Teradyne Stock Is the Top Performer in the S&P 500. Here’s Why.

Teradyne reported better-than-expected earnings and revenue in the second quarter. (Dreamstime)

Teradyne stock surged double digits on Wednesday after the maker of semiconductor test equipment posted better-than-expected earnings in the second quarter.

Shares surged 19% to $107.96, putting the stock on pace for its highest close since March 7, according to Dow Jones Market Data. The stock traded as high as $110.50 Wednesday morning.

The sharp gains came after Teradyne posted second-quarter earnings on Tuesday that surpassed expectations. Adjusted earnings of 57 cents a share topped the 54 cents a share the Street had anticipated, according to FactSet.

While revenue of $652 million beat the $651 million analysts were looking for, it declined 11% from the same period a year ago and fell from $686 million in the first quarter.

Teradyne projects revenue to rise in the current third quarter, guiding for a range of $710 million to $770 million, above Wall Street forecasts. Adjusted earnings are expected to fall between 69 cents and 87 cents a share, below the consensus of 89 cents among analysts polled by FactSet.

The company’s semiconductor test segment was a standout in the quarter, accounting for $492 million of total revenue. CEO Greg Smith said he expected “growth through the mid term” beginning in 2026 as certain end markets get into position for a cyclical recovery.

“As we progress through the third quarter, we are gaining confidence in AI compute-related revenue inflecting in the second half of the year,” Smith said on the earnings call Wednesday.

The CEO conceded that customers in the automobile and industrial end markets “remain cautious about significant capacity adds.” However, “we do not expect test equipment order patterns to deteriorate further,” he continued.

“There are areas within this end market that are showing strength like the power semiconductors for data center build-outs, and we believe that the long-term trend toward electrification will drive growth beyond 2025,” Smith said.

The company, which counts Qualcomm and Texas Instruments among its customers, has repeatedly credited artificial intelligence-related demand as a growth driver.

Teradyne was the best-performing stock in the S&P 500 index as of Wednesday morning.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com