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ON Q2 Earnings Call Signals AI-Led Demand and Margin Lift
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Key Takeaways
ON expects 2026 AI data center revenues to more than double, with silicon carbide sales up nearly 60%.
ON guides third-quarter revenues to $1.65B-$1.75B and gross margin to 40%-42% as utilization rises.
ON's lead times reached about 32 weeks as book-to-bill stayed above 1 and some orders extended into 2028.
ON Semiconductor Corporation (ON - Free Report) used its second-quarter 2026 earnings call to emphasize AI data center demand, tighter supply and operating leverage from higher factory utilization.
CEO Hassane El-Khoury raised the 2026 AI data center outlook to more than double last year, while CFO Thad Trent guided to sequential third-quarter revenue and gross-margin growth. Pricing, capacity and automotive demand dominated the Q&A.
ON Raises the AI Data Center Outlook
El-Khoury said AI data center remains onsemi’s fastest-growing market, supported by wins and more content across the power tree.
He cited an expanded NVIDIA MGX role, two Great Wall platform wins and designs supporting AWS power supplies and battery backup systems. He expects AI data center silicon carbide revenues to rise nearly 60% in 2026.
A Needham analyst asked whether revenues could exceed a $500 million level discussed earlier. El-Khoury declined to give a new figure but stressed that growth is sustained and spans high-voltage infrastructure through low-voltage delivery near the processor.
onsemi Sees a Margin Step-Up in Q3
CFO Trent guided third-quarter revenues to $1.65-$1.75 billion, non-GAAP gross margin to 40%-42% and non-GAAP earnings to 81 cents-93 cents per share.
Second-quarter non-GAAP earnings of $0.74 topped the Zacks Consensus Estimate of $0.72. Revenues of $1.60 billion also exceeded the $1.59 billion consensus mark.
ON Semiconductor Corporation Price, Consensus and EPS Surprise
Trent said utilization rose to 83% from 77%, with the profit benefit reaching the income statement after about two quarters. He maintained that each utilization point can add 25 to 30 basis points to gross margin, assuming a consistent mix.
ON Addresses Supply and Capacity Constraints
Trent said average lead times extended to about 32 weeks from 27 weeks, while book-to-bill remained significantly above 1. Some customers are ordering into 2027 and, in certain cases, 2028.
El-Khoury said onsemi prioritized AI data center power products over automotive and industrial shipments. He described the issue as timing because wafer-to-finished-goods cycles can take four to six months.
A Morgan Stanley analyst asked about capacity limits. Trent said utilization in the low 90% range is fully loaded, and capacity would not become a concern until revenues are 25% to 30% above the current run rate.
onsemi Keeps Auto Stable as China Gains Build
El-Khoury characterized automotive demand as stable and said onsemi is shipping to end demand after the inventory correction. Automotive revenues were $781 million, down 2% sequentially on European seasonality but up 7% year over year.
First-half automotive revenues in China rose 13%, even as total vehicle sales declined 4%. He expects China automotive silicon carbide revenues to increase 60% to 70% in 2026.
A BofA Securities analyst asked whether pricing actions extend to automotive customers. El-Khoury said increases are being applied across markets to offset higher substrate, gold and other input costs, not to create a near-term margin lift.
ON Broadens the Power and Sensing Strategy
El-Khoury said AI investment is also lifting energy infrastructure demand. He expects energy storage system revenue to grow about 40% in 2026, led by North American microgrid customers.
The company released an EliteSiC hybrid module with 99.3% efficiency and began sampling a 500-kilowatt platform with 20% greater power density. He also highlighted Treo connectivity and sensing products as a source of design wins at favorable margins.
The planned Synaptics acquisition would add connected-compute capabilities to onsemi’s power, sensing and control portfolio. El-Khoury expects the transaction to close in mid-2027, subject to customary approvals.
ON Enters the Second Half With Discipline
Management paired demand confidence with inventory and spending discipline. El-Khoury said onsemi is monitoring sell-through and channel inventory to avoid producing ahead of customer consumption.
Trent’s priorities remain supply catch-up, margin expansion and Fab Right execution. He expects those actions to produce about $35 million of annualized savings, with initial benefits in 2027.
Style Scores complement the Zacks Rank, with the strongest combinations generally pairing a Zacks Rank #1 or #2 (Buy) with A or B scores. ON’s current mix provides a favorable momentum signal but weaker support from the other styles. The Zacks Rank can change as estimates are revised after the just-reported results.
View the Zacks #1 Rank List
Image: Bigstock
ON Q2 Earnings Call Signals AI-Led Demand and Margin Lift
Key Takeaways
ON Semiconductor Corporation (ON - Free Report) used its second-quarter 2026 earnings call to emphasize AI data center demand, tighter supply and operating leverage from higher factory utilization.
CEO Hassane El-Khoury raised the 2026 AI data center outlook to more than double last year, while CFO Thad Trent guided to sequential third-quarter revenue and gross-margin growth. Pricing, capacity and automotive demand dominated the Q&A.
ON Raises the AI Data Center Outlook
El-Khoury said AI data center remains onsemi’s fastest-growing market, supported by wins and more content across the power tree.
He cited an expanded NVIDIA MGX role, two Great Wall platform wins and designs supporting AWS power supplies and battery backup systems. He expects AI data center silicon carbide revenues to rise nearly 60% in 2026.
A Needham analyst asked whether revenues could exceed a $500 million level discussed earlier. El-Khoury declined to give a new figure but stressed that growth is sustained and spans high-voltage infrastructure through low-voltage delivery near the processor.
onsemi Sees a Margin Step-Up in Q3
CFO Trent guided third-quarter revenues to $1.65-$1.75 billion, non-GAAP gross margin to 40%-42% and non-GAAP earnings to 81 cents-93 cents per share.
Second-quarter non-GAAP earnings of $0.74 topped the Zacks Consensus Estimate of $0.72. Revenues of $1.60 billion also exceeded the $1.59 billion consensus mark.
ON Semiconductor Corporation Price, Consensus and EPS Surprise
ON Semiconductor Corporation price-consensus-eps-surprise-chart | ON Semiconductor Corporation Quote
Trent said utilization rose to 83% from 77%, with the profit benefit reaching the income statement after about two quarters. He maintained that each utilization point can add 25 to 30 basis points to gross margin, assuming a consistent mix.
ON Addresses Supply and Capacity Constraints
Trent said average lead times extended to about 32 weeks from 27 weeks, while book-to-bill remained significantly above 1. Some customers are ordering into 2027 and, in certain cases, 2028.
El-Khoury said onsemi prioritized AI data center power products over automotive and industrial shipments. He described the issue as timing because wafer-to-finished-goods cycles can take four to six months.
A Morgan Stanley analyst asked about capacity limits. Trent said utilization in the low 90% range is fully loaded, and capacity would not become a concern until revenues are 25% to 30% above the current run rate.
onsemi Keeps Auto Stable as China Gains Build
El-Khoury characterized automotive demand as stable and said onsemi is shipping to end demand after the inventory correction. Automotive revenues were $781 million, down 2% sequentially on European seasonality but up 7% year over year.
First-half automotive revenues in China rose 13%, even as total vehicle sales declined 4%. He expects China automotive silicon carbide revenues to increase 60% to 70% in 2026.
A BofA Securities analyst asked whether pricing actions extend to automotive customers. El-Khoury said increases are being applied across markets to offset higher substrate, gold and other input costs, not to create a near-term margin lift.
ON Broadens the Power and Sensing Strategy
El-Khoury said AI investment is also lifting energy infrastructure demand. He expects energy storage system revenue to grow about 40% in 2026, led by North American microgrid customers.
The company released an EliteSiC hybrid module with 99.3% efficiency and began sampling a 500-kilowatt platform with 20% greater power density. He also highlighted Treo connectivity and sensing products as a source of design wins at favorable margins.
The planned Synaptics acquisition would add connected-compute capabilities to onsemi’s power, sensing and control portfolio. El-Khoury expects the transaction to close in mid-2027, subject to customary approvals.
ON Enters the Second Half With Discipline
Management paired demand confidence with inventory and spending discipline. El-Khoury said onsemi is monitoring sell-through and channel inventory to avoid producing ahead of customer consumption.
Trent’s priorities remain supply catch-up, margin expansion and Fab Right execution. He expects those actions to produce about $35 million of annualized savings, with initial benefits in 2027.
Zacks Signals for ON
ON carries a Zacks Rank #3 (Hold). Its Momentum Score is B, while its Value, Growth and VGM Scores are D, showing stronger momentum than its other style readings. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Style Scores complement the Zacks Rank, with the strongest combinations generally pairing a Zacks Rank #1 or #2 (Buy) with A or B scores. ON’s current mix provides a favorable momentum signal but weaker support from the other styles. The Zacks Rank can change as estimates are revised after the just-reported results.