ONTO Q4 Earnings Lag Estimates, Fall Y/Y, Revenues Meet on AI Tailwinds

Onto Innovation Inc. ONTO reported fourth-quarter 2025 earnings per share of $1.26, which missed the Zacks Consensus Estimate by 1.6%. The bottom line also compared unfavorably with the prior-year quarter's $1.51.

Quarterly revenues of $267 million matched the Zacks Consensus Estimate. The top line expanded 1.1% year over year and 22% sequentially, exceeding the high end of management’s guidance ($250-$265 million). Full-year revenue totaled $1.005 billion, surpassing the billion-dollar mark for the first time in the company’s history. The performance reflects sustained demand for its inspection and metrology solutions, particularly in AI infrastructure applications.

A major strategic win during the quarter was a volume purchase agreement exceeding $240 million with a leading HBM manufacturer, covering Dragonfly 2D inspection and 3D bump metrology systems through 2027. The shipment of next-generation Dragonfly systems to multiple customers now in evaluation is a key catalyst. As HBM scaling and advanced packaging complexity increase, high-resolution inspection and metrology become essential for yield and performance.

This deal provides multi-year revenue visibility and firmly anchors Onto Innovation within the rapidly expanding AI memory ecosystem. It also completed the acquisition of select product lines from Semilab’s materials analysis business, expanding its process control capabilities. This move broadens the company’s technology portfolio and strengthens its ability to address critical customer challenges across advanced nodes and specialty devices.

Onto Innovation Inc. Price, Consensus and EPS Surprise

Onto Innovation Inc. price-consensus-eps-surprise-chart | Onto Innovation Inc. Quote

Specialty devices and advanced packaging generated about $145 million, accounting for just over half of total revenue, jumping 25% sequentially, with 2.5D packaging sales doubling sequentially from the prior quarter. This segment also included roughly $9 million in revenue from the Semilab acquisition.

Revenues from the Advanced nodes rose by a little more than 30% quarter over quarter to $72 million, mainly driven by pilot line shipments for a new gate-all-around (GAA) customer.

Margin Details

Non-GAAP gross margin came in at 54.6% compared with 54.5% in the previous-year quarter.

Non-GAAP operating expenses were $78.4 million, up 14.6% year over year.

Non-GAAP operating income was $67.2 million compared with $75.5 million in the year-ago quarter. Non-GAAP operating margin was 25%, down from 29% in the previous-year quarter.

Liquidity

As of Jan. 3, 2026, the company had $639.6 million in cash, cash equivalents and marketable securities with $218.9 million of total current liabilities compared with $983.9 million and $162.9 million, respectively, as of Sept. 27, 2025.

Accounts receivable were $268.9 million.

Onto Innovation generated a record $95 million in cash from operations in the fourth quarter, representing a cash conversion of 150% of non-GAAP net income. 

Q1 2026 Outlook Signals Margin Recovery and Continued Growth

With momentum in both advanced packaging and advanced nodes, first-quarter revenue is projected at $275–$285 million, with the second quarter expected to surpass $300 million, marking a core business acceleration to roughly 12–14% growth in the first half of 2026 versus the second half of 2025.

At the midpoint of its revenue guidance, ONTO expects gross margin to improve about 50 basis points sequentially, driven by tariff mitigation efforts and a higher volume of shipments from its expanded manufacturing footprint. Gross margin is projected at 54.6-55.6%.

Operating expenses are projected to be around $80 million, reflecting a full quarter of Semilab-related costs, while non-GAAP operating margin is expected to rise to 25.5–26.5%. GAAP operating margin is expected at 14.2-15.6%.

Non-GAAP earnings per share are predicted to be between $1.26 and $1.36. GAAP earnings per share are expected to range from 74 cents to 84 cents.

ONTO’s Zacks Rank

Onto Innovation currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Recent Performance of Other Firms

Fortive Corporation FTV reported fourth-quarter 2025 adjusted EPS from continuing operations of 90 cents, surpassing the Zacks Consensus Estimate of 83 cents. The bottom line increased 12.5% year over year. Revenues increased 4.6% year over year to $1.12 billion. The top line beat the Zacks Consensus Estimate by 2.6%. Core revenues jumped 3.3%.

AMETEK, Inc. AME reported fourth-quarter 2025 results, wherein both the top and bottom lines surpassed the Zacks Consensus Estimate. AMETEK reported its fourth-quarter non-GAAP earnings of $2.01 per share, beating the Zacks Consensus Estimate by 3.6%. The figure increased 7.5% year over year. AMETEK’s top line of $2 billion surpassed the Zacks Consensus Estimate by 2.6%. The figure increased 13.4% year over year.

Teradyne TER reported fourth-quarter 2025 non-GAAP earnings of $1.8 per share, which beat the Zacks Consensus Estimate by 32.22% and surged 89.5% year over year. Revenues of TER came at $1.08 billion and beat the Zacks Consensus Estimate by 11.82% and increased 43.7% year over year.

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This article originally published on Zacks Investment Research (zacks.com).

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