ON Semiconductor Corporation

Q3 revenue was $1.72 billion, up 7% sequentially and 11% year over year. Non-GAAP gross margin was 41.2%, up 190 basis points quarter over quarter, and GAAP gross margin was 41.4%. Non-GAAP diluted EPS was $0.90; GAAP EPS was $0.79. Q3 revenue by end market: automotive $777 million (down 1% sequentially and year over year), industrial $467 million (up 10% sequentially and 9% year over year), AI data center $180 million (up 39% sequentially and 175% year over year), and other end markets $299 million (up 11% sequentially and 10% year over year). For Q4, revenue is expected to be $1.715 billion to $1.815 billion, non-GAAP gross margin 41.5% to 43.5%, and non-GAAP EPS $0.95 to $1.07. Full-year AI data center revenue is expected to be about $620 million in 2026. Capex is expected to be about 2% of revenue for the full year and $40 million to $50 million in Q4.

Hassane El-Khoury said the company is seeing continued strength across its strategic growth markets, with AI data center accelerating faster than expected, industrial improving, and automotive gaining content despite near-term supply constraints. He framed the quarter as validation of onsemi’s focus on power density and differentiated power/sensing solutions, pointing to new wins, new product ramps, and broader customer adoption across the power tree. He also sounded increasingly constructive on the business trajectory, saying the company is building toward stronger earnings and cash generation.

Thad Trent highlighted that the business is converting revenue growth into operating leverage: Q3 revenue was $1.72 billion, non-GAAP gross margin was 41.2%, and free cash flow was $489 million, or 28% of revenue. Cash and short-term investments were about $4.4 billion, total liquidity was $5.9 billion, inventory declined to 186 days on a days basis, and capex was only $28 million in Q3, with full-year capex expected at about 2% of revenue. He said Q4 gross margin should expand to 41.5% to 43.5% on higher utilization, favorable mix, and pricing, and noted the Ferric acquisition is $600 million plus up to $175 million in earn-outs, with the intent to delever quickly after the Synaptics deal and remain opportunistic on buybacks.

Analysts focused on why automotive is being held back and whether that risks share loss. Management said it is a short-term, supply-driven decision, not a strategic deemphasis, and stressed that end demand is still being supported while replenishment is delayed until supply comes online, with automotive expected to return to normalized levels in Q1 and then back to long-term growth in 2027. Questions also centered on AI data center growth, gross margin expansion, and Ferric; management said AI data center is scaling through the full power tree, that utilization and mix are key margin drivers, and that Ferric’s IVR technology adds best-in-class transient response, z-height, and integration for next-generation AI processors.