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Investing.com -- Shares of Onto Innovation Inc. (NYSE:ONTO) plummeted 31% as the company’s second-quarter guidance fell short of analysts’ expectations. Despite reporting a modest earnings beat and record revenue for the first quarter of 2025, investor sentiment soured on the outlook for the upcoming quarter.
Onto Innovation achieved a first-quarter EPS of $1.51, slightly above the consensus estimate of $1.47. Revenue for the quarter was reported at $267 million, narrowly beating the consensus estimate of $266.94 million. This marked a substantial increase from the $228.846 million revenue reported in the same quarter the prior year.
However, the company’s future outlook dampened the initial positive response. Onto Innovation provided second-quarter EPS guidance in the range of $1.21-$1.35, notably below the consensus estimate of $1.50. Revenue projections for Q2 2025 were also lower than expected, at $240-260 million compared to the consensus of $268.5 million.
The company’s financial results for the first quarter included several highlights, such as a GAAP gross margin of 54% and non-GAAP gross margin of 55%, along with GAAP operating income of $63 million and non-GAAP operating income of $76 million. Additionally, Onto Innovation boasted a record cash from operations of $92 million, representing 35% of revenue.
Onto Innovation’s CEO, Michael Plisinski, emphasized the company’s record quarter and strong market alignment, which led to significant cash generation. He also noted the robust demand in advanced nodes and the growth in the packaging market, which requires advanced inspection and metrology solutions.
Despite these positive developments, Wall Street analysts have adjusted their views in light of the guidance. Stifel downgraded the stock to hold from buy, with a price target cut to $117 from $165, citing concerns over market share stabilization in logic Advanced Packaging (NYSE:PKG). Jefferies, while maintaining a buy rating, reduced its price target to $135 from $175, pointing out that the strong results in Advanced Nodes were insufficient to offset a slowdown in AI Packaging.
Investors reacted negatively to the guidance, leading to the steep decline in Onto Innovation’s stock price. The market’s reaction underscores the importance of forward-looking statements and their impact on investor confidence.
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