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    ONTO
    Earnings call· Mar 2026(Q1 FY26)

    ONTO INNOVATION Q1 FY26 earnings call ONTO

    May 5, 2026 Source

    Executive summary

    Onto Innovation Q1 FY26 — Strong Demand for AI Compute Drives Revenue Growth and Margin Expansion

    Onto Innovation delivered a strong Q1 FY26, exceeding revenue and margin expectations, driven by robust demand for AI compute across advanced nodes and packaging. The company's strategic partnership with Rigaku expands its metrology capabilities, while new product adoptions like Dragonfly G5 and Atlas G6 are gaining traction. Management anticipates continued momentum, with significant revenue growth and margin expansion expected throughout 2026 and into 2027, despite some material cost headwinds.

    Highlights

    5

    • Q1 revenue of $292 million increased nearly 10% sequentially, exceeding the high end of guidance.

    • Q2 revenue outlook represents a 20% increase year-over-year at the midpoint.

    • Advanced packaging revenue is expected to grow more than 50% in 2026.

    • Advanced nodes business is expected to grow approximately 25% in 2026, ahead of WFE growth expectations.

    • Q1 operating margin increased by 150 basis points to 26.7%, with EPS of $1.42, a 13% improvement sequentially.

    Concerns

    1

    • Increasing headwinds around certain material input costs, such as memory, higher fuel, and shipping charges, are impacting the cost structure.

    Guidance & targets

    14
    CategoryTargetConfidence
    Revenue growth
    more than 15% sequential growth
    high materiality
    High
    Full-year revenue growth
    more than 30%
    high materiality
    High
    Advanced packaging revenue growth
    more than 50%
    high materiality
    High
    Advanced nodes business revenue growth
    approximately 25%
    medium materiality
    High
    Q2 Revenue
    $320 million to $330 million
    high materiality
    High
    Full-year revenue
    greater than $1.3 billion
    high materiality
    High
    Q2 Gross margin
    56% to 56.5%
    medium materiality
    High
    Q2 Operating expenses
    $90 million to $92 million
    medium materiality
    High
    Q2 Operating margin
    28% to 28.6%
    medium materiality
    High
    Q2 Non-GAAP EPS
    approximately $1.69 per share
    high materiality
    High
    Non-GAAP tax rate
    approximately 15%
    low materiality
    High
    Diluted shares outstanding
    slightly more than 50 million
    low materiality
    High
    Gross margin improvement
    at least 50 basis points per quarter
    medium materiality
    High
    Operating margin
    greater than 30%
    high materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Specialty device and AP
    Approximately $160 million in the quarter, of which 2/3 was advanced packaging, $25 million related to semi lab, and the remainder specialty device, including power semi.
    		$160 million———
    Advanced nodes
    Approximately $80 million, of which 60% was memory (primarily DRAM) and the remainder logic.
    		$80 million———
    Software and services
    Comprised the remaining first quarter revenue ($292M total - $160M AP/SD - $80M AN).
    		$52 million———

    Operational metrics

    11
    Non-GAAP gross margin
    55.7%increased sequentially by 110 basis points
    Q1 FY26

    Demonstrated solid margin performance despite increasing headwinds around certain material input costs.

    Non-GAAP operating margin
    26.7%increased by 150 basis points
    Q1 FY26

    Reflects benefits recognized primarily from the move to extended factories.

    Non-GAAP EPS
    $1.4213% improvement over Q4 2025
    Q1 FY26

    Exceeded the high end of the guidance range.

    Revenue
    $292 millionincreased nearly 10% sequentially
    Q1 FY26

    Exceeded the high end of the guidance range on strength primarily across advanced nodes business.

    Rigaku dividend income
    approximately $7 million or more
    per year

    Based on expected ownership stake in Rigaku; expected to contribute to offsetting foregone interest income.

    Dragonfly G5 shipments
    several systemsahead of plan
    Q1 FY26

    Initial commercial shipments of the Dragonfly G5, with more expected in Q2, Q3, and Q4.

    Dragonfly G5 pipeline
    over 15 distinct applications
    current

    Pipeline for new customers and applications, indicating promising outlook.

    3DI bump height
    below 6 micronsTwo years ago, approximately 15 to 25 microns high
    current

    Adoption of smaller, more dense bumps plays to the strength of 3DI technology.

    3DI orders
    over 10 additional orders
    Q1 FY26

    Received from several more OSAT customers.

    JetStep qualifications
    2 packaging suppliers
    recent

    Qualified at AI device manufacturers with ramp-up expectations in 2027.

    Atlas TSV metrology shipments
    expected to commence
    2H FY26

    Secured a new application win for TSV metrology using the Atlas system.

    Industry KPIs

    7
    MetricValueDetails
    Lead timesextending out a little bit
    Backlog order bookrecord backlog
    Bookings net order intakeover 10 additional ordersorders
    Wfe industry spend outlooklow 20s%
    Design wins socket pipelinequalification adoption of Dragonfly G5
    Node platform ramp scheduleAtlas G6 platform
    End market segment revenue mixSpecialty device and AP: $160 million; Advanced nodes: $80 million; Software and services: $52 millionUSD

    Orderbook & backlog

    1
    Backlogrecord backlogQ1 FY26

    Visibility continues to strengthen, supported by record backlog.

    Deals & partnerships

    1
    RigakuPurchase of 27% stake in Rigaku from Carlyle Group$710 million

    Deepening of strategic partnership, provides a seat on their Board of Directors, strengthens long-term alignment, provides deeper insight into X-ray technology road maps, and positions for joint advancement of next-generation hybrid metrology solutions.

    Risks & headwinds

    1
    Material input costsQ1 FY26 and Q2 FY26

    Increasing headwinds around certain material input costs, such as memory and higher fuel and shipping charges

    Mitigation: Demonstrated solid margin performance in Q1, with gross margin improving sequentially by 110 bps to 55.7% and operating margin by 150 bps to 26.7%, due to extended factories. Confident in improving gross margins by at least 50 bps per quarter in Q3 and Q4, and exiting Q4 with operating margin >30%.

    What to watch in Q2 FY26

    5

    Dragonfly G5 shipment ramp

    Q2 FY26
    Currentseveral systems shipped in Q1
    Targetmore into Q2 and even more in Q3 and Q4

    Why it matters

    Indicates the pace of adoption for a key new product in advanced packaging, crucial for future revenue growth and market share gains.

    we've shipped several systems in Q1, will be shipping more into Q2 and even more in Q3 and Q4. So we see a steady growth in demand for the G5 throughout all 4 quarters.

    Q&A highlights

    10

    How does the Dragonfly G5 pipeline provide visibility for growth through 2H FY26, and what is the outlook for 2027?

    The company is seeing pull-ins for G5 shipments across all quarters of 2026, indicating steady growth. For 2027, stronger demand is expected from existing customers as production expands, and a strong pipeline of application studies in existing and new markets implies significant expansion.

    “we've shipped several systems in Q1, will be shipping more into Q2 and even more in Q3 and Q4. So we see a steady growth in demand for the G5 throughout all 4 quarters.”

    asked by Craig Ellis · answered by Michael Plisinski

    2 min read5 chapters

    Detailed Narrative

    01

    AI Compute Demand & Portfolio Synergy

    Strong demand for high-performance AI compute is driving significant growth across both front-end and advanced packaging segments. Onto Innovation's broad and synergistic portfolio of optical process control technologies, enhanced by its AI software, provides actionable intelligence to manufacturers. The strategic collaboration with Rigaku, a leader in X-ray technology, further expands this capability, allowing for the application of X-ray technology to address challenges with exotic materials and 3D structures, leveraging AI software for hybrid metrology solutions.

    02

    Rigaku Strategic Partnership

    Onto Innovation announced a strategic partnership with Rigaku, including the purchase of a 27% stake for approximately $710 million, expected to close in 2H FY26. Rigaku, with over $600 million in 2025 revenue (40% from semiconductors), brings extensive X-ray technology. This investment aims to strengthen long-term alignment, provide deeper insight into X-ray technology roadmaps, and jointly advance next-generation hybrid metrology solutions. Financial benefits include incremental licensing revenue from AI software integration, increased sales of metrology tools, and annual dividends of approximately $7 million, expected to offset foregone interest income within a year of closing.

    03

    Advanced Packaging Momentum

    The Dragonfly G5 inspection system achieved qualification and adoption at a leading 2.5D logic customer, with shipments ahead of plan. The G5 offers improved sensitivity, high throughput, and multiple sensors, addressing a pipeline of over 15 distinct applications across more than 10 customers. The adoption of smaller, denser bumps (below 6 microns) plays to the strength of 3DI technology, leading to several new OSAT customers and over 10 additional orders. Panel-level packaging, driven by heterogeneous packaging and larger package sizes, saw JetStep qualified at two AI device packaging suppliers with ramp-up expected in 2027.

    04

    Advanced Nodes Strength

    The Advanced Nodes business is strengthening across both logic and memory. The Atlas G6 platform is expanding following successful competitive head-to-head evaluations for next-generation logic nodes, including gate-all-around customers. DRAM customers are ramping development of next-generation devices, contributing to solid traction. Additionally, a new application win for TSV metrology using the Atlas system is expected to commence initial shipments in the second half of 2026. This broad-based strength, coupled with early signs of NAND recovery, positions the business for significant growth.

    05

    Operational Discipline & Margin Expansion

    The company exceeded Q1 guidance across all key financial metrics, including revenue, gross margin, operating margin, and EPS. Despite increasing headwinds from material input costs, fuel, and shipping charges, gross margin improved sequentially by 110 basis points to 55.7%, and operating margin increased by 150 basis points to 26.7%. This performance reflects benefits from the company's move to extended factories. Management is confident in continued margin expansion, targeting gross margin improvement of at least 50 basis points per quarter in Q3 and Q4, and an operating margin greater than 30% by Q4 FY26.

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