Onto Innovation (ONTO) Declined as Projections Fell Short of Expectations

TimesSquare Capital Management, an equity investment management company, released its “U.S. Small Cap Growth Strategy” second-quarter 2025 investor letter. A copy of the letter can be downloaded here. During the quarter, the fund returned 11.28% (gross) and 11.02% (net), compared to the Russell 2000 Growth Index by 11.97%. Equities posted double-digit returns in the second quarter as global economic activity measures lifted. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its second-quarter 2025 investor letter, TimesSquare Capital Small Cap Growth Strategy highlighted stocks such as Onto Innovation Inc. (NYSE:ONTO). Onto Innovation Inc. (NYSE:ONTO) designs, develops, manufactures, and supports process control tools that perform optical metrology and inspection. The one-month return of Onto Innovation Inc. (NYSE:ONTO) was 2.14%, and its shares lost 41.42% of their value over the last 52 weeks. On September 12, 2025, Onto Innovation Inc. (NYSE:ONTO) stock closed at $110.98 per share, with a market capitalization of $5.44 billion.

TimesSquare Capital U.S. Focus Growth Strategy stated the following regarding Onto Innovation Inc. (NYSE:ONTO) in its second quarter 2025 investor letter:

"Among the wide variety of Information Technology companies, we prefer critical system providers, specialized component designers, systems that improve productivity or efficiency for their clients, and others that are growing their shares of corporate IT budgets. Onto Innovation Inc. (NYSE:ONTO) designs, develops, and produces high-performance control metrology, defect inspection, lithography, and data analysis systems that are used by microelectronic device manufacturers. While first quarter results were in line with the Street, second quarter projections fell short. That triggered a -16% tumble in its share price."

Onto Innovation Inc. (NYSE:ONTO) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 37 hedge fund portfolios held Onto Innovation Inc. (NYSE:ONTO) at the end of the second quarter, which was 31 in the previous quarter. Onto Innovation Inc. (NYSE:ONTO) achieved a strong second quarter with revenue of $253.6 million, reflecting an increase of approximately 5% year-over-year. While we acknowledge the potential of Onto Innovation Inc. (NYSE:ONTO) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we covered Onto Innovation Inc. (NYSE:ONTO) and shared the list of most undervalued semiconductor stocks to buy according to analysts. In addition, please check out our hedge fund investor letters Q2 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.