Teradyne and Lumentum Earnings Previews Show Analysts Raising the Bar

Two AI suppliers are back in focus before earnings

Teradyne and Lumentum are two of the strongest-performing hardware stocks of the AI buildout, and both are heading into earnings season with analysts expecting a lot. Teradyne makes chip-test equipment. Lumentum makes optical components. Each has gone from a slow-growing supplier to a company whose quarterly revenue has roughly doubled from a year earlier. Analysts are now raising estimates and price targets, but the stocks themselves already sit near or above many of those targets.

Read together, the coverage points to one conclusion. Few analysts doubt that demand is real. The open question is whether the next two reports can clear forecasts that have already risen sharply. Lumentum looks better placed to do that than Teradyne.

Teradyne: steady beats, uneven stock reactions

Teradyne's second quarter set the tone for the rest of 2026. The company reported $2.47 in earnings per share against a consensus of about $2.09, on revenue of $1.33 billion versus an expected $1.22 billion. Revenue rose 103.9% from a year earlier. Management attributed more than 60% of quarterly revenue to AI-related products, including testers for accelerators, CPUs, networking chips, and high-bandwidth memory and DRAM.6

The company has beaten estimates for a while now. Its EPS has topped consensus in each of its last eight reports.8 The four most recent beats ranged from about 7% to 30%.1

The stock has not always rewarded those beats. Shares fell about 23.8% after the April report even though EPS came in roughly 21% above estimates. They slipped another 4.6% after the July beat.8 Over eight reports, the average move has been about 12.8% in either direction.8 For a stock this volatile, a beat on its own does not mean the shares will rise.

Teradyne's third-quarter setup

For the third quarter, Teradyne guided to revenue of $1.20 billion to $1.30 billion and non-GAAP EPS of $1.85 to $2.15.28 Consensus sits near the top half of that range. Estimates put EPS between about $2.04 and $2.08 and revenue at $1.26 billion to $1.27 billion. That would mean roughly 64% to 65% revenue growth from the $769 million reported a year earlier.5928 If the EPS consensus holds, earnings would rise about 140% from the 85 cents of the prior-year quarter.2

Margins are the bigger issue. Teradyne guided its third-quarter non-GAAP operating margin to 28% to 30%, down from 33.7% in the second quarter. The company cited a shift in sales away from compute and rising operating expenses.6 Gross margin guidance is roughly 58% to 59%. Management flagged memory products and pricing as ongoing pressures, along with supply-chain constraints and competition.8 Analysts expect revenue growth to slow from 64% this quarter to about 16.5% in the December quarter.1

The sources also disagree on the report date. Some list October 21.3 Most put it on October 27, but they split on whether it comes before the market opens or after the close.827 Investors should check the company's own announcement.

Teradyne's 2027 estimates run ahead of management

The most important tension in Teradyne's numbers is about 2027, not this quarter. Consensus for 2026 is about $9.09 to $9.11 per share, an increase of about 130% from 2025.12 For 2027, consensus is about $11.65, with individual forecasts ranging from $9 to more than $16.1 Management's own target model calls for $9.50 to $11 in non-GAAP EPS, which puts the 2027 consensus above the company's highest figure.6

This is why Teradyne's analyst ratings look more cautious than its results. Baird cut the stock to Neutral in August with a $420 target, citing valuation and suggesting investors take some profits.24 Morgan Stanley rates it Hold with a $397 target.7 Zacks moved it from Strong Buy to Hold in late September. Bullish firms such as Susquehanna and Cantor Fitzgerald have targets of $550, and Bank of America is at $525.7

Estimates of the average price target vary widely depending on the data provider:

• $446.47, a widely cited figure that implies only modest upside from a share price of about $400324
• $474.20, from TipRanks, based on targets set in the past three months7
• $396.80, from MarketBeat

Whichever figure is right, the stock is trading close to the Street's targets. That leaves little room for error if third-quarter margins disappoint or guidance shows the slowdown arriving sooner than expected.

Lumentum: revenue more than doubling

Lumentum's results have grown even faster. In its fiscal fourth quarter of 2026, revenue rose 109.3% from a year earlier to about $1.01 billion.12 Earnings also came in above expectations.18 For the fiscal first quarter of 2027, the company guided to revenue of $1.225 billion to $1.275 billion and adjusted EPS of $4.05 to $4.35.1216

Analysts expect about $1.25 billion in revenue for that quarter, up 134% from $534 million a year earlier, and about $4.21 in EPS.5 In the same quarter last year, Lumentum earned 88 cents per share.16 For the current fiscal year, the consensus forecast is $19.78 in EPS.16 Some commentary points to a management target of $40 in adjusted EPS by fiscal 2028.19

The report date is unsettled here too, with some sources listing November 2 and others November 5.1415

Why Lumentum's analysts keep raising targets

The main reason is that Lumentum still cannot make enough product. Stifel, which raised its target to $1,232 from $1,100 on October 5 and kept a Buy rating, pointed to strong demand for ultra-high-power lasers, especially from Nvidia, and said supply continues to trail demand.11 One analysis estimated that Lumentum may be unable to fill about 70% of demand for some products through next year.19 When customers are waiting for supply, guidance is less likely to come in short, and that tends to support further estimate increases.

Other firms have raised their targets too:

• Bernstein started coverage at Outperform with a $1,220 target on September 30.14
• Rosenblatt reiterated Buy with a $1,300 target.16
• JPMorgan raised its target to $1,280 in August.16
• Argus raised its target to $1,332 on October 7.20

The stock is up about 563% over the past year and set a new 52-week high of $1,143 on October 9.1119

Lumentum's skeptics focus on price, not demand

Lumentum's skeptics are fewer but clear. TD Cowen rates the stock Hold with an $820 target, citing questions about where the business cycle is headed.11 Bank of America cut its target to $1,000 with a Neutral rating, and UBS set an $820 target.18 MarketBeat's average target of $1,078.75 is roughly at the current share price.12 One report said the median target, about $1,040, is below the stock price.18

Investors should also keep the accounting in view. Lumentum shows a negative trailing GAAP price-to-earnings ratio, even though its adjusted earnings are rising quickly.15 Insiders sold about $86 million of stock over the past 90 days, though at least one sale was to cover taxes on vesting shares.19

The shared risk: high expectations

Both companies are expected to post triple-digit earnings growth, and both have record beats behind them. Benzinga lists both among the S&P 500's fastest-growing companies by revenue, with Teradyne up about 104% and Lumentum up about 109%.5

The difference is in how much the rest of the market lets them miss. Teradyne's stock has fallen after beats before, because investors cared more about margins and the year ahead than the quarter just reported. Its 2027 consensus already sits above management's own model, so it needs something new to lift estimates further. Lumentum, by contrast, is still supply-constrained. Each time it adds production capacity, that capacity can show up almost directly as revenue. That gives Lumentum a clearer path to another round of higher targets, while Teradyne's challenge is to show that its margin decline is temporary and modest.

The main risk for both stocks is the same. With prices sitting at or above average analyst targets, good results may already be reflected in the share price. To push the stocks higher, the coming reports will probably need to beat estimates and raise guidance.