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Onto Innovation Inc (ONTO)
NYSE:ONTO
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Onto Innovation
(NYSE:ONTO)
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Rating:79Outperform
Price Target:
$256.00
▲(13.67% Upside)
Action:ReiteratedDate:02/25/26
The score is driven primarily by strong financial quality (debt-free balance sheet and robust free cash flow) and supportive technical momentum (price above key moving averages with positive MACD). These are tempered by a demanding valuation (high P/E) despite an upbeat earnings call that highlighted rising backlog, strong revenue guidance, and expected margin expansion.
Positive Factors
Balance Sheet Strength
A debt‑free, equity‑bolstered balance sheet provides durable financial flexibility: it reduces refinancing and covenant risk, enables funding of R&D, M&A, and factory scaling from internal resources, and cushions the company through semiconductor capex cycles without raising costly external capital.
Cash Generation
Consistently high operating and free cash flow underpins sustainable investment capacity and shareholder optionality. Robust cash conversion funds capital expenditures, product development, service infrastructure and potential buybacks/acquisitions, making growth and margin expansion less dependent on external financing.
Multi‑year Revenue Visibility (VPA & Backlog)
A large VPA and expanding backlog create multi‑quarter revenue visibility and de‑risk near‑term cycles. Contracted volume supports factory planning, predictable system deliveries and recurring service revenue, improving long‑term capacity utilization and the durability of revenue and margin expansion.
Negative Factors
Margin Compression
Eroding returns and lower operating leverage versus prior peaks indicate structural margin pressure. If cost base, product mix, or pricing dynamics do not improve, lower returns could persist, limiting reinvestment capacity and making sustained high ROIC outcomes harder to achieve over the medium term.
Supply‑chain & Lead‑time Constraints
Supplier capacity tightness can materially delay deliveries and revenue recognition for capital systems. Extended lead times raise the risk of missed ramps, higher component costs and strained customer relationships, potentially slowing growth and compressing margins while the company scales extended‑factory output.
Semilab and Power‑Semi Uncertainty
The Semilab acquisition adds capability but also near‑term revenue uncertainty tied to a weakening power‑semiconductor end market. Integration and segment cyclicality could mute expected contribution, requiring a strategic pivot to longer‑term opportunities and creating execution risk for 2026 growth targets.
Onto Innovation (ONTO) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$10.99B
Dividend YieldN/A
Average Volume (3M)964.69K
Price to Earnings (P/E)81.1
Beta (1Y)2.34
Revenue Growth6.38%
EPS Growth-4.15%
CountryUS
Employees1,551
SectorTechnology
Sector Strength88
IndustrySemiconductors
Share Statistics
EPS (TTM)1.26
Shares Outstanding49,702,362
10 Day Avg. Volume1,147,965
30 Day Avg. Volume964,694
Financial Highlights & Ratios
PEG Ratio-1.86
Price to Book (P/B)3.88
Price to Sales (P/S)8.11
P/FCF Ratio27.18
Enterprise Value/Market Cap1.02
Enterprise Value/Revenue11.12
Enterprise Value/Gross Profit22.38
Enterprise Value/Ebitda50.74
Forecast
1Y Price Target
$265.71Price Target Upside17.98% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering7
EPS Forecast (FY)6.19
Revenue Forecast (FY)$1.22B
Onto Innovation Business Overview & Revenue Model
Company DescriptionOnto Innovation Inc. engages in the design, development, manufacture, and support of process control tools that performs macro defect inspection and 2D/3D optical metrology, lithography systems, and process control analytical software worldwide. It offers process and yield management solutions, and device packaging and test facilities through standalone systems for macro-defect inspection, packaging lithography, probe card test and analysis, and transparent and opaque thin film measurements; and process control software portfolio that includes solutions for standalone tools, groups of tools, and enterprise-or factory-wide suites. The company also provides spare parts and software licensing services. Its products are used by semiconductor and advanced packaging device manufacturers; silicon wafer; light emitting diode; vertical-cavity surface-emitting laser; micro-electromechanical system; CMOS image sensor; power device; RF filter; data storage; and various industrial and scientific applications. The company was formerly known as Rudolph Technologies, Inc. Onto Innovation Inc. was founded in 1940 and is headquartered in Wilmington, Massachusetts.
How the Company Makes MoneyOnto Innovation generates revenue through the sale of its core products, which include metrology and inspection systems, alongside software solutions that support semiconductor manufacturing processes. The company primarily earns money through direct sales to semiconductor manufacturers, as well as recurring revenue from service contracts, maintenance agreements, and software licensing. Key revenue streams include new system sales, upgrades to existing systems, and ongoing support services. Additionally, Onto Innovation benefits from strategic partnerships with major semiconductor firms, which can lead to collaborative development projects and enhanced market penetration, thereby contributing to its overall earnings.
Onto Innovation Key Performance Indicators (KPIs)
Any
Revenue by Segment
Reveals how different parts of the business contribute to overall sales, highlighting key areas of strength and potential vulnerabilities in the company's operations.
Reveals how different parts of the business contribute to overall sales, highlighting key areas of strength and potential vulnerabilities in the company's operations.
Data provided by:
The Fly
The FlyOnto Innovation Earnings Call Summary
Earnings Call Date:Feb 19, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:May 06, 2026
Earnings Call Sentiment Positive
The call communicated strong operational and financial momentum: record quarterly and annual revenue, improved margins, record cash generation, a large multi-year VPA (> $240M), doubled backlog and bullish guidance (Q1 revenue $275M–$285M; Q2 >$300M). Key growth engines are advanced packaging (>30% expected growth in 2026) and advanced nodes (more than doubled in 2025), supported by new product introductions and strategic Semilab acquisition. Offsets and near-term risks include a projected ~10% decline in power semiconductor revenue in 2026, supply-chain and lead-time pressures, and timing uncertainty for some advanced nodes ramps and next-gen product qualifications. Overall, the positives materially outweigh the negatives and management is guiding to continued margin and revenue expansion throughout 2026.Q4-2025 Updates
Positive Updates
Record Quarterly and Full-Year Revenue
Q4 record revenue of $267 million, a 22% increase sequentially from Q3; full-year 2025 revenue was a record $1.005 billion.
Significant Cash Generation
Record cash generation of $95 million in Q4, representing approximately 150% cash conversion of non-GAAP net income.
Improving Margins
Gross margin improved ~50 basis points sequentially to 54.6% in Q4; operating margin improved ~410 basis points sequentially to 25.2% in Q4. Company expects ~50 basis points of gross margin improvement at the Q1 midpoint and operating margins of ~25.5%–26.5% in Q1.
Strong EPS and Guidance
Adjusted diluted EPS for Q4 was $1.26. Q1 EPS guidance is $1.26 to $1.36 (assumes ~16% tax rate and ~49.9M shares outstanding).
Large Multi-Year VPA
Signed a volume purchase agreement valued at over $240 million for Dragonfly 2D and 3D bump metrology through 2027, including over $60 million in systems for 3D bump metrology — providing multi-year revenue visibility.
Advanced Packaging Momentum
Advanced packaging business grew over 25% sequentially in the quarter. Company estimates advanced packaging revenue will grow over 30% in 2026, with reported advanced packaging and specialty devices revenue of ~$504 million for full-year 2025.
Advanced Nodes Strength
Advanced nodes revenue more than doubled year-over-year to $308 million in 2025. Q4 advanced nodes revenue was $72 million, up slightly over 30% sequentially. New products (e.g., Atlas G6) are being adopted for gate-all-around and HBM4 DRAM applications.
Record Films & Integrated Metrology Revenue
Films metrology and integrated metrology achieved record revenue in 2025; integrated metrology expanded to include two logic customers for leading-edge processes expected to ramp in 2026.
New Orders and Product Wins
Received orders for JetStep and 8 Firefly systems to support a new large panel packaging facility, first orders for surface charge metrology from Semilab acquisition, and multiple purchase orders for 3Di metrology and panel-level process development.
Backlog and Near-Term Revenue Visibility
Backlog nearly doubled over the last three months to a record level of approximately two quarters. Q1 revenue guidance of $275M–$285M and expectation that Q2 revenue will exceed $300M, implying 12%–14% core growth in H1 2026 vs H2 2025.
Strategic Acquisition Closed
Completed acquisition of Semilab on November 17; consideration paid was $445 million cash plus issuance of 641,771 shares. Semilab contributed ~$9 million of revenue in Q4 and is expected to contribute low $100M–$110M in revenue in 2026 (subject to market trends).
Negative Updates
Power Semiconductor Headwinds
Power semiconductor revenue, while strong in Q4, is expected to decline seasonally in Q1 and be down ~10% for 2026 due to weakening EV demand and slowing infrastructure spending; this will impact Semilab-related power-semicondutor revenue as well.
Semilab Near-Term Revenue Uncertainty
Semilab's 2026 revenue outlook was initially low $100M–$110M, but management indicated the power-semi segment may be more challenged than originally planned, requiring a pivot from opportunistic sales to longer-term opportunities.
Supply Chain and Lead-Time Constraints
Rapid order growth is stressing suppliers, particularly for precision optics, leading to tightening capacity and gradually extended lead times; company is working with suppliers and customers to manage this risk.
Timing and Visibility Risk in Advanced Nodes
While advanced nodes demand is strong, management cited uncertainty on timing and magnitude of ramps. Advanced nodes growth was conservatively modeled as mid-teens (roughly 10%–20%), with some upside dependent on closing additional VPAs and factory timelines.
Early-Stage Qualifications for New Products
Next-generation inspection systems (e.g., Dragonfly G5) have positive preliminary customer feedback, but qualification efforts are still early and full adoption/timing and mix (G3 vs G5) are uncertain; management took a conservative approach in modeling G5 adoption.
Transition Period for Extended Factories
Company is ramping extended factories to support higher throughput; while capacity target (~$2B run-rate) is not a concern long-term, there is a transitional operational period to fully scale extended factory output.
Concentration and Geographic Exposure
Less than 3% of revenue came from China in 2025 — while this limits China exposure, it also indicates higher concentration of revenues with non-China customers which could pose concentration risk depending on a few large customers and VPAs.
Company Guidance
The company guided Q1 revenue of $275 million to $285 million (Q4 was $267M, up 22% QoQ) and expects Q2 revenue to exceed $300 million, implying 12%–14% core growth in H1 2026 versus H2 2025; backlog has nearly doubled over the last three months to about two quarters of cover. They forecast continued margin expansion each quarter in 2026, with Q4 gross margin at 54.6% (improved ~50 bps from Q3) and Q1 gross margin at the midpoint expected to be ~50 bps higher, Q4 operating margin was 25.2% (up 410 bps QoQ) and Q1 operating margin is expected to be ~25.5%–26.5% with operating expenses of about $80 million. EPS for Q1 is projected at $1.26–$1.36 (assuming ~16% tax rate and ~49.9 million shares), and management reiterated record FY2025 revenue of $1.005 billion, Q4 cash generation of $95 million (cash conversion ~150% of non‑GAAP net income), Semilab contributed roughly $9 million in Q4 and is expected to be in the low $100M–$110M revenue range in 2026, advanced packaging revenue is expected to grow over 30% in 2026 while power semiconductor revenue is forecast to decline about 10%, and advanced nodes visibility points to mid‑teens growth (within a 10%–20% WFE range) as VPAs and customer ramps solidify.Onto Innovation Financial Statement Overview
Summary
Strong overall fundamentals supported by an exceptionally conservative balance sheet (minimal/no debt) and robust cash generation (high free cash flow and solid cash conversion). The main constraint is profitability/returns moderating versus prior peaks, with margin compression noted despite the revenue re-acceleration.Income Statement
Revenue is up strongly over the long run (from ~$556M in 2020 to ~$1.01B in 2026), including a solid +29% in the latest year, showing the business can re-accelerate after the 2023 downturn (-19%). Profitability remains healthy with ~50% gross margin and ~13.6% net margin in 2026, but margins have compressed versus 2021–2024 (when net margin was closer to ~18–22%), indicating weaker operating leverage and/or higher costs in the most recent period.72
Positive
Balance Sheet
The balance sheet is a clear strength: debt is minimal to none (debt-to-equity near zero across periods, and total debt is $0 in 2026), providing significant financial flexibility. Equity has steadily increased (to ~$2.10B in 2026), supporting a conservative capital structure. The main watch-out is that returns on equity have moderated versus peak levels (about ~6.5% in 2026 vs ~10–14% in 2021–2024), consistent with the recent margin compression.92
Very Positive
Cash Flow
Cash generation is strong and generally well-aligned with earnings: operating cash flow is robust (about $328M in 2026) and free cash flow is high (about $300M), with free cash flow covering roughly 91% of net income in 2026. Cash conversion is consistently solid across years, and the latest year shows a sharp step-up in free cash flow growth, although free cash flow growth has been volatile historically (including a decline in 2022).85
Very Positive
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 1.01B | 987.32M | 815.87M | 1.01B | 788.90M |
| Gross Profit | 499.77M | 515.31M | 420.25M | 539.22M | 429.09M |
| EBITDA | 223.34M | 249.41M | 183.29M | 301.38M | 222.21M |
| Net Income | 136.76M | 201.67M | 121.16M | 223.33M | 142.35M |
Balance Sheet | |||||
| Total Assets | 2.37B | 2.12B | 1.91B | 1.79B | 1.65B |
| Cash, Cash Equivalents and Short-Term Investments | 639.62M | 852.33M | 697.81M | 547.78M | 511.34M |
| Total Debt | 0.00 | 15.16M | 19.52M | 22.02M | 17.72M |
| Total Liabilities | 267.09M | 191.21M | 173.18M | 198.44M | 223.76M |
| Stockholders Equity | 2.10B | 1.93B | 1.74B | 1.60B | 1.43B |
Cash Flow | |||||
| Free Cash Flow | 299.80M | 213.77M | 149.40M | 118.30M | 163.24M |
| Operating Cash Flow | 328.31M | 245.68M | 171.97M | 136.70M | 175.28M |
| Investing Cash Flow | -121.57M | -226.55M | -103.39M | -55.69M | -141.79M |
| Financing Cash Flow | -75.15M | -35.67M | -9.47M | -68.35M | 2.67M |
Onto Innovation Technical Analysis
Positive
225.22
Price Trends
193.52
Positive
165.86
Positive
134.79
Positive
Market Momentum
7.73
Positive
62.03
Neutral
59.15
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ONTO, the sentiment is Positive. The current price of 225.22 is above the 20-day moving average (MA) of 212.40, above the 50-day MA of 193.52, and above the 200-day MA of 134.79, indicating a bullish trend. The MACD of 7.73 indicates Positive momentum. The RSI at 62.03 is Neutral, neither overbought nor oversold. The STOCH value of 59.15 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for ONTO.
Onto Innovation Risk Analysis
Onto Innovation disclosed 40 risk factors in its most recent earnings report. Onto Innovation reported the most risks in the "Tech & Innovation" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Onto Innovation Peers Comparison
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
79 Outperform | $10.99B | 81.12 | 6.79% | ― | 6.38% | -4.15% | |
74 Outperform | $14.46B | 57.24 | 23.08% | ― | 39.37% | 40.87% | |
72 Outperform | $7.50B | 182.34 | 8.70% | ― | 21.12% | -54.97% | |
69 Neutral | $8.34B | 302.96 | 13.39% | ― | 20.60% | ― | |
68 Neutral | $12.00B | 32.25 | 8.67% | 0.81% | 0.13% | -16.17% | |
66 Neutral | $7.23B | -525.79 | -1.39% | ― | -7.23% | -15.69% | |
61 Neutral | $37.18B | 12.37 | -10.20% | 1.83% | 8.50% | -7.62% |
* Technology Sector Average
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Onto Innovation
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Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.