Income Taxes

3 Months Ended

Mar. 29, 2026

Income Tax Disclosure [Abstract]

Income Taxes

S. INCOME TAXES

The effective tax rate for the three months ended March 29, 2026, and March 30, 2025, was 13.3% and 12.2%, respectively. The increase in the effective tax rate from the three months ended March 30, 2025, to the three months ended March 29, 2026, is primarily attributable to lower benefits from tax credits, lower benefits related to U.S. taxation of international income, and higher expense related to Pillar Two. These impacts were partially offset by increased benefits from equity compensation and a projected shift in the geographic distribution of income.

On a quarterly basis, Teradyne evaluates the realizability of the deferred tax assets by jurisdiction and assesses the need for a valuation allowance. As of March 29, 2026, Teradyne believes that it will ultimately realize the deferred tax assets recorded on the condensed consolidated balance sheet. However, should Teradyne believe that it is more-likely-than-not that the deferred tax assets would not be realized, the tax provision would increase in the period in which Teradyne determined that the realizability was not likely. Teradyne considers the probability of future taxable income and historical profitability, among other factors, in assessing the realizability of the deferred tax assets.

As of both March 29, 2026, and December 31, 2025, Teradyne had $6.9 million of gross reserves for uncertain tax positions.

Teradyne recognizes interest and penalties related to income tax matters in income tax expense. As of March 29, 2026, and December 31, 2025, $0.3 million and $0.3 million, respectively, of interest and penalties were accrued for uncertain tax positions.

Expense of less than $0.1 million was recorded for each of the three months ended March 29, 2026, and March 30, 2025 for interest and penalties related to income tax items.

Teradyne qualifies for a tax holiday in Singapore by fulfilling the requirements of an agreement with the Singapore Economic Development Board under which certain headcount and spending requirements must be met. The tax savings attributable to the Singapore tax holiday for three months ended March 29, 2026 and March 30, 2025 were $8.3 million or $0.05 per diluted share, and $2.0 million or $0.01 per diluted share, respectively. In December 2025, Teradyne entered into an agreement with the Singapore Economic Development Board which extended our Singapore tax holiday under substantially similar terms to the agreement which expired on December 31, 2025. The new tax holiday is scheduled to expire on December 31, 2035.

On January 5, 2026, the Organisation for Economic Co-operation and Development (OECD/G20) Inclusive Framework released a ‘side-by-side’ arrangement that provides a safe harbor for U.S.-headquartered multinationals. The arrangement effectively recognizes the U.S. tax system as complying with the Pillar Two GloBE rules for fiscal years beginning on or after January 1, 2026. Under this arrangement, the Company expects its U.S.-parented group and foreign subsidiaries to be exempt from the Income Inclusion Rule (IIR) and the Undertaxed Profits Rule (UTPR) in foreign jurisdictions that adopt this safe harbor. As a result, we do not expect to have a material impact from top-up taxes under the IIR and UTPR. Teradyne continues to monitor the implementation of Qualified Domestic Minimum Top-up Taxes (QDMTTs) in foreign jurisdictions, which remain unaffected by the side-by-side arrangement.

On July 4, 2025, the One Big Beautiful Bill Act (OBBBA, P.L. 119-21) was enacted, introducing significant changes to U.S. federal income tax law. Key provisions include a permanent extension of 100% bonus depreciation, immediate expensing of research and experimental expenditures, and modifications to the business interest expense deduction. The OBBBA also reduces deduction rates related to foreign income and export sales income. The OBBBA is not expected to have a material impact on Teradyne’s consolidated financial statements for the year ended December 31, 2026.