ON Semiconductor: Automotive Inflection and AI Power Surge Lead Estimates

$ON Semiconductor(ON)$ reversed early losses to trade higher following its earnings report.

While guidance exceeded Street estimates, the overall market reaction remained measured.

The report highlighted two undervalued signals: first, the automotive cycle posted its first year-over-year (YoY) growth in seven quarters, signaling a potential (though not yet full-scale) recovery. Second, revenue from AI data center power chips surged +30% quarter-over-quarter (QoQ), far outstripping management's own "high-teens" forecast. This segment is expected to double in 2026, suggesting ON’s data center narrative is materializing faster than anticipated.

Key Financials

• Revenue: $1.51 billion, slightly beating Street estimates of $1.49 billion (+1.3%).

• Gross Margin: 38.5% (in line with Street 38.6%).

• EPS: $0.64, beating Street estimates of $0.62 (+3%).

Segment Performance

• Automotive: $797 million (first YoY growth in 7 quarters).

• Industrial: $417 million (beat GS/Street).

• AI Data Center: +30% QoQ growth (vs. expected high-teens).

Q2 Guidance

• Revenue: $1.59 billion (vs. Street $1.53 billion, a +4% beat).

• EPS (Midpoint): $0.71 (vs. Street $0.66, an +8% beat).

• Utilization: Factory utilization target is flat to up (every +1% in utilization adds +25-30bps to Gross Margin).

Analyst Note: Goldman Sachs maintains a Neutral rating but raised its Price Target (PT) from $60 to $80.