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How to Approach Onto Innovation Stock Ahead of Q3 Earnings?
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Key Takeaways
Onto Innovation expects Q3 revenue of $380-$400 million, with EPS guidance of $2.18-$2.38.
Advanced-packaging growth, AI chips and HBM demand support ONTO's outlook, with 2026 growth projected at 80%.
A record $1.1 billion backlog and expanding margins support growth, but customer concentration poses a risk.
Onto Innovation (ONTO - Free Report) is set to report earnings for the third quarter of 2026 on Nov. 9, after the closing bell.
The Zacks Consensus Estimate for third-quarter earnings per share (EPS) is pinned at $2.27, suggesting a jump of 146.7% from the year-ago quarter’s figure. The company expects non-GAAP EPS between $2.18 and $2.38.
The consensus mark for revenues is pegged at $390.7 million, indicating a 79.1% rise from the year-earlier quarter’s actuals.
ONTO’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, while missing once, with the average surprise being 5.5%.
Image Source: Zacks Investment Research
ONTO’s Earnings Whispers
Our proven model does not predict an earnings beat for Onto Innovation this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is not the case here.
Earnings ESP: ONTO has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Strong momentum in advanced packaging and semiconductor process control is likely to have aided ONTO’s third-quarter performance, with rising demand for AI chips, HBM and advanced logic devices strengthening its growth outlook. However, a sharp pullback in ONTO shares has raised questions about whether the stock offers an attractive buying opportunity ahead of results or whether investors should wait for greater clarity.
Onto Innovation reported a record backlog exceeding $1.1 billion in the second quarter, providing greater visibility into future demand. Driven by robust demand and strong execution, Onto Innovation raised its second-half 2026 revenue, margin and EPS outlook. Building on a strong first half, it expects second-half revenue to grow more than 25%, with third-quarter revenue of $380–$400 million and further growth in the fourth quarter.
At the midpoint, revenue guidance implies another sequential increase of roughly 14%, suggesting demand remains exceptionally strong. Despite ongoing cost headwinds, including higher material, fuel and freight expenses, it expects gross margin to expand by another 50 basis points (bps) in each of the third and fourth quarters. ONTO expects gross margin to be between 57.3% and 57.8%. It expects operating margin to improve 200 bps to 31.5-32.5% in the third quarter. It expects GAAP EPS of $1.54 to $1.70 and GAAP operating margin of 21.4% to 22.4%.
For the third quarter, we expect revenue at $390.3 million. Advanced packaging remains a major growth catalyst for Onto Innovation as chipmakers adopt increasingly complex packaging architectures to support AI accelerators and high-performance computing. In the second quarter, its Dragonfly-led inspection business grew 30% sequentially, backed by demand from 2.5D logic and HBM applications. Management also raised its full-year 2026 advanced-packaging growth outlook to approximately 80% from 50% previously.
Image Source: Zacks Investment Research
Onto Innovation also secured more than $200 million in Dragonfly orders from a single OSAT partner, with most deliveries expected in 2027. This highlights the potential for continued growth beyond the current quarter. Demand for advanced logic and memory devices is another important growth driver. Onto Innovation's advanced-node revenue surged 50% sequentially in the second quarter to a record level, supported by stronger demand across logic and memory customers. Continued strength in these markets could help sustain revenue growth and improve the company's product mix.
Its collaboration with Rigaku and expanding silicon photonics opportunity, targeting a serviceable addressable market of approximately $500 million by 2027, could provide additional growth avenues. In August, Onto Innovation closed its investment in Rigaku Holdings, acquiring a 27% minority stake from Atom Investment, L.P., an affiliate of Carlyle, for approximately $720 million. The 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 under the fair value option and will not consolidate Rigaku’s results.
Nonetheless, Onto Innovation faces risks from changing trade policies, tariffs, imported material costs and freight expenses, which could pressure margins despite ongoing efficiency improvements. Customer and geographic concentration also remain concerns, with four customers accounting for 57.3% of first-half 2026 revenue and Taiwan and South Korea representing significant sales markets. Any slowdown in major customers' capital spending or regional disruption could affect shipments, collections and revenue growth.
Additionally, intense competition, rising R&D expenses, customer qualification requirements and acquisition-related costs could weigh on profitability. The Semilab business continues to incur operating losses, highlighting integration and execution challenges as Onto Innovation expands its product portfolio.
ONTO Stock vs. Industry
ONTO’s shares have plunged 48.8% in the past month compared with the Zacks Nanotechnology industry’s fall of 48.2%. The company has also underperformed the Zacks Computer and Technology sector and the S&P 500 composite’s fall of 18.2% and 6.1%, respectively.
Image Source: Zacks Investment Research
ONTO’s tough competitors include KLA Corporation (KLAC - Free Report) , Camtek Ltd (CAMT - Free Report) and Nova Ltd. (NVMI - Free Report) . KLAC has fallen 34.1%, while CAMT and NVMI declined 39.7% and 25.8%, respectively, over the same period.
ONTO’s Valuation
In terms of forward price/earnings, ONTO’s shares are trading at 13.97X, higher than the industry’s 2.73X.
Image Source: Zacks Investment Research
KLAC, CAMT and NVMI are trading at multiples of 21.3X, 20.71X and 22.7X, respectively.
ONTO Before Q3 Earnings: Buy, Sell or Hold?
Strong AI-driven demand, rising advanced-packaging sales, a record backlog and expanding margins support Onto Innovation's growth outlook. Its growing opportunities in HBM, advanced nodes and silicon photonics could drive further revenue and earnings growth, making the stock attractive for long-term investors now.
View the Zacks #1 Rank List
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How to Approach Onto Innovation Stock Ahead of Q3 Earnings?
Key Takeaways
Onto Innovation (ONTO - Free Report) is set to report earnings for the third quarter of 2026 on Nov. 9, after the closing bell.
The Zacks Consensus Estimate for third-quarter earnings per share (EPS) is pinned at $2.27, suggesting a jump of 146.7% from the year-ago quarter’s figure. The company expects non-GAAP EPS between $2.18 and $2.38.
The consensus mark for revenues is pegged at $390.7 million, indicating a 79.1% rise from the year-earlier quarter’s actuals.
ONTO’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, while missing once, with the average surprise being 5.5%.
Image Source: Zacks Investment Research
ONTO’s Earnings Whispers
Our proven model does not predict an earnings beat for Onto Innovation this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is not the case here.
Earnings ESP: ONTO has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: ONTO currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors to Note for ONTO’s Q3 Performance
Strong momentum in advanced packaging and semiconductor process control is likely to have aided ONTO’s third-quarter performance, with rising demand for AI chips, HBM and advanced logic devices strengthening its growth outlook. However, a sharp pullback in ONTO shares has raised questions about whether the stock offers an attractive buying opportunity ahead of results or whether investors should wait for greater clarity.
Onto Innovation reported a record backlog exceeding $1.1 billion in the second quarter, providing greater visibility into future demand. Driven by robust demand and strong execution, Onto Innovation raised its second-half 2026 revenue, margin and EPS outlook. Building on a strong first half, it expects second-half revenue to grow more than 25%, with third-quarter revenue of $380–$400 million and further growth in the fourth quarter.
At the midpoint, revenue guidance implies another sequential increase of roughly 14%, suggesting demand remains exceptionally strong. Despite ongoing cost headwinds, including higher material, fuel and freight expenses, it expects gross margin to expand by another 50 basis points (bps) in each of the third and fourth quarters. ONTO expects gross margin to be between 57.3% and 57.8%. It expects operating margin to improve 200 bps to 31.5-32.5% in the third quarter. It expects GAAP EPS of $1.54 to $1.70 and GAAP operating margin of 21.4% to 22.4%.
For the third quarter, we expect revenue at $390.3 million. Advanced packaging remains a major growth catalyst for Onto Innovation as chipmakers adopt increasingly complex packaging architectures to support AI accelerators and high-performance computing. In the second quarter, its Dragonfly-led inspection business grew 30% sequentially, backed by demand from 2.5D logic and HBM applications. Management also raised its full-year 2026 advanced-packaging growth outlook to approximately 80% from 50% previously.
Image Source: Zacks Investment Research
Onto Innovation also secured more than $200 million in Dragonfly orders from a single OSAT partner, with most deliveries expected in 2027. This highlights the potential for continued growth beyond the current quarter. Demand for advanced logic and memory devices is another important growth driver. Onto Innovation's advanced-node revenue surged 50% sequentially in the second quarter to a record level, supported by stronger demand across logic and memory customers. Continued strength in these markets could help sustain revenue growth and improve the company's product mix.
Its collaboration with Rigaku and expanding silicon photonics opportunity, targeting a serviceable addressable market of approximately $500 million by 2027, could provide additional growth avenues. In August, Onto Innovation closed its investment in Rigaku Holdings, acquiring a 27% minority stake from Atom Investment, L.P., an affiliate of Carlyle, for approximately $720 million. The 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 under the fair value option and will not consolidate Rigaku’s results.
Nonetheless, Onto Innovation faces risks from changing trade policies, tariffs, imported material costs and freight expenses, which could pressure margins despite ongoing efficiency improvements. Customer and geographic concentration also remain concerns, with four customers accounting for 57.3% of first-half 2026 revenue and Taiwan and South Korea representing significant sales markets. Any slowdown in major customers' capital spending or regional disruption could affect shipments, collections and revenue growth.
Additionally, intense competition, rising R&D expenses, customer qualification requirements and acquisition-related costs could weigh on profitability. The Semilab business continues to incur operating losses, highlighting integration and execution challenges as Onto Innovation expands its product portfolio.
ONTO Stock vs. Industry
ONTO’s shares have plunged 48.8% in the past month compared with the Zacks Nanotechnology industry’s fall of 48.2%. The company has also underperformed the Zacks Computer and Technology sector and the S&P 500 composite’s fall of 18.2% and 6.1%, respectively.
Image Source: Zacks Investment Research
ONTO’s tough competitors include KLA Corporation (KLAC - Free Report) , Camtek Ltd (CAMT - Free Report) and Nova Ltd. (NVMI - Free Report) . KLAC has fallen 34.1%, while CAMT and NVMI declined 39.7% and 25.8%, respectively, over the same period.
ONTO’s Valuation
In terms of forward price/earnings, ONTO’s shares are trading at 13.97X, higher than the industry’s 2.73X.
Image Source: Zacks Investment Research
KLAC, CAMT and NVMI are trading at multiples of 21.3X, 20.71X and 22.7X, respectively.
ONTO Before Q3 Earnings: Buy, Sell or Hold?
Strong AI-driven demand, rising advanced-packaging sales, a record backlog and expanding margins support Onto Innovation's growth outlook. Its growing opportunities in HBM, advanced nodes and silicon photonics could drive further revenue and earnings growth, making the stock attractive for long-term investors now.