Teradyne Inc (TER) — Q1 2026 Earnings Call Transcript

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 first quarter of 2026 and our outlook for the second quarter. The press release containing our first quarter results was issued last evening. We are providing slides as well as a copy of these prepared remarks 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, 2025, 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-focused investor conferences hosted by Bernstein, TD Cowen, Stifel and Bank of America. Our quiet period will begin at the close of business on June 12, 2026. Following Greg and Michelle's comments this morning, we'll open up the call for questions. This call is scheduled for one hour. Greg?

Good morning. With revenue of approximately $1.3 billion and non-GAAP EPS of $2.56, Teradyne delivered record results in the first quarter of 2026. Our previous high watermark was in the consumer-driven mobile peak of Q2 of 2021. In Q1 of 2026, our revenue was $200 million, or 18%, higher than that previous record. This new record comes from durable AI demand drivers and the continuing acceleration of our wafer-to-AI data center strategy. This strategy is delivering demand across Teradyne's portfolio. In Q1, AI-related demand accounted for nearly 70% of our revenue, up from about 60% in Q4 of 2025. Our strategy continues to be anchored across three broad trends: verticalization, electrification and AI. Verticalization is the concentration of our business into extremely large vertically integrated technology companies. The verticalization trend was clear by 2024 and continues to accelerate. This includes companies like hyperscalers, but also huge AI ecosystem enablers like foundries, merchant compute, memory and networking companies. Many of these companies are customers of all three of our businesses: Semiconductor Test, Product Test and Robotics. And this product portfolio enables us to serve their needs from wafer to data center. While these massive customers are driving strong growth, it also means that the business is increasingly concentrated to these customers into a smaller number of very large ASIC and commercial device programs. This concentration also increases the risk that bottlenecks in other areas could shift demand for our products, which can lead to short-term demand peaks and valleys superimposed over a long-term strong growth trend. In other words, it's lumpy growth. The electrification trend continues. In the auto and industrial segment, 46% of our revenue came from data center devices in the first quarter, which historically has been dominated by automotive and industrial devices. It goes without saying, AI is the dominant force shaping our business. We think about the opportunity presented by AI as three superimposed waves, each building on the one before it. We are in the heart of the first wave, which focused on the build-out of general-purpose AI data center capacity. This was behind the massive increase in data center spend in 2025. In 2026, we are entering the second wave. While there is still huge investment in general-purpose AI data centers, these data centers are being augmented with compute silicon optimized for inference at scale. This wave will grow to a high run rate over the next few years. Still yet to come is the edge AI physical AI wave. As the technologies for silicon packaging, memory and AI models improve, compelling use cases for AI at the edge will emerge. Obvious examples of this are self-driving cars, robotics, PCs, wearables and smartphones. These waves are broad-based, and we expect them to stack on top of each other, driving significant ATE TAM growth over the full midterm. Because of Teradyne's wafer-to-data center strategy and our historic strength in mobile, automotive and industrial, we are well positioned to ride each of these waves as they arrive. Back in our January call, we shared that we expected robust double-digit year-over-year growth. We still expect that the compute TAM and revenue will grow significantly from an already strong 2025 base. We're seeing healthy engagement with both networking and VIP compute customers, and our pipeline of new design wins remains robust. Aligned with this momentum, I am pleased to share that we have received our first multi-system production test orders for merchant GPU in Q1. We expect these systems to ship, be installed and be in production in Q2. Customer engagement remains strong, and we are well positioned to capture further share as we bring up more devices on our platform. In automotive and industrial, we're seeing moderate but steady recovery in both TAM and revenue. There are signs of strength in automotive, primarily ADAS, and we're seeing increased demand for power going into AI data centers. As of now, mobile appears a bit weaker, with memory pricing and availability affecting end market demand, especially outside the iOS ecosystem. Memory test demand appears to be even stronger than our view in January, with AI compute demand for both HBM and DRAM continuing to act as an accelerator. We're also beginning to see increasing flash test demand driven by SSD. The overall memory market is on track for solid TAM growth for the year, and we expect to gain low single-digit share. In 2025, our IST group expanded its HDD customer base and entered the SLT compute market. Now in 2026, IST is on track to deliver against this expanded opportunity. We're seeing strength in HDD, driven by greater than 20% annual exabyte growth fueled by AI. This translates into longer test times per drive and a larger HDD TAM and revenue for Teradyne. In Robotics, we delivered our fourth consecutive quarter of sequential growth. This is particularly notable because Q4 is typically our strongest quarter and Q1 is typically down. We're seeing strong customer engagement across e-commerce, electronics manufacturing and semiconductor end markets. Robotics is a key part of our wafer-to-AI data center strategy, with robotic-assisted assembly, test and data center operations. Our robots are being used in environmental sensing and data centers, and we recently demonstrated a complex physical AI work cell in partnership with a generalist partner as part of the recent NVIDIA GTC. In prior calls, we have often talked about the investments that we are making to capture growth opportunities coming from our wafer-to-data center strategy. In Q1, these investments have resulted in two significant new product introductions. The first is Photon 100, which is our platform for silicon photonics and co-packaged optics testing. The Photon 100 is based on our proven UltraFLEXplus tester and is bringing SiPho testing from lab to fab. I'll remind you that silicon photonics and co-packaged optics are in the very early stages of a ramp that will likely be substantial. There is uncertainty about the timing and the slope of this ramp, but as optical interconnections are increasingly used for scale-out and then scale-up networking, it is going to be a big chunk of the total networking TAM. As this market grows, we also expect to bring significantly more efficient test solutions online, so it would be a mistake to linearly extrapolate from today's test strategies and economics. That being said, we expect that this is a meaningful TAM expansion opportunity, which could reach $300 million to $700 million per year over the midterm. The second product introduction is Omnyx, which is a new production board test platform designed to address the unique set of test challenges for server boards and tray assemblies. This platform uses power, thermal, optical and TDR test capabilities from across all of Teradyne to enable earlier detection of defects that are plaguing the build-out of AI data centers. In addition, we continue to pursue inorganic opportunities to grow our business. Our MultiLane Test Products joint venture closed on April 8, and we believe this partnership will accelerate the development of high-speed I/O and data center interconnect test solutions, a critical test need as AI data centers transition from cable-based connections to backplane and midplane architectures. Additionally, we closed the acquisition of TestInsight two weeks ago. TestInsight is the leading provider of test development tools that are used with our testers and competing platforms. This acquisition strengthens Teradyne's design-to-test software capabilities, enabling us to build a virtual test environment, which will reduce time to market for complex AI and networking devices. In summary, Q1 2026 was a record quarter for Teradyne. We're executing our strategy, capitalizing on secular growth drivers and delivering value for our customers and shareholders. Our team, especially our operations team and manufacturing partners, went above and beyond to hit this ramp, and I'm grateful for their hard work and skill. We came into the second quarter with a lot of momentum and confidence that 2026 will be a strong growth year, and we are well on our way to achieving our target earnings model. With that, I'll turn the call over to Michelle.

Thank you, Greg, and good morning, everyone. Today, I will cover our first quarter financial results and our second quarter 2026 outlook. Starting first with Q1. First quarter sales were $1.282 billion with non-GAAP EPS of $2.56, both above the high end of our guidance range. Total company sales were up 87% from first quarter last year and up 18% sequentially from last quarter. Non-GAAP earnings per share was up 241% from first quarter last year and up 42% sequentially from last quarter. This represents a record financial performance for the company, driven by AI across all three of our business groups. In the quarter, we continue to have two specifying customers and one purchasing customer greater than 10% of our revenue. Building on that, let's look a little deeper at revenue starting with Semiconductor Test. Revenue was $1.1 billion, breaking the $1 billion threshold for the first time, up 26% sequentially from last quarter and over 100% year-over-year versus Q1 2025. The revenue breakdown within Semiconductor Test was SoC at $882 million, memory at $203 million, and IST at $27 million. The key drivers were continued AI strength in compute segments and memory. At roughly 75%, compute is the largest portion of our SoC product revenue. This continues the evolution of our test portfolio from being mobile-centric to shifting to AI-dominant. Within auto and industrial, revenue nearly doubled sequentially from a low base last quarter, driven by power management demand increases for AI data center build-outs. Mobile revenue was roughly flat with fourth quarter 2025 and remains a muted impact to our overall results with the increasing importance of compute in our SoC portfolio. Aligned with our strong top-line performance, operationally, we have more than doubled our UltraFLEXplus shipments over the last nine months while sustaining our 12- to 16-week lead times. Our multisource strategy, primarily leveraging contract manufacturers, provides ultimate flexibility for our customers while ensuring capacity continuity in today's dynamic environment. Moving on to memory. Our memory business delivered another strong quarter of $203 million in revenue, relatively flat to our record last quarter, driven by robust HBM and DRAM test solution demand. We also successfully ramped the newest generation of our memory tester, Magnum 7. IST revenue of $27 million was relatively flat year-over-year, though we are seeing early indicators for potential growth, driven primarily by HDD in the second half and continuing into 2027. Product Test Group revenue was $80 million, up 8% year-over-year. Growth was led by sustained defense and aerospace demand and production board test. Robotics revenue was $91 million, up 32% year-over-year, representing our fourth sequential quarter of growth. Our one sales team approach is delivering results with revenue strength across end market verticals and e-commerce, electronics manufacturing and semiconductors, including in AI data centers. Shipments associated with our large e-commerce customer increased sequentially and AI revenue increased to 15% of the quarter's sales. Now moving down the P&L. A confluence of positive factors delivered record earnings results, including peak AI-driven volume, favorable product mix and nonrecurring one-time benefits. Gross margin for the quarter was 60.9%, up 370 basis points sequentially, driven by strong semiconductor test volume and product mix and nonrecurring operational impacts. OpEx declined sequentially from last quarter and was favorable to guidance, due primarily to the timing of nonrecurring engineering. Non-GAAP operating income was $480 million, with an operating margin of 37.5%, both all-time financial records. Now moving on to capital allocation. Our capital allocation strategy remains consistent, and that is to maintain cash reserves to enable us to run the business and have dry powder for M&A. We ended the quarter with cash and investments of roughly $400 million. Working capital, predominantly in accounts receivable, increased in support of the revenue growth delivered in the quarter. Capital expenditures were flat year-over-year with the expectation that Q2 will increase, driven by continued investments in innovation and operations scaling. We paid $20 million in dividends in the quarter, and our share buybacks were de minimis. As Greg mentioned, we closed on two important inorganic asset opportunities this month. On April 8, we closed on our previously announced MultiLane Test Products joint venture. The results of this business will be consolidated into the Product Test group, and our EPS will reflect our share of the results of this business. On April 16, we closed on the acquisition of TestInsight, furthering our wafer-to-AI data center product penetration. Combined, these two deals used roughly $165 million of cash in the second quarter, which we funded via our credit revolver. Looking ahead to our second quarter guidance. For the quarter, we expect revenue in the range of $1.15 billion to $1.25 billion and non-GAAP EPS of $1.86 to $2.15. Gross margins are expected to be in the range of 58% to 59%, normalized for peak volumes and one-time benefits. Operating expenses are expected to run at approximately 27% to 28% of second quarter sales. The non-GAAP operating profit rate is expected to be between 30% and 32%. Based on current customer order visibility, we continue to expect first-half weighted revenue with approximately 55% to 60% of annual revenue expected in the first half. This expanded range from three months ago recognizes the continued strong demand signals we are hearing from our customers, while also balancing potential order lumpiness that could impact revenue timing across quarters or years. For the year, we have line of sight to about $50 million in revenue for merchant GPU, but our visibility into the second half is quite limited with increasing contributions over the midterm period. So in closing, our teams delivered exceptional financial results, reflecting strong execution and robust demand across our portfolio aligned with our wafer-to-AI data center strategy. We remain confident in the full-year trajectory and our target model of $6 billion in revenue and $9.50 to $11 in non-GAAP EPS. I want to thank all of our Teradyne team members for their performance and operational discipline in delivering for our customers and shareholders. With that, we'll open the call for questions. Operator?

Greg, my question is on the back half of the year. It sounds like demand signals have not materially changed over the past three months, but you're not raising guidance for the back half of the year. Is this, to some degree, factoring in some constraints that may be downstream of your business? I know you talked about VIP being very lumpy. Maybe that's part of it. Can you talk about that?

Tim, it's Michelle. I'll start, and then Greg can add some specifics from a customer perspective. So let me start with where we're at today. Q1 was an exceptional quarter, a record quarter. When you look at our Q2 guidance, it's equally strong. So revenue of $1.15 billion to $1.25 billion represents about 84% year-over-year growth at the midpoint after coming off of a really strong Q1 of 87% growth. As a result of the strength in the first half, we have expanded our first-half revenue range to 55% to 60%. This is a change from January where we gave a point estimate of 60%. When I think about the ranges, the low end of the range really reflects the potential for timing impact. This could be lumpiness in terms of large customer ordering patterns or hiccups in the AI data center build-out ecosystem in terms of when our testers actually get accepted. These dynamics can impact revenue within a quarter or across quarters. That is part of what's playing out in the second half. The high end of the range reflects continued strength that we're seeing from a demand perspective across compute, networking and memory. The other element I would add is visibility. We talked in our January call about improved visibility from a customer ordering perspective. That is consistent with where we're at today. Historically, this business has had about 13 weeks of visibility. Coming into this year, we improved that and can now see into another quarter out, although not as strong as the current quarter. So we still do have some undefined parts as we think about Q4.

Tim, let me give you more color on how the first-half, second-half polarization breaks down by group and technology. The part of our business that we believe is most first-half weighted is VIP compute. We have pretty good visibility into the timing of programs associated with that and the specific customers that we have. We think that's really strong in the first half of the year, and the next generation of that technology is early 2027; it might start bleeding into the end of 2026, but we really don't know. Networking has started very strong and we think it will stay reasonably strong through the year, but our visibility into the second half isn't as strong; historically that fills in over time, and there's potential upside. Memory I think will end up being more back-half weighted than front-half weighted, which is a counterbalancing factor. The stronger memory gets, the more we can trend toward the 55% end of the range we gave. In Semiconductor Test, for auto and industrial, right now data center is very hot in that segment and we expect that to continue. What we're hearing from those customers is that the rest of their portfolio has reduced inventories and potential demand increases, but that hasn't yet translated into increased capital equipment demand beyond data center. For IST, we definitely think that's stronger in the second half than the first half, but we're coming off a base of $27 million in Q1, so there's a lot of upside to go before it moves the needle enterprise-wide. Product Test will be back-half weighted as well, but it's a smaller percentage of the total. Typically, our second half is much stronger in Robotics than the first half, but we started this year at a good run rate. The signs are encouraging, but we've learned to be careful about predicting beyond lead time in Robotics. Does that help?

First, congrats on your first merchant GPU win. Curious how to think about the follow-through there. What are the steps to try to achieve greater penetration? Also, how are you thinking about custom ASICs from here beyond your one very large customer?

On GPU, the first project is the hardest because it involves qualifying the test platform and converting the underlying libraries that support the testing. That part of the project is behind us, and we are into the phase where that initial qualification can go into production. The next phase is the fast-follower phase. We'll begin working on projects earlier in their life cycle that we can complete more quickly than the first qualification project. Those projects probably have time lines where we would be releasing into production late this year. Whether that capacity ramp starts to hit at the end of 2026 or into 2027 is an open question. Over the midterm, we expect a dual-source customer to manage share in the 30% to 70% range. It will take us a few years to get there because there are many different part types and SKUs. As an incumbent platform, customers have flexibility, so replacing incumbents takes time. During the fast-follower phase, we're competing on platform differentiation and ability to serve spot demand quickly. We're working to convert as many SKUs to our platform as possible. I would expect it will take a few years to move from low single digits in 2026 to entering that 30% to 70% range over the midterm. Regarding custom ASICs, there are two hyperscaler compute programs at scale now. If you include edge and automotive, there are three hyperscalers at commercial scale driving significant volume for us or our competitor. We are actively competing for parts that have not yet ramped and for dual-source status against hyperscalers that have already ramped. The timing for that is more likely 2027 than 2026, but stay tuned for news as we progress.

On gross margins, we had a really strong Q1 at 60.9%, another record. Several favorable factors drove this: strong AI-driven semiconductor test volume, favorable product mix and some nonrecurring operational benefits. The step down from Q1 to Q2 at the midpoint is about 240 basis points. About half of that is driven by the one-time operational benefits we had. Coupled with mix shifts in Q2, this is somewhat of a normalization. When you look at the first half overall, margins will be around 59.7%, which is at the low end of our target model range. It's important to keep in context that our margins move around; they are lumpy like our revenue. We typically see up to 400 basis points of movement within a year, but year-over-year it's a much tighter range, within about 200 basis points. Some of this is noise within the first half. That's how I would think about it from a modeling perspective.

Two questions. First, your quarterly performance has consistently exceeded guidance. Are you seeing a consistent trend where late in a quarter you get rush orders and the last month becomes the source of upside? Or is there something different in the way you communicate with the Street? Second, since the last earnings call, agentic AI has become a buzzword and new semiconductor companies are pursuing tokenization and new CPUs. Historically, x86 has been a driver for in-house test solutions. Does the diversification of CPU for agentic AI add a new layer of opportunity for you? Was that already embedded in your longer-term forecast, or is this new upside?

When we set guidance, we try to give the best view balancing risks and opportunities in the current quarter. We typically carry some upside capacity that, if we get quick-turn orders and can help customers by serving orders within lead time, we will do that. In a strengthening demand environment we tend to over-perform. At the same time, we work hard to solve supply chain issues that come from ramping capacity, and there are supply chain risks we may not have solved when we go into a quarter. We are still being cautious about Robotics. We are seeing improved predictability and growth from that unit, but we don't want to assume a new permanent higher growth rate until we better understand the funnel and conversion rates. We're happy about four on-track quarters, but we remain careful predicting higher rates of growth in Robotics until we have more visibility.

To add to Greg's point about supply chain variability, that's not just within Teradyne but also with our customers. If all parts of a test cell are not coming together, customers are not ready to take and install our testers. There could be slips within a quarter, which can be upside or downside in how it plays out week to week. You'll see this sitting in our receivables at the end of a quarter when we shipped a lot of units that were originally expected to be pushed out. So we see variability not only on the order side but also in customer supply chains.

On agentic AI and new CPUs, I view this more as potential upside than something fully in our plan. We are testing primarily ARM-based CPUs for data center applications and have active design-in opportunities we expect to convert. In addition to new CPU demand for agentic workloads, there's a trend toward optimizing data centers for inference at scale. If workloads shift toward more inference and agentic AI, I think we have potential long-term upside because we have exposure to devices used in those applications.

On networking regarding CPO and silicon photonics, can you talk about where you stand in terms of share now and how you anticipate your share tracking? I'm asking because a competitor announced they received their first high-volume AT order for silicon photonics. Also, one of your auto industrial customers mentioned a tester shortage; are customers fighting for queue position at Teradyne? Where do you stand in terms of capacity and utilization and how much capacity are you looking to expand over the next year?

So far in 2026, our best guess is that share is quite balanced between us and our competitor. The difference is whether we're talking about single large orders or multiple smaller orders, but overall share appears balanced. It's very early days; few end customers are trying to ramp CPO into production. The share split right now is mostly around which test insertion is being done by which companies. Our strength is primarily in the second insertion, where you're connecting electrically to a compound structure and looking at light below. We are releasing solutions for that in production and working with partners to do so. This is a multi-party effort that involves foundries, end customers, ficonTEC and Teradyne. We're coordinating teams in Taiwan, Israel, Germany and North America to bring this technology to production. We expect that in 2027, this will be primarily associated with scale-out networking; scale-up networking is likely to be even higher volume but over a longer period like 2028–2029. We expect test efficiency to improve dramatically, potentially by a factor of 10 over the next couple of years, and despite that efficiency improvement, we still think this can be $300 million to $700 million worth of equipment a few years into the midterm. Regarding the tester shortage comment, if that customer is having trouble getting testers, they're obviously not buying them from Teradyne. We are able to serve the demand we have; our capacity has ramped rapidly with multiple contract manufacturing partners enabling production. For that particular end customer, we have a good relationship and are able to deliver the testers and lead times they need. This highlights why customers are increasingly focused on supply chain resilience back to their test equipment suppliers. For high-volume devices, we expect multiple sourcing of test equipment to be more common, which is a positive for Teradyne overall.

On silicon photonics, you spoke about the $300 million to $700 million midterm opportunity. How big is the market this year — is it tens of millions? And regarding ficonTEC being acquired by a Chinese entity, is that an issue or a nonissue for you?

This year, silicon photonics is probably around $100 million, maybe a little less or a little more. It's substantial but early days. Regarding ficonTEC, they have been an independently operated unit of a Chinese corporation since 2021; that's not new. Our relationship with ficonTEC is with the unit in Germany and the Chinese company it is part of, RoboTechnik. We have a great relationship with their CEO. They are one of the world-class providers of active alignment for silicon photonics assembly and test. Achieving alignment in assembly for electro-optic modules or CPOs is difficult, and ficonTEC is a world leader. They are building their business in semiconductor capital equipment test, which is a high priority for us and for them. Press reports about acquisitions or ownership issues have been refuted by ficonTEC, and we don't see evidence on the ground that any reported concerns are true.

Quick follow-up for Michelle: as auto and industrial recovery happens, is that a large tailwind for your gross margin given legacy higher-margin testers?

Short answer is no. When you think about our full-year expectations and what's really going to influence results over the midterm, we've given a target model of 59% to 61%. We're sitting at 60.9% in Q1 and expect first-half margins around 59.7%. Given that, auto and industrial is not going to be the biggest swing for our overall margin portfolio. Our overall margins tend to be tight within about 200 basis points year-over-year. So while auto and industrial can be a tailwind, it's not likely to be significant to the overall margin picture given the size relative to our portfolio.

Over the years, our product lines have converged toward similar margins, so even if auto and industrial grows as a percentage of revenue, I wouldn't expect that to be a big mover. Also remember that ADAS testers for automotive look a lot like VIP compute testers. Aggregation by end market does not necessarily reflect distinct platform economics.

On the GPU engagement and the large customer where demand is increasing, what is the gating factor to getting to, say, 20%–30% market share? What share is assumed in your $6 billion target model? Also, on visibility: AI is over 70% of your sales, but other semiconductor companies claim strong visibility into 2027. Why doesn't that translate into stronger visibility for the testing part?

The gating factor to getting to 25% share of GPU is how efficiently we execute our fast-follower strategy: how fast we can bring up test programs and solutions for devices early enough in their life cycle to capture a significant portion of the ramp. Over time, tester-agnostic development is emerging, where customers develop test solutions against a virtual test system and can target our platform or another via software. When that becomes common, competition will be more about throughput, performance and availability than incumbency. We have advantages in test coverage for elements of devices, platform reliability and responsiveness to demand. High-performance memory is a precedent: we were later to market for HBM performance testing but gained share when we released a platform with better economics and performance. As accelerators migrate toward solutions present on both platforms, we can compete on capacity and productivity. In terms of the $6 billion model, we do not need extremely high GPU share; low double-digit share in the fast-follower phase could be sufficient to hit the model assumptions. On visibility, Michelle made an important point: the lead time for a tester is on the order of the same lead time as the wafer itself. Customers are building front-end capacity to increase wafer volumes, but until they see wafers through production they're cautious ordering test equipment. Testers are sold for particular devices and ramps, and those ramps can move significantly if first silicon has issues, injecting delays. We work with strategic forecasts for capacity expansion, but that is different from the level of commitment from customers about what they'll buy and when. So front-end equipment demand can look less lumpy, but back-end test demand will follow; timing is the primary source of uncertainty.

Relative to the CPO opportunity, can you level set where you expect CPO revenue to land this year, 2026? And you talked about a four-way partnership for some insertion solutions. Do you have any plans or thoughts about integrating that more under one roof?

We are not publicly disclosing our expectations for 2026 CPO revenue because there's so much uncertainty about where in the test flow investment will go — whether insertion 1, 2 or 3 will be the focus. The four-way partnership model is how the industry works: there is a specifier, a foundry, an OSAT, handler or prober provider, a tester provider and a probe card provider. We advocate an open ecosystem. We want to help partners like ficonTEC build capability in semiconductor test equipment but acknowledge they are world experts in active alignment. We prefer to help them be great members of the ecosystem rather than trying to acquire or fully integrate their capabilities under one roof.

As a follow-up for Michelle, philosophically on OpEx: if you grow multiyear at much stronger rates, would you under-punch OpEx intensity or develop more OpEx resources and R&D over time?

Historically, we've talked about growing OpEx at about 50% of revenue, and we still believe in that model. We believe in investing back in the business, particularly to address pain points in our wafer-to-data center strategy. We'll look for opportunities to reinvest, which will impact OpEx. In the current year, in such a hyper-growth mode, we wouldn't expect the same translation to play out within 2026, but over the midterm and longer term, that's the aspiration we would drive toward.

I'd add that there's a high rate of technology change and many interesting opportunities. There is a lot of waste due to yield issues and quality escapes; it's a perfect environment for investing in things that help customers achieve high quality. For a while, the marginal utility of additional R&D spend was not that great, but now we have a long list of initiatives that will drive long-term revenue growth. We'll constrain G&A growth, keep sales and marketing growth focused on customer technical investments, and lean into R&D because it's a target-rich environment.

Thank you, operator. Thanks, everyone, for joining the call. We are really looking forward to Q2, another really strong quarter. I want to reiterate our thanks to the team for the performance in Q1. We're calling 2026 the year of execution. The team is hitting on all cylinders and doing really well, and we appreciate your interest in the company.