Onto Innovation ((ONTO)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Onto Innovation’s recent earnings call reflected a generally positive sentiment, with the company showcasing a robust performance in the second quarter of 2025. The call highlighted strategic acquisitions and growth in AI packaging and advanced nodes as key drivers of this success. However, there were concerns about a potential revenue slowdown and the impact of tariffs in the upcoming quarter.
Strong Financial Performance in Q2 2025
Onto Innovation reported a strong second quarter with revenues reaching $253.6 million, marking a 5% increase compared to the previous year. The operating margin exceeded the midpoint of the company’s guidance, underscoring effective cost management and operational efficiency.
Strategic Acquisition of Semilab Product Lines
The company announced a strategic agreement to acquire product lines from Semilab International. This acquisition is expected to significantly boost Onto Innovation’s annual revenue by over $130 million and increase earnings per share by more than 10%, highlighting the company’s strategic growth initiatives.
Growth in Advanced Node Revenue
Advanced nodes contributed significantly to the company’s revenue, generating $89 million and accounting for 35% of the total Q2 revenue. This growth was driven by increased investments in NAND and DRAM technologies, reflecting the company’s strong position in the semiconductor market.
Expansion in AI Packaging and Specialty Devices
Onto Innovation is anticipating substantial growth in AI logic packaging, with revenue expected to increase by at least 50% quarter-over-quarter in Q4. This expansion is set to mitigate the anticipated decline in this sector, showcasing the company’s adaptability and forward-thinking strategy.
Anticipated Revenue Slowdown in Q3 2025
The company expects a revenue slowdown in the third quarter, with projections ranging from $210 million to $225 million. This anticipated decline is attributed to reduced spending in advanced nodes, posing a challenge for the upcoming quarter.
Tariff Impacts on Gross Margin
Tariffs have impacted Onto Innovation’s gross margin, with a $1.1 million expense recorded in Q2 and similar impacts expected in Q3. The company is actively seeking ways to mitigate these effects in the future.
Temporary Decrease in Q3 Operating Margin
A temporary decrease in operating margin is anticipated for the third quarter, expected to fall within the range of 18% to 21%. This is primarily due to the projected lower revenue, but the company remains optimistic about future improvements.
Forward-Looking Guidance
Onto Innovation’s forward-looking guidance suggests a cautious yet optimistic outlook. While a revenue slowdown is expected in Q3, the company anticipates a sharp rebound in AI packaging spend in Q4, potentially increasing revenue by at least 50% quarter-over-quarter. Additionally, the company is working towards improving gross margins and mitigating tariff impacts by 2026.
In summary, Onto Innovation’s earnings call painted a picture of a company that is both thriving and facing challenges. The strong Q2 performance, strategic acquisitions, and growth in advanced technologies are promising, yet the anticipated revenue slowdown and tariff impacts require careful navigation. Overall, Onto Innovation remains a resilient player in the semiconductor industry, with strategic plans to overcome near-term hurdles.