Teradyne forecast first-quarter revenue and profit above Wall Street estimates on Monday, driven by multibillion-dollar investments by technology companies on data center expansion to enable AI capabilities, sending its shares up about 20% in extended trading.

The increase in complexity of AI compute and memory chips and an acceleration in production timelines has prompted chipmakers to increase capital spending on testing equipment, benefiting Teradyne.

Its equipment is used to test the quality and reliability of semiconductors. Analysts have noted that improving utilization rates at major chip factories often precede new orders for testing equipment.

"In 2026, we expect year-over-year growth across all of our businesses, with strong momentum in compute driven by AI," CEO Greg Smith said.

Teradyne provides automated test equipment for a range of chips, from complex SOCs used in smartphones and AI data centers to memory chips.

The company, with customers that include Qualcomm and Texas Instruments, forecast first-quarter revenue between $1.15 billion and $1.25 billion, ahead of analysts' average estimate of $934.5 million, according to data compiled by LSEG.

It sees adjusted earnings per share in the range of $1.89 to $2.25 for the quarter, ahead of an average estimate of $1.26.

Teradyne posted fourth-quarter revenue of $1.08 billion, beating an estimate of $973.2 million, fueled by AI-related demand in compute, networking and memory within its semi test business.