ON (ON) Q2 Revenue Drops 15%
Key Points
GAAP revenue slightly beat expectations at $1,468.7 million for Q2 2025 but remained down compared to the prior year.
Non-GAAP earnings per share matched estimates
Ongoing restructuring and strategic cost actions impacted margins and profitability.
ON Semiconductor (NASDAQ:ON), a leading supplier of intelligent power and sensing solutions for automotive and industrial markets, released its results for the second quarter of 2025 on August 4, 2025. The company reported GAAP revenue of $1,468.7 million, coming in just above the consensus estimate of $1,452.2 million. However, Non-GAAP earnings per share (EPS) came in at $0.53, exactly matching analyst expectations. Compared to the same period last year, GAAP revenue fell approximately 15%, and Non-GAAP EPS dropped sharply by 44.8%. Margins and free cash flow faced significant pressure, reflecting both ongoing operational restructuring and persistent customer caution in major end markets. Despite these headwinds, management noted signs of market stabilization and continued to execute on its cost-saving initiatives.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $0.53 | $0.53 | $0.96 | (44.8 %) |
| Revenue (GAAP) | $1,468.7 million | N/A | $1,735.2 million | (15.4 %) |
| Gross Margin (Non-GAAP) | 37.6 % | 45.3 % | (7.7 pp) | |
| Operating Margin (Non-GAAP) | 17.3 % | 27.5 % | (10.2 pp) | |
| Free Cash Flow (Non-GAAP) | $106.1 million | $221.1 million | (52.0 %) |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
Company Overview and Strategic Focus
ON Semiconductor is best known for its intelligent power and sensing technologies. The company's products are central to applications in electric vehicles (EVs), industrial automation, medical devices, and smart infrastructure. Its business is heavily weighted toward two key markets: automotive, which brings in around 55% of total revenue, and industrial, which contributes 25% of revenue.
Over the last several years, ON Semiconductor has prioritized innovation in high-growth areas: vehicle electrification, advanced driver-assistance systems (ADAS), industrial automation, and energy efficiency. Strategic investments, such as expanding its silicon carbide (SiC) power product family, have helped the company deepen its presence in emerging applications across these markets. Success now depends on staying ahead in power and sensing technologies and maintaining operational discipline as industry demand cycles fluctuate.
Quarter Highlights and Operating Performance
The period saw GAAP revenue come in modestly above expectations, but most company metrics declined compared to the prior year. Automotive and industrial end-markets continued to account for about 80% of the revenue mix. ON Semiconductor achieved strong design wins for its high-voltage SiC power solutions, particularly in China, where the company’s technology is set to ramp in 50% of new electric vehicle models introduced this year. In China, the company’s technology is set to ramp in nearly 50% of new electric vehicle models introduced in late 2025. Management also pointed to progress in medical and aerospace sub-segments within industrial, which showed early signs of stabilization.
By segment, the Power Solutions Group (PSG) delivered sequential growth, rising to $698.2 million (GAAP), although this was still down 16% year over year. The Analog & Mixed Signal Group (AMG) fell 2% sequentially and 14 % year over year, while the Intelligent Sensing Group (ISG) declined 8% sequentially. The broader decline reflects soft demand, customer caution, and pricing pressure, with all business units impacted by customer caution, inventory adjustments, and pricing pressure in some product lines.
Product innovation remained a focus. ON Semiconductor’s silicon carbide solutions, used in next-generation automotive and industrial power systems, secured placement in major OEM platforms. Management highlighted that SiC device wins have grown, particularly in China’s EV market, with broader adoption expected over the next few years as hybrid platforms adjust to stricter emissions standards. The image sensor family, critical in ADAS for safety and automation, also gained multiple design wins among Asian automotive OEMs. Revenue from the Treo platform, a diverse portfolio targeting analog, power management, and sensing applications for automotive and AI data center uses, has started ramping. Management reaffirmed its goal of reaching $1 billion in Treo revenue by 2030, with margins between 60% and 70%.
The company completed the acquisition of silicon carbide JFET (junction field-effect transistor) technology from Qorvo for $118.8 million on January 14, 2025. This move further strengthens the company in high-voltage power solutions for EV, industrial, and AI data center applications, and is expected to benefit the Power Solutions Group.
Operationally, ON Semiconductor continued to execute its “Fab Right” strategy, which involves optimizing manufacturing capacity and trimming organizational costs. The period included a 12% reduction in internal fab (factory) capacity and a 9% workforce reduction, resulting in $49.2 million of restructuring, asset impairment, and other charges (GAAP). An extra $5 million of recurring savings projected for subsequent quarters in the second half of 2025. Management expects room for improved gross margins (non-GAAP) once market demand returns, with cost actions set to deliver more leverage over time. No dividend is currently paid by ON.
Looking Forward: Guidance and Considerations
For Q3 FY2025, management forecasts GAAP and non-GAAP revenue in the range of $1,465 million to $1,565 million, with non-GAAP gross margin expected between 36.5% and 38.5% for Q3 2025. Non-GAAP EPS guidance is set between $0.54 and $0.64. These projections imply revenue and margin stability rather than significant improvement for Q3 2025. Geopolitical risks and ongoing inventory reduction efforts at customers will likely keep growth muted in the near term.
As management noted, “We are beginning to see signs of stabilization across our end markets, and we remain well-positioned to benefit from a market recovery,” Investors should keep an eye on demand trends in automotive and industrial, progress on cost discipline, and execution of strategic new product ramps, particularly in SiC and sensing technologies, which could influence future margin expansion and top-line growth.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
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