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    ONTO
    Earnings call· Jun 2026(Q2 FY26)

    ONTO INNOVATION Q2 FY26 earnings call ONTO

    Aug 6, 2026 Source

    Executive summary

    Onto Innovation Q2 FY26 — Record Revenue and Backlog Driven by AI Demand

    Onto Innovation delivered a record Q2 FY26, driven by strong demand in advanced packaging and advanced nodes, particularly from AI and HBM applications. The company significantly raised its second-half revenue growth outlook and achieved record backlog, reflecting increased customer visibility and confidence in multi-year capacity plans. Management is focused on innovation, operational efficiency, and leveraging extended factories to sustain growth and margin expansion into 2027.

    Highlights

    6

    • Revenue of $343 million, up 18% sequentially and 35% year-over-year, exceeding the high end of guidance.

    • Advanced nodes revenue grew 50% quarter-over-quarter to approximately $120 million.

    • Inspection business (Dragonfly systems) grew 30% quarter-over-quarter.

    • Record backlog surpassing $1.1 billion, with 30-40% covering 2027.

    • Non-GAAP gross margin reached 57%, up 250 bps from Q4 2025 and 130 bps from Q1 2026, surpassing initial 200 bps expansion expectation for 2026.

    • Non-GAAP operating margin reached 30%, up nearly 500 bps from the beginning of the year.

    Concerns

    1

    • Continued headwinds around certain material input costs, fuel surcharges, and freight expense are anticipated in the second half of 2026.

    Guidance & targets

    14
    CategoryTargetConfidence
    Second Half 2026 Revenue Growth
    more than 25% over the first half
    high materiality
    High
    Q4 2026 Revenue
    higher than the Q3 revenue
    medium materiality
    High
    Full Year 2026 Advanced Packaging Growth
    approximately 80%
    high materiality
    High
    Panel-Level Packaging Revenue Growth
    more than double year-over-year
    medium materiality
    High
    Advanced Nodes Revenue Growth
    more than 35%
    medium materiality
    High
    Q3 2026 Revenue
    $380 million to $400 million
    high materiality
    High
    Second Half 2026 Gross Margin Expansion
    incremental 50 basis points per quarter in Q3 and in Q4
    medium materiality
    High
    Q3 2026 Operating Margin
    32%
    medium materiality
    High
    Exit 2026 Operating Margin
    33% or higher
    medium materiality
    High
    Q3 2026 Non-GAAP EPS
    approximately $2.28 per share
    high materiality
    High
    Full Year 2026 Gross Margin Expansion
    350 basis points
    medium materiality
    High
    Full Year 2026 Operating Margin Expansion
    more than 750 basis points
    medium materiality
    High
    Non-GAAP Tax Rate
    15%
    low materiality
    High
    Shares Outstanding
    slightly more than 50 million shares
    low materiality
    High

    Segment performance

    6
    SegmentRevenueYoYQoQMargin
    Advanced Nodes
    Strong growth across memory and logic segments, including expanded adoption of Atlas G6 platform. Expected to grow more than 35% in FY26.
    Memory revenue: approximately 60% of total Advanced NodesLogic revenue: approximately 40% of total Advanced Nodes
    		approximately $120 million—50%—
    Advanced Packaging and Specialty Device
    Inspection strong, driven by 2.5D and HBM. Other packaging and specialty device declined sequentially as expected, but will rebound to Q1 levels next quarter. Full year growth outlook increased to approximately 80%.
    Inspection (Dragonfly product family) growth QoQ: 30%
    		nearly half of revenue (approx. $171.5 million)———
    Advanced Nodes - Memory
    Comprises about 60% of total Advanced Nodes revenue. New DRAM customers adopting new technology.
    		——approximately 60%—
    Advanced Nodes - Logic
    Strong growth in the quarter.
    		——more than 40%—
    Specialty Device - Silicon Photonics
    Nascent market with significant order wins, expected to grow to over $500 million SAM by 2030. Traction in both inspection and metrology.
    Orders received: over $50 millionOrders for 2027 delivery: roughly 2/3
    		————
    Panel-Level Packaging
    Expected to more than double year-over-year in FY26 with further growth in 2027, driven by heterogeneous packaging and larger package sizes. Utilizes JetStep lithography, Firefly process control, and Discover software.
    		—more than double——

    Operational metrics

    12
    Non-GAAP gross margin
    57%up 250 bps from Q4 2025; up 130 bps from Q1 2026
    Q2 FY26
    Non-GAAP operating margin
    30%up nearly 500 bps from beginning of the year
    Q2 FY26
    Cash and investments balance
    $1.9 billion
    Q2 FY26
    Convertible Debt Offering
    $1.5 billion
    Q2 FY26

    Completed in May.

    Share Repurchase
    $200 million
    Q2 FY26

    Used from the convertible debt offering.

    Cap Call Purchase
    $100 million
    Q2 FY26

    Used from the convertible debt offering for professional fees and to increase strike price for dilution purposes.

    Non-GAAP EPS
    $1.93up $0.20 over the high end of our previous guidance range
    Q2 FY26
    WFE growth expectations
    —
    FY26

    Advanced nodes revenue growth (35%+) is "continuing to outpace the latest WFE growth expectations."

    Hyperscale Capital Expenditures
    north of $1 trillion
    CY27

    Industry analysts forecasting.

    X-ray Technology Market Size (Semiconductor applications)
    approximately $1 billion
    Current

    Expected to grow above average in the years ahead due to complex 3D transistor and packaging technology.

    Silicon Photonics Served Addressable Market (SAM)
    over $500 million
    2030
    Revenue Capacity
    much higher than $2 billionpreviously $2 billion with in-house factories
    Current

    Extended factories provide equal capability to in-house, reducing cycle times and adding shifts.

    Industry KPIs

    11
    MetricValueDetails
    Lead times—
    Backlog order book$1.1 billionUSD
    Book to bill ratio—
    Ai data center revenue—
    Fab capacity utilization—
    Bookings net order intakeover $200 millionUSD
    Wfe industry spend outlook—
    Design wins socket pipeline—
    Inventory channel inventory—
    Node platform ramp schedule—
    End market segment revenue mixAdvanced nodes: approximately $120 million; Advanced Packaging and Specialty device: nearly half of revenueUSD

    Orderbook & backlog

    3
    Total Backlog$1.1 billionQ2 FY26

    record backlog

    Approximately 60-70% tied to 2026, 30-40% covering 2027.

    Dragonfly Technology Ordersover $200 millionQ2 FY26

    Majority of these orders will be delivered in 2027. From a single OSAT partner for 2.5D Logic and HBM applications.

    Silicon Photonics Ordersover $50 millionQ2 FY26

    Roughly 2/3 to be delivered in 2027.

    Product announcements

    3
    ProductTypeDetails
    Dragonfly G5launch
    Atlas G6 platformupdate
    RSG2update

    Deals & partnerships

    1
    RigakuCollaboration to deliver new process control solutions for X-ray technology in semiconductor applications.

    Customer response has been very positive. The market for X-ray technology in semiconductor applications is approximately $1 billion and expected to grow with complex 3D transistor and packaging technology.

    Risks & headwinds

    1
    Material Input Costs, Fuel Surcharges, Freight Expensesecond half of 2026

    Cognizant of continued headwinds

    Mitigation: Company anticipates additional gross margin expansion despite these headwinds, implying operational efficiencies are offsetting them.

    What to watch in Q3 FY26

    5

    Q3 FY26 Revenue

    Next quarter (Q3 FY26)
    CurrentQ2 FY26 Revenue $343M
    Target$380M-$400M

    Why it matters

    Key indicator of continued strong demand and execution against raised guidance.

    Specifically, we expect Q3 revenue in the range of $380 million to $400 million

    Q&A highlights

    7

    Inquired about the mix and duration of the $1.1 billion backlog, and how it informs confidence for 2027 revenue and growth.

    Mike Plisinski stated the backlog reflects strong customer confidence and commitment to securing supply. Approximately 60-70% is for 2026, and 30-40% covers 2027, indicating another strong year. The mix continues to be strong in packaging (HBM, 2.5D Logic, OSATs) and advanced nodes.

    “Probably 60%, 70% of it is tied to this year, but 30%, 40% is covering 2027, and it's still early. So I think it bodes well for another year of strength in 2027, the discussions we're having with our customers is quite constructive for 2027 growth and growth dynamics.”

    asked by Craig Ellis · answered by Michael Plisinski

    2 min read6 chapters

    Detailed Narrative

    01

    Record Quarter Performance

    Onto Innovation reported record Q2 FY26 results, with revenue, gross margin, operating margin, and EPS all surpassing the high end of guidance. Revenue reached $343 million, an 18% sequential and 35% year-over-year increase. This performance was driven by strong execution in advanced nodes, which grew 50% sequentially, and the inspection business, including Dragonfly systems, which saw 30% sequential growth.

    02

    Expanding Advanced Packaging Opportunities

    The company is experiencing unprecedented🌐 demand for its Dragonfly G5 system, leading to an increased full-year outlook for advanced packaging growth to approximately 80%, up from 50%. This surge is primarily from HBM manufacturers and OSATs supporting heterogeneous packaging for AI applications, exemplified by over $200 million in orders from a single OSAT partner for delivery in 2027.

    03

    Emerging Markets and Technology Inflections

    Onto Innovation is capitalizing on new market opportunities such as silicon photonics, securing over $50 million in orders, with two-thirds for 2027 delivery. The served addressable market in silicon photonics is estimated to grow to over $500 million by 2030. Panel-level packaging revenue is also expected to more than double year-over-year in FY26, with further growth in 2027, driven by the adoption of heterogeneous packaging and larger die sizes.

    04

    Advanced Nodes and Metrology Leadership

    Revenue from advanced nodes customers grew 50% sequentially, surpassing previous records, with broad-based strengthening across memory and logic segments. The Atlas G6 platform is gaining expanded adoption for transistor metrology at sub-20nm nodes, and the company expects to ship multiple systems to a major DRAM customer in H2 FY26. Iris films and integrated metrology product lines are also on track for record revenue in FY26.

    05

    Operational Efficiency and Margin Expansion

    The company achieved a non-GAAP gross margin of 57% and a non-GAAP operating margin of 30% in Q2 FY26, exceeding initial expectations. These improvements are attributed to the successful ramp of extended factories in Asia, which provide increased operational flexibility, reduced capital expenditure, and lower costs. Management anticipates continued margin expansion into 2027, with full-year 2026 gross margin expansion of 350 bps and operating margin expansion of over 750 bps.

    06

    Strong Backlog and Future Visibility

    Onto Innovation reported a record backlog exceeding $1.1 billion, with 30-40% covering 2027, indicating strong customer confidence and multi-year capacity plans. This backlog, coupled with industry analysts forecasting hyperscale capital expenditures north of $1 trillion in 2027, provides exceptional visibility and supports the company's expectation to outperform the broader WFE market in 2027.

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