Amid tariff whiplash from the Trump administration and increased geopolitical and economic tensions, companies in the test equipment and services space are navigating new market uncertainties. During the recent round of first quarter calls, some of analysts’ most frequent questions revolved around what impacts test companies were seeing from tariffs, and how they were dealing with them.
A few common themes from the responses of executives: They are increasing their prices due to tariffs and expect to both revenue impacts and increased costs on their supplies. They are shifting sourcing, and using other strategies to mitigate their exposure to tariffs and the associated costs. Several companies also mentioned eating initial tariff costs for orders which had already been placed, before they put price hikes in place.
Most executives said that they haven’t seen changes in their customer behavior yet, but are wary and watchful—and in many cases, being conservative about their expectations for financial performance for the rest of the year.
Let’s dive further in to more details from Teledyne and Viavi Solutions. (Read details from Keysight Technologies and Teradyne in Part 2.)
However, keep in mind that tariff details are shifting from week to week—indeed, two judges ruled this week that Trump overstepped his authority by imposing unilateral tariffs under emergency powers, and that decision is likely to soon be appealed to the U.S. Supreme Court. So specific tariff conditions may have changed since these conversations, which took place over the past month of Q1 reporting.
Teledyne CEO: ‘Yes, the tariffs are going to affect us’
Robert Mehrabian, longtime CEO and now executive chairman of Teledyne Technologies—which includes test equipment specialist Teledyne LeCroy—outlined two components of tariff impacts on the company’s most recent quarterly call with analysts.
The first was supply chain impacts and increases to the cost of supplies. Mehrabian said that could result in $100 million in increased costs annually, although mitigation strategies might be able to get it down to around $18 million in additional costs per quarter. Additional costs won’t fully hit its bottom line until later in the year, as it goes through existing inventory.
The second part of the tariffs would be revenue impacts. Eighty percent of what the company makes is either made in the U.S. and sold in the U.S., or made internationally and sold internationally, Mehrabian said. Another 17% of revenues involve selling U.S. products to international customers, and four percent is selling from Teledyne’s international locations to the U.S. Less than 2% of its revenues come from China.
Mehrabian also emphasized that “Teledyne has never believed that offshoring U.S. manufacturing and technology was a wise action. As a result, we have little low-cost country manufacturing, we are a net exporter, and most of our external sales are produced and sold within regions.”
The company’s imports from China and Mexico in 2024 each accounted for less than $25 million in value, he added. He also said that there are further tariff exemptions that Teledyne may be able to take advantage of to protect its profit margins, along with pricing increases as it deems necessary.
“Yes, the tariffs are going to affect us,” Mehrabian said. But, he added, Teledyne still expects revenues to increase year-over-year—particularly due to growth from acquisitions. He said later in the call: “It’s going to cause a little pain, but … we’ll make it up somewhere else.”
That 2% of sales to China includes sales of avionic computers for commercial airlines to China, according to Mehrabian, as well as high-end oscilloscopes and protocol analyzers. (Of note: Some sales of avionic control components to China appear to just been “paused” by the Trump administration, according to reporting by The New York Times, but it’s unclear whether Teledyne specifically is impacted by those new restrictions.)
Teledyne is doing better than expected so far this year, but isn’t raising its guidance due to the uncertain environment. “We must assume that the market uncertainty will have some impact,” Mehrabian said. Teledyne is assuming a negative sales impact of about 1% of annual sales, which it expects to be offset by its acquisition of Qioptic, a precision optics specialist for aerospace and defense.
Viavi Solutions: Absorbing $3 million in tariff costs
Viavi Solutions is absorbing $3 million in tariffs on previously committed orders and imported U.S. materials, President and CEO Oleg Khaykin said, resulting in a low-single-digit impact on its operating margin during the most recent quarter.
“We made a conscious effort: all the POs that we accepted and committed to, we’re going to eat the tariffs, and that’s about $3 million,” Khaykin said.
However, eating the tariffs was short-lived. Any orders in process or new orders now get a “universal tariff adder, and it’s non-negotiable,” Khaykin clarified. “There were some people who tried to play the game and said, ‘hey, I’m not going to pay tariffs’. I said, well, it’s kind of like if you buy a product on Amazon and you refuse to pay the tax—you don’t get the product.”
“What we see in the industry is universally, all of our peers, and everybody’s passing it on,” Khaykin said. “Even the biggest customers are saying it is what it is. It is the new normal.”
The initial tariff period was particularly rocky, with major fluctuations. Viavi “basically stopped all shipments into U.S.” and held onto purchase orders to see if things would stabalize, Khaykin said. That smoothed out in the weeks following, although some purchase orders had to go back to customers to be reapproved. “So far, nobody has canceled. Nobody has reduced the size of the order, and they’re accepting the tariff increases,” he added.
However, Khaykin also pointed out that the customers who respond the earliest on POs are usually the ones who need the product the most. Other customers may be able to wait to see if the tariff situation changes yet again, so Viavi is being conservative about its outlook for the year, particularly in its Network and Service Enablement (NSE) segment, because of concerns about customer orders being delayed. Its Optical Security and Performance unit is expected to see negligible impacts, because the company has factories around the world that produce for local geographies.
“If any segment [is] going to push out and you may see some slippage of revenue, that would be more for the service provider segment, rather than the lab and production [segment]”, he said, with the latter including semiconductor companies, equipment vendors, data centers and module integrators.
About 15% of Viavi’s annual revenues are subject to tariffs, he added, and the company is “already moving things around” to reduce that percentage. “Given our global footprint, we are in the position to realign our supply chain to further reduce the tariffs impact as they stand today within 6 months,” Khaykin said, adding: “I think, within 6 months, the tariff impact will be fairly de minimis.”
Read insights from Keysight Technologies and Teradyne executives in Part 2.
