Executive Summary

Q4 2024 was resilient operationally in a soft market: revenue $1.72B, non-GAAP gross margin 45.3%, and non-GAAP EPS $0.95; auto and industrial comprised 84% of revenue with auto up 8% QoQ to $1.03B on SiC ramps, while industrial fell 5% QoQ to $417M .
Cash generation improved: Q4 free cash flow was $422M (25% margin) on $580M CFO and $157M capex; FY24 FCF reached $1.21B (3x YoY); ON repurchased $200M in Q4 and has ~$1.7B remaining authorization .
Outlook reset for Q1 2025: revenue $1.35–$1.45B, non-GAAP GM 39–41%, non-GAAP EPS $0.45–$0.55, with utilization guided to mid‑50% and auto expected down “25%+” QoQ; mix and underutilization drive the margin step-down .
Structural levers intact: management reiterated the long-term 53% gross margin target and a 2025 full-year FCF margin of 25–30% as Fab Right cost actions, portfolio rationalization, and lower capital intensity (mid‑single‑digit) take hold .
Catalysts: near-term sentiment hinges on Q1 guide reset (revenue, margin, auto softness) versus visibility into late‑2025 cost benefits, SiC momentum (auto/AI data center), and execution on FCF/share repurchases .

What Went Well and What Went Wrong

What Went Well
- Auto grew 8% QoQ to $1.03B on SiC programs (notably China), while ISG rose 9% QoQ; ON emphasized share gains and new ramps in Q4 .
- Cash discipline: Q4 FCF rose 39% QoQ to $422M (25% margin); 2024 FCF hit $1.2B (3x YoY), with 54% returned to shareholders and ~$1.7B buyback capacity remaining .
- Strategic positioning: SiC portfolio (including JFET acquisition) targets AI data center PSUs/UPS and broader EV/industrial applications; Treo AMS platform opens a $36B TAM with up to 70% GM potential, accelerating AMS proliferation .
What Went Wrong
- Mixed end‑market demand: industrial revenue fell 5% QoQ; noncore “other” declined 24% QoQ with early pricing pressure—management is willing to exit $350–$400M of price‑sensitive, volatile business over time .
- Margin pressure ahead: Q1 non‑GAAP GM guided to 39–41% on lower utilization (mid‑50%) and unfavorable mix; underabsorption and mix are sizable headwinds near term .
- Auto visibility: management expects auto down “25%+” QoQ in Q1, citing China EV inventory digestion, an early Lunar New Year, and broader geopolitical/tariff uncertainty .

Financial Results

Headline P&L vs prior year and sequential

Metric	Q4 2023	Q2 2024	Q3 2024	Q4 2024
Revenue ($M)	$2,018.1	$1,735.2	$1,761.9	$1,722.5
GAAP Gross Margin	46.7%	45.2%	45.4%	45.2%
Non‑GAAP Gross Margin	46.7%	45.3%	45.5%	45.3%
GAAP Operating Margin	30.3%	22.4%	25.3%	23.7%
Non‑GAAP Operating Margin	31.6%	27.5%	28.2%	26.7%
GAAP Diluted EPS	$1.28	$0.78	$0.93	$0.88
Non‑GAAP Diluted EPS	$1.25	$0.96	$0.99	$0.95

Cash flow and capex trend

Metric	Q4 2023	Q2 2024	Q3 2024	Q4 2024
Cash from Operations ($M)	$611.2	$362.2	$465.8	$579.7
Capex Purchases ($M)	$386.4	$154.5	$172.2	$157.3
Free Cash Flow ($M)	$224.8	$207.7	$293.6	$422.4

Segment revenue (Unaudited)

Segment ($M)	Q4 2023	Q3 2024	Q4 2024
PSG	$965.6	$829.4	$809.4
AMG	$744.8	$653.7	$610.6
ISG	$307.7	$278.8	$302.5
Total	$2,018.1	$1,761.9	$1,722.5

Q4 2024 operating KPIs

KPI	Q4 2024
Automotive Revenue	$1.03B
Industrial Revenue	$417M
Other Revenue (QoQ change)	Down 24% QoQ
Utilization	59%
Inventory	216 days; includes ~100 days SiC bridge inventory
Distribution Inventory	9.6 weeks; down $55M QoQ
FCF Margin	25%
Capital Intensity	9%

Non‑GAAP adjustments in Q4 primarily included amortization of intangibles, restructuring/impairments, third‑party M&A costs, actuarial pension items, and tax effects .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	Q1 2025	N/A	$1.35–$1.45B	Initiated
Non‑GAAP Gross Margin	Q1 2025	N/A	39.0%–41.0%	Initiated
Non‑GAAP OpEx	Q1 2025	N/A	$313–$328M	Initiated
Non‑GAAP Other Inc./(Exp.), net	Q1 2025	N/A	+$14M	Initiated
Non‑GAAP Diluted EPS	Q1 2025	N/A	$0.45–$0.55	Initiated
Non‑GAAP Tax Rate	Q1 2025	N/A	~16%	Initiated
Diluted Shares	Q1 2025	N/A	~425M	Initiated
Capex	Q1 2025	N/A	$110–$150M	Initiated

Reference: Prior quarter’s (Q3) “Q4 2024 outlook” was revenue $1.71–$1.81B, non‑GAAP GM 44–46%, OpEx $300–$315M, non‑GAAP EPS $0.92–$1.04; Q4 actuals landed within those ranges .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2 2024 and Q3 2024)	Current Period (Q4 2024)	Trend
Auto demand & mix	Q3: Auto $951M, +5% QoQ; China EV/SiC share gains; OEM sell‑through below plan . Q2: sequential declines across segments .	Auto +8% QoQ to $1.03B in Q4; but Q1 auto guided down ~25%+ on China EV inventory digestion and early CNY .	Near‑term down; structurally positive (share/content).
Industrial demand	Q3: $440M, −6% QoQ; pockets in solar/A&D; broad digestion .	Q4 industrial −5% QoQ; digestion persists into 2025 .	Weak, ongoing digestion.
SiC strategy & ramp	Q3: 200mm M3 qualified; 80/20 auto/industrial mix; China/Europe ramps; low‑mid single‑digit 2024 growth .	H2’24 SiC +22% vs H1; lumpy QoQ; JFET acquisition expands AI PSU/UPS; $1.3B TAM; 2025 growth expected .	Strategically improving; lumpy near term.
Fab Right & utilization	Q3: GM mid‑40s at ~65% utilization; capex LT target cut to mid‑single‑digit; FCF focus .	Q4 utilization 59%; Q1 mid‑50%; GM sensitivity now ~20–25 bps per 100 bps utilization at low utilizations .	Utilization down near term; leverage on recovery.
Distribution strategy (mass market)	Q3: Disti weeks to ~10; mass‑market customer count +15% YoY .	Q4 disti inventory 9.6 weeks (−$55M QoQ); mass‑market customers +18% YoY .	Executing; controlled channel.
Pricing & noncore exit	Q3: Value‑based pricing; not chasing commodity markets .	Early pricing pressure in noncore; potential $350–$400M exit over time; core pricing stable via internal efficiencies .	Portfolio pruning; protects margin mix.
Long‑term model & FCF	Q3: 53% GM target intact; capex intensity mid‑single‑digit; FCF 25–30% LT .	53% GM reiterated; 2025 FCF margin target 25–30%; $422M Q4 FCF (25% margin) .	Reaffirmed; FCF momentum.
AI data center	Q3: Wins at 3 of 4 hyperscalers; 2025 rev contributions expected .	2024 AI DC revenue +40% YoY; JFET strengthens high‑voltage PSU/UPS opportunity .	Building; positive trajectory.

Management Commentary

“As we continue to navigate this market downturn, our actions over the last four years have proven we are a structurally different company… we remain committed to our long‑term strategy.” – CEO Hassane El‑Khoury .
“Automotive revenue increased 8% sequentially driven by China… while Q1 is seeing an early Chinese New Year impact and extended shutdowns.” – CEO .
“We plan to further rationalize our manufacturing footprint and reduce excess capacity through our Fab Right strategy… with benefits starting in late 2025.” – CFO Thad Trent .
“We will not play in highly volatile, price‑sensitive markets… we may exit ~$350–$400 million of noncore revenue over time.” – CEO/CFO .
“We remain committed to that 53% gross margin target… and expect free cash flow of 25%–30% in 2025.” – CFO .

Q&A Highlights

Auto outlook and LTSAs: Auto down 25%+ QoQ in Q1, driven by China EV inventory digestion; LTSAs are continually renegotiated to match true demand rather than forcing overshipment .
Margin bridge and utilization sensitivity: From Q4 to Q1, ~half the GM decline is math from lower revenue, ~100 bps from mix, and ~150 bps from lower utilization; at current low utilizations, every 100 bps of utilization moves GM by ~20–25 bps .
Noncore portfolio and pricing: Early pricing pressure observed in noncore; ON will let such revenue wither rather than chase price, while core pricing remains stable via internal cost efficiencies .
Inventory posture: Internal inventory flat in dollars; 216 days including ~100 days SiC bridge; distribution inventory reduced by $55M in Q4; ON believes it is under‑shipping natural demand to accelerate channel normalization .
Capital allocation: Capex now guided to $110–$150M in Q1; company remains committed to share repurchases (returned 54% of FY24 FCF; ~$1.7B authorization left) .

Estimates Context

S&P Global consensus estimates for Q4 2024 revenue and EPS could not be retrieved due to a temporary request limit; therefore, explicit beat/miss vs consensus is not shown here. Where available, ON’s Q4 actuals fell within its prior Q4 guidance ranges set on Oct 28, 2024 (revenue $1.71–$1.81B; non‑GAAP GM 44–46%; non‑GAAP EPS $0.92–$1.04) .
Note: When available, we anchor estimate comparisons on S&P Global consensus.

Key Takeaways for Investors

Near‑term reset: Q1 2025 guide (rev $1.35–$1.45B; non‑GAAP GM 39–41%; EPS $0.45–$0.55) signals a steeper trough driven by auto demand softness, mix, and utilization; this is the principal stock‑moving catalyst near term .
Structural margin/FCF story intact: Management reiterated a 53% long‑term GM and expects 25–30% FCF margin in 2025, aided by Fab Right cost actions, portfolio pruning, and lower capital intensity .
Auto/SiC: Despite Q1 lumpiness, ON continues to gain SiC share (China and Europe), with H2’24 SiC up 22% vs H1; medium‑term EV/800V adoption and AI PSU/UPS use‑cases underpin growth .
Mix management: Willingness to exit $350–$400M of noncore revenue protects long‑term margin structure and reduces volatility exposure .
Channel discipline: Tight control of distribution inventory (9.6 weeks; −$55M QoQ) and mass‑market expansion support resilience into recovery .
Operating leverage on demand recovery: With GM sensitivity of ~20–25 bps per 100 bps utilization at low levels, a utilization rebound can drive outsized margin recovery once end demand stabilizes .
Capital returns supported by cash generation: Q4 FCF of $422M (25% margin) and ~$1.7B remaining repurchase authorization provide downside support through cyclical softness .

Appendix: Additional Details and Reconciliations

Non‑GAAP reconciliations for Q4 2024 include adjustments for amortization of intangibles, restructuring/impairments, third‑party M&A costs, actuarial pension items, and tax impacts, resulting in non‑GAAP operating margin of 26.7% and non‑GAAP EPS of $0.95 .
Balance sheet highlights: Cash and short‑term investments of ~$3.0B; total liquidity $4.1B including undrawn revolver of $1.1B .
FY 2024 summary: Revenue $7.08B; non‑GAAP GM 45.5%; non‑GAAP operating margin 27.9%; non‑GAAP EPS $3.98; FCF $1.21B .

ON SEMICONDUCTOR CORP (ON)·Q4 2024 Earnings Summary