Company Overview
ON Semiconductor reported earnings this morning with Q3 EPS of $0.63 beating the consensus estimate of $0.59 by $0.04, while the company’s revenue of $1.55 billion topped analyst expectations. This marks a significant beat for the automotive and industrial semiconductor specialist during a challenging period for the chip industry.
Revenue exceeded expectations, reaching $1.55 billion against a forecast of $1.52 billion, representing a 6% increase quarter-over-quarter. What makes this morning’s results particularly compelling is the emerging stabilization: ON Semiconductor President and CEO Hassane El-Khoury noted that the company is seeing steady stabilization in its core markets and continued growth in AI. The company’s automotive revenue grew 7% and industrial revenue rose 5%, aligning with broader industry trends favoring advancements in automotive technologies and industrial automation.
Key Technical and Fundamental Drivers
Morning Earnings Beat → 7% EPS Surprise ON Semiconductor reported Q3 EPS of $0.63, beating the consensus estimate of $0.59 by $0.04, with revenue of $1.55 billion topping analyst expectations of $1.52 billion, demonstrating execution strength.
Sequential Revenue Growth → 6% Q/Q Acceleration Revenue reached $1.55 billion, a 6% increase quarter-over-quarter, with automotive revenue growing 7% and industrial revenue rising 5%, showing momentum building across core segments.
Core Market Stabilization → Recovery Underway CEO Hassane El-Khoury noted that ON Semiconductor is seeing steady stabilization in its core markets and continued growth in AI, as demand for energy efficiency rises across automotive, industrial, and AI platforms.
Strong Cash Generation → 21% FCF Margin Cash from operations was $419 million, and free cash flow was $372 million, with year-to-date free cash flow at 21% of revenue, providing flexibility for shareholder returns and investments.
Q4 Guidance → Continued Growth Expected ON Semiconductor set Q4 2025 guidance at $0.57-$0.67 EPS with revenue guidance of $1.5 billion-$1.6 billion, indicating confidence in sustained momentum into year-end.
Market Takeaway
ON Semiconductor’s solid Q3 beat this morning signals that the automotive and industrial semiconductor downturn may finally be bottoming out. The 6% sequential revenue growth and 7% automotive segment growth are particularly encouraging as they suggest the inventory correction that plagued the sector throughout 2024 and early 2025 is finally clearing. The company’s strategic positioning in power semiconductors for electric vehicles and energy-efficient industrial applications positions it perfectly for the ongoing electrification megatrend.
What makes ON particularly compelling is its differentiated focus on system-level power solutions rather than just discrete chips. The company’s ability to support power delivery from high voltage all the way to the processor core gives it a competitive moat in automotive and AI applications where energy efficiency is critical. With strong free cash flow generation at 21% of revenue and management returning capital to shareholders aggressively, ON Semiconductor offers both growth and shareholder-friendly capital allocation. The Q4 guidance suggesting continued sequential growth reinforces that the recovery has legs, making this morning’s earnings beat more than just a one-quarter blip. As automotive production stabilizes and AI infrastructure spending accelerates, ON Semiconductor stands to benefit from both secular growth drivers while trading at a reasonable valuation following the sector’s extended weakness.