Analog chips maker onsemi (NASDAQ: ON) beat Wall Street’s revenue expectations in Q3 CY2025, but sales fell by 12% year on year to $1.55 billion. The company expects next quarter’s revenue to be around $1.53 billion, close to analysts’ estimates. Its non-GAAP profit of $0.63 per share was 6.6% above analysts’ consensus estimates.

Is now the time to buy ON? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

onsemi’s third quarter results reflected stabilization in its core Automotive and Industrial markets, as well as continued expansion in AI-related products. Management attributed sequential growth in these segments to new design wins and customer diversification, with CEO Hassane El-Khoury highlighting progress in high-efficiency power delivery and intelligent sensing. The company also made strategic portfolio enhancements through acquisitions and technology launches. El-Khoury noted, “We are seeing stabilization in Automotive and Industrial while continuing to grow in AI.”

Looking ahead, onsemi’s guidance is shaped by expectations for normalized seasonal trends and further gains in AI, Automotive, and Industrial applications. Management is focused on scaling recent product innovations, including its Treo platform and vertical GaN technology, to address increasing power requirements in applications such as AI data centers and electric vehicles. El-Khoury stated, “We remain committed to our gross margin expansion strategy through innovation with both organic and inorganic investments in differentiation.”

Key Insights from Management’s Remarks

Management cited several factors that shaped the quarter’s performance, including new technology deployment, acquisitions, and shifts in end-market demand.

• AI data center momentum: onsemi’s AI revenue roughly doubled year-over-year, with management expecting AI-related sales to reach nearly $250 million in 2025. The company highlighted its ability to deliver end-to-end power solutions for data centers, differentiating itself from competitors by supporting power delivery from high voltage down to the processor core.

• Treo platform scaling: The Treo platform, which integrates advanced analog, digital, and power technologies, continued to gain traction across Automotive, Industrial, and AI segments. The design funnel now exceeds $1 billion, and management expects to double the number of products sampling this year.

• Vertical GaN (vGaN) introduction: onsemi launched its proprietary vertical GaN technology, developed at its Syracuse facility, which enables higher voltage and power density for demanding applications in AI, electric vehicles, and renewable energy. Sampling has begun with lead customers, and management expects this technology to be a long-term contributor.

• Vcore acquisition and integration: The acquisition of Vcore Power Technology and IP assets from Aura Semiconductor strengthens onsemi’s offering in advanced multiphase controllers and smart power stages, particularly for next-generation AI data centers and compute platforms. Initial product integration is expected in early 2026.

• Geographic and end-market shifts: While Americas and Japan posted strong sequential growth, China and Europe saw declines due to macroeconomic softness and shifting customer order patterns. Management emphasized ongoing diversification and strategic wins in China, especially with local electric vehicle manufacturers and energy storage customers.

Drivers of Future Performance

onsemi’s outlook centers on further growth in AI and Automotive, margin expansion initiatives, and navigating industry headwinds such as inventory and pricing dynamics.

• AI and automotive growth: The company expects AI-related products to remain a major growth driver, with its power and sensing solutions increasingly adopted in data centers and electric vehicles. Management believes its broad technology portfolio will enable share gains as demand for high-efficiency power delivery rises.

• Margin expansion efforts: Structural changes in manufacturing and portfolio focus are aimed at expanding operating margins over time. Management noted that utilization rates and product mix will be key factors, with every point of utilization contributing to gross margin improvement.

• Inventory and pricing risks: Management flagged that broader restocking cycles have not yet materialized, and that customer confidence and geopolitical factors could impact order patterns. Pricing is expected to remain stable, but management is monitoring the competitive landscape for any shifts.

Catalysts in Upcoming Quarters

In upcoming quarters, key catalysts to watch include: (1) the pace of adoption and revenue contribution from onsemi’s new vertical GaN and advanced analog products; (2) signs of a broader restocking cycle in Automotive and Industrial markets; (3) the impact of recent acquisitions like Vcore on the company’s ability to deliver comprehensive solutions for AI data centers; and (4) execution in China and continued progress on margin expansion initiatives.

onsemi currently trades at $50.33, in line with $50.04 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).

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