ON Semiconductor (ON.US) Q3 performance and Q4 guidance both exceed expectations; raises 2030 AI data center revenue target to over $3 billion

According to Zhihu Finance APP, ON Semiconductor (ON.US) announced its third quarter 2026 results after the US stock market closed on Monday, November 2nd. The financial report shows that ON Semiconductor's Q3 revenue increased by 11% year-over-year to $1.722 billion, exceeding analysts' average expectations of about $1.7 billion. Adjusted earnings per share were $0.90, up 43% year-over-year and better than analysts' consensus forecast of $0.88. GAAP gross margin was 41.4%, up 3.5 percentage points year-over-year; non-GAAP gross margin was 41.2%, up 190 basis points quarter-over-quarter, marking its fifth consecutive quarterly expansion; non-GAAP operating margin reached 23.2%.

The growth structure continues to tilt toward Artificial Intelligence (AI) business. The Power Solutions Group (PSG) recorded revenue of $890 million, a 21% increase year-over-year, accounting for about 52% of total revenue. The Analog & Mixed Signal Group (AMG) and Intelligent Sensing Group (ISG) each saw revenue increase by 2% year-over-year. CEO Hassane El-Khoury stated that AI data center revenue rose 39% quarter-over-quarter and 175% year-over-year, and the rising power demand is accelerating customer adoption of its differentiated products.

Cash flow and capital allocation actions were intensive during the quarter. Operating cash flow for the quarter was $516 million, up 23% year-over-year; free cash flow was $489 million, up 31% year-over-year, accounting for 28% of revenue; capital expenditures were only about $28 million.

The company also announced two key deals: it acquired power management company Ferric for $600 million in cash plus up to $175 million in milestone consideration, and raised its 2030 AI data center revenue target by $500 million to over $3 billion. The terms of the Synaptics acquisition were revised to an all-cash deal of approximately $5.7 billion ($123 per share), replacing the original all-stock offer of about $7 billion. The company stated that the transaction is expected to be immediately accretive to earnings per share. Notably, stock buybacks for the quarter dropped to $19.9 million (compared to $345 million in the previous quarter), and cash and equivalents rose to $4.16 billion, providing ammunition for the all-cash acquisition.

Fourth quarter guidance is comprehensively above market expectations. ON Semiconductor expects Q4 revenue between $1.715 billion and $1.815 billion, with the midpoint of $1.765 billion exceeding analysts' consensus forecast of about $1.74 billion. Adjusted earnings per share are projected to range from $0.95 to $1.07, with the midpoint of $1.01 above the consensus of $0.95.

Although both Q3 results and Q4 guidance exceeded expectations, pessimism toward the technology sector may have already dampened investor enthusiasm. As of press time, ON Semiconductor fell more than 3% in after-hours US trading on Monday.