Back to top

Image: Bigstock

Will Onto Innovation's Cash Balance Fuel Its Next Growth Phase?

Read MoreHide Full Article

Key Takeaways

  • Onto Innovation's cash reserves and operating cash flow support its next growth phase.
  • ONTO invested about $720M in Rigaku to advance X-ray process control solutions.
  • ONTO's revenues surged 35.3% year over year, but rising costs and supply-chain pressures remain key concerns.

Onto Innovation Inc.’s (ONTO - Free Report) cash balance provides ample financial flexibility to pursue growth opportunities across advanced packaging, metrology and AI infrastructure.

The company had $1.9 billion in cash and short-term investments at the end of the second quarter of 2026, supported by its recent financing activities and improving operational performance

In May, ONTO issued $1.5 billion of 0% convertible notes due in 2031. The financing generated about $1.2 billion in net cash after $300 million worth of share repurchases, capped calls and transaction costs.

Onto Innovation generated $62 million in cash from operations during the quarter. Quarterly revenues of $343.1 million rose 35.3% year over year and nearly 18% sequentially.

Onto Innovation Inc. Cash and Equivalents (Quarterly)

Onto Innovation Inc. Cash and Equivalents (Quarterly)

Onto Innovation Inc. cash-equivalents-quarterly | Onto Innovation Inc. Quote

The company is leveraging its financial resources to strengthen the technology portfolio and capitalize on the growing opportunities. In August 2026, Onto Innovation completed its approximately $720 million acquisition of a 27% equity stake in Rigaku Holdings Corporation. This move is intended to accelerate joint development of next-generation X-ray-based process control solutions for semiconductor manufacturing. Onto Innovation will account for the stake at fair value option and will not consolidate Rigaku’s results.

On the last earnings call, management highlighted that the estimates for the semiconductor X-ray technology market is approximately $1 billion at present, with increasingly complex 3D transistor and packaging technology expected to create additional opportunities.

Onto Innovation Inc. Total Long Term Debt (Quarterly)

Onto Innovation Inc. Total Long Term Debt (Quarterly)

Onto Innovation Inc. total-long-term-debt-quarterly | Onto Innovation Inc. Quote

However, the $1.5 billion convertible senior notes introduce financial obligations that could limit future flexibility. Although the zero-coupon structure eliminates regular interest payments, the notes mature in 2031 and require cash settlement of the principal if converted.

Further, the Rigaku investment represents a significant financial commitment. Rising expenses (certain material input costs, fuel surcharge and freight), increasing inventory requirements and supply-chain pressures also warrant monitoring amid intense competition in the semiconductor space.

Mapping the Competitive Terrain

KLA Corporation (KLAC - Free Report) remains a formidable competitor. The company ended fiscal 2026 with $4.9 billion in cash, cash equivalents and marketable securities. During the June quarter, KLA generated $906 million in operating cash flow and $817 million in free cash flow, while returning $876 million to its shareholders.

It is also investing in manufacturing capacity and next-generation product development to capitalize on AI-driven semiconductor demand. KLA expects advanced packaging process control systems’ revenues to reach approximately $1.1 billion in calendar 2026, up more than 70% year over year. However, at the end of fiscal 2026, the company had long-term debt of $5.89 billion.  

Nova Ltd. (NVMI - Free Report) ended second-quarter 2026 with more than $1.7 billion in cash and investments, providing flexibility for strategic growth initiatives, research and development (“R&D”) and selective acquisitions. The company invests approximately 15% of revenues in R&D and recently expanded its California cleanroom, doubling U.S. manufacturing capacity.

In September, Nova authorized a share repurchase program up to $200 million, underscoring its focus on shareholder returns. Growing adoption of the Nova WMC platform and continued investment in AI-driven metrology solutions strengthen its competitive position.

ONTO Price Performance, Valuation and Estimates

ONTO’s shares have gained 8.5% in the past month, underperforming the Zacks Nanotechnology industry’s growth of 11.3%.

Zacks Investment Research
Image Source: Zacks Investment Research

On a forward price-to-earnings basis, ONTO’s shares trade at 24.1X, higher than the industry’s 4.66X.

Zacks Investment Research
Image Source: Zacks Investment Research

The Zacks Consensus Estimate for ONTO has moved up for both 2026 and 2027 over the past 60 days.

Zacks Investment Research
Image Source: Zacks Investment Research

Onto Innovation currently holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Published in