onsemi (NASDAQ:ON) reported third-quarter 2026 revenue of $1.72 billion, up 7% sequentially and 11% from a year earlier, as accelerating demand from AI data centers and improving industrial markets helped offset a short-term supply allocation shift away from automotive inventory replenishment.
The company said third-quarter results exceeded the midpoint of its guidance, with non-GAAP gross margin rising 190 basis points sequentially to 41.2% and non-GAAP diluted earnings per share reaching $0.90. GAAP net income was $314 million, or $0.79 per share, while non-GAAP net income was about $354 million.
“Our third quarter results reflect continued strength in our business and the momentum we are building across our strategic growth markets,” President and CEO Hassane El-Khoury said. He cited above-seasonal growth, accelerating AI data-center demand and improving industrial demand, particularly in applications where power density is increasingly important.
AI Data Center Revenue Accelerates
AI data-center revenue rose 39% sequentially and 175% year over year to $180 million in the third quarter. onsemi now expects approximately $620 million in AI data-center revenue for 2026, representing 140% year-over-year growth, and said it expects that revenue to double again in 2027 from the higher 2026 base.
The company began volume shipments during the quarter into multiple platforms, including Google, supplying silicon carbide and silicon MOSFET products for power supply units and 54-volt-to-12-volt applications. El-Khoury said onsemi addresses the full data-center power chain, from power supply units to low-voltage power stages close to processors.
Management also pointed to the transition toward 800-volt architectures as a future content opportunity. At the Open Compute Project Summit, the company demonstrated an 800-volt-to-6-volt solution using vertical gallium nitride technology, gate drivers and MOSFETs.
Onsemi announced it will acquire Ferric, a provider of integrated voltage regulator technology, for $600 million in cash plus up to $175 million in earnouts tied to revenue milestones. The transaction is expected to close in the fourth quarter, subject to customary closing conditions.
Chief Financial Officer Thad Trent said Ferric is expected to support onsemi’s growth and gross-margin objectives and become accretive to earnings per share at scale, though it is not expected to have a meaningful near-term financial impact. The acquisition led the company to raise its 2030 AI data-center revenue target by $500 million to more than $3 billion.
Industrial Strength and Automotive Supply Allocation
Industrial revenue was $467 million, up 10% sequentially and 9% year over year. The company cited demand from energy infrastructure, factory automation and the broader industrial market. Management expects industrial revenue to increase by a low-double-digit percentage rate in the fourth quarter.
El-Khoury described industrial momentum as an “AI halo” effect, referring to power demand beyond the data center itself, including grid and energy-infrastructure applications. The company reported hybrid EliteSiC and IGBT module wins with customers including Sungrow and Sineng.
Automotive revenue totaled $777 million, down 1% both sequentially and year over year. Trent said the decrease primarily reflected the reallocation of supply toward AI data-center and industrial markets, where demand came in stronger than planned.
Management expects automotive revenue to decline by a high-single-digit percentage rate in the fourth quarter, reflecting continued supply allocation decisions as well as delivery timing and phasing. However, El-Khoury said the company is meeting automotive end demand and is withholding only inventory replenishment shipments in coordination with customers.
“We are not de-emphasizing the automotive market,” El-Khoury said during the question-and-answer session. He said automotive remains onsemi’s largest strategic end market under its five-year outlook and that the supply shift is temporary rather than a sign of lost market share.
The company expects automotive supply and demand to return to more normalized levels in the first quarter of 2027 as additional supply becomes available. Management reiterated its expectation that automotive growth in 2027 will align with its long-term target.
Margins, Cash Flow and Fourth-Quarter Outlook
GAAP gross margin was 41.4%, while non-GAAP gross margin expanded for the fifth consecutive quarter to 41.2%. Management attributed the improvement to earlier utilization gains and a more favorable mix of new products. Factory utilization was flat at 83% during the third quarter.
Trent said utilization improvement, new-product mix, pricing and the company’s “fab-right” manufacturing strategy should support additional margin expansion. The company closed the divestiture of a backend facility in the Philippines during the quarter and remains on track to divest its Mountaintop fabrication facility by the end of 2027.
- Cash and short-term investments: approximately $4.4 billion.
- Total liquidity: $5.9 billion, including $1.5 billion available under an undrawn revolver.
- Cash from operations: $516 million.
- Free cash flow: $489 million, or 28% of revenue.
- Capital expenditures: $28 million, or 1.6% of revenue.
For the fourth quarter, onsemi forecast revenue of $1.715 billion to $1.815 billion, representing 2.5% sequential growth at the midpoint. The company projected non-GAAP gross margin of 41.5% to 43.5% and non-GAAP diluted earnings per share of $0.95 to $1.07.
Management expects AI data-center revenue to rise by a mid-teens percentage rate in the fourth quarter, industrial revenue to increase by a low-double-digit percentage rate and other revenue to rise by a high-teens percentage rate. The company said it expects demand momentum, revenue growth and gross-margin expansion to continue into 2027 based on its current visibility.
About onsemi (NASDAQ:ON)
onsemi is engaged in disruptive innovations and also a supplier of power and analog semiconductors. The firm offers vehicle electrification and safety, sustainable energy grids, industrial automation, and 5G and cloud infrastructure, with a focus on automotive and industrial end-markets. It operates through the following segments: Power Solutions Group, Advanced Solutions Group, and Intelligent Sensing Group. The Power Solutions Group segment offers discrete, module, and semiconductor products that perform multiple application functions, including power switching, power conversion, signal conditioning, circuit protection, signal amplification, and voltage reference functions.
