ON · ON Semiconductor Corporation

Period Performance

Period Performance

Revenue for the quarter ended April 3, 2026 was $1,513.3 million, up 5% from $1,445.7 million in the prior-year quarter. Gross profit surged 98% to $583.1 million, driving gross margin from 20.3% to 38.5%. The margin expansion was largely due to the absence of $237.7 million in excess and obsolete inventory charges and a $43.9 million write-off of consumables that had depressed the prior year. Operating loss improved dramatically from -$573.7 million to -$53.4 million, reflecting lower restructuring charges and improved gross profit. Net loss narrowed to $33.4 million from $486.1 million.

Segment Dynamics

• PSG (48.7% of revenue): Revenue grew 14% to $736.6 million, driven by increased demand across automotive, industrial, and other end-markets. Gross margin improved 8.1 ppts to 27.2% due to the absence of prior-year write-offs and improved manufacturing absorption.
• AMG (35.7% of revenue): Revenue declined 5% to $540.4 million, with decreases in automotive and other end-markets partially offset by industrial growth. Gross margin edged up 0.5 ppts to 53.6% on favorable product mix.
• ISG (15.6% of revenue): Revenue rose 1% to $236.3 million, led by industrial growth. Gross margin swung from -55.6% to 39.4% as prior-year $232.2 million excess inventory charges did not reoccur.

Forward View

Management highlighted a focus on profitable revenue growth through differentiated technologies and manufacturing realignment. The 2026 Manufacturing Realignment Program is expected to incur total severance of $24 million, with $20.2 million recognized in Q1. Share repurchases totaled $348.6 million in the quarter. For FY2026, capital expenditures are planned at approximately 5% of revenue. The company maintains a strong liquidity position with $2.4 billion in cash and $1.5 billion available under its credit facility. No explicit revenue guidance was provided, but the narrative emphasizes alignment of capacity with long-term demand and margin expansion through cost efficiencies.

Notes & Operating Detail

Balance Sheet & Liquidity

Cash and cash equivalents stood at $2,003.6M as of April 3, 2026, down from $2,147.6M at year-end 2025. Short-term investments remained flat at $400.0M. Total debt (net of discounts and issuance costs) was $2,982.9M, essentially unchanged. Stockholders' equity decreased to $7,320.8M from $7,691.9M, driven by share repurchases and the net loss. Inventory increased to $2,049.2M from $1,989.6M, reflecting higher work-in-process.

Commitments & Contractual Obligations

Remaining performance obligations under Long-term Supply Agreements (LTSAs) totaled approximately $6.5 billion as of April 3, 2026, of which about 35% is expected to be recognized as revenue over the next 12 months. Contract liabilities (deferred revenue) were $87.7M, down from $121.6M at year-end. The company also has contingent consideration of $111.5M related to the Vcore acquisition.

Capital Allocation

During the quarter, the company repurchased 5.7 million shares for $348.6 million (including fees and excise tax). The weighted-average purchase price was $60.54 per share. The new $6.0 billion share repurchase program (authorized November 2025) had $5.7 billion remaining. No dividends were declared. Capital expenditures (cash) were $21.9M, significantly lower than $147.6M in the prior-year quarter, reflecting the manufacturing realignment. Debt remained stable with no new issuances or repayments.

Segment / Geographic Mix

Segment revenue: PSG $736.6M (up 14% YoY), AMG $540.4M (down 5% YoY), ISG $236.3M (flat). Segment gross profit: PSG $200.4M, AMG $289.6M, ISG $93.1M. Notably, ISG gross profit improved from a loss of $130.3M in Q1 2025. Revenue by geography: UK $392.2M, Hong Kong $368.9M, Singapore $322.2M, US $296.5M, Other $133.5M. Sales channel: distributors $816.8M, direct customers $696.5M.

Cash Flow Quality

Cash Flow Quality

Operating cash flow (CFO) of $239.1M significantly exceeded the net loss of $32.9M, driven by large non-cash charges: depreciation and amortization ($286.7M), share-based compensation ($37.3M), and asset impairment ($147.0M). However, CFO dropped 60.3% from $602.3M a year ago, primarily due to a $485.2M net loss in the prior period (including $431.5M impairment) and adverse working capital changes. Inventory built up by $59.8M (vs. a $184.6M reduction last year), and accounts payable decreased $75.9M (vs. a $1.4M increase), consuming cash.

Capital expenditures (capex) were slashed 85.2% to $21.9M from $147.6M, reflecting lower investment intensity. This resulted in a strong CFO-to-capex coverage ratio of 10.9x.

Share repurchases of $345.7M exceeded CFO, indicating reliance on cash reserves or debt. The company used $366.0M in financing activities overall, including $26.9M for tax withholding on RSUs.

Overall, cash generation weakened despite reduced capex, and capital returns were aggressive relative to operating cash flow.