onsemi Q3 2025 slides: Revenue growth accelerates with AI data center doubling

Introduction & Market Context

onsemi (NASDAQ:ON) reported its third quarter 2025 results on November 3, showing sequential growth across key markets despite ongoing semiconductor industry challenges. The company’s strategic focus on automotive, industrial, and AI data center markets appears to be yielding positive results, with revenue exceeding expectations.

Despite beating analyst forecasts with an EPS of $0.63 versus the expected $0.59, onsemi’s stock fell 1.9% in pre-market trading to $49.13, suggesting investors may have had even higher expectations or concerns about future guidance.

Quarterly Performance Highlights

onsemi reported Q3 2025 revenue of $1.55 billion, representing a 6% sequential increase and exceeding analyst expectations of $1.52 billion. The company’s gross margin improved to 38.0%, up 40 basis points quarter-over-quarter, while operating margin expanded significantly to 19.2%, a 190 basis point improvement.

As shown in the following financial performance breakdown, automotive and industrial segments led growth, with automotive revenue increasing 7% sequentially to $787 million and industrial revenue growing 5% to $426 million:

A standout performer was the AI data center business, which approximately doubled year-over-year, highlighting onsemi’s growing presence in this high-growth market. The company’s last twelve months free cash flow margin reached 21.9%, representing a substantial improvement of 815 basis points year-over-year.

Strategic Initiatives

During the quarter, onsemi announced several strategic moves to strengthen its market position. The company expanded its collaboration with Schaeffler for a new EliteSiC-based PHEV platform and partnered with NVIDIA to accelerate the transition to 800 VDC power solutions for next-generation AI data centers.

The company’s strategic announcements are illustrated below:

In a significant move to bolster its AI data center capabilities, onsemi acquired Vcore Power Technology from Aura Semiconductor. This acquisition aligns with the company’s focus on high-growth markets, as illustrated in their portfolio strategy:

The company also unveiled its breakthrough vertical GaN (vGaN) semiconductors, which promise superior efficiency and power density for AI and electrification applications:

onsemi’s automotive market penetration remains strong, with approximately 500 products in production vehicles today, positioning the company to benefit from continued electrification trends:

Forward-Looking Statements

For Q4 2025, onsemi provided guidance for revenue between $1.48 billion and $1.58 billion, with non-GAAP gross margin of 37.0% to 39.0% and non-GAAP EPS of $0.57 to $0.67.

The detailed guidance is shown below:

Looking further ahead, onsemi outlined ambitious financial targets for 2027, including revenue growth at 10-12% CAGR, gross margin expansion to 53% (from 45.4% in 2024), and operating margin improvement to 40% (from 27.9% in 2024). The company also aims to increase free cash flow margin to 25-30% by 2027.

These long-term targets are part of onsemi’s strategy to accelerate shareholder value creation:

The company’s financial model acceleration shows the path to achieving these targets:

Market Reaction

Despite the positive quarterly results and optimistic long-term outlook, onsemi’s stock declined 1.9% in pre-market trading to $49.13. The stock has experienced significant volatility over the past year, trading between a 52-week low of $31.04 and a high of $74.52.

CEO Hassane El-Khoury emphasized the company’s growth in AI during the earnings call, stating, "We are seeing stabilization in automotive and industrial while continuing to grow in AI." Meanwhile, CFO Thad Trent highlighted the company’s "disciplined execution and financial leverage."

The market’s tepid reaction may reflect broader concerns about semiconductor industry challenges, potential supply chain disruptions, or questions about the sustainability of growth in key markets. However, onsemi’s continued focus on high-growth sectors and margin expansion suggests the company is positioning itself for long-term success despite near-term market fluctuations.

Full presentation:

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