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    ON
    Earnings call· Sep 2025(Q3 FY25)

    ON SEMICONDUCTOR CORP ON

    Nov 3, 2025 Source

    Executive summary

    onsemi Q3 FY25 — AI Revenue Doubles, Automotive Stabilizes, vGaN Launched

    onsemi delivered Q3 FY25 results above guidance midpoints, driven by strong execution and strategic focus on high-growth markets. The company saw stabilization in Automotive and Industrial segments, with AI revenue doubling year-over-year and becoming material. Key product innovations like vGaN and the Vcore acquisition are expanding the portfolio for AI data centers and EVs, positioning onsemi for long-term growth as market demand normalizes.

    Highlights

    6

    • Revenue of $1.55 billion exceeded the midpoint of guidance.

    • Non-GAAP gross margin of 38% was above the midpoint of guidance.

    • AI revenue approximately doubled year-over-year in Q3 and is expected to reach almost $250 million in 2025.

    • Automotive revenue grew 7% sequentially to $787 million, showing stabilization.

    • Industrial revenue grew 5% sequentially to $426 million, driven by aerospace, defense, and security.

    • Repurchased $925 million of shares year-to-date, returning approximately 100% of free cash flow to shareholders.

    Concerns

    4

    • Europe revenue was down 4% sequentially due to macro softness.

    • China revenue was down 7% sequentially.

    • Non-core business exits are expected to result in a $55 million revenue headwind in Q4 FY25 and $300 million in FY26.

    • Manufacturing utilization is expected to be flat to down slightly in Q4 as die bank builds complete.

    Guidance & targets

    11
    CategoryTargetConfidence
    Q4 Revenue
    $1.48 billion to $1.58 billion
    high materiality
    High
    Q4 Non-GAAP Gross Margin
    37% to 39%
    high materiality
    High
    Q4 Non-GAAP Operating Expenses
    $282 million to $297 million
    medium materiality
    High
    Q4 Non-GAAP Other Income
    net benefit of $7 million
    low materiality
    High
    Q4 Non-GAAP Tax Rate
    approximately 16%
    medium materiality
    High
    Q4 Non-GAAP Diluted Share Count
    approximately 405 million shares
    low materiality
    High
    Q4 Non-GAAP EPS
    $0.57 to $0.67
    high materiality
    High
    Q4 Capital Expenditures
    $20 million to $40 million
    medium materiality
    High
    Field Stop 7 IGBT revenue growth
    continued double-digit growth
    medium materiality
    Medium
    8-inch SiC production
    on track
    medium materiality
    High
    vGaN revenue
    in the '27 time frame
    medium materiality
    Medium

    Segment performance

    10
    SegmentRevenueYoYQoQMargin
    Automotive
    driven by increases in Americas, China and Japan.
    		$787 million—7%—
    Industrial
    primarily driven by aerospace, defense and security.
    		$426 million—5%—
    Other (excluding Auto and Industrial)
    with continued momentum in AI data center.
    AI data center momentum
    		——2%—
    Power Solutions Group (PSG)
    an increase of 6% quarter-over-quarter and a decrease of 11% year-over-year.
    		$738 million-11%6%—
    Analog and Mixed-Signal Group (AMG)
    an increase of 5% quarter-over-quarter and a decrease of 11% year-over-year.
    		$583 million-11%5%—
    Intelligent Sensing Group (ISG)
    a 7% increase quarter-over-quarter and a decline of 18% over the same quarter last year as we strategically refocused this business.
    		$230 million-18%7%—
    Americas
    from momentum in automotive and aerospace, defense and security.
    		——22%—
    Japan
    driven by traction in automotive and image sensing.
    		——38%—
    Europe
    as macro softness persisted.
    		——-4%—
    China
    sequentially.
    		——-7%—

    Operational metrics

    27
    Non-GAAP gross margin
    38%above midpoint of guidance
    Q3 FY25

    due to favorable mix within the quarter.

    Manufacturing utilization
    74%up compared to Q2
    Q3 FY25

    as we started to build die bank inventory to support the mass market.

    Non-GAAP operating expenses
    $291 million
    Q3 FY25
    Non-GAAP operating margin
    19.2%
    Q3 FY25
    Non-GAAP tax rate
    16%
    Q3 FY25
    Non-GAAP EPS
    $0.63towards the high-end of our range
    Q3 FY25
    Diluted share count
    408 million
    Q3 FY25

    GAAP and non-GAAP diluted share count

    Shares repurchased
    $325 million
    Q3 FY25
    Shares repurchased
    $925 million
    YTD FY25

    returning approximately 100% of our free cash flow to shareholders.

    Remaining share repurchase authorization
    $861 million
    Q3 FY25 end

    at the end of the quarter.

    Cash and investments balance
    $2.9 billion
    Q3 FY25 end
    Total liquidity
    $4 billion
    Q3 FY25 end
    Free cash flow margin
    21%
    YTD FY25

    of revenue

    Capex
    $46 million
    Q3 FY25
    Inventory
    194 daysdecreased by $39 million to 194 days from 208 days in Q2
    Q3 FY25 end
    Bridge inventory
    82 daysdown from 87 days in Q2
    Q3 FY25 end
    Base inventory
    112 days
    Q3 FY25 end

    healthy at 112 days

    Distribution inventory
    10.5 weeksdeclined to 10.5 weeks from 10.8 weeks in Q2
    Q3 FY25 end

    within our target range of 9 to 11 weeks.

    AI-related revenue
    $250 millionapproximately doubled year-over-year in Q3
    FY25

    now becoming material with almost $250 million expected in 2025.

    Industrial image sensor funnel
    55%year-over-year
    YTD

    with traction in factory automation and inspection.

    Field Stop 7 IGBT revenue
    increaseover 2024
    FY25
    Content per rack
    $50,000from maybe a few thousand dollars today
    by '27

    the content per rack going from maybe a few thousand dollars today to maybe as much as $50,000 by '27 or so.

    Mass market customer count
    20%year-on-year
    YTD

    Our customer count increased almost 20% year-on-year just in the mass market.

    Revenue through distribution
    58%
    Q3 FY25

    roughly about 58% of our business goes through distribution.

    Distribution revenue split
    half
    Q3 FY25

    About half of that is fulfillment, half is demand creation.

    Distribution revenue split
    half
    Q3 FY25

    About half of that is fulfillment, half is demand creation.

    Mass market revenue
    25%
    Q3 FY25

    Maybe it's 25% of the total distribution revenue, somewhere in that kind of camp if you think about it.

    Industry KPIs

    13
    MetricValueDetails
    Lead timesaround 20 weeksweeks
    Backlog order book—
    Book to bill ratio—
    Ai data center revenue$250 millionUSD
    Services installed base—
    Fab capacity utilization74%%
    Bookings net order intake—
    Wfe industry spend outlook—
    Design wins socket pipelineDesign funnel exceeds $1 billionUSD
    Inventory channel inventoryTotal inventory: 194 days; Bridge inventory: 82 days; Base inventory: 112 days; Distribution inventory: 10.5 weeksdays, weeks
    Node platform ramp schedule8-inch SiC production
    Wafer shipments foundry ASP—
    End market segment revenue mixAutomotive: $787 million (7% QoQ); Industrial: $426 million (5% QoQ); Other: 2% QoQUSD

    Product announcements

    4
    ProductTypeDetails
    Treo platformmilestone
    vGaN platformlaunch
    SiC JFETexpansion
    Advanced multiphase controllers and monolithic smart power stages (from Vcore acquisition)milestone

    Deals & partnerships

    2
    Aura SemiconductorAcquisition of Vcore Power Technology and IP assets.

    Expanded analog and mixed-signal portfolio. New products to be integrated into Treo platform, with sampling this quarter and production in early 2026.

    NVIDIACollaboration on 800-volt DC power architecture.

    Aims to accelerate transition to 800-volt DC power architecture for next-gen AI data centers.

    Risks & headwinds

    6
    Macro softness in EuropeQ3 FY25

    Europe revenue down 4% sequentially.

    China revenue declineQ3 FY25

    China revenue down 7% sequentially.

    Mitigation: Securing strategic wins in high-voltage traction inverters and ADAS applications with local OEMs and NIO to diversify customer base.

    Revenue headwind from non-core business exits (FY25)FY25

    $200 million for FY25, with $45 million exited in Q3 and $55 million remaining for Q4.

    Mitigation: Strategic refocusing of the business.

    Revenue headwind from non-core business exits (FY26)FY26

    $300 million for FY26 (5% of 2025 revenue).

    Mitigation: Strategic refocusing of the business.

    Lack of OEM restocking due to geopolitical instability and lack of credible demand signalNear-term

    haven't seen a restocking cycle yet.

    Mitigation: Supporting customers, emphasizing need for replenishment cycle and safety stock to buffer disruptions.

    Manufacturing utilization expected to declineQ4 FY25

    flat to down slightly in the fourth quarter from 74% in Q3.

    Mitigation: Strategic completion of die bank builds for mass market, aiming for normalized utilization thereafter.

    What to watch in Q4 FY25

    5

    Automotive demand stabilization and restocking

    Next quarter
    Currentdemand is stabilizing, we're starting to see a seasonal trend. But one thing I would highlight is we haven't seen a restocking cycle yet.
    TargetEvidence of a broad restocking cycle or increased OEM confidence.

    Why it matters

    Restocking would signal a stronger market recovery and increased demand beyond current consumption.

    demand is stabilizing, we're starting to see a seasonal trend. But one thing I would highlight is we haven't seen a restocking cycle yet. So that's still out there.

    Q&A highlights

    6

    What drove the Q3 automotive upside, and what is the outlook for Q4 and 2026, especially regarding restocking?

    Hassane El-Khoury stated that Q3/Q4 automotive performance reflects normal lumpiness due to seasonality and new design ramps, not a significant market shift. He emphasized demand stabilization but noted that a broad restocking cycle has not yet occurred.

    “demand is stabilizing, we're starting to see a seasonal trend. But one thing I would highlight is we haven't seen a restocking cycle yet. So that's still out there.”

    asked by Ross Seymore · answered by Hassane El-Khoury

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Investments and Product Innovation

    onsemi highlighted four key milestones: the scaling of its Treo platform with a design funnel exceeding $1 billion, the launch of its vertical GaN (vGaN) platform for high-voltage applications, the proliferation of SiC JFETs in AI data centers and aerospace, and the acquisition of Vcore Power Technology IP to enhance its analog and mixed-signal portfolio for AI compute platforms. These initiatives aim to expand leadership beyond silicon and silicon carbide.

    02

    AI Market Penetration and Differentiation

    The company expects AI revenue to reach almost $250 million in 2025, having approximately doubled year-over-year in Q3. onsemi differentiates itself by offering power delivery solutions 'from wall to core,' covering the entire power tree from high-voltage systems to the processor, supported by its diverse product portfolio including SiC JFETs and AMG products.

    03

    Demand Environment and Regional Trends

    onsemi observed stabilization in Automotive (up 7% sequentially) and Industrial (up 5% sequentially) markets. Regional performance varied, with Americas up 22% and Japan up 38% sequentially, driven by automotive and aerospace. Europe was down 4% due to macro softness🌐, and China was down 7% sequentially, though strategic wins were secured in high-voltage traction inverters and ADAS applications.

    04

    AI's Impact on Power Landscape

    The company emphasized AI's role in reshaping power delivery, citing projections for quadrupled electricity demand from AI data centers by 2030. onsemi's intelligent power technologies, including IGBTs, SiC, and smart power stages, are being deployed across the full power tree for hyperscale AI deployments, from solar/energy storage to UPS and compute board levels, including collaboration with NVIDIA on 800-volt DC architecture.

    05

    Capital Allocation and Shareholder Returns

    onsemi continues disciplined capital allocation, repurchasing $925 million of shares year-to-date, representing approximately 100% of free cash flow returned to shareholders. The company has $861 million remaining on its share repurchase authorization and remains committed to capital efficiency while investing in innovation.

    06

    Inventory Management and Utilization

    Manufacturing utilization increased to 74% in Q3 to build die bank inventory for the mass market, which is expected to normalize📎 in Q4. Despite these strategic builds, total inventory decreased by $39 million to 194 days, with base inventory at a healthy 112 days and distribution inventory within the target range of 9 to 11 weeks.

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