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    ON
    Earnings call· Jun 2025(Q2 FY25)

    ON SEMICONDUCTOR Q2 FY25 earnings call ON

    Aug 4, 2025 Source

    Executive summary

    onsemi Q2 FY25 — AI Data Center Growth and Automotive Stabilization Drive Sequential Improvement

    onsemi delivered Q2 FY25 results above guidance, driven by strong growth in AI Data Center and stabilization in Automotive, particularly in China. The company continues to execute its strategic transformation, focusing on high-value products and operational efficiencies, while managing inventory and preparing for a market recovery. Management remains disciplined in capital allocation and portfolio rationalization, positioning for long-term margin expansion.

    Highlights

    6

    • Q2 revenue of $1.47 billion exceeded the midpoint of guidance, increasing 1.6% over Q1.

    • Non-GAAP gross margin of 37.6% and non-GAAP EPS of $0.53 exceeded the midpoint of guidance.

    • AI Data Center revenue nearly doubled year-over-year in Q2.

    • China revenue grew 23% sequentially in Q2, driven by silicon carbide and new EV ramps.

    • Treo platform design funnel more than doubled quarter-over-quarter, with over 5 million units shipped from East Fishkill.

    • Returned 107% of free cash flow to shareholders year-to-date, repurchasing $300 million in Q2.

    Concerns

    4

    • Non-GAAP operating expenses were above the midpoint of guidance due to delays in realizing full restructuring benefits in Q2.

    • Industrial revenue increased only 2% sequentially, with traditional industrial declining slightly.

    • Automotive revenue decreased 4% sequentially, driven by weakness in America and Europe.

    • Silicon carbide gross margin is currently below the corporate average due to underutilization.

    Guidance & targets

    12
    CategoryTargetConfidence
    Q3 Revenue
    $1.465 billion to $1.565 billion
    high materiality
    High
    Q3 Non-GAAP Gross Margin
    36.5% and 38.5%
    high materiality
    High
    Q3 Non-GAAP Operating Expenses
    $280 million to $295 million
    medium materiality
    High
    Q3 Non-GAAP Other Income
    net benefit of $8 million
    low materiality
    High
    Q3 Non-GAAP Tax Rate
    approximately 16%
    medium materiality
    High
    Q3 Non-GAAP Diluted Share Count
    approximately 410 million shares
    medium materiality
    High
    Q3 Non-GAAP EPS
    $0.54 to $0.64
    high materiality
    High
    Q3 Capital Expenditures
    $35 million to $50 million
    medium materiality
    High
    FY26 Revenue not repeating
    approximately 5% of our 2025 revenue
    high materiality
    High
    FY25 Non-GAAP Tax Rate
    no material change
    low materiality
    High
    FY26 Non-GAAP Tax Rate
    approximately 15%
    medium materiality
    High
    FY25 Free Cash Flow Margin
    25%
    high materiality
    High

    Segment performance

    7
    SegmentRevenueYoYQoQMargin
    Automotive
    Performed better than anticipated, expected to grow in Q3. Weakness in America and Europe offset by continued strength in China.
    		$733 million—-4%—
    Industrial
    Medical and aerospace & defense businesses continue to grow, traditional industrial declined slightly. Expected to be up low single-digit in Q3.
    		$406 million—+2%—
    Other
    Includes AI Data Center, which is a significant contributor and nearly doubled year-over-year. Expected to be up mid- to high single-digit in Q3.
    		——+16%—
    Power Solutions Group (PSG)
    Increased quarter-over-quarter.
    		$698 million-16%+8%—
    Analog and Mixed-Signal Group (AMG)
    Decreased quarter-over-quarter.
    		$556 million-14%-2%—
    Intelligent Sensing Group (ISG)
    Decreased quarter-over-quarter. Undergoing repositioning towards higher value segments like ADAS and machine vision.
    		$215 million-15%-8%—
    China (geographic)
    Driven by silicon carbide with new EV ramps. Strong traction in both BEV and PHEV platforms.
    		——+23%—

    Operational metrics

    29
    Revenue
    $1.47 billion+1.6% QoQ
    Q2 FY25

    Exceeded the midpoint of guidance.

    Non-GAAP gross margin
    37.6%
    Q2 FY25

    Above the midpoint of non-GAAP guidance.

    Non-GAAP operating expenses
    $298 million-$17 million QoQ, vs $308 million YoY
    Q2 FY25

    Above the midpoint of guidance due to delays in realizing full restructuring benefits, expected to be recognized fully in Q3.

    Non-GAAP operating margin
    17.3%
    Q2 FY25
    Non-GAAP EPS
    $0.53vs $0.96 YoY
    Q2 FY25

    Above the midpoint of guidance.

    Cash and investments balance
    $2.8 billion
    Q2 FY25
    Total liquidity
    $4 billion
    Q2 FY25
    Free cash flow margin
    19%
    YTD FY25

    Year-to-date figure.

    Capital expenditures
    $78 million
    Q2 FY25
    Share repurchase
    $300 million
    Q2 FY25

    Part of the 2025 targeted share repurchase.

    Capital returned to shareholders
    107%
    YTD FY25

    As a percentage of free cash flow.

    Manufacturing utilization
    68%Flat QoQ
    Q2 FY25

    Based on reduced manufacturing capacity post Q1 impairment.

    Under-absorption charges
    900
    Q3 FY25

    Included in Q3 guidance.

    Depreciation reduction
    $5 million
    starting Q4 FY25

    Expected reduction on the income statement.

    GAAP operating expenses
    $359 millionvs $396 million in Q2 FY24
    Q2 FY25
    Restructuring charges
    $539 million
    Q1 FY25

    Included in Q1 GAAP operating expenses.

    GAAP operating margin
    13.2%
    Q2 FY25
    GAAP tax rate
    12.6%
    Q2 FY25
    GAAP EPS
    $0.41vs $0.78 in Q2 FY24
    Q2 FY25
    Diluted share count
    415 million
    Q2 FY25

    GAAP and non-GAAP diluted share count.

    Revenue not repeating (ISG repositioning)
    $50 million to $100 million
    FY26

    Expected impact from ISG repositioning, part of the total 5% of 2025 revenue not repeating in 2026.

    AI Data Center revenue growth
    Nearly doubledYoY
    Q2 FY25

    Reported as part of the 'Other' segment.

    Treo platform units shipped
    Over 5 million
    YTD FY25

    Important milestone for the Treo platform.

    Treo platform design funnel growth
    More than doubledQoQ
    Q2 FY25

    Momentum continues to build around the Treo platform.

    Fab Right initiatives impact
    200
    long-term

    Expected gross margin improvement from Fab Right initiatives.

    Fab divestitures impact
    200
    long-term

    Expected gross margin improvement from monetization of fab divestitures.

    Automotive revenue growth
    low single-digit percentage
    Q3 FY25

    Expected growth for the upcoming quarter.

    Industrial revenue growth
    low single-digit percentage
    Q3 FY25

    Expected growth for the upcoming quarter.

    Other revenue growth
    mid- to high single-digit range
    Q3 FY25

    Expected growth for the upcoming quarter, driven by AI Data Center.

    Industry KPIs

    6
    MetricValueDetails
    Ai data center revenueNearly doubled%
    Fab capacity utilization68%%
    Design wins socket pipelineMore than doubled%
    Inventory channel inventory208 daysdays
    Node platform ramp schedule1,200-volt EliteSiC M3e; EliteSiC M4T trench technology
    End market segment revenue mixAutomotive: $733M; Industrial: $406M; PSG: $698M; AMG: $556M; ISG: $215MUSD

    Product announcements

    6
    ProductTypeDetails
    EliteSiC M3e (1,200-volt)expansion
    EliteSiC M4T trench technologylaunch
    Single SPS (Smart Power Stage)milestone
    Dual SPS (Smart Power Stage)launch
    Treo platform (10BASE-T1S)milestone
    Next-generation wide band gap semiconductorslaunch

    Deals & partnerships

    3
    XiaomiIntegration of 1,200-volt EliteSiC M3e in YU7 electric SUV models.

    Select Xiaomi YU7 electric SUV models integrate onsemi's 1,200-volt EliteSiC M3e.

    SchaefflerCollaboration to deliver next-generation traction inverter for a global OEM's PHEV platform.

    Expanded collaboration to deliver a next-generation traction inverter using onsemi's latest EliteSiC M4T trench technology.

    NVIDIACollaboration to accelerate the shift to 800-volt DC power architecture in AI Data Centers.

    Working with market leaders like NVIDIA to accelerate the shift to 800-volt DC power architecture.

    Risks & headwinds

    4
    Weakness in America and Europe automotive marketsQ2 FY25, ongoing

    Automotive revenue down 4% sequentially in Q2.

    Mitigation: Focus on strong China growth, EV ramps, and strategic product differentiation.

    Uncertainty in end market demand and cautious customer behaviorCurrent

    Not explicitly quantified, but leads to customers waiting to place orders.

    Mitigation: Maintaining flexibility, focusing on controllable factors, disciplined inventory management.

    Tariffs (Section 232, 301)Ongoing

    No material direct impact expected as of today.

    Mitigation: Diversified manufacturing footprint provides sourcing options and competitive advantage.

    Underutilization of manufacturing capacityQ2-Q3 FY25

    900 basis points of noncash under-absorption charges in Q3 guidance. SiC gross margin below corporate average.

    Mitigation: Expectation of market recovery to drive utilization up, Fab Right initiatives, portfolio rationalization towards higher-margin products.

    What to watch in Q3 FY25

    5

    Automotive revenue growth

    Q3 FY25
    CurrentDown 4% QoQ in Q2 FY25
    TargetGrowth in Q3 FY25

    Why it matters

    Indicates the start of a cyclical recovery in a key end market.

    Automotive revenue in Q2 was down 4%, performing better than anticipated and is expected to grow in the third quarter with continued EV ramps.

    Q&A highlights

    7

    What are the current cyclical trends (tailwinds/headwinds)? When will secular growth drivers offset the impact of exited businesses?

    Hassane noted stabilization in end markets, with Automotive bottoming in Q2 and expected to grow in Q3, though remaining cautious. AI Data Center revenue doubled YoY, and Treo platform is gaining traction with significant design funnel growth and 5 million units shipped. These secular drivers are key to reshaping the company towards high-value products and better revenue quality, offsetting the planned exits.

    “We're seeing stabilization relative to where we have been over, call it, the last 3, 4, 5 quarters, that is a positive development.”

    asked by Ross Seymore · answered by Hassane El-Khoury

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Transformation & Portfolio Rationalization

    onsemi is actively reshaping its portfolio by exiting legacy products and non-core businesses, and repositioning its image sensing portfolio towards higher-value segments like ADAS and machine vision. These actions are expected to result in approximately 5% of 2025 revenue not repeating in 2026, with about $50 million to $100 million of that from ISG repositioning. The goal is to enhance efficiency, improve revenue quality, and drive long-term operational efficiencies.

    02

    AI Data Center Momentum

    The company is making significant strides in AI Data Centers, enabling next-generation power architectures through collaborations with market leaders like NVIDIA for 800-volt DC power architecture. AI Data Center revenue nearly doubled year-over-year in Q2, and onsemi is sampling dual Smart Power Stages (SPS) in a 5x5 package, indicating a strong product roadmap for this high-growth area.

    03

    Automotive & China Strength

    Automotive revenue, while down 4% sequentially in Q2 due to weakness in America and Europe, performed better than anticipated and is expected to grow in Q3. China remains a strong growth driver, with Q2 revenue up 23% sequentially, fueled by new EV ramps and the adoption of 1,200-volt EliteSiC M3e and M4T trench technology in models like Xiaomi YU7 and Schaeffler's traction inverter.

    04

    Treo Platform Progress

    The Treo platform continues to build momentum, with its design funnel more than doubling quarter-over-quarter and the company on track to double the number of products sampling from last year. After recognizing first revenue in Q1, onsemi has now shipped over 5 million units from its East Fishkill facility, demonstrating strong customer engagement and the platform's differentiated technology in areas like 10BASE-T1S for automotive zonal architectures.

    05

    Gross Margin Expansion Levers

    Management outlined key levers for gross margin expansion towards the 53% long-term target. These include improved utilization (with full utilization now in the low 90% range post-impairment), the monetization of divested fabs (contributing an additional 200 basis points), and the favorable margins of new products. The current 900 basis points of underutilization charges are expected to recover as demand and utilization improve.

    06

    Inventory Management & Capital Returns

    The company's inventory management strategy is focused on burning through strategic bridge inventory, which is expected to decline in Q3 and Q4. Distribution inventory remains within the target range of 9 to 11 weeks. onsemi continues its disciplined capital return program, having repurchased an additional $300 million of shares in Q2, bringing year-to-date returns to 107% of free cash flow.

    AI-generated summary of the company’s earnings call. Not investment advice.