onsemi Meets Q4 Expectations but Cautious Outlook Weighs on Shares
ON Semiconductor Corp. (NASDAQ:ON) reported financial results for the fourth quarter and full year of 2025 that largely aligned with analyst forecasts for the period just ended. However, a revenue outlook for the current quarter that fell short of expectations has prompted a negative after-hours reaction from investors, overshadowing the company's achievements in cash generation and shareholder returns.
Fourth Quarter Performance Versus Estimates
For the critical holiday quarter, onsemi delivered results that were largely in line with pre-announced expectations. The company reported revenue of $1.53 billion, which showed a significant 11.2% decline compared to the $1.72 billion generated in the fourth quarter of 2024. This top-line figure came in slightly below the analyst consensus estimate of approximately $1.58 billion.
On the profitability front, the company's non-GAAP earnings per share (EPS) of $0.64 edged out the average analyst estimate of $0.6414. This indicates that despite the revenue pressure, onsemi's operational discipline and cost management allowed it to meet bottom-line expectations.
The company's segment performance for Q4 2025 showed a mixed picture:
- Power Solutions Group (PSG): Revenue of $724.2 million, down 2% sequentially and 11% year-over-year.
- Analog & Mixed-Signal Group (AMG): Revenue of $556.3 million, down 5% sequentially and 9% year-over-year.
- Intelligent Sensing Group (ISG): Revenue of $249.6 million, up 9% sequentially but down 17% year-over-year.
Market Reaction and the Guidance Catalyst
The immediate market response to the earnings release was negative, with shares trading down over 4% in after-hours activity. This reaction appears to be primarily driven by the company's outlook for the first quarter of 2026, rather than the backward-looking Q4 results.
onsemi provided Q1 2026 revenue guidance in a range of $1.435 billion to $1.535 billion. The midpoint of this range, $1.485 billion, falls below the analyst consensus estimate of $1.50 billion for the coming quarter. While the difference may seem modest, in a market sensitive to growth trajectories and timing of recovery, the softer outlook suggests the anticipated stabilization may be progressing more slowly than some investors hoped.
Key Highlights from the 2025 Report
Beyond the quarterly comparisons, management highlighted several strategic and financial accomplishments for the full year 2025:
- Record Free Cash Flow: The company generated $1.8 billion in cash from operations and $1.4 billion in free cash flow, achieving a record free cash flow margin of 24%.
- Full Return to Shareholders: Demonstrating confidence in its financial model, onsemi returned 100% of its annual free cash flow to shareholders through share repurchases.
- Strategic Technology Moves: The quarter was marked by significant developments in next-generation power semiconductors, including the introduction of vertical gallium nitride (vGaN) products and new manufacturing collaborations with Innoscience and GlobalFoundries to expand gallium nitride (GaN) production capacity.
- New Buyback Authorization: The board authorized a new share repurchase program of up to $6 billion over the next three years, signaling a continued commitment to returning capital.
Outlook and Positioning
CEO Hassane El-Khoury stated that the company saw "increasing signs of stabilization in our key markets" and emphasized its strategy to "lead in automotive, industrial, and AI data center power." CFO Thad Trent noted that with the major investment cycle behind it, the company is focused on "operational excellence and margin expansion" and is "well-positioned to benefit as market conditions improve."
The challenge for investors is balancing this strong foundational performance—exemplified by robust cash flow and shareholder returns—against a near-term revenue trajectory that remains under pressure. The market's negative reaction suggests a focus on the timing of the expected recovery, with the softer Q1 guide tempering enthusiasm.
For a detailed look at upcoming earnings dates and analyst estimate revisions for ON Semiconductor, you can review the information available here.
Disclaimer: This article is for informational purposes only and does not constitute investment advice, an endorsement, or a recommendation to buy, sell, or hold any security. Investors should conduct their own research and consult with a qualified financial advisor before making any investment decisions.
