tapebrief
ON · Q3 2025
Preliminary brief— based on press release only. Full analysis including management tone and Q&A will be added when the transcript is available.

ON · Q4 2025 Earnings

ON Semiconductor

Reported February 9, 2026

30-second summary

Revenue of $1.53B (-11% YoY, -1.3% QoQ) landed at the lower-midpoint of the $1.48–1.58B guide while non-GAAP gross margin of 38.2% cleared the 38.0% guide midpoint by 20bps and EPS of $0.64 came in above midpoint of $0.57–$0.67. The substantive shift is in the forward framing: Q1 FY2026 revenue guide of $1.435–1.535B is explicitly described as the first quarter of YoY growth since the downturn began three years ago, AI data center is sized at high-teens sequential growth per Hassan (though Thad characterized AI data center within the "other" bucket as up high-single-digits sequentially — the two transcript characterizations conflict), and a new $6B three-year buyback authorization replaces the prior program. Industrial turned positive YoY for the first time in eight quarters — the inflection has now appeared in the actuals, not just the language.

Headline numbers

EPS

Q4 FY2025

$0.64

Revenue

Q4 FY2025

$1.53B

-11.0% YoY

Gross margin

Q4 FY2025

36.0%

Free cash flow

Q4 FY2025

$0.49B

Operating margin

Q4 FY2025

13.1%

Key financials

Q4 FY2025
MetricQ4 FY2025YoYQ3 FY2025QoQ
Revenue$1.53B-11.0%$1.55B-1.3%
EPS$0.64—$0.63+1.6%
Gross margin36.0%—37.9%-190bps
Operating margin13.1%—17.0%-390bps
Free cash flow$0.49B—$0.37B+30.3%

Guidance

Q4 FY2025 results met/beat guidance (revenue at lower end, EPS and gross margin in-line/above); company guiding Q1 FY2026 modestly lower CapEx but raising profile of AI data center revenue growth.

Guidance is issued for both next quarter and the full year. Both may appear below.

Actuals vs prior guidance

MetricPeriodPrior guideActualΔResult
RevenueQ4 FY2025$1,480 to $1,580 million$1,530.1 million+$-50 to -$50 within guide; at lower-midpoint of rangeBeat
Non-GAAP Earnings Per ShareQ4 FY2025$0.57 to $0.67$0.64in-line (midpoint of guide)Met
Non-GAAP Gross MarginQ4 FY202537% to 39%38.2%+38bps above midpoint (37.5% to 38.5%)Beat
Non-GAAP Operating ExpensesQ4 FY2025$282 to $297 millionwithin guide range (not separately disclosed)no discrete figure provided; management implied in-line executionMet

New guidance

MetricPeriodGuideYoY
Capital ExpendituresQ1 FY2026$35 to $45 million—
Operating ExpensesQ1 FY2026$285 to $300 million—
Gross MarginQ1 FY202637.5% to 39.5%—
AI Data Center Revenue GrowthQ1 FY2026high teens percentage growth—

Segment performance

Q4 FY2025
SegmentQ4 FY2025YoY
PSG$0.724B-11.0%
AMG$0.556B-9.0%
ISG$0.25B-17.0%

Capacity & utilization

Q4 FY2025
SegmentQ4 FY2025
Operating Cash Flow$554.5M
Free Cash Flow$485.4M

Profitability

Q4 FY2025
SegmentQ4 FY2025
Non-GAAP Gross Margin38.2%
Non-GAAP Operating Margin19.8%
Free Cash Flow Margin (Full Year)24%

Other KPIs

Q4 FY2025
SegmentQ4 FY2025
Share Repurchases (Q4)$450.2M
Share Repurchases (Full Year)$1,377.6M
New Share Repurchase Authorization$6.0B over 3 years

Management tone

Q1 sliding through trough → Q2 cyclical bottom called → Q3 stabilization with seasonal patterns emerging → Q4 entering 2026 from a position of strength

Three quarters ago Hassan would only commit to "signs of stabilization." Two quarters ago it became "we've gone from stabilization to seasonal patterns… first step to recovery." This quarter the language has firmed materially: per the press-release commentary, "As we move into 2026, we are encouraged by a market environment that is showing clearer signs of improvement across automotive, industrial, and AI infrastructure," and Q1 is now explicitly framed as "the first quarter with expected year-over-year growth since the downturn started over three years ago." The arc has moved from defensive to offensive in four quarters, and the Q1 guide ratifies it numerically.

Industrial moved from "bouncing across the bottom" (Q2) to a quantified inflection. The disclosure that "following eight quarters of year-over-year declines, Q4 marked the first quarter of year-over-year growth in our industrial revenue, increasing 6% over the fourth quarter of 2024" is the concrete data point that the prior three quarters of stabilization commentary had been pointing toward. It also makes the ISG -17% print harder to dismiss — industrial-end demand is recovering, but the sensing portfolio is being actively pruned at the same time.

AI data center transitioned from sized ($250M annualized in Q3) to quantitatively guided. The disclosure framework has tightened — from refusing to size it (Q2), to anchoring a run-rate (Q3), to guiding sequential growth (Q4). That said, the transcript contains two distinct characterizations of Q1 AI data center growth: Hassan stated "AI data center revenue in Q1 will grow high teens percentage-wise," while Thad — speaking to the segment-level walk within the "other" bucket — referenced "AI data center that I referred to, up high single digits." Worth reconciling on follow-up; the progression nevertheless suggests management now views the segment as durable enough to be modeled rather than narrated.

The gross margin bridge got mechanically transparent. Management quantified that Q4's 38.2% includes ~700bps of underutilization charges that "will dissipate with increasing utilization." Combined with the FabRite contribution that began to show this quarter and a $45–50M depreciation reduction from footprint optimization, the path to the long-term target now has explicit components rather than aspirational anchors. That said, hedging language remains: utilization is only guided "to the low 70% range" (from 68% in Q3), and the recovery is qualified as "It's a matter of the when, not the if."

The new $6B three-year buyback authorization, coming alongside the first YoY-positive guidance in three years, is the clearest capital-allocation signal management has sent in the cycle. FY buybacks of $1.38B against $1.42B FCF mean the prior program ran near 100% conversion; the new authorization implies that pace is the floor, not the ceiling.

Recurring themes management leaned on this quarter:

Market stabilization across automotive and industrial after downturnAI data center as accelerating growth driver with broad power conversion portfolioMargin expansion path through utilization recovery and FabRite structural improvementsProduct-centric transformation with Treo platform proliferation and GAN/vertical GAN leadershipFree cash flow generation and shareholder returns (100% of FCF deployed)Manufacturing footprint optimization reducing depreciation by $45-50M

Risks management surfaced:

Continued macro uncertainty and limited visibility despite improved signalsAutomotive tier-1 suppliers running on thin margins, limiting potential inventory restockingNon-core business exits creating headwinds ($300M full-year run rate)Vertical GAN revenue not expected until 2027, delaying product monetizationDependency on AI data center platform architecture standardization and customer adoption

Answers to last quarter's watch list

Whether Q4 gross margin lands above the 38.0% midpoint — Cleared at 38.2%, 20bps above midpoint, with FabRite starting to contribute and ~700bps of underutilization charges quantified as the bridge to the long-term target. Q1 guide midpoint of 38.5% extends the trajectory.
Resolved positively
AI data center run-rate growth from the disclosed $250M — Management guided Q1 FY2026 AI data center growth, though the transcript contains conflicting characterizations (Hassan: high-teens sequential; Thad: high-single-digits within "Other") and elevated AI data center to "a meaningful growth engine." This is the second consecutive quarter of expanded disclosure on the segment.
Resolved positively
Q1 2026 commentary on whether seasonal patterns hold — Q1 revenue guide of $1.435–1.535B is described as "in line with normal seasonality at the midpoint" and is the first guided YoY-positive quarter in three years. Seasonality is intact and the cycle line was crossed.
Resolved positively
ISG revenue trajectory as human-vision exits complete — ISG -17% YoY in Q4, still the worst of the three segments. The $50M non-core exit guided for Q1 will keep this segment a drag in the near term.
Continue monitoring
Free cash flow margin sustainability — Q4 FCF of $485M on $1.53B revenue, and FY FCF margin of 24% (company-stated record) on revenue down 15% — the cash-conversion thesis held through the trough. The new $6B buyback authorization is the durable validation.
Resolved positively
Silicon carbide gross margin trajectory — Not separately disclosed on this print; SiC remains below corporate average per prior commentary and the company didn't quantify movement this quarter.
Continue monitoring

What to watch into next quarter

Whether Q1 revenue lands above the $1.485B midpoint — the midpoint delivers the first YoY-positive print in three years; landing in the lower half re-opens the question of whether the inflection is real or a one-quarter seasonal pop

AI data center sequential growth — reconciling the high-teens vs. high-single-digits framings — the two transcript characterizations need to converge into a single reportable number; anything below the lower end forces a re-rating of the "meaningful growth engine" framing

Q1 gross margin clearing the 38.5% midpoint — the bridge to the long-term target now has explicit components; the first sequential step-up needs to materialize to validate the utilization-recovery mechanics

Industrial sustaining positive YoY growth — Q4's +6% YoY industrial print was the cycle marker; a Q1 reversal would mean the eight-quarter decline ended at a single positive print

CapEx normalization vs. the $35–45M Q1 guide — up from the prior $20–40M Q4 guide; watch whether AI-data-center-related investment continues to creep, and what FY 2026 CapEx anchors at

Pace of the new $6B buyback authorization in Q1 — Q4 deployed $450M; sustaining $400M+ quarterly buybacks against rising FCF would compress share count materially through 2026

Sources

  1. ON Semiconductor Q4 2025 Press Release, 8-K Exhibit 99.1, filed February 9, 2026 — https://www.sec.gov/Archives/edgar/data/1097864/000114036126004405/ef20065070_ex99-1.htm
  2. ON Semiconductor Q4 2025 prepared remarks and forward guidance commentary (transcript excerpts)

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