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ON SEMICONDUCTOR CORP (ON)·Q3 2025 Earnings Summary

Executive Summary

  • ON delivered Q3 2025 revenue of $1.55B and non-GAAP EPS of $0.63, beating S&P Global consensus on both metrics; gross margin expanded sequentially as mix improved, and free cash flow rose to $372M (24% of revenue) . Consensus: Revenue $1.517B*, EPS $0.591*.
  • Sequential stabilization across core end-markets with Auto up 7% q/q to $787M and Industrial up 5% q/q to $426M; “Other” rose 2% q/q with AI data center momentum .
  • Q4 guide is seasonally in line: revenue $1.48–$1.58B, non-GAAP GM 37–39%, non-GAAP EPS $0.57–$0.67; midpoint is essentially in-line with consensus ($1.537B rev, $0.623 EPS)* .
  • Strategic catalysts: launch of vertical GaN (vGaN) on GaN-on-GaN for 700V/1,200V devices, sampling now for AI/Auto, and Treo platform traction (Teledyne selection), reinforcing ON’s “wall-to-core” AI power delivery strategy .

Note: Asterisked values are from S&P Global.

What Went Well and What Went Wrong

  • What Went Well

    • Beat on revenue and EPS with sequential margin expansion: Q3 revenue $1,550.9M, non-GAAP GM 38.0% (vs 37.6% in Q2), non-GAAP operating margin 19.2% (vs 17.3% in Q2) .
    • Auto and Industrial stabilized and grew sequentially; Auto $787M (+7% q/q), Industrial $426M (+5% q/q); management emphasized stabilization: “We’re seeing continued signs of stabilization across our core markets, as well as positive growth in AI.” .
    • AI data center advancing: 2025 AI revenue ~“almost $250M” expected; ON differentiates by spanning “wall to core,” one of only two vendors to do so; launched vGaN sampling for AI/Auto .
    • Capital returns: Q3 repurchases $325M; YTD buybacks $925M (~100% of FCF) .
    • CEO quote: “Our third quarter results exceeded expectations… continued signs of stabilization… positive growth in AI.” .

  • What Went Wrong

    • Year-over-year pressure persists: revenue -12% y/y; non-GAAP gross margin 38.0% vs 45.5% in Q3’24; non-GAAP operating margin 19.2% vs 28.2% .
    • China/Europe softness and lumps in industrial: Europe down 4% q/q; China down 7% q/q; management cited macro softness and solar slowdown in China as temporary .
    • Underutilization still a headwind; Q3 utilization was 74%, with CFO reiterating 25–30 bps gross-margin impact per 1pt of utilization; no restocking cycle yet .
    • Ongoing portfolio exits: ~$200M 2025 revenue headwind, 5% ($300M) non-recurring in 2026 as non-core exits continue .

Financial Results

Headline results vs prior periods and consensus

MetricQ3 2024Q2 2025Q3 2025 ActualQ3 2025 Consensus*
Revenue ($M)1,761.9 1,468.7 1,550.9 1,517.0*
GAAP Diluted EPS ($)0.93 0.41 0.63 0.591*
Non-GAAP Diluted EPS ($)0.99 0.53 0.63 0.591*
GAAP Gross Margin (%)45.4% 37.6% 37.9% —
Non-GAAP Gross Margin (%)45.5% 37.6% 38.0% —
Non-GAAP Op Margin (%)28.2% 17.3% 19.2% —

Note: Asterisked values are from S&P Global.

Quarterly trend (2025 year-to-date)

MetricQ1 2025Q2 2025Q3 2025
Revenue ($M)1,445.7 1,468.7 1,550.9
Non-GAAP Gross Margin (%)40.0% 37.6% 38.0%
Non-GAAP Operating Margin (%)18.3% 17.3% 19.2%
Non-GAAP Diluted EPS ($)0.55 0.53 0.63
Cash from Operations ($M)602.3 184.3 418.7
Free Cash Flow ($M)454.7 106.1 372.4

Segment breakdown (revenue)

Segment ($M)Q3 2024Q2 2025Q3 2025
Power Solutions Group (PSG)829.4 698.2 737.6
Analog & Mixed Signal (AMG)653.7 555.9 583.3
Intelligent Sensing Group (ISG)278.8 214.6 230.0
Total1,761.9 1,468.7 1,550.9

End-market mix (Q3 2025)

End-Market ($M)Q2 2025Q3 2025
Automotive733 787
Industrial406 426
Other~332.~338.9 (derived from total – auto – industrial)

. Values for “Other” are calculated from disclosed totals and end-market figures.

KPIs and operating metrics

KPIQ2 2025Q3 2025
Manufacturing Utilization (%)68% (post-impairment basis) 74%
Inventory (days)208 days; Bridge 87; Base 121 194 days; Bridge 82; Base 112
Distribution Inventory (weeks)10.8 (target 9–11) 10.5 (target 9–11)
Cash & Short-term Investments ($B)~2.8 (C&CE $2.53B; STI $0.30B) ~2.9 (C&CE $2.47B; STI $0.40B)
YTD Share Repurchases ($M)627 (Q1–Q2) 925
Q3 Buybacks ($M)302 325
Diluted Shares (Q3) (M)414.9 408.0
Tax RateGAAP 12.6%; non-GAAP 16% (Q2) GAAP 6.5%; non-GAAP ~16% (Q3)
Lead TimesMid-teens weeks; ~20 weeks by Q3 ~20 weeks

Guidance Changes

MetricPeriodPrevious Guidance (as of Aug 4 for Q3’25)Current Guidance (Q4’25)Change (sequential guide midpoint)
Revenue ($M)Next quarter$1,465–$1,565 $1,480–$1,580 Raised (midpoint $1,515 → $1,530)
Non-GAAP Gross Margin (%)Next quarter36.5–38.5 37.0–39.0 Raised (midpoint 37.5 → 38.0)
Non-GAAP OpEx ($M)Next quarter$280–$295 $282–$297 Slightly higher (midpoint 287.5 → 289.5)
Other Inc./(Exp.), net ($M)Next quarter+8 +7 Slightly lower
Non-GAAP EPS ($)Next quarter$0.54–$0.64 $0.57–$0.67 Raised (midpoint $0.59 → $0.62)
Diluted Shares (M)Next quarter410 405 Lower (favorable)

Management noted Q4 guide aligns with typical seasonality (flat to down ~2% q/q; midpoint down ~1.3%) .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1–Q2 2025)Current Period (Q3 2025)Trend
AI data center power “wall-to-core”AI revenue doubled y/y in Q1 & Q2; smart power stages sampling; UPS/PSU wins; collaboration on 800V architectures AI revenue ~“almost $250M” in 2025; multiple PSU/rack wins; vGaN sampling; “one of only two” spanning wall to core Accelerating
Supply chain/tariffsFlexible footprint to mitigate tariffs; no direct tariff impact; cautious on uncertainty Q4 guide assumes no material direct tariff impact; backlog layering improving; lead times ~20 weeks Stable/cautious
Utilization & marginsUnder-absorption ~900 bps; every 1pt utilization = 25–30 bps GM; Q2 utilization 68% post-impairment Q3 utilization 74%; expect flat-to-down in Q4 as die-bank builds complete; 25–30 bps per pt reiterated Improving sequentially
Auto & Industrial trendsQ1 auto trough; industrial green shoots; regional strength China EV Auto +7% q/q; Industrial +5% q/q; Europe down 4%, China down 7% q/q; stabilization emphasized Stabilizing
Portfolio/ExitsNon-core exits; ~5% of 2025 revenue not repeating in 2026 ~$200M 2025 exits; ~$300M 2026 (~5% of 2025) Ongoing
Technology roadmapTreo pipeline, early revenue; SiC trench gen progressing vGaN launch; VCORE IP acquisition; SiC JFET/Trench wins; ADAS imaging traction Broadening

Management Commentary

  • CEO: “We’re seeing continued signs of stabilization across our core markets, as well as positive growth in AI.”
  • CEO on differentiation: “We are one of the only companies… able to support the power delivery from the high voltage all the way to the core” for AI data centers .
  • CFO on leverage: “Every point of utilization is 25 to 30 basis points of gross margin improvement” with utilization at 74% in Q3 .
  • Q4 tone: Seasonality typical (flat to down ~2%); Q4 midpoint down ~1.3% sequentially; no direct tariff impact assumed .

Q&A Highlights

  • Auto stabilization vs growth: Auto up 7% q/q; management frames Q/Q lumpiness vs H2>H1; still no broad restocking; visibility improving but cautious .
  • AI data center: 2025 AI revenue ~“almost $250M”; ON claims unique “wall-to-core” coverage; multiple PSU/UPS wins; collaboration on 800V DC architectures .
  • Utilization/margins: Q3 utilization 74%; expect flat-to-down Q4; 25–30 bps GM per 1pt utilization; under-absorption remains a tailwind as volumes recover .
  • Inventory/lead times: Inventory days down to 194 (bridge 82; base 112); distribution inventory 10.5 weeks; lead times moved to ~20 weeks as order patterns improve .
  • Non-core exits: ~$200M 2025 headwind, ~$300M (≈5%) in 2026; not margin-accretive long-term, part of portfolio quality upgrade .

Estimates Context

  • Q3 2025 results beat S&P Global consensus: revenue $1,550.9M vs $1,517.0M*; EPS $0.63 vs $0.591*.
  • Q4 2025 guidance is in-line with consensus at the midpoint: company revenue $1,480–$1,580M vs $1,536.8M*; company non-GAAP EPS $0.57–$0.67 vs $0.623* .
  • Estimate implications: modest upward adjustments to near-term EPS/gross margin trajectories may occur given Q3 beat and Q4 GM midpoint lift (37.5% → 38.0%), but magnitude likely limited by seasonal revenue guide and continued under-absorption dynamics .

Note: Asterisked values are from S&P Global.

Key Takeaways for Investors

  • Quality of beat: ON beat on both revenue and EPS with sequential margin expansion and stronger FCF, signaling execution through downturn and mix improvements .
  • Stabilization narrative: Auto/Industrial posted sequential growth; Europe/China softness persists but appears macro- and timing-driven; no broad restock yet—a latent upside when it starts .
  • Utilization tailwind ahead: With Q3 utilization at 74% and 25–30 bps GM per 1pt utilization, recovery in volumes and further footprint optimization should drive structural margin improvement .
  • AI as a second growth engine: ~“$250M” 2025 AI revenue, “wall-to-core” differentiation, vGaN sampling, and Treo roadmap support multi-year AI power tree share gains .
  • Portfolio discipline: Non-core exits (~$200M 2025; ~5% of 2025 in 2026) plus Treo/SiC/vGaN investments aim to upgrade revenue quality and margin profile over time .
  • Capital returns credible: YTD repurchases $925M (~100% of FCF) and Q3 buybacks $325M; liquidity robust with ~$2.9B cash/STI and $1.1B revolver capacity .
  • Near-term setup: Q4 guide in-line with seasonal patterns and consensus; watch for utilization trajectory, AI program ramps, and any signs of restocking as potential upside catalysts .

Supporting Documents

  • Q3 2025 8-K and Exhibit 99.1 Press Release (financials, guidance) .
  • Q3 2025 Earnings Call Transcript (end-market, utilization, AI strategy, exits) .
  • Q2 2025 8-K/Call (prior guide, utilization framework) .
  • Q1 2025 8-K/Call (prior trough, industrial green shoots) .
  • vGaN and Treo press releases (technology catalysts) .