onsemi (ON)

Investment Review After Q1 2026 Earnings (stock price as of 2026.07.10)

TL;DR

onsemi makes the power and sensing chips that run electric cars, factories and — increasingly — AI data centers. Just reported: Q1 2026 revenue up 5% (its first growth after a brutal two-year downturn) with margins recovering and AI-data-center revenue more than doubling. The stock more than doubled off its 2025 low (to ~$96, from a ~$134 peak) on the recovery, the AI-power ramp, and a ~$7B all-stock deal to buy Synaptics for "Physical AI." But at ~33x depressed earnings, it prices a full recovery — the business is deeply cyclical, ~80% tied to autos and industrial, and the AI-power and Synaptics bets are still early.

Summary

Finding	Assessment
5-Year Stock Return	$95.96 now vs $45.84 five years ago (+109%); a cyclical power-semi that troughed near $41 and doubled.
Business Model	Intelligent power + sensing semiconductors (SiC / analog / image sensors) for autos (51%), industrial (28%) and AI data center.
Competitive Moat	MODERATE Real analog/power/SiC design-in moat + "only broad US power supplier," but cyclical, auto-concentrated, competitive.
Past 5-YR Drivers	The auto/EV + SiC cycle, the 2023–25 downturn + FabRight, and the AI-data-center-power pivot.
Recent Stock Move	$95.96, off a ~$134 May peak; troughed near $41 in early 2025.
Revenue Trend	ACCELERATING YoY revenue growth 4.6%→11.6% (Q1'26→Q2'26E).
Margin Trend	EXPANDING Non-GAAP margin 19.1%→20.1% (Q1'26→Q2'26E).
TTM OP Trajectory	ACCELERATING TTM OP QoQ +2.3%→+6.6% (Q1'26→Q2'26E).
Key Opportunities	AI data center power (2× to ~$500M), the margin recovery (53%/40% model), and Synaptics/Physical AI.
Key Risks	Deep cyclicality + ~80% auto/industrial, a trough-earnings ~33× multiple, and early competitive pivots.
Catalysts	AI-power doubling, sequential margin expansion, and the Synaptics close (mid-2027).
P/E(ttm) Valuation	33x — a trough-earnings multiple; prices a full recovery + the AI-power ramp.

What Just Reported

The cyclical bottom is confirmed: Q1 revenue $1.5B, up 5% — the first year-over-year growth after seven quarters of decline. Management said "this cycle has found its low point," with non-GAAP margins expanding (gross margin 38.5%, its third straight up-quarter) and utilization rising to 77%.
But the headline GAAP number was a loss. A $329M restructuring/impairment charge (the "FabRight" fab realignment) drove a GAAP operating loss; on a non-GAAP basis, operating income was $290M (19.1% margin) and EPS was $0.64 (+16%).
Every end market grew. Automotive turned positive (+5%, its first growth in seven quarters), Industrial +4%, and Other (AI data center) +5% — with Power (PSG) the recovery leader at +14%.

AI Data Center Power & the Synaptics Deal

AI data center is the growth engine. Revenue more than doubled year-over-year (up 30%+ sequentially) and is guided to double again in 2026 (to ~$500M). onsemi's pitch: it's "the only broad-based US power semiconductor supplier," and content per rack jumps ~10× at 800V ($9,500 → $115,000).
A ~$7B all-stock acquisition of Synaptics (announced June 2026, closing mid-2027) adds edge-AI compute, connectivity and sensing for a "Physical AI" strategy — accretive within 18 months and growing onsemi's addressable market by $30B.
Margins are the real bet. Management guides sequential margin expansion every quarter toward a long-term model of 53% gross margin and 40% operating margin — well above today's recovering ~19%.

Guidance & Key Takeaways

Q2 2026: revenue $1.535–1.635B (above normal seasonality), non-GAAP gross margin 38–40%, and non-GAAP EPS $0.65–0.77 — with the second half guided to outgrow the first.
The recovery is content-driven, not restocking. Auto grew on rising semiconductor content (SiC, 900V EV platforms, Treo) rather than customers rebuilding inventory — management says the industry is "shipping to natural demand."
Cash is the constant strength. Free-cash-flow conversion stayed above 100% even in the trough, and onsemi bought back $346M (~160% of free cash flow) at the lows, under a fresh $6B authorization; it pays no dividend.

Key Segments and Revenue Mix (FY2025)

Segment	FY2025 Revenue	% · Growth · GM	Key Details
PSG (Power Solutions)	$2.8B	47% · −16% · 25%	Power discretes, SiC/GaN, modules — the AI-datacenter-power + EV engine.
AMG (Analog & Mixed-Signal)	$2.3B	38% · −13% · 51%	Analog/mixed-signal, Treo platform, power management — the margin anchor.
ISG (Intelligent Sensing)	$0.9B	15% · −18% · 15%	CMOS image sensors for automotive ADAS + industrial.
Total	$6.0B	−15%	End markets: Auto 51%, Industrial 28%, Other 21%; non-GAAP margin ~19% (from ~34% peak).

Business Model

SUPPLIERS

Vertically integrated SiC (grows own crystal — EliteSiC)
Silicon, GaN, materials; own fabs ("Fab Right")
Design & R&D
Edge-AI & connectivity IP (Synaptics, pending)

Materials + IP →

ONSEMI

Intelligent power (SiC/GaN/modules) + analog (Treo) + sensing
Power / Sense / Control — + edge-AI compute (Synaptics)
~19% non-GAAP margin (targeting 40%)

Power + sensing chips → $

CUSTOMERS

Automotive / EV (51%; Geely, NIO, China)
Industrial (28%; energy, factory automation)
AI data center (hyperscalers via Flex Power)
Distributors 54% (one ~12%)

Moat Assessment: MODERATE

A real analog/power/sensing design-in moat. onsemi has vertically integrated silicon-carbide (it grows its own crystal), a high-margin analog franchise (AMG at ~51% gross margin, Treo at 60–70%), and multi-year automotive qualifications that make designs sticky — a genuine moat above commodity manufacturing.
The "only broad-based US power supplier" edge. In AI data center power, onsemi covers the full power tree (grid-to-processor) in silicon, SiC and GaN — content that jumps ~10× per rack at 800V — and the pending Synaptics deal adds edge-AI compute for "Physical AI."
But it's deeply cyclical and concentrated. Revenue just fell ~27% peak-to-trough; ~80% of sales are autos and industrial; it competes with Infineon, TI and STMicroelectronics; and the AI-power (~$500M) and Synaptics pivots are early — so we rate the moat MODERATE.

Stock vs. Earnings — 5-Year Performance

Stock $95.96, up ~109% over 5 years and +29% over 2 — but the real move is recent: it troughed near $41 in early 2025 and more than doubled, hitting ~$134 in May before settling at ~$96.
The earnings base is deeply cyclical: trailing non-GAAP operating profit peaked near $2.9B in 2022, fell to ~$1.1B at the 2025 trough, and is now recovering to $1,318M — with margins halved from ~34% to ~19%.
The multiple re-rated on the recovery: P/E ran from a mid-cycle ~12–23× to ~33x — but that's on depressed trough earnings, pricing a full recovery plus the AI-power ramp.

Chart 1: Stock vs TTM Operating Profit & Free Cash Flow

Past 5-Year Key Drivers

The auto/EV + silicon-carbide cycle. onsemi rode surging EV and industrial content (it's a SiC leader with vertically integrated crystal growth), peaking in 2022 at ~34% margins before the cycle turned.
The downturn + FabRight. Revenue fell ~27% peak-to-trough (2023–25) on the EV/industrial correction; onsemi cut ~3,000 jobs and rationalized fabs to protect cash and margins.
The AI-data-center-power pivot. Repositioning its power portfolio (SiC/GaN/Vcore) for AI data centers — plus the Synaptics deal — reframed onsemi from a cyclical auto-chip maker into an AI-infrastructure and "Physical AI" story.

Quarterly Key Metrics

USD	Q2'24	Q3'24	Q4'24	Q1'25	Q2'25	Q3'25	Q4'25	Q1'26	Q2'26E	Q3'26E
Quarter End	Jun 2024	Sep 2024	Dec 2024	Mar 2025	Jun 2025	Sep 2025	Dec 2025	Mar 2026	Jun 2026	Sep 2026
Stock	$68.55	$74.39	$63.46	$40.94	$52.93	$49.76	$54.24	$55.66	$94.54	$95.96
Stock QoQ	-7%	9%	-15%	-35%	29%	-6%	9%	3%	70%	2%
Rev YoY	-17%	-19%	-15%	-22%	-15%	-12%	-11%	5%	12%	27%
OM%	28%	28%	27%	18%	17%	19%	20%	19%	20%	20%
R40	10%	9%	12%	-4%	2%	7%	9%	24%	32%	47%
TTM OP	$2,365M	$2,152M	$1,974M	$1,697M	$1,475M	$1,276M	$1,120M	$1,145M	$1,221M	$1,318M
TTM OP QoQ	-8%	-9%	-8%	-14%	-13%	-13%	-12%	2%	7%	8%
FCF/OP	37%	49%	61%	83%	87%	106%	127%	103%	113%	108%
Debt/EBITDA	1.1x	1.2x	1.3x	1.4x	1.6x	1.8x	1.7x	1.5x	1.5x	1.5x
P/E	15x	17x	16x	12x	17x	18x	23x	22x	35x	33x

Recent Stock Performance & Drivers

Stock $95.96, up ~29% over two years — but it troughed near $41 in early 2025 and more than doubled, hitting ~$134 in May before settling at ~$96.
Three narratives drove it: the cyclical bottom (Q1's first positive revenue), AI-data-center power (revenue doubling), and the ~$7B Synaptics "Physical AI" acquisition.
At ~33× on depressed trough earnings, the stock prices a full recovery to the 53% gross-margin / 40% operating-margin model plus the AI-power ramp — a lot of optimism for a cyclical chipmaker.

Opportunities

AI data center power. Revenue guided to double to ~$500M in 2026, with content per rack rising ~10× at 800V ($9,500 → $115,000) as onsemi's full power-tree portfolio (SiC/GaN/Vcore) wins across hyperscalers.
The cyclical + margin recovery. Automotive turned positive (+5%), utilization is climbing (68% → 77%), and management guides sequential margin expansion toward a 53% gross-margin / 40% operating-margin model.
Synaptics / Physical AI. The ~$7B all-stock deal adds edge-AI compute and connectivity, grows the addressable market $30B, and — accretive within 18 months — repositions onsemi from components to intelligent systems.

Challenges

Deep cyclicality + concentration. Revenue fell ~27% peak-to-trough; ~80% of sales are autos and industrial, and the auto recovery is content-driven (no restocking yet) with EV demand still uncertain.
Trough-earnings valuation. At ~33× on depressed earnings, the stock prices a full recovery plus the AI-power ramp; any stumble in either is expensive.
Early, competitive pivots. The AI-power business is still ~$500M (~8% of revenue) against Infineon, Vicor and Monolithic Power, and the Synaptics deal (closing mid-2027) carries integration and dilution risk (~12% new shares).

Next 12 Months

Recovery + margin delivery. Whether revenue keeps re-accelerating (2H > 1H) and margins step up toward the model, quarter after quarter.
AI-power doubling. Whether AI-data-center revenue actually doubles to ~$500M and the 800V content ramp materializes with hyperscaler wins.
Synaptics progress. Shareholder + regulatory approvals toward a mid-2027 close, and early integration signals.

Next 12-24 Months

The 53% / 40% model. Whether utilization recovery, FabRight and mix actually restore peak-like margins — the core of the bull case.
AI-power scale + Physical AI. Whether AI data center reaches the 10–15% of revenue peers imply, and whether Synaptics' edge-AI compute makes "Physical AI" a real system-level franchise.
Cyclical durability. Whether autos and industrial sustain a multi-year up-cycle on rising semiconductor content, or roll over again.

Core Metrics Scorecard

	Q4'21	Q1'22	Q2'22	Q3'22	Q4'22	Q1'23	Q2'23	Q3'23	Q4'23	Q1'24	Q2'24	Q3'24	Q4'24	Q1'25	Q2'25	Q3'25	Q4'25	Q1'26	Q2'26E	Q3'26E
	Dec21	Mar22	Jun22	Sep22	Dec22	Mar23	Jun23	Sep23	Dec23	Mar24	Jun24	Sep24	Dec24	Mar25	Jun25	Sep25	Dec25	Mar26	Jun26	Sep26
R40 > 40%	✅	✅	✅	✅	✅															✅
R40 accelerate		✅		✅									✅		✅	✅	✅	✅	✅	✅
TTM OP QoQ > 10%	✅	✅	✅	✅
TTM OP QoQ accelerate		✅													✅		✅	✅	✅	✅
TTM FCF/OP > 60%	✅	✅	❌	✅	❌	❌	❌	❌	❌	❌	❌	❌	✅	✅	✅	✅	✅	✅	✅	✅
Debt/EBITDA < 3.5	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅
Total passes	4	6	3	5	2	1	1	1	1	1	1	1	3	2	4	3	4	4	4	5
Stock QoQ	+47%	-5%	-21%	+23%	-1%	+31%	+13%	+1%	-10%	-12%	-7%	+9%	-15%	-35%	+29%	-6%	+9%	+3%	+70%	+2%
P/E ttm	23x	17x	12x	13x	12x	16x	18x	18x	16x	15x	15x	17x	16x	12x	17x	18x	23x	22x	35x	33x

onsemi is a high-quality but deeply cyclical analog/power chipmaker. At the 2022 peak it scored 6/6 with a Rule-of-40 of 65% and a ~34% operating margin; through the 2023–25 downturn it collapsed to 1 pass with negative R40 and a halved margin — the scorecard maps the cycle almost perfectly.
The recovery is now showing. Passes are back to 4–5 and R40 has climbed from negative to the 20s (heading toward the 40s in the estimates) as revenue turns positive and margins expand — an early-cycle inflection.
The one constant strength is cash. Free-cash-flow conversion stayed above 100% even in the trough (FabRight cut capex to ~6% of revenue), funding a buyback that ran at ~160% of free cash flow at the lows — the quality that carried onsemi through the downturn.

Chart: R40 vs Stock Price (Since 2020)

Chart: Scorecard Total Passes vs Stock Price (Since 2020)

Source: SEC EDGAR annual and quarterly filings, company earnings conference calls and presentations.

Disclaimer: This report is for educational purposes only. NO investment advice.