectations, driven by AI-related demand for computing, networking, and memory within our Semiconductor Test business. All our business units—Semiconductor Test, Production Test, and Robotics—achieved sequential growth, and the company delivered 13% growth for the full year 2025." Smith added, "We expect all our businesses to grow year-over-year in 2026, with AI-driven computing maintaining strong momentum." This indicates that the surge in AI-related demand that fueled the fourth-quarter performance is likely to continue. Following the earnings release, Teradyne's stock surged 23.6% in Monday's after-hours trading at the time of writing.