Onto Innovation Inc. (ONTO) Q2 2025 Earnings Call Transcript
Revenue $253.6 million, an increase of about 5% year-over-year. The increase was attributed to strong performance in advanced nodes and specialty devices and advanced packaging markets.
Gross Margin 54.5%. Excluding $1.1 million of tariff expenses, gross margin would have been approximately 55%. The margin benefited from productivity gains in R&D and operations.
Operating Margin 25.9%, near the high end of the expected range. This was due to productivity gains in R&D and operations.
Earnings Per Share (EPS) $1.25, reflecting a $0.01 impact due to unfavorable foreign exchange loss and a $0.02 impact caused by an increase in the effective tax rate to 16%.
Advanced Nodes Revenue $89 million, representing 35% of Q2's revenue. This was driven by increased investments in NAND and strong DRAM performance, although gate-all-around revenue slowed as expected.
Specialty Devices and Advanced Packaging Revenue $117 million, representing 46% of revenue. Growth was driven by AI packaging innovations and increased demand for subsurface inspection and 3Di technology.
Software and Services Revenue $48 million, representing 19% of revenue.
Cash from Operations $58 million, representing cash conversion of 95% of non-GAAP net income. This was supported by strong operational performance.
Cash and Investments $895 million, an increase of $44 million from Q1. The increase was attributed to strong cash flow generation.
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Is AI Truly Displacing Software? A Wall Street Expert Explains Why Not.
Current State of Software Market: The software market, once a favorite for growth, is now facing challenges, with concerns about overvaluation and the sustainability of major platforms despite the ongoing AI boom.
Investment Caution: Marc Chaikin advises investors to be cautious about buying into software stocks too early, emphasizing the need for market stabilization and thorough analysis before identifying potential winners and losers.
Focus on AI and Infrastructure: The AI boom is still thriving, driven by data centers and chip reliability, which are crucial for supporting AI technologies, while the software sector is experiencing a shift in leadership and market dynamics.
Highlighted Stocks for Investment: Analysts recommend five specific stocks that are currently seen as strong investment opportunities, suggesting that these companies are well-positioned to thrive in the evolving market landscape.
U.S. Stocks Rally as Strong Earnings Lift Nasdaq 1.2%
- Semiconductor Surge: Taiwan Semiconductor's blockbuster earnings reignited enthusiasm, leading AMD and ASML shares to rise about 6% each, reflecting a robust recovery in the AI supply chain and boosting market confidence.
- Strong Financials: Goldman Sachs and Morgan Stanley saw their stocks rise by 4% and 5% respectively after reporting earnings, reassuring investors about the profitability of major financial institutions amid mixed sector results.
- Regional Bank Rebound: The SPDR S&P Regional Banking ETF's surge helped lift small-cap stocks, with the Russell 2000 index hitting record highs for the tenth consecutive session, pushing year-to-date gains above 7%, indicating optimism towards small businesses.
- Positive Economic Data: Initial jobless claims fell to 198,000, significantly below the forecast of 215,000, showcasing the resilience of the U.S. labor market and further bolstering investor confidence in economic recovery.
S&P 500 Futures Rise in Pre-Market Trading; Penumbra and Talen Energy Take the Lead
Market Opening: U.S. stock markets are set to open in two hours.
Penumbra Inc. Performance: Penumbra Inc. (PEN) saw a 14.0% increase in pre-market trading.
Talen Energy Corp. Performance: Talen Energy Corp. (TLN) experienced a 10.2% rise in pre-market trading.
Overall Market Sentiment: The pre-market gains indicate positive sentiment among investors for these companies.
Wells Fargo Raises Packaging Corp Price Target to $233
- Price Target Increase: Wells Fargo raised the price target for Packaging Corp Of America from $222 to $233, with analyst Gabe Hajde upgrading the stock from Equal-Weight to Overweight, reflecting confidence in the company's future growth prospects.
- Market Performance: Packaging Corp shares closed at $211.13 on Monday, indicating a potential upside of 10.4% based on the new target, which may attract more investor interest in the stock.
- Other Rating Changes: Needham increased the price target for Onto Innovation from $150 to $200 while maintaining a Buy rating, demonstrating strong optimism regarding the company's innovation capabilities.
- Industry Dynamics: BTIG raised the price target for Expedia Group from $275 to $330, maintaining a Buy rating, indicating analysts' optimistic outlook on the recovery of the travel industry.
Nova Named IBD Stock Of The Day Amid Strong AI-Driven Demand
- AI-Driven Demand Surge: Nova, as a supplier of semiconductor manufacturing equipment, is experiencing strong business growth driven by the AI megatrend, highlighting the company's significant position in a rapidly evolving market.
- Increased Market Recognition: The widespread application of AI technologies has led to a notable increase in demand for Nova's products, further solidifying its leadership in the semiconductor industry.
- Rising Investor Interest: Being named IBD Stock Of The Day reflects heightened investor recognition of Nova's future growth potential, which could drive stock price appreciation.
- Strategic Market Positioning: The company's robust performance in AI-related sectors indicates a strategic alignment with market trends, likely attracting more investor attention moving forward.
Bridge City Capital Increases Onto Innovation Stake to 47,342 Shares
- Stake Increase: Bridge City Capital disclosed an acquisition of 31,096 additional shares of Onto Innovation, raising its total holdings to 47,342 shares valued at $6.12 million as of September 30, 2025, indicating sustained confidence in the semiconductor sector.
- Asset Allocation: Onto Innovation now represents 1.63% of Bridge City Capital's 13F reportable assets, highlighting its significance in the portfolio and potentially influencing future investment decisions.
- Market Performance: As of November 11, 2025, Onto Innovation shares were priced at $133.44, down 23.59% over the past year, underperforming the S&P 500 by 38.39 percentage points, which may present a buying opportunity for investors.
- Industry Outlook: Given the strong demand for AI chips, Bridge City Capital's increased stake likely reflects optimistic expectations for semiconductor process control companies, especially in the context of current low valuations that may attract more investor interest.
Is AI Truly Displacing Software? A Wall Street Expert Explains Why Not.
Current State of Software Market: The software market, once a favorite for growth, is now facing challenges, with concerns about overvaluation and the sustainability of major platforms despite the ongoing AI boom.
Investment Caution: Marc Chaikin advises investors to be cautious about buying into software stocks too early, emphasizing the need for market stabilization and thorough analysis before identifying potential winners and losers.
Focus on AI and Infrastructure: The AI boom is still thriving, driven by data centers and chip reliability, which are crucial for supporting AI technologies, while the software sector is experiencing a shift in leadership and market dynamics.
Highlighted Stocks for Investment: Analysts recommend five specific stocks that are currently seen as strong investment opportunities, suggesting that these companies are well-positioned to thrive in the evolving market landscape.
U.S. Stocks Rally as Strong Earnings Lift Nasdaq 1.2%
- Semiconductor Surge: Taiwan Semiconductor's blockbuster earnings reignited enthusiasm, leading AMD and ASML shares to rise about 6% each, reflecting a robust recovery in the AI supply chain and boosting market confidence.
- Strong Financials: Goldman Sachs and Morgan Stanley saw their stocks rise by 4% and 5% respectively after reporting earnings, reassuring investors about the profitability of major financial institutions amid mixed sector results.
- Regional Bank Rebound: The SPDR S&P Regional Banking ETF's surge helped lift small-cap stocks, with the Russell 2000 index hitting record highs for the tenth consecutive session, pushing year-to-date gains above 7%, indicating optimism towards small businesses.
- Positive Economic Data: Initial jobless claims fell to 198,000, significantly below the forecast of 215,000, showcasing the resilience of the U.S. labor market and further bolstering investor confidence in economic recovery.
S&P 500 Futures Rise in Pre-Market Trading; Penumbra and Talen Energy Take the Lead
Market Opening: U.S. stock markets are set to open in two hours.
Penumbra Inc. Performance: Penumbra Inc. (PEN) saw a 14.0% increase in pre-market trading.
Talen Energy Corp. Performance: Talen Energy Corp. (TLN) experienced a 10.2% rise in pre-market trading.
Overall Market Sentiment: The pre-market gains indicate positive sentiment among investors for these companies.
Wells Fargo Raises Packaging Corp Price Target to $233
- Price Target Increase: Wells Fargo raised the price target for Packaging Corp Of America from $222 to $233, with analyst Gabe Hajde upgrading the stock from Equal-Weight to Overweight, reflecting confidence in the company's future growth prospects.
- Market Performance: Packaging Corp shares closed at $211.13 on Monday, indicating a potential upside of 10.4% based on the new target, which may attract more investor interest in the stock.
- Other Rating Changes: Needham increased the price target for Onto Innovation from $150 to $200 while maintaining a Buy rating, demonstrating strong optimism regarding the company's innovation capabilities.
- Industry Dynamics: BTIG raised the price target for Expedia Group from $275 to $330, maintaining a Buy rating, indicating analysts' optimistic outlook on the recovery of the travel industry.
Nova Named IBD Stock Of The Day Amid Strong AI-Driven Demand
- AI-Driven Demand Surge: Nova, as a supplier of semiconductor manufacturing equipment, is experiencing strong business growth driven by the AI megatrend, highlighting the company's significant position in a rapidly evolving market.
- Increased Market Recognition: The widespread application of AI technologies has led to a notable increase in demand for Nova's products, further solidifying its leadership in the semiconductor industry.
- Rising Investor Interest: Being named IBD Stock Of The Day reflects heightened investor recognition of Nova's future growth potential, which could drive stock price appreciation.
- Strategic Market Positioning: The company's robust performance in AI-related sectors indicates a strategic alignment with market trends, likely attracting more investor attention moving forward.
Bridge City Capital Increases Onto Innovation Stake to 47,342 Shares
- Stake Increase: Bridge City Capital disclosed an acquisition of 31,096 additional shares of Onto Innovation, raising its total holdings to 47,342 shares valued at $6.12 million as of September 30, 2025, indicating sustained confidence in the semiconductor sector.
- Asset Allocation: Onto Innovation now represents 1.63% of Bridge City Capital's 13F reportable assets, highlighting its significance in the portfolio and potentially influencing future investment decisions.
- Market Performance: As of November 11, 2025, Onto Innovation shares were priced at $133.44, down 23.59% over the past year, underperforming the S&P 500 by 38.39 percentage points, which may present a buying opportunity for investors.
- Industry Outlook: Given the strong demand for AI chips, Bridge City Capital's increased stake likely reflects optimistic expectations for semiconductor process control companies, especially in the context of current low valuations that may attract more investor interest.
