Executive Summary

Q2 2025 revenue was $1.469B (+1.6% q/q, -15% y/y), non-GAAP gross margin 37.6% and non-GAAP EPS $0.53; revenue was modestly above S&P Global consensus ($1.451B*) and EPS was in line ($0.532*), as underutilization continued to weigh on margins . Values retrieved from S&P Global.
Management sees “signs of stabilization” across end markets; automotive likely bottomed in Q2 and is guided up in Q3, while AI data center nearly doubled y/y and remains a standout growth vector .
Q3 2025 guide: revenue $1.465–$1.565B, non-GAAP GM 36.5–38.5%, non-GAAP EPS $0.54–$0.64, with ~900 bps under-absorption again embedded; OpEx guided down as restructuring savings materialize .
Capital return: repurchased $302.3M in Q2 and 107% of YTD FCF; ending cash and ST investments ~$2.8B; FCF was $106.1M in Q2 versus $454.7M in Q1 on working-capital timing .

What Went Well and What Went Wrong

What Went Well
- “We are beginning to see signs of stabilization across our end markets,” with AI data center nearly doubling y/y; China EV ramps drove 23% sequential China revenue growth and automotive expected to grow in Q3 .
- Treo platform momentum (design funnel more than doubled q/q; >5M units shipped from EFK this year); first Treo revenues recognized and more products sampling, supporting long-term, accretive mix .
- Discipline on costs and capital return: OpEx trended down sequentially on restructuring; company returned 107% of YTD FCF via buybacks, and maintained liquidity of ~$4B including revolver .
What Went Wrong
- Margins compressed on continued underutilization (≈900 bps), with non-GAAP gross margin at 37.6% (down from 45.3% y/y and 40.0% q/q) as utilization remains ~68% post-impairment .
- Automotive weak in US/Europe and softer “traditional” industrial; ISG faced strategy-driven E&O and repositioning headwinds (notably in H1), pressuring segment profitability .
- Free cash flow fell to $106.1M on working capital timing; inventory days remained elevated (208 days, including 87 days of SiC transition “bridge” inventory), though management expects reductions in H2 .

Financial Results

Metric	Q2 2024	Q1 2025	Q2 2025
Revenue ($USD Millions)	$1,735.2	$1,445.7	$1,468.7
Non-GAAP Gross Margin %	45.3%	40.0%	37.6%
Non-GAAP Operating Margin %	27.5%	18.3%	17.3%
GAAP Diluted EPS ($)	$0.78	$(1.15)	$0.41
Non-GAAP Diluted EPS ($)	$0.96	$0.55	$0.53
Cash from Operations ($M)	$362.2	$602.3	$184.3
Free Cash Flow ($M)	$221.1	$454.7	$106.1

Segment Revenue ($USD Millions)

Segment	Q2 2024	Q1 2025	Q2 2025
PSG	$835.2	$645.1	$698.2
AMG	$647.8	$566.4	$555.9
ISG	$252.2	$234.2	$214.6
Total	$1,735.2	$1,445.7	$1,468.7

Key KPIs (Q2 2025)

Inventory: 208 days total; includes 87 days of SiC “bridge” inventory for fab transitions .
Distribution inventory: 10.8 weeks (target 9–11 weeks) .
Utilization: ~68% post-capacity impairment basis (flat q/q) .
Share repurchase: $302.3M in Q2; 6.9M shares at ~$43.26 avg price .
Cash & ST investments: ~$2.8B at quarter-end .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	Q3 2025	N/A	$1.465B–$1.565B	New (no prior Q3 guide)
Non-GAAP Gross Margin %	Q3 2025	N/A	36.5%–38.5%	New
Non-GAAP OpEx ($M)	Q3 2025	N/A	$280–$295	New
Other income/(expense) (non-GAAP)	Q3 2025	N/A	+$8M benefit (net)	New
Non-GAAP EPS	Q3 2025	N/A	$0.54–$0.64	New
Diluted shares (M)	Q3 2025	N/A	~410	New
Non-GAAP Tax Rate	Q3 2025	N/A	~16%	New
Capex	Q3 2025	N/A	$35–$50M	New
Revenue	Q2 2025	$1.40B–$1.50B	Actual: $1.469B	In-line vs guide
Non-GAAP GM %	Q2 2025	36.5%–38.5%	Actual: 37.6%	In-line
Non-GAAP EPS	Q2 2025	$0.48–$0.58	Actual: $0.53	In-line

Notes: Q3 guidance embeds ~900 bps under-absorption; utilization expected flat to slightly up; pricing environment stable; OpEx to trend lower from restructuring benefits .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2024, Q1 2025)	Current Period (Q2 2025)	Trend
AI/Data Center Power	SiC JFET acquisition; AI PSU/BBU wins; >40% growth in 2024	“AI data center nearly doubled y/y”; ramping SPS (single) and sampling dual SPS; power delivery is bottleneck	Positive acceleration
Automotive	China strength; US/EU softness; Q1 auto down ~26% seq; LTSA flexibility	Q2 auto down 4% seq; expected up in Q3; China EV ramps (e.g., Xiaomi); EU/US weak	Stabilizing; China-led
Industrial	Traditional industrial weak; pockets in medical	Industrial +2% q/q; “bouncing around bottom,” stabilization signs	Early stabilization
Pricing	Using selective pricing to defend/increase share; low single-digit declines	“No change” in pricing environment; stable and within expectations	Stable
Utilization/Margins	Utilization mid-50s in Q1; each point = 25–30 bps; ~900 bps under-absorption guide	Utilization ~68% post-impairment; ~900 bps under-absorption again in Q3; full utilization now low-90% on new footprint	Margin rebuild lever remains utilization
ISG Repositioning	Focus on machine vision; trimming lower-value human vision	Continuing repositioning; incremental non-core/legacy exits included in 5% 2026 headwind	Portfolio mix-upgrading
Treo Platform	Launched; 60–70% margin profile; first revenues in 2025	Design funnel >2x q/q; shipped >5M units YTD at EFK; more sampling	Strong ramp

Management Commentary

“We are beginning to see signs of stabilization across our end markets, and we remain well-positioned to benefit from a market recovery.” — Hassane El‑Khoury, CEO .
“AI growth will be limited by power delivery rather than compute alone… Onsemi is the only broad-based U.S. power semiconductor supplier addressing this challenge.” — CEO .
“Our Q3 guide includes roughly 900 basis points of underutilization charges… every point of utilization is 25 to 30 basis points of gross margin improvement.” — Thad Trent, CFO .
“We returned 107% of our free cash flow to shareholders on a year-to-date basis.” — CFO .

Q&A Highlights

Margin mechanics: Utilization remains the primary lever; ~900 bps under-absorption persists into Q3; fully utilized threshold improved to low-90s post-impairment, adding margin sensitivity per point .
Automotive outlook: China EV ramps and PHEV designs (trench SiC) underpin recovery; NA/EU remain cautious; auto expected up in Q3 .
ISG strategy: Continued focus on machine vision/ADAS; 2026 revenue headwind from legacy/non-core exits estimated at ~$50–$100M, inclusive of the 5% baseline exit .
Inventory/pricing: Inventory peaked in Q2; expected to decline in H2; pricing environment stable; selective pricing used tactically .
AI power: Sampling dual SPS; tied to XPU roadmaps; standard 12–18 month qual cycles .

Estimates Context

Q2 2025 actuals vs S&P Global consensus: revenue $1.469B vs $1.451B*, EPS $0.53 vs $0.532*; 30 EPS estimates and 28 revenue estimates contributed; essentially in-line on EPS and a slight revenue beat. Values retrieved from S&P Global.
Implication: With stable pricing and flat-to-up utilization outlook, estimate revisions will likely focus on mix, AI ramp cadence, and the pace of auto/industrial stabilization .

Metric	Consensus*	Actual
Revenue ($USD Millions)	1,451.1	1,468.7
Primary EPS ($)	0.532	0.53
EPS estimates (#)	28	—
Revenue estimates (#)	30	—

Values retrieved from S&P Global.

Key Takeaways for Investors

Near-term: Results were broadly in line with consensus; the narrative shifts to Q3 guide (flat-to-up revenue, EPS mid-$0.50s–$0.60s) and signs of end-market stabilization; watch under-absorption persistence and utilization trajectory for margin re-rate .
Auto: China-led EV ramps and PHEV redesigns (trench SiC) support sequential recovery in Q3; breadth across BEV/PHEV and die/module flexibility aids share gains despite regional weakness .
AI/Data Center: Power-delivery bottleneck plays to ON’s strengths; SPS and SiC JFET/MOSFET portfolio positioning suggests durable multi-year growth optionality .
Mix & Portfolio: Treo platform momentum and ISG repositioning should enhance long-term margin quality (>60% Treo margins), while non-core exits (~5% revenue into 2026) ease structural drag .
Cash discipline: Strong liquidity (~$2.8B cash/STI), capital intensity trending mid-single digits, and active buybacks (107% of YTD FCF) provide downside support through the cycle .
Watch items: Utilization inflection (each point adds ~25–30 bps GM), China EV demand durability, pricing discipline, and the pace of inventory normalization (bridge inventory unwind) .

Appendix: Additional Data

Revenue by End-Market (Q2 2025; $USD Millions)

Automotive: $733.2 (down from $906.9 y/y) .
Industrial: $406.2 (down from $468.0 y/y) .
Other (computing/consumer/comm): $329.3 (down from $360.3 y/y) .

Free Cash Flow (LTM as provided)

LTM FCF $1,287.3M; LTM revenue $6,398.8M (company supplemental) .

Disclosures: Underutilization charges, special items, and non-GAAP definitions are detailed in the company’s reconciliation disclosures .

ON SEMICONDUCTOR CORP (ON)·Q2 2025 Earnings Summary