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The end of the earnings season is always a good time to take a step back and see who shined (and who didn’t). Let’s take a look at how analog semiconductors stocks fared in Q2, starting with onsemi (NASDAQ:ON). Demand for analog chips is generally linked to the overall level of economic growth, as analog chips serve as the building blocks of most electronic goods and equipment. Unlike digital chip designers, analog chip makers tend to produce the majority of their own chips, as analog chip production does not require expensive leading edge nodes. Less dependent on major secular growth drivers, analog product cycles are much longer, often 5-7 years. The 14 analog semiconductors stocks we track reported a very strong Q2. As a group, revenues beat analysts’ consensus estimates by 1.8% while next quarter’s revenue guidance was 4.9% above. Amidst this news, share prices of the companies have had a rough stretch. On average, they are down 5.8% since the latest earnings results. Spun out of Motorola in 1999 and built through a series of acquisitions, onsemi (NASDAQ:ON) is a global provider of analog chips specializing in autos, industrial applications, and power management in cloud data centers. onsemi reported revenues of $1.60 billion, up 9.2% year on year. This print exceeded analysts’ expectations by 0.9%. Overall, it was a strong quarter for the company with a beat of analysts’ EPS estimates and a meaningful improvement in its inventory levels. Investor expectations, however, were likely higher than Wall Street’s published projections, leaving some wishing for even better results (analysts’ consensus estimates are those published by big banks and advisory firms, not the investors who make buy and sell decisions). The stock is down 10% since reporting and currently trades at $72.39. Is now the time to buy onsemi? Access our full analysis of the earnings results here, it’s free. Founded in 1997 by its longtime CEO Michael Hsing, Monolithic Power Systems (NASDAQ:MPWR) is an analog and mixed signal chipmaker that specializes in power management chips meant to minimize total energy consumption. Monolithic Power Systems reported revenues of $980.6 million, up 47.6% year on year, outperforming analysts’ expectations by 8.6%. The business had an incredible quarter with a significant improvement in its inventory levels and a beat of analysts’ EPS estimates. Monolithic Power Systems pulled off the biggest analyst estimate beat, highest guidance raise, and fastest revenue growth among its peers. Although it had a fine quarter compared to its peers, the market seems unhappy with the results as the stock is down 6.5% since reporting. It currently trades at $1,231. Is now the time to buy Monolithic Power Systems? Access our full analysis of the earnings results here, it’s free. Taiwan-based Himax Technologies (NASDAQ:HIMX) is a leading manufacturer of display driver chips and timing controllers used in TVs, laptops, and mobile phones. Himax reported revenues of $227.4 million, up 5.9% year on year, exceeding analysts’ expectations by 2%. Still, it was a slower quarter as it posted EPS in line with analysts’ estimates. The stock is flat since the results and currently trades at $13.48. Read our full analysis of Himax’s results here. Founded by two MIT graduates, Ray Stata and Matthew Lorber in 1965, Analog Devices (NASDAQ:ADI) is one of the largest providers of high performance analog integrated circuits used mainly in industrial end markets, along with communications, autos, and consumer devices. Analog Devices reported revenues of $4.02 billion, up 39.6% year on year. This number beat analysts’ expectations by 2.6%. It was a very strong quarter as it also recorded revenue guidance for next quarter exceeding analysts’ expectations and an impressive beat of analysts’ operating income estimates. The stock is down 5.9% since reporting and currently trades at $354.50. Read our full, actionable report on Analog Devices here, it’s free. Serving major consumer electronics manufacturers, Universal Display (NASDAQ:OLED) is a provider of organic light emitting diode (OLED) technologies used in display and lighting applications. Universal Display reported revenues of $152.2 million, down 11.4% year on year. This result lagged analysts’ expectations by 3.6%. Overall, it was a mixed quarter for the company. Universal Display had the weakest performance against analyst estimates and slowest revenue growth in the group. The stock is up 2.5% since reporting and currently trades at $82.38. Read our full, actionable report on Universal Display here, it’s free. Over the past year, investors have been forced to repeatedly answer the same question: what is the market’s biggest risk? The answer has changed several times, and each shift has reshaped market leadership. Late in 2025 and early 2026, artificial intelligence became the market’s primary uncertainty. Investors questioned whether AI would erode software pricing power and weaken competitive moats as AI made it easier to replicate once-differentiated products. By the spring, technology took a back seat to geopolitics. The U.S. conflict with Iran briefly became the market’s dominant narrative, raising concerns about oil prices, inflation, and global growth. But as energy markets remained orderly and fears of a prolonged supply disruption faded, investors quickly turned their focus back to fundamentals. Want to invest in winners with rock-solid fundamentals? Check out our Top 5 Quality Compounder Stocks and add them to your watchlist. 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Image source: The Motley Fool. Tuesday, Aug. 4, 2026 at 8:00 a.m. ET Vice President of Investor Relations and Corporate Development - Parag Agarwal President and Chief Executive Officer - Hassane El-Khoury Chief Financial Officer - Thad Trent Operator: Good day, and thank you for standing by. Welcome to the onsemi Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Parag Agarwal, Vice President of Investor Relations and Corporate Development. Parag Agarwal: Thank you, Josh. Good afternoon, and thank you for joining onsemi's Second Quarter Results Conference Call. I am joined today by Hassane El-Khoury, our President and CEO; and Thad Trent, our CFO. This call is being webcast in the Investor Relations section of our website at www.onsemi.com. A replay of this webcast, along with our second quarter earnings release, will be available on our website approximately 1 hour following this conference call, and the recorded webcast will be available for approximately 30 days following this conference call. Additional information is posted on the Investor Relations section of our website. Our earnings release and this presentation include certain non-GAAP financial measures. Reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures and a discussion of certain limitations when using non-GAAP financial measures are included in our earnings release, which is posted separately on our website in the Investor Relations section. During the course of this conference call, we'll make projections or other forward-looking statements regarding future events or the future financial performance of the company. We wish to caution that such statements are subject to risks and uncertainties that could cause actual events or results to differ materially from projections. Important factors that can affect our business, including factors that could cause actual results to differ materially from our forward-looking statements, are described in our most recent Form 10-Ks, Form 10-Qs and other filings with the Securities and Exchange Commission and in our earnings release for the second quarter. Our estimate or other forward-looking statements might change, and the company assumes no obligation to update forward-looking statements to reflect actual results, change assumptions or other events that may occur except as required by law. Now let me turn it over to Hassane. Hassane? Hassane El-Khoury: Thank you, Parag. Good afternoon, and thank you for joining us on the call. Our second quarter results reflect the progress we have made in reshaping the business and our technology portfolio over the past several years and the strengthening demand environment. As we anticipated, the recovery continued to take shape during the quarter with continued strength in our AI data center business. We also saw multiple indicators of strengthening demand with China BEVs and automotive, for example, and energy infrastructure and medical and industrial already showing over market growth. Supply is tightening in several growth areas, lead times are extending, and we are seeing increases in both orders placed within lead time and customer escalations, all signs of a healthy recovery across the board. In Q2, we delivered $1.6 billion of revenue, non-GAAP gross margin of 39.3% and non-GAAP diluted earnings per share of $0.74, all above the midpoint of our guidance. These results reflect the operating leverage in our model with recovering demand, driving accelerated margin expansion and earnings growth. AI data center remains our fastest-growing market. We now expect AI data center revenue to more than double in 2026, driven by stronger demand, further accelerated by broader customer wins and expanding content across the entire Power Tree. We have expanded our role in the NVIDIA MGX ecosystem to supply advanced power systems designed to support the next generation of AI data centers, broadening the number of platforms where our intelligent power solutions are designed in. In addition, we secured 2 power supply platform wins with Great Wall, a leading provider of power solutions for China's cloud and AI infrastructure market. In parallel, we continue to add content in U.S. hyperscalers AI deployments with design wins supporting AWS power supply and battery backup systems. These wins create additional content opportunities for our differentiated high-voltage power portfolio, including silicon carbide solutions and reflect the value of our higher power efficiency and superior power density in next-generation AI power architectures. In 2026, we expect our silicon carbide revenue in AI data center applications to grow nearly 60% year-over-year. We expect our high-voltage revenue to accelerate as power requirements continue to rise and system architectures evolve towards 800-volt DC distribution, driving greater adoption of our intelligent power solutions from high-voltage infrastructure through low-voltage power delivery. As the only broad-based U.S. power semiconductor supplier with technologies spanning the full AI Power Tree, we are uniquely positioned to support this transition from the grid all the way to the processor. Importantly, this is not a position we earned overnight. It is the result of years of investment in solving complex power challenges, particularly in automotive, where power efficiency, thermal management, reliability and system integration have long been critical design requirements. Our opportunity extends beyond the data center into the power infrastructure required to support AI deployments. In our industrial business, we are increasingly seeing the benefits of the AI halo effect where AI growth is driving demand across the power infrastructure required to support it, including energy storage systems or ESS. We expect our ESS revenue to grow approximately 40% year-over-year in 2026, driven by higher year-over-year growth in North America with microgrid customers. During the quarter, we released our next-generation EliteSiC hybrid ESS module, delivering industry-leading 99.3% efficiency. We also began sampling our industry-first and the world's highest power density hybrid module platform at 500 kilowatts, which increases power density by 20% compared to our previous platform, delivering growth at accretive gross margins. Growth in AI workloads and increasing grid reliability and resilience requirements are expanding our industrial portfolio into higher-value infrastructure markets with greater semiconductor content. Turning to automotive. We continue to expand our content per vehicle through a growing portfolio of differentiated power, sensing and connectivity solutions. In China, our automotive revenue increased 13% in the first half of '26 over the same period last year against a total vehicle sales number that was down 4%, supported by expanding content per vehicle with customers like Geely Zeekr and Xiaomi. With our market share gains in China EVs, we now expect silicon carbide revenue in that market to increase between 60% and 70% year-over-year as our market share gains continue and programs ramp across existing platforms and newer vehicle launches. In the U.S., we continue to gain share across EV disruptors with a recent example of our power content on Rivian's R2 platform, where our MOSFETs support power distribution throughout the vehicle's zonal controller architecture, while our silicon carbide solutions are deployed in the onboard charging system. These wins highlight our ability to participate across multiple vehicle domains as EV architectures continue to evolve. The demands of next-generation vehicle architecture around efficiency, power density and reliability increasingly mirror the challenges being addressed in AI infrastructure and energy systems, enabling onsemi to leverage decades of power expertise across multiple growth markets. A growing share of our recent design wins are coming from products introduced over the last 2 years, including our 10BASE-T1S Ethernet offering and our inductive and ultrasonic sensing products, reflecting the increasing contribution of Treo, our analog-mixed-signal platform, at favorable margins. By leveraging common technology building blocks across automotive, industrial and AI infrastructure applications, Treo enables faster innovation cycles and more efficient product development. We remain on track to double the number of products sampling this year, further strengthening our pipeline and positioning us to capture additional content opportunities as vehicle architectures evolve. Over a multiyear period, we expect to outgrow underlying vehicle production through content expansion, technology leadership and shared gains. More broadly, across automotive, industrial and AI data center, the industry is moving toward architectures requiring higher levels of power efficiency, power density and system intelligence, all of which place greater demands on power conversion, delivery and management. This is what we do. As we look ahead, our confidence in the second half is grounded in the momentum we are seeing across our key growth drivers. We now expect AI data center revenue to more than double for the year. At the same time, the AI halo effect continues to create incremental growth opportunities across energy infrastructure, where we expect ESS revenue to grow by approximately 40% this year. In automotive, we continue to gain content and share, particularly in China, where automotive silicon carbide revenue is expected to grow between 60% and 70%. As I wrap up, I want to highlight our announced agreement to acquire Synaptics. Beyond the compelling strategic and financial rationale, we are excited about the opportunities this combination creates for all shareholders. Synaptics' market-leading connected compute capabilities complement our strength in power, sensing and control at accretive gross margins. Our combination would leverage our manufacturing scale, global sales channel and mass market engine to drive growth across our highly complementary portfolio. We expect the transaction to close in mid-2027, subject to customary approvals. Let me now turn the call over to Thad to provide more details on our results and guidance for the third quarter. Thad Trent: Thanks, Hassane. Our second quarter results demonstrate the operating leverage in our model, with revenue up 9% year-over-year and non-GAAP earnings per share growing approximately 4x faster than revenue. Free cash flow nearly quadrupled and non-GAAP gross margin expanded for the fourth consecutive quarter. This reflects the earnings power of our focused portfolio, the benefits of our manufacturing cost actions, and we are entering the second half of the year from a position of strength as demand continues to recover. Our results were above the midpoint of our guidance range as we delivered revenue of $1.6 billion, driven by increasing demand in AI data center. Non-GAAP gross margin expanded 80 basis points sequentially to 39.3%, while non-GAAP earnings per share increased to $0.74. We generated $425 million of free cash flow in Q2 and returned $332 million to shareholders through share repurchases. Year-to-date, we have returned approximately 105% of free cash flow. Our ability to simultaneously invest for growth, expand profitability and return capital reflects the structural improvements in our business and differentiates onsemi today. Turning back to revenue for the quarter. Q2 revenue was $1.6 billion, up 6% sequentially and above normal seasonality even as we completed the final $35 million of planned non-core revenue exits. Across the business, our overall book-to-bill ratio has been significantly above 1 for several quarters and continued to strengthen. Given the accelerated ramp in AI data center demand, we prioritized shipments to AI data center over automotive and industrial. We expect this to normalize as supply rebalances to match demand. Automotive revenue was $781 million in the second quarter, down 2% quarter-over-quarter and grew 7% year-over-year. Consistent with previous years, the sequential decline was primarily driven by specific customer seasonality in Europe, offset by strength in China. Year-to-date, automotive revenue increased approximately 6% compared to 2025. Industrial revenue was $423 million, up 1% sequentially and 4% year-over-year, driven by strength in our focus areas of energy infrastructure, medical and factory automation, partially offset by declines in traditional part of the industrial market. Total revenue for the other category in the second quarter was $400 million, up 34% sequentially, anchored by stronger-than-expected AI data center demand as well as growth in other end markets. Our AI data center business continued to grow in Q2, and 2026 is now on pace to more than double compared to 2025. Looking at the second quarter split between the business units. Revenue for the Power Solutions Group, or PSG, was $829 million, an increase of 13% quarter-over-quarter and 19% year-over-year. Revenue for the Analog and Mixed Signal Group, or AMG, was $546 million, an increase of 1% quarter-over-quarter and 2% decrease year-over-year. Revenue for the Intelligent Sensing Group, or ISG, was $229 million, a 3% decrease quarter-over-quarter and a 7% increase over the same quarter last year. Moving to gross margin. GAAP gross margin was 38.4% and non-GAAP gross margin was 39.3%, an increase of 80 basis points sequentially. We benefited from improved manufacturing performance and favorable mix. Utilization increased to 83% from 77% as we continue to quickly ramp production to support the increasing backlog for future quarters. In Q3, we expect utilization to be flat to up. We are seeing incremental increases in input costs, primarily in raw materials and external manufacturing. We are implementing a second round of price increases to offset these costs and expect to see the benefit over the next several quarters. The announced divestitures of our Mountain Top and Philippines manufacturing facilities further advances our Fab Right strategy of exiting subscale legacy operations to improve our cost structure. We expect approximately $35 million of annualized savings with the initial benefit starting in 2027 and the full savings realized in 2028. This represents approximately 50 basis points of the 200 basis points of gross margin improvement from our planned Fab Right initiatives. GAAP operating expenses were $358 million, including $41 million in restructuring expenses and non-GAAP operating expenses were $297 million. GAAP operating margin for the quarter was 16.1% and non-GAAP operating margin was 20.8%. Our GAAP tax rate was 16% and non-GAAP tax rate was 15%. GAAP earnings per share was $0.56. Non-GAAP earnings per share was $0.74, a 16% increase over the prior quarter. GAAP share count was 404 million shares and non-GAAP share count was 397 million shares. Turning to the balance sheet. Cash and short-term investments was approximately $3.9 billion with total liquidity of $5.4 billion, including $1.5 billion undrawn on our revolver. Cash from operations was $460 million and free cash flow was $425 million. We achieved record free cash flow margin on an LTM basis of 24%. Capital expenditures were $34 million or 2.1% of revenue. Inventory declined 9 days to 192 days and flat on a dollar basis. As expected, we continue to drain our strategic inventory, which is down 8 days. Our base inventory declined 1 day to 125 days, reflecting a healthy level of inventory supporting our expected revenue growth. Distribution inventory declined to 10.1 weeks from 10.8 weeks in Q1, with sell-through outpacing sell-in and our mass market revenue increased 20% sequentially. Looking forward, let me provide the key elements of our non-GAAP guidance for the third quarter. As a reminder, today's press release contains a table detailing our GAAP and non-GAAP guidance. We anticipate Q3 revenue will be in the range of $1.65 billion to $1.75 billion. Our non-GAAP gross margin is expected to be between 40% and 42%, which includes share-based compensation of $8 million. This represents a significant step-up function increase as we realize the benefit of increasing utilization since the start of the year. Given the improving demand outlook, we expect sequential gross margin expansion throughout the year. Non-GAAP operating expenses are expected to be between $303 million and $318 million, which includes share-based compensation of $33 million. Operating expenses are expected to increase at a slower pace than revenue, supporting continued operating leverage as we grow into our model. We anticipate our non-GAAP other income to be a net benefit of $18 million with our interest income exceeding interest expense. We expect our non-GAAP tax rate to be approximately 15% and our non-GAAP share count is expected to be approximately 395 million shares. This results in non-GAAP earnings per share in the range of $0.81 to $0.93. At the midpoint, EPS growth would outpace revenue by nearly 3x. We expect capital expenditures in the range of $40 million to $50 million, and we now expect capital expenditure for the year to be below 5% of revenue. In closing, the actions we have taken to reshape the company have created a structurally stronger and more efficient business, and we believe we are still in the early stages of realizing the full benefit of our model. We are entering the second half of the year from a position of strength with a stronger demand environment, a more focused portfolio and additional manufacturing efficiencies still ahead of us, we remain confident in our ability to drive sustainable value for our shareholders. We look forward to sharing more with you during our Analyst Day in New York on September 16. With that, I'll turn the call back over to Josh to open it up for questions. Operator: [Operator Instructions] Our first question comes from Vivek Arya with Bank of America Securities. Vivek Arya: Hassane, I was hoping you would give us some more color on the automotive environment. Sales were down slightly sequentially, maybe some of it was because of exits. But how should we think about in the context of the 6% sequential you're guiding, how you expect your automotive business to do in Q3? And then what is kind of the typical seasonality in Q4? And the reason I want to ask about autos is that does the pricing lever apply to autos also? Because I imagine you are exposed to large OEMs and Tier 1s, so do you get the same benefit of pricing even when dealing with the automotive customers? So just commentary on demand and pricing and sequentials would be helpful. Hassane El-Khoury: Yes. Let me -- there's a lot to unpack here, Vivek. So let me take it and if I miss any, just prompt me again. So overall, the quarter came in exactly as we expected. We still are -- believe we're shipping to true demand now that the inventory is behind us. So that's what we see as true demand. Of course, regionally, automotive behaves very, very differently. I talked about some of the strength with share gains in North America. China is doing very well for us. All came in kind of where we expected. Q2 for us, if you look historically in '24 and '25, Q2 is a seasonally typically down quarter. I think the numbers for the last few years have been like 11% down and a 4% down. So Q2 is not -- is, again, seasonality given a couple of key customers in Europe specifically. Outside of that, we see the demand environment kind of stable. We see us maintaining our content gains with new products we are introducing, whether it's the Treo starting to ramp in some of the zonal architectures already or silicon carbide, which we are expecting growth with a stellar growth coming out of China, again, based on the competitive nature of the share gains we have -- I have talked about here on these calls. So overall, we see automotive kind of, how do you say, very stable with a good outlook. As far as the pricing is concerned, pricing for us is not really market-driven because the price -- the cost increases that we are seeing are, I want to call it, material in nature, material, meaning substrates or gold or a lot of it is -- applies regardless of market. And therefore, yes, our pricing actions that Thad and I both talked about last quarter are offsetting those costs across all of our markets. We do have some surgical cost increases where we see strength or we see really allocation. But in general, where we're offsetting cost, that's across the board, including automotive. Vivek Arya: Got it. For my follow-up, maybe one for Thad on gross margins. So Thad, the gross margins went up about 80 basis points, although I think utilization you mentioned went up almost 800 basis points. So is it that a bulk of that benefit you get to see in Q3? What kind of utilization should we assume for Q3? And what is the effect of mix and pricing? And I ask these questions because if I go back to the levels of revenue we saw for on towards the end of '24, it was in this $1.7-ish billion quarterly range, and your gross margins were already in the mid-40s. So I imagine that, that was a different time versus what we have. So just help us think through the effect of utilization mix and pricing for your current trajectory of gross margins. Thad Trent: Yes, Vivek, for the Q2 gross margin, you actually need to go back and look at the Q4 utilization because remember, there's about 2 quarter for utilization to hit the P&L. So in Q4, utilization actually dropped 6 percentage points from Q3 to Q4. So that would have been a headwind to Q2. So we actually offset that headwind with favorable mix primarily, and we saw that coming because our guide was 39%. We came in at 39.3%, so better than we expected. But we saw that favorable mix that we guided to. There really wasn't much of a margin impact at all from pricing because of the input costs that Hassane just walked through. So you can think about anything we did in pricing in the second quarter really didn't give a bump to the gross margin. The utilization increases now here in Q2 that we see going up will obviously impact us in the future quarters, right? So you can think about Q2 hitting Q4. So that's why we're very confident that you'll see additional gross margin expansion through the rest of this year as utilization has been consistently going up since Q4. So as the market improves, as the utilization continues to go up as we catch up supply to demand just because demand has moved so quickly, we'll be able to see that, that benefit coming through the P&L for the remainder of the year. Operator: Our next question comes from Timothy Arcuri with UBS. Timothy Arcuri: Thad, I just wanted to follow up on that comment on gross -- or sorry, on utilization tailwind to gross margin. So is the right rubric still to think like 30 bps per point of utilization. So all things equal between now and Q4, the increase in utilization should drive margin up by, I don't know, 150 basis points to 200 basis points. Is that kind of the right way to think about it? Thad Trent: Yes. The math is 25 basis points to 30 basis points of gross margin improvement for every point of utilization. So as we look into Q4, yes, you should expect a margin increase, all things being equal, that's assuming a consistent mix, those types of things. Now again, we had a richer mix here in Q2. So just keep that in mind. We saw that coming. But yes, we will see additional margin expansion in Q4. Timothy Arcuri: Okay. And then just with respect to the exits. So I think you exited $35 million you said in the second quarter. Can you just talk about, do you still see $300 million for the full year? It sounded like you made a comment that it's done now that the exits are done. So can you just walk through all that? Thad Trent: Yes. The exits are done. So the $35 million was the Q2 impact. So if you take what we did for Q1, Q2 and you annualize it, you get to roughly about $300 million for the year because that doesn't -- obviously, those don't repeat in Q3 and Q4. So the exits are behind us now. We won't be talking about that going forward. It was $35 million for the quarter, and that's it for the year. And that really, if you go back to when we map this out, it's about $900 million of annual revenue that we've exited over the last few years. So right on target to what we expected. Operator: Our next question is from Joe Quatrochi with Wells Fargo. Joseph Quatrochi: You talked about like prioritizing data center demand over auto industrial in the quarter. Was that any sort of impact to revenue? Or how do we think about that dynamic? Hassane El-Khoury: Yes. I mean, obviously, when we have some technologies specifically in power, where we have constraint, we did see some orders come in, what I would say, within lead time, and we had to make priority calls. So we did shift some, not just automotive specifically, but we did prioritize AI data center that took away from our other businesses in the short term as manufacturing really catches up to the updated signals of demand. So we made those calls within the quarter. You saw that strength in AI data center. We expect that AI data center, of course, to continue strength during the year. So it's not just a temporary Q2, meaning we got the gain. We got the designs. We will continue to ramp and then our manufacturing output will catch up to the, call it, automotive and industrial. So overall, we made those calls within the quarter. That's the long-term beneficial for the company, and we didn't have really a customer impact in the short term, but it is something that we're catching up to here in the third and fourth quarter. Joseph Quatrochi: And then just maybe as a follow-up, any sort of help in just thinking about the subsegments of the business looking into 3Q on the guidance front? Thad Trent: Yes. As you look forward, we expect auto to be up low single digits, industrial to be relatively flat, and we expect other, which has our AI data center to be up high teens. Those are all percentagewise. Operator: Our next question comes from Quinn Bolton with Needham & Company. Quinn Bolton: I guess maybe just following up on that sort of guide. Other was up $100 million sequentially. It looks like it will be up several tens of millions. But the third quarter guide, that certainly implies a pretty healthy AI data center business. I know you guys are saying it's going to more than double, but is it going to be significantly higher than the previous $500 million target you talked about last quarter? I mean how much better than $500 million do you think you can do? Certainly, it seems like if all of the strength in other in Q2, Q3 is coming from AI data center, you've got a data center business with $500 million. Hassane El-Khoury: I'll let you run the numbers. But I mean, the fact that we started with not disclosing to doubling now more than doubling, I would just say, highlights of the momentum we are gaining, which is not a surprise. We've always said the AI data center is coming in exactly where our technology is the most competitive. and we're going to win on our technology -- on the baseline of our technology, and that's what you're seeing. We're not breaking it out beyond that at this point, but we are seeing momentum, we're seeing strength. And like you said, it is sustained strength. It's not a quarterly strength. And by the way, just projecting more forward -- forward-looking as we get to the 800-volt DC transition, that's going to fuel more of our content. So we're excited about where we are. Our investments have delivered to the market today, and our investment will continue to deliver in that market. Quinn Bolton: A follow-up question. I think in the prepared comments, you mentioned that -- I think you said it was your North American silicon carbide business for data center PSUs would be up 60% to 70%. I guess I would have thought that silicon carbide was one of your lead products in the data center business, which is now likely to be more than double year-on-year. And so just wondering, was that comment specific to North America? Or is there a reason silicon carbide maybe growing slower than the rest of the data center business? Or maybe asked a different way, what's leading to that growth in data center if it's not silicon carbide based? Hassane El-Khoury: Yes. I've always said our growth in data center is literally from the wall to the core. We do not have a single technology that isn't outsized across the power tree, which gives us a very good distribution from what I call the high voltage because it's not only silicon carbide MOSFETs, we have silicon carbide JFETs, and we have silicon as well all the way to, I'd say, the SPS, which is right at the XPU. Our data center revenue is very, I would say, very equal across all of them. So the growth that we are seeing in AI data center is not necessarily anchored on the high voltage. We are gaining share and ramping close to the core as well. But all of it is growing. And those are -- by the way, those are all consistent with what we've said as far as wins that we've talked about over the last couple of quarters are now starting to ramp and contribute revenue. Silicon carbide is specifically that -- now silicon carbide, obviously, we've made the investment thesis on automotive that's still winning in China, both in AI data center and automotive specifically. And my commentary is more on we're seeing that growth now in North America, in PSUs and so on where high voltage comes in. But it is not only a silicon carbide story for us in AI data center. It's really across the board. Operator: Our next question comes from Christopher Rolland with Susquehanna. Christopher Rolland: Yes. In regard to the AI opportunity, and I know you've hit a lot of this, but it was a considerable increase in the slide deck for the AI DC TAM. I think you went from $12 billion to almost $50 billion in that number. You also talked about an expanded role in NVIDIA MGX as well as a hyperscale opportunity, I believe, for battery backup at AWS. I guess, first of all, can you talk about that increase in the TAM and what from a product basis is expanding that almost fourfold. Hassane El-Khoury: Yes. Yes, a couple of things. So if you look at the number, the number we're anchoring on is 2030. And the projection we are basing on the increase is really correlated to a -- I'm going to call it, a gigawatt scale that would be installed by 2030. And if you take the installed base of power and compute that is really projected in 2030 and you backtrack and convert that to really installation of power that we need at a data center side or a rack side, and we use our content per rack, that's where the increase happens. So that's point number one is just the volume that is proportional to the gigawatt increase that we've seen. This is purely, call it, market data. We do see the correlation with market data, and we're using that data to backfill into our content. Point number two, because that -- my second point is more on across the board, not just on AI data center, our TAM has increased, and that is really a factor of we have targeted, we have invested and we have been introducing products that we did not have last time we updated this a few years ago in our Analyst Day. And as we turn those investments into opportunities and those markets now start coming into the investments that we've made into the last couple of years, we're starting to see that increase. Of course, it's high in the AI data center given the content growth that I talked about, 10x on the high voltage, for example, but also our TAM is increasing across the board. You can think about vertical GaN, you can think about additional opportunities with Treo. You can think about some of our silicon carbide JFET that is both finding its way in the data center, but also the industrial halo, solid-state circuit breakers, solid-state power disconnect and, and, and. All of these are opportunities that did not exist even a few years ago. And when you add all of them up, that is the opportunity in front of us, and that is the investment we have already made in products that we have been delivering, and that's the next 5 years for us. So stay tuned, and we'll love to see you at Analyst Day. Christopher Rolland: I will certainly be there, Hassane. The other big change here, I think, was the EV TAM that went from like $26 billion to $63 billion. Very interested as to what's driving that. Obviously, the silicon carbide opportunity. I think maybe there was a zonal architecture commentary as well. But what else is almost doubling that EV TAM for you guys? Hassane El-Khoury: So you can take a look at it where before, as you get more and more penetration of the EV and more of the acceleration of the EV, remember, we've talked about 2 things in electrification. One is EVs as a higher percent of SAAR. And number two is the acceleration given the -- I guess, the financial side of silicon carbide and the advancements we've made there that silicon carbide, which is the opportunity for us is a higher percent of penetration within the EVs from your standard silicon. And the other one, which we've talked about here about some designs that we have won both in China and North America on the hybrid, where we've always thought hybrid will remain as a silicon or IGBT. And given our competitive nature and what we've introduced and the extended range of hybrids that OEMs are looking for, that's content that we have, again, within the same area that we have products for already. So that's part of our increased TAM. And you mentioned it in addition to a lot of the Treo opportunities that we've had with 10BASE-T1S ultrasonic sensing and, and, and plus a lot of the onboard charging, one of which I highlighted here, which are all coming into our technology domain. So all of these, again, we took a very fresh view of where the market is and is headed given the trends and the technologies we have. And that's -- you can think about it as a bottoms-up TAM adjustment that we've done as part of our work for Analyst Day and our strategic work we have been performing to refine and deploy our strategy. Operator: Our next question comes from Blayne Curtis with Jefferies. Blayne Curtis: I actually want to go back, I think, a prior question. The growth in other of $100 million, I just want to make sure that was a correct statement that data center was the primary driver there before you were giving out percent of revenue. I don't know if you can just dial us in a little bit better. I want to make sure that, that is the source of the growth. Thad Trent: The AI data center was the primary driver, but the other markets were also up. So it wasn't 100% AI data centers. But that was -- as a percentage was the highest growth in that bucket. Blayne Curtis: Got you. And then, Thad, I wanted to ask, you mentioned lead times were extending. I was wondering if you could kind of give us a context of what that means. And then I guess you're talking about prioritization. I'm kind of just curious on the utilization, keeping it flat. Is it just a mix issue that you couldn't improve those deliverables? Or I'm just trying to understand -- walk us through the flat utilization. Thad Trent: Yes. The -- let me start with the lead time. So lead times stretched out from about 27 weeks to somewhere around 32 weeks on average. That's across the entire portfolio. We have some that are shorter, some that are longer, obviously. But we did see lead time stretching out. As Hassane said, we're seeing a lot of orders inside of lead time, a lot of escalations kind of points to, I guess, kind of a healthy environment, demand environment, which kind of gives us that indication of the future. And I mentioned the book-to-bill continues to improve. So we're getting better visibility even into '27, and we've got, in some situations, some customers ordering out into '28, trying to lock up supply. In terms of the utilization, look, we've had to increase utilization very sharply to reflect the increase in demand that we've seen, sharp, right? So if you think about a cycle time, a fab cycle time all the way through from beginning a wafer to a finished goods, it can be 4 to 6 months. And so you've kind of got to get that -- you've got to ramp it and then you can catch up with demand. So that's where we expect that happening. Now if the demand continues to increase beyond what we're seeing, we'll continue to take that utilization up. But right now, we believe we can catch up, and that's why utilization doesn't have to go up at least in the next quarter. Operator: Our next question comes from Tom O'Malley with Barclays. Thomas O'Malley: I just wanted to complete the deep dive on gross margins. I know you've gotten a bunch here, but the last remaining component there is depreciation. If you look at depreciation in the quarter, I think it was at a low for over the past 2 years plus. I just want to make sure nothing changed there. And then as you look forward, obviously, you're going to see this utilization step up. But anything unexpected from a depreciation side or anything expected that we can look at September, December? I know that like you've kind of trended in this mid-600 basis points range. Anything changing there just because I know you are doing a lot of these exits that should naturally come down, I would imagine. Anything to help there? Thad Trent: Yes. No. Yes, Tom, so we did that -- we took capacity offline about 12%, right? And so that's starting to hit the depreciation as that capacity is coming offline. I would say the depreciation that you're seeing now is really kind of steady state at this point, right? And if you look at our CapEx, it's maintenance CapEx, I said that's going to be below our 5% target for this year. I think our target over multiple years is kind of in that mid-single-digit percentage range, but we're keeping it tight this year, and it's primarily maintenance. So no, no change to depreciation from kind of what you're seeing a steady state right now. Thomas O'Malley: And then just one if I could sneak it in on the disti side, I saw it stepped up a little bit. Traditionally, you see disti kind of aligned with China, so I saw that step up as well. Is that the right way to think about it? And is that more auto or industrial related? Any color on that step-up in disti would be helpful. Thad Trent: So the mass market actually increased 20% quarter-over-quarter. So you can think about a lot of that mass market tends to be industrial. There is some automotive in there. But it's -- I wouldn't call anything other than the mass market, and that's a good leading indicator, right? So we've been investing and putting inventory into the channel to satisfy that mass market. We're now seeing that happen with the 20% sequential growth in that revenue. Operator: Our next question comes from Tore Svanberg with Stifel. Tore Svanberg: I just had a follow-up on some of these capacity/utilization questions, Thad. So obviously, Fab Right strategy makes a lot of sense, but it sounds like you do have some delinquencies. So I'm just curious like why wouldn't you ramp the capacity utilization faster? And if you do get continued upside orders here, how much flexibility do you have with your external partners to keep ramping capacity? Hassane El-Khoury: Sorry, you cut out for like a few seconds in the middle, but I think I caught onto how would we reconcile divestitures with increasing demand to capture? Tore Svanberg: No, I was asking how much flexibility do you have with your external partners to ramp more capacity. Hassane El-Khoury: Yes. So external, obviously, everything is constrained, whether it's internal or external. When it comes to short lead time, we believe we have good capacity and good allocation coming from the outside. The issue is not really capacity of what we can support as far as max capacity or max revenue. It is how quickly the demand came in. We can service a lot of demand from die bank, but at some point, like Thad said, when we start a wafer today for an order that we got within the quarter that we didn't anticipate, you have a short-term allocation we have to deal with. That's both internal and external, even if you have the capacity secured is how quickly you are able to get to the capacity. So we feel comfortable about external supply. We're not fighting for a lot of the advanced nodes like on the compute side. Our capacity is well understood. A lot of our capacity is also internal. We still do over 60% on internal manufacturing at onsemi even with the divestitures. So all of these put together put us in a good place, and that's what Thad said. It's a short term where we're going to catch up. If demand continues to accelerate, we'll take utilization up. We're not capped out. It's just how quickly we get there. And in the short term, we just have to make these calls of prioritization until manufacturing output catches up. Thad Trent: Yes. Not all capacity is fungible, right? So we do have some supply constraints on certain lanes. That's where we've just got to catch up with that demand, and then we believe we can service it. Tore Svanberg: Yes, that makes sense. And as my follow-up, and Hassane, you talked about the power from grid to core. You talked about the content per rack, $15,000 going eventually to $115,000. How should we think about that journey? And will it be a gradual journey? Or is there like a step function maybe by -- I guess, is when 800-volt and maybe by 2028 when that market really starts to take off. But yes, any more color you could add there would be really helpful. Hassane El-Khoury: Yes. Yes, the content -- look, a rack that is -- an 800-volt DC rack with the backplane at 800-volt is a step function from a prior rack. You're not going to see that as far as revenue step function because remember, you have a build-out that's going to happen. So as these racks start to get deployed into newer data centers and whether older data centers will come in and how quickly they will retrofit and so on. So we model that into a gradual, but a very, very healthy growth trajectory or slope, if you will. But it's not going to be just a step function, but it is going to be a very aggressive longer-term growth that we see. And what you said is right, you can think about it as starting whatever people believe there's kind of a range that I give end of '27, beginning of '28, give or take a quarter. But that's kind of where it's going to start ramping and then mature somewhere depending on the build-out of the data center. So that's how we are looking at it from the time. But we're already starting to see some platforms. That's where they are designed in. So it's kind of starting to look like the content is justified the way we model it. And our content in those, you heard me talk about vertical GaN, JFET and so on. So you're starting to see a lot of that content really solves density and efficiency problems in these new architectures. Operator: Our next question comes from Jim Schneider With Goldman Sachs. James Schneider: In light of all the metrics you cited around lead times extending and everything else in terms of expedites, and normally, at this point in time, I would have thought you would see OEM customers' inventory start to expand or customers taking a little bit more risk on their own balance sheet. Is that something you're seeing yet at this point in the cycle or not quite yet in terms of absolute dollars or in terms of days? Hassane El-Khoury: No. I mean, obviously, I can't speak for our customers because that's unless they publicly talk about it. But we're not seeing -- from our perspective, we're not seeing an inventory build. We are seeing really consumption to demand, and that's why you see it in specifically, of course, in auto and industrial, we do believe we are shipping to end demand. And there are technologies where you would see that is where it's constrained, and we're making a lot of the hard decisions, which is, by the way, the same thing we've done back in COVID, where we decided this quarter to take inventory or days of inventory down in the channel, so we have very close control of potential inventory build. So we're very disciplined about this. We're excited about the signals in the market that I quoted. We're excited about the opportunity in AI data center, but we are maintaining a very disciplined and process-based KPI-based approach to our manufacturing and our deployment of resources. So we don't get ahead of it. By the way, you see that in our inventory position and the drain and so on across the board. All metrics look -- show a disciplined approach even in the backdrop of a strong market or stronger market. James Schneider: That makes sense. And then just in terms of the input cost increases you talked about, you mentioned increasing price to offset those input costs over the coming quarters. As you look into, for example, 2027, what are your suppliers telling you about further potential input cost increases? And maybe if you could handicap your level of confidence in staying ahead of those in terms of pricing or potentially significantly ahead of those? Hassane El-Khoury: Yes. So obviously, we have a very broad range. We have some suppliers where we have long-term views and we give long-term visibility, and we have long-term visibility for increase -- for potential increases that is coming. What I would say is the only consistent message I can say here is it's not going down. And given the fact that it's not going down, we are anticipating to make sure our business also reflects that whether from now because a lot of them will be effective in Q4 or telegraphing that in '27, we're not going to have any reductions or annual reductions and so on. So it's not a one size fits all, I would say, but we have visibility on where we're landing for '27, and we'll get more and more clarity as we get closer to that. But we have started these discussions. And I can tell you, nothing is coming down. And therefore, I'm not expecting a softer pricing environment in '27 either. Operator: Our next question comes from Joe Moore with Morgan Stanley. Joseph Moore: Utilization in the low 80s, how do you think that compares to some of your direct competitors? And if we sort of continue to get into a more supply-constrained environment, do you anticipate that you'd be able to take share given where you're sitting with capacity? Thad Trent: Yes, Joe, look, I don't want to comment about our competitors. I can tell you what we're doing in our business, right? Again, we've taken this utilization up quick in response to the snapback in demand. For us, getting to kind of in that low 90% with 92%, 93% is fully utilized. Once we get there, we start flexing to the outside. So there's a certain amount of our products today that we're manufacturing inside that we can take to the outside. So I don't think we're going to be limited. For us to really start to get to a point where we even think about getting capped out, revenue is still 25%, 30% higher than the run rate today. So we're not worried about that given our flexibility with our fab right and our ability to flex inside and outside. Hassane El-Khoury: And look, the focus for our growth and our new product introduction, think about Treo, for example, that investment in capacity is done. It's in East Fishkill. East Fishkill is not fully utilized. So we have the runway to ramp. So it's not -- like Thad said earlier, not everything is fungible, but the areas where we have growth and the areas we've invested in, those areas where we have runway, and we will continue to ramp aggressively across all markets. Joseph Moore: That's helpful. And then in terms of things getting tighter and starting to see some constraints, are there any specific areas that are more impacted than others? Any hotspots, silicon carbide different than everything else? Just any sense of where supply/demand might be different? Hassane El-Khoury: No, I think if you think about it across power, and it's not just high voltage because a lot of the -- for example, data center is consuming power, not just in the high voltage. I mentioned earlier, we're ramping everything from the wall all the way to the XPU and that is high voltage all the way to low voltage, and we see constraints in some of those lanes. We have one of the most efficient power products out there. So we're getting an outsized, and we're running it in multiple fabs now. So we're increasing our capacity and our flexibility to be able to service it. But that we are -- those lead times have extended, and we are working with customers on supporting it. We will win share where others cannot. But that's not how we're winning. We're winning because really the product is superior because if it's a multi-source product, you can imagine the margin is not as exciting, and that's not business we play in. That's the business we actually exited. So we are winning where our products provide a differentiation to our end customers, and that's what's consistent. You see that in silicon carbide. I called out China specifically, given that I keep talking about we always win across the board based on efficiencies and product. You see that in China, you see it in North America, and you've seen it in Europe. So that's our focus. That's our investment, and that's how the margin expansion will continue. Operator: Our next question comes from Vijay Rakesh with Mizuho. Vijay Rakesh: Just a quick question. On the AI data center side, I saw that $48 billion TAM, big increase in that opportunity there. Is there a way to look at it how that -- how your content breaks out between site power, the power in the rack and the compute rack as you broke out? Like what's the split of the opportunity set within that? Hassane El-Khoury: Yes, I'm going to give you an approximate. And the approximate is if you look at the numbers we've given as far as content per rack, and you think about high voltage, which I would put the first order in the side card going to 50% of the total, $115,000 of content, 50% of it is high voltage, 50% is medium and low voltage. That gives you that split 50-50. Today, on the $15,000 of content, that split between high voltage and then the rest is 70-30, 30 is high voltage, 70 is medium to low. So the increase from a dollar content is on the high-voltage side, but both are going up, one is going up 10x, one is going up like 5x to 6x. So both increasing, but an outsized increase is, of course, in the high voltage given the market trend we are talking about. Vijay Rakesh: Got it. And then on the -- when you look at your auto, industrial and data center other -- is there a way to look at how the order trends are by the different geographies? Like what are you seeing in U.S. versus Europe versus China, I guess? Hassane El-Khoury: Yes. I think if I take it in order, automotive specifically. Thad Trent: All 3. Hassane El-Khoury: All 3. Okay. It's like very, very different -- all 3. So I would say automotive, I'll just rank order. In auto, it's China, U.S., Europe. Industrial, I would say, China, U.S., Europe and AI data center is really U.S. and some China that I talked about with Great Wall on this call is starting for us as well, but primarily in the U.S. In Europe, you have, of course, the AI halo that I call out within our industrial business, not on AI data center, but it is an AI halo that's supporting it. I think that's kind of how you can think about it. Operator: I would now like to turn the call back over to Hassane El-Khoury, President and CEO, for closing remarks. Hassane El-Khoury: Thank you all for joining us today. Before we close, I'd like to recognize our employees around the world for their dedication, innovation and execution. The momentum we are seeing across our business, the opportunities ahead of us and our confidence in the future are all made possible by their hard work and commitment. On behalf of the leadership team, thank you for everything you do to serve our customers and move onsemi forward. Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect. Before you buy stock in ON Semiconductor, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and ON Semiconductor wasn’t one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years. 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As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has positions in and recommends Amazon and Nvidia. The Motley Fool recommends ON Semiconductor. The Motley Fool has a disclosure policy. ON Semiconductor (ON) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

onsemi’s second quarter performance was driven by surging demand in its AI data center segment and ongoing portfolio reshaping efforts. Management pointed to robust momentum in advanced power systems, particularly for AI workloads, and highlighted content expansion in automotive and energy infrastructure. CEO Hassane El-Khoury explained that, “AI data center remains our fastest-growing market,” noting wins with key hyperscalers and design-ins with leading global customers. The company also cited operational leverage as a factor in margin expansion. Is now the time to buy ON? Find out in our full research report (it’s free). Revenue: $1.60 billion vs analyst estimates of $1.59 billion (9.2% year-on-year growth, 0.9% beat) Adjusted EPS: $0.74 vs analyst estimates of $0.72 (3.5% beat) Adjusted Operating Income: $334.1 million vs analyst estimates of $326.8 million (20.8% margin, 2.2% beat) Revenue Guidance for Q3 CY2026 is $1.7 billion at the midpoint, above analyst estimates of $1.67 billion Adjusted EPS guidance for Q3 CY2026 is $0.87 at the midpoint, above analyst estimates of $0.84 Operating Margin: 16.1%, up from 13.2% in the same quarter last year Inventory Days Outstanding: 191, down from 200 in the previous quarter Market Capitalization: $31.6 billion While we enjoy listening to the management’s commentary, our favorite part of earnings calls is the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention. Vivek Arya (Bank of America Securities) asked about the stability of automotive demand and the applicability of recent pricing actions. CEO Hassane El-Khoury explained that pricing increases are being applied across all markets, including automotive, to offset input cost pressures. Timothy Arcuri (UBS) inquired about the impact of utilization improvements on gross margin and the timing of margin benefits. CFO Thad Trent clarified that margin expansion will track utilization increases, with the full effect realized over subsequent quarters. Joseph Quatrochi (Wells Fargo) sought clarity on the prioritization of AI data center shipments and potential revenue impact for automotive and industrial. El-Khoury confirmed that prioritization was necessary due to constraints but expects normalization as manufacturing catches up. Christopher Rolland (Susquehanna) questioned the substantial increase in the company’s total addressable market (TAM) for AI data centers and electric vehicles. El-Khoury attributed the TAM increase to greater projected power and compute installation and expanded product offerings, including new technologies. Tore Svanberg (Stifel) asked about supply chain flexibility and the pace of content growth in next-generation data center racks. El-Khoury noted that while capacity is adequate, rapid demand increases require short-term prioritization, and the transition to 800-volt systems will drive aggressive long-term growth. In the coming quarters, the StockStory team will be monitoring (1) the pace of AI data center revenue growth and associated design wins, (2) tangible margin improvement from higher utilization and cost control initiatives, and (3) expansion of automotive content, particularly in China’s EV segment and new U.S. platforms. Execution on price increases and manufacturing optimization will also be closely tracked. onsemi currently trades at $81.31, up from $80.40 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members). ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively. Find out which 5 stocks it’s flagging this month — FREE. Get Our Top 5 Growth Stocks for Free HERE. Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.

ON Semiconductor Corporation recently reported second-quarter 2026 results, with sales rising to US$1,603.5 million and diluted EPS from continuing operations increasing to US$0.56, and issued third-quarter guidance calling for US$1,650 million to US$1,750 million in revenue and diluted EPS of US$0.79 to US$0.91. The company coupled these results with record free cash flow margins, AI data center–driven growth, and completion of a US$677.63 million share repurchase program covering 2.24% of shares. Next, we’ll explore how the stronger AI data center momentum and upbeat guidance may reshape ON Semiconductor’s investment narrative. Capitalize on the AI infrastructure supercycle with our selection of the 55 best 'picks and shovels' of the AI gold rush converting record-breaking demand into massive cash flow. To own ON Semiconductor, you need to believe its pivot toward higher value power and sensing chips in EVs and AI data centers can offset pressure in more cyclical segments. The latest quarter’s AI data center driven upside and upbeat Q3 guidance support that near term catalyst, while ongoing exposure to auto demand cycles and manufacturing utilization remains a key risk that this report does not fully resolve. The completion of the US$677.63 million share repurchase program, covering 2.24% of shares, is particularly relevant here because it sits alongside record free cash flow margins and stronger AI data center demand. Together, these updates highlight how ON is using its improving cash generation during this AI ramp, even as it continues to work through portfolio exits and competitive pressures in silicon carbide and image sensing. But beneath the strong AI headlines, investors should still be aware of how underutilized capacity and auto exposure could impact margins and cash flow... Read the full narrative on ON Semiconductor (it's free!) ON Semiconductor's narrative projects $8.4 billion revenue and $2.3 billion earnings by 2029. This requires 11.4% yearly revenue growth and roughly a $1.7 billion earnings increase from $573.7 million today. Uncover how ON Semiconductor's forecasts yield a $113.52 fair value, a 41% upside to its current price. Some of the lowest analysts were assuming roughly US$8.0 billion of revenue and US$2.2 billion of earnings by 2029, yet they still see rising geopolitical and localization costs as powerful headwinds, a much more cautious view than the consensus that Q2’s AI strength alone might justify. Explore 4 other fair value estimates on ON Semiconductor - why the stock might be worth as much as 41% more than the current price! Disagree with existing narratives? Extraordinary investment returns rarely come from following the herd, so go with your instincts. A great starting point for your ON Semiconductor research is our analysis highlighting 1 key reward and 2 important warning signs that could impact your investment decision. Our free ON Semiconductor research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate ON Semiconductor's overall financial health at a glance. The market won't wait. These fast-moving stocks are hot now. Grab the list before they run: This technology could replace computers: discover 25 stocks that are working to make quantum computing a reality. Invest in the nuclear renaissance through our list of 88 elite nuclear energy infrastructure plays powering the global AI revolution. Uncover the next big thing with 21 elite penny stocks that balance risk and reward. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include ON. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

ON Semiconductor Corporation ON 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. 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. 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-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. 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. 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. 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. 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. 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. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report ON Semiconductor Corporation (ON) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Find winning stocks in any market cycle. Join 7 million investors using Simply Wall St's investing ideas for FREE. ON Semiconductor has delivered a strong 81.1% gain over the past five years, yet its latest valuation checks suggest the stock no longer looks like a clear bargain, with the Discounted Cash Flow (DCF) estimate sitting close to the current share price while market multiples lean expensive. Over the last 5 years, ON Semiconductor shares are up 81.1%, which puts more weight on whether today’s price already reflects much of that progress. Upcoming earnings and the planned Synaptics acquisition can shape expectations for future cash flows, while any disappointment in growth or integration progress may pressure the valuation investors are currently paying. ON Semiconductor passes only 1 of 6 valuation checks, which points to a stock that leans expensive on the broader measures rather than a clear-value opportunity. For investors, the debate is whether ON Semiconductor’s recent gains and mixed valuation signals leave enough room for further upside from here. ON Semiconductor delivered 70.2% returns over the last year. See how this stacks up to the rest of the Semiconductor industry. The Discounted Cash Flow (DCF) approach estimates what ON Semiconductor might be worth today based on its projected future cash generation. ON Semiconductor has latest twelve month free cash flow of about $744.7 million, and the model assumes that cash flows continue growing from this base rather than shrinking. Under these assumptions, the 2 Stage Free Cash Flow to Equity model points to an intrinsic value of about $74 per share. With the DCF indicating the stock trades around 8.3% above that estimate, ON Semiconductor screens as slightly overvalued on this cash flow view rather than clearly cheap. The upcoming second quarter earnings release and the planned Synaptics acquisition are already part of the story investors are pricing in, which helps explain why the current market price sits above the model’s value. Overall, ON Semiconductor appears roughly fairly valued on the DCF model, with only a mild tilt toward being overvalued at today’s price. ON Semiconductor is fairly valued according to our Discounted Cash Flow (DCF), but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act. Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for ON Semiconductor. The P/E ratio is a useful way to judge what you are paying for each dollar of ON Semiconductor earnings. ON Semiconductor currently trades at about 54.5x earnings, which sits slightly above the broader Semiconductor industry average of 52.0x. The fair P/E for ON Semiconductor, based on its profile, is estimated at about 40.0x. That is well below the current 54.5x. This suggests investors are paying a premium to what this framework points to as a more grounded level. ON Semiconductor also trades below a peer group average of 91.9x, although that peer figure can be skewed by companies with very high multiples. On balance, the company screens as priced more richly than the tailored fair P/E even if it is not at the very top of the peer range. Overall, ON Semiconductor appears overvalued on the P/E multiple relative to the fair ratio implied by its fundamentals and industry position. See what the numbers say about this price — find out in our valuation breakdown. Simply Wall St Narratives pick up where the ON Semiconductor valuation puzzle leaves off. They set out in plain terms what would need to happen to ON Semiconductor’s revenue, margins and earnings for the stock to be worth meaningfully more or less than today. Rather than rely on a single multiple or DCF output, each narrative lays out the assumptions behind its fair value so you can compare those to the company’s actual results over time on the Community page. One of the top community narratives on ON Semiconductor: 29% undervalued Read one of the top narratives on ON Semiconductor Do you think there's more to the story for ON Semiconductor? Head over to our Community to see what others are saying! For ON Semiconductor, the Discounted Cash Flow (DCF) view points to intrinsic value that sits slightly below the current share price, while the P/E comparison suggests the stock screens as overvalued relative to its tailored fair ratio. That mix, together with a low broader value score, indicates the shares no longer stand out as a clear value opportunity. From here, the key debate is whether ON Semiconductor can deliver the earnings and cash flow progress that would justify the current premium and keep the multiple from slipping back toward more moderate levels. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include ON. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

Microchip MCHP is set to report its first-quarter fiscal 2027 results on Aug. 6.For the to-be-reported quarter, MCHP expects revenues between $1.442 billion and $1.469 billion. The Zacks Consensus Estimate for revenues is pegged at $1.46 billion, suggesting 35.39% growth from the figure reported in the year-ago quarter.Microchip expects non-GAAP earnings in the 67-71 cents per share range. The consensus mark for earnings is pegged at 70 cents per share, up by a penny over the past 30 days. The company reported earnings of 27 cents per share in the year-ago quarter. Image Source: Zacks Investment Research MCHP’s earnings have surpassed the Zacks Consensus Estimate in all the trailing four quarters, with the average being 8.72%. Microchip Technology Incorporated price-eps-surprise | Microchip Technology Incorporated Quote Let us see how things have shaped up for the upcoming announcement. Microchip’s fiscal first-quarter results are expected to have benefited from improving demand across its major end markets, including industrial, automotive, communications, aerospace & defense and data center. The company indicated that customer inventory normalization was largely complete, with bookings strengthening across geographies and end markets. Higher distributor replenishment and increasing direct customer purchases are likely to have supported sequential revenue growth.The to-be-reported quarter’s results are expected to have been supported by robust bookings momentum and channel replenishment. MCHP highlighted that April bookings reached their highest monthly level in nearly four years, while distributor inventories remained near historical lows at roughly 26 days. Strong sell-through trends and distributors rebuilding inventory to support higher demand are expected to have contributed to top-line growth during the quarter.Strong demand for AI and data center infrastructure is expected to have remained a key growth driver. Microchip continues to benefit from increasing adoption of storage controllers, CXL memory controllers, PCIe switches and connectivity products. Growing design activity, expanding customer engagement and momentum across high-speed connectivity solutions likely supported revenues during the quarter.Higher factory utilization, lower inventory-related charges and disciplined cost management are expected to have driven margin expansion in the quarter. Management guided to improved gross margin of roughly 62.8% and operating margin of about 33.8% for the first quarter of fiscal 2027, reflecting operating leverage as revenue growth accelerated and inventory correction progressed. Microchip shares have inched up 18% year to date (YTD), underperforming the Zacks Computer and Technology sector’s appreciation of 11.7%. The company has lagged peers, including Texas Instruments TXN, onsemi ON and Analog Devices ADI, over the same time frame, shares of which have returned 55.4%, 48.5% and 33.4%, respectively. Image Source: Zacks Investment Research Microchip shares are trading at a premium, as suggested by a Value Score of D. In terms of the forward 12-month price-to-earnings (P/E), Microchip is trading at 21.87X, higher than the sector’s 20.74X and onsemi’s 21.16X. However, MCHP shares are trading at a lower multiple compared with Texas Instruments’ 29.17X and Analog Devices’ 25.68X. Image Source: Zacks Investment Research Microchip’s long-term growth is expected to be driven by its expanding AI and data center business. The company expects its dedicated Data Center Solutions business to grow sharply, supported by PCIe Gen6 switches, CXL memory controllers, storage controllers and newly introduced PCIe retimers. Multiple design wins, including hyperscaler engagements, position the company to benefit from increasing AI infrastructure investments and the shift toward inference computing.Microchip continues to focus on five strategic pillars: microcontrollers, analog, networking & connectivity, high-performance compute and edge AI. Its Total System Solutions strategy enables higher content per customer through integrated hardware, software and reference designs, while megatrend exposure spanning AI, industrial automation, networking, automotive modernization and sustainability supports growth above the broader semiconductor industry.Microchip faces intense competition in high-speed connectivity and PCIe switching markets. onsemi’s strong position in automotive and industrial power semiconductors and an expanding AI infrastructure portfolio is a key catalyst. Analog Devices is raising competitive pressure through strong momentum in industrial automation, aerospace & defense, AI infrastructure and automotive. Texas Instruments remains one of Microchip’s strongest competitors through its broad analog and embedded processing portfolio, manufacturing scale and aggressive capacity expansion.Moreover, rising foundry, OSAT, materials and manufacturing costs remain a headwind for Microchip. Sustaining utilization, managing inventory toward long-term targets and successfully executing its recovery plan while achieving its 65% gross margin and 40% operating margin objectives will remain critical to MCHP’s long-term performance. Despite near-term competitive and cost pressures, Microchip appears well positioned heading into fiscal first-quarter 2027. Improving bookings, channel replenishment, higher factory utilization and growing demand across AI, data center, industrial and automotive markets are expected to support solid top-line growth and margin expansion. The company’s expanding high-performance compute and connectivity portfolio, coupled with its Total System Solutions strategy, provides a strong foundation for sustained long-term growth. Microchip currently has a Zacks Rank #2 (Buy) and has a Growth Score of A, a favorable combination that offers a strong investment opportunity, per the Zacks Proprietary methodology. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Microchip Technology Incorporated (MCHP) : Free Stock Analysis Report Analog Devices, Inc. (ADI) : Free Stock Analysis Report Texas Instruments Incorporated (TXN) : Free Stock Analysis Report ON Semiconductor Corporation (ON) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research