ONTO — Onto Innovation Inc.

Summary of Onto Innovation Inc. Q1 2026 Earnings Call

1. Key Financial Results and Metrics

• Revenue: $292 million, up nearly 10% sequentially, exceeding guidance.
• Gross Margin: Improved by 110 basis points to 55.7%.
• Operating Margin: Increased by 150 basis points to 26.7%.
• Earnings Per Share: $1.42, a 13% improvement over Q4 2025.
• Advanced Packaging Revenue: Approximately $160 million, with two-thirds from advanced packaging.
• Advanced Nodes Revenue: About $80 million, primarily from DRAM memory.

2. Strategic Updates and Business Highlights

• AI Compute Demand: Strong demand for AI compute is driving revenue growth, particularly in advanced packaging and advanced nodes.
• Partnership with Rigaku: Onto announced a strategic collaboration with Rigaku, acquiring a 27% stake for $710 million, enhancing capabilities in X-ray technology and hybrid metrology solutions.
• Dragonfly G5 Launch: Successful qualification and adoption of the Dragonfly G5 inspection system at a leading customer, with promising growth prospects and a pipeline of over 15 applications across 10 customers.
• Advanced Packaging Growth: Expected to grow over 50% in 2026, driven by demand for smaller, denser bumps and new applications in panel-level packaging.

3. Forward Guidance and Outlook

• Q2 Revenue Guidance: Expected between $320 million and $330 million, representing a 28% year-over-year growth.
• 2026 Revenue Growth: Anticipated to exceed 30%, with expectations of more than 15% sequential growth in the second half of the year.
• Margin Expectations: Continued gross and operating margin expansion is expected, with Q2 gross margin projected between 56% and 56.5%.

4. Bad News, Challenges, or Points of Concern

• Material Input Costs: Increasing headwinds from material costs, fuel charges, and shipping expenses could impact margins.
• Supply Chain Issues: While currently manageable, lead times are extending, and there are concerns about potential bottlenecks affecting production commitments.
• Market Competition: The competitive landscape remains intense, particularly in advanced packaging and metrology solutions.

5. Notable Q&A Insights

• Dragonfly G5 Demand: Customers are requesting earlier shipments, indicating strong demand. The platform is expected to contribute significantly to revenue growth in 2027.
• Advanced Nodes Growth Drivers: Key drivers include improved metrology capabilities and integration of new technologies, with expectations of 25% growth in 2026.
• Rigaku Collaboration Revenue: Licensing revenue from the Rigaku partnership is expected to grow, with initial contributions anticipated in 2026, although the impact on overall revenue will be gradual.
• Future Market Opportunities: Onto sees substantial growth potential in silicon photonics and panel-level packaging, with ongoing efforts to expand into new markets.

Overall, Onto Innovation Inc. is positioned for strong growth in 2026, driven by robust demand in AI compute and strategic partnerships, despite facing some challenges related to costs and supply chain management.