Sanjay Mehta
Vice President and Chief Financial Officer at Teradyne
Thank you, Greg. Good morning, everyone. Today, I'll cover the financial summary of Q3, provide our Q4 outlook and provide some color around 2025.
Now to Q3. Third quarter sales were $737 million, which was at the high end of our guidance with non-GAAP EPS of $0.90, which was above our high end guide of $0.86. Non-GAAP gross margins were 59.7%. This was above our high guidance due primarily to product mix. Non-GAAP operating expenses were $275 million, up sequentially and year-over-year, consistent with our guidance as we invest in targeted opportunities to drive long-term growth. Non-GAAP operating profit was approximately 22%.
Turning to our revenue breakdown in Q3. Semi test revenue for the quarter was $543 million with SoC contributing $393 million and memory $150 million. Strength in SoC was driven by compute, while mobile and industrial continued to ship at a consistent level for Q2. Memory test revenue was driven by HBM DRAM shipments. Flash tooling for new UFS 4.0 standard in mobility and DRAM wafer sort. In memory, we continue to expect DRAM to dominate the memory mix at over 80% of the memory TAM in 2024.
In System Test Group, Q3 revenue was $73 million with continued weakness across the businesses. Production board test business decline was driven by weakness in the automotive end market. Storage test weakness in SLT was tied to the mobile end market. While the HDD end market is recovering, the demand is being satisfied with underutilized test capacity. In wireless test, revenue was $33 million in Q3, lower sequentially and year-on-year on a slower-than-expected ramp of Wi-Fi 7 and continued weakness in the PCN market.
Now to robotics. Revenue was approximately $89 million, flattish sequentially and up 3% year-over-year. In the quarter, UR contributed $73 million and MiR contributed $15 million. As noted, although the overall market is down, we are experiencing year-over-year growth tied to our SAM expansion and channel strategies.
Some other financial information in Q3. Our equity investment [Indecipherable] is reflected below the line in the income statement, where we recognized 10% of TPI's profit one quarter in arrears. Clarity, as the transaction closed at the end of May, our third quarter results reflect the impact of one month of the TPI investment. We had three 10% customers in the quarter. The tax rate, excluding discrete items for the quarter, 13.6% on a GAAP basis and 13.8% on a non-GAAP basis, full year rate is expected to be 14% on a GAAP basis, 14.5% on a non-GAAP basis.
Shifting to some cash metrics. At a company level, our free cash flow was $114 million, primarily driven by earnings and net working capital improvements in the quarter. We repurchased $25 million of shares in the quarter and paid $20 million in dividends. We ended the quarter with $678 million in cash and marketable securities.
Now to our outlook for Q4. Q4 sales are expected to be between $710 million and $760 million. Q4 gross margins are estimated at 59.5% to 60.5%. Recall, in January, we had a plan to improve gross margins back to model in the second half of 2024. The first half of 2024 had subscale revenues tied to a seasonally low Q1 and operational resiliency spends. In the second half of 2024, we are back to our model gross margins of 59% to 60%.
A little more color on gross margin seasonality. In Q1 2025, we anticipate revenue to be roughly 5% to 10%, down quarter-over-quarter. With this lower volume, our gross margin is expected to be slightly below our target model. Back to Q4. Opex is expected to run at 36.5% to 38.5% of fourth quarter sales. The non-GAAP operating profit rate at the midpoint of our fourth quarter guidance is 23% with non-GAAP EPS expected to be in the range of $0.80 to $0.97 on 164 million diluted shares. GAAP EPS is expected to be in the range of $0.73 to $0.91.
A few comments on the semiconductor test market. We are revising up our total semiconductor ATE TAM estimates for 2024. We have provided a slide in the appendix of our earnings deck with this information. Recall, our SoC TAM range has been $3.6 billion to $4.2 billion with a midpoint of $3.9 billion. We now expect the SoC TAM to be at the high end of this range around $4.2 billion. This is comprised of compute, which we now estimate to be $1.8 billion, up $200 million from our prior midpoint estimate and industrial to be around $400 million, up $100 million from our prior estimate. We continue to estimate mobile to be around $800 million, auto MCU to be around $500 million and services at $700 million. We are also raising our memory TAM estimate to $1.4 billion, up from an estimated range of $1.2 billion to $1.3 billion.
Within our 2024 expectations, as Greg noted, we are calibrating our expectations of growth in robotics around the relative growth of the peer group. We are targeting growth in our robotics business to be 15% to 20% above the industrial automation peer group, which contemplates macroeconomic factors that are outside of our control. We are confident in the long-term growth of this business and we'll continue to have a disciplined approach to spending. Given the weak end market, we now expect robotics growth in 2024 to be between 5% and 10%. With regard to capital allocation, we will continue to target our share buybacks in 2024 to an amount necessary to offset dilution from equity compensation and our employee share purchase program.
Looking ahead to 2025. With an uptick in utilization and an expectation of end-market improvement, we will be making investments that will increase our operating expenses. However, we expect to have a plan with operating leverage. We expect revenue growth to accelerate from 2024 levels across all businesses. That said, demand for most of our end-markets outside of AI related to compute and memory is improving, but remains muted and the timing and magnitude of a broader-based recovery is not known. Our variable business model is scalable and resilient with outsourced manufacturing and our operating expenses having a variable component.
During a cyclical downturn, we shed opex enabling greater profitability and free cash flow generation. During an upturn in the market, we expect in 2025, we will see an accelerated opex increase tied to our variable opex model. In 2025, given our expected top-line growth, we are planning a low teens increase in year-over-year opex mainly to fund our semi-test growth initiatives, primarily in engineering and go-to-market. Also, approximately 30% of the growth is due to our variable compensation model. Q1 opex is expected to grow 15% to 20% year-over-year.
Summing up, we delivered strong sales and earnings in the third quarter as memory and compute revenue helped us drive to the high end of the range. Our robotics team delivered year-over-year growth by the difficult auto and industrial end market as the business continues to execute its new product development and go-to-market strategy. Overall, our midterm fundamentals remain strong and we are investing to accelerate our long-term growth trajectory.
With that, I'll turn the call back to the operator to open the line-up for questions. Operator?
