ON Semiconductor Corporation

NASDAQ Global Select
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Somewhat Bullish +35

The Numbers Behind ON Semiconductor’s (ON) Higher Target and Unchanged Hold Rating

📈 ON Semiconductor delivered stronger-than-expected Q2 earnings and issued third-quarter guidance above Wall Street expectations.

💰 Management expects non-GAAP gross margins to reach 40%-42% in Q3, up from 39.3% in the second quarter.

🚀 CEO Hassane El-Khoury reaffirmed that AI data center revenue is on track to more than double in 2026.

📉 Analyst Tristan Gerra raised the price target to $108 from $100 but kept a Neutral rating due to market share concerns.

⚠️ Competitors Texas Instruments and STMicroelectronics grew revenue by 23% and 26% respectively, compared to ON's 9% growth.

🏭 Analysts worry that ON Semiconductor's limited internal manufacturing capacity could be a disadvantage if supply tightens.

📊 Hedge fund ownership dropped from 63% to 58% between Q4 2025 and Q1 2026, though total holdings rose slightly.

🔻 Short interest stands at 11.05%, indicating significant investor skepticism about the stock's near-term prospects.

🤖 AI data center revenue is a key growth driver expected to more than double in 2026 according to company guidance.

🌍 Improving momentum is noted across industrial markets, electric vehicles, and China despite competitive headwinds.

Bullish Signals
  • ON Semiconductor delivered stronger-than-expected second-quarter earnings, providing a solid foundation for future growth.
  • Third-quarter non-GAAP gross margin guidance of 40%-42% represents an improvement over the previous quarter's 39.3%.
  • CEO Hassane El-Khoury confirmed that AI data center revenue is projected to more than double in 2026.
  • Analyst Tristan Gerra raised the price target from $100 to $108, reflecting improved confidence in fundamentals.
  • Momentum is improving across key sectors including AI data centers, industrial markets, electric vehicles, and China.
  • Higher factory utilization and a more favorable product mix are expected to push gross margins above 50% during this cycle.
Risk Factors
  • Market share losses in industrial, automotive, and analog segments remain a significant concern as peers grow faster.
  • Competitors Texas Instruments and STMicroelectronics expanded revenue by roughly three times ON Semiconductor's growth rate in Q2 fiscal 2026.
  • ON Semiconductor's relatively limited internal manufacturing capacity could become a competitive disadvantage if supply conditions tighten.
  • Hedge fund ownership declined from 63% to 58% between the fourth quarter of 2025 and the first quarter of 2026.
  • A short interest of 11.05% indicates that many investors are still betting against the company.
  • Analysts suggest that other AI stocks may offer greater promise for delivering higher returns within a shorter time frame.
Full Analysis
ON Semiconductor (NASDAQ: ON) delivered stronger-than-expected second-quarter earnings and issued third-quarter guidance that exceeded Wall Street expectations. CEO Hassane El-Khoury reaffirmed that AI data center revenue is on track to more than double in 2026, while management expects non-GAAP gross margins to rise between 40% and 42% for the quarter, up from 39.3% previously. Robert W. Baird analyst Tristan Gerra raised his price target for ON Semiconductor to $108 from $100, citing improving momentum in AI data centers, industrial markets, electric vehicles, and China alongside higher factory utilization. However, he maintained a Neutral rating due to concerns over market share losses in industrial, automotive, and analog sectors where competitors like STMicroelectronics and Texas Instruments are growing faster. Competitor performance highlights these risks, with Texas Instruments reporting 23% year-over-year revenue growth and STMicroelectronics growing net revenue by 26% in the second quarter of fiscal 2026, compared to ON Semiconductor's 9% revenue increase. Analyst Gerra also noted that ON's limited internal manufacturing capacity could become a competitive disadvantage if supply conditions tighten further. Investor sentiment remains mixed as hedge fund ownership declined from 63% to 58% between the fourth quarter of 2025 and the first quarter of 2026, though total holdings increased marginally. A short interest of 11.05% indicates continued skepticism among some investors, while the article concludes that other AI stocks may offer higher returns within a shorter timeframe.