Analog chipmaker onsemi (NASDAQ:ON) announced better-than-expected revenue in Q3 2026, with revenue up 11.1% year on year to $1.72 billion. Guidance for next quarter’s revenue was better than expected at $1.77 billion at the midpoint, 1.6% above analysts’ consensus estimates. Its non-GAAP profit of $0.90 per share was 2.5% above analysts’ consensus estimates.
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onsemi (ON) Q3 2026 highlights:
- Revenue $1.72 billion vs S&P analysts’ consensus estimates of $1.71 billion (11.1% year-on-year growth, 0.9% beat)
- Adjusted EPS $0.90 vs S&P analysts’ consensus estimates of $0.88 (2.5% beat)
- Adjusted operating income $399.8 million vs analysts’ consensus estimates of $393.7 million (23.2% margin, 1.5% beat)
- Revenue guidance $1.77 billion at the midpoint for Q4 2026, above analysts’ consensus estimates of $1.74 billion
- Adjusted EPS guidance $1.01 at the midpoint for Q4 2026, above analysts’ consensus estimates of $0.96
- Operating margin 22%, up from 17% in the same quarter last year
- Free cash flow margin 28.4%, up from 24% in the same quarter last year
- Inventory days outstanding 187, down from 191 in the previous quarter
- Market capitalization $27.9 billion
“Increasing power requirements are driving accelerated demand in our AI data center and industrial end markets, as customers adopt and ramp our differentiated products,” said Hassane El-Khoury, President and CEO of onsemi. “Our third quarter revenue, gross margin and earnings per share exceeded the midpoint of our guidance, while AI data center revenue grew 39% sequentially and 175% year-over-year.”
Revenue growth
Reviewing a company’s long-term revenue performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. onsemi struggled to consistently increase demand as its $6.37 billion in revenue for the trailing 12 months was close to its revenue five years ago. This was below our standards and is a sign of poor business quality. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions.
Long-term growth matters most, but within semiconductors, a half-decade historical view may miss new demand cycles or industry trends like artificial intelligence. onsemi’s recent performance shows its demand remained suppressed as its revenue has declined by 7.1% annually over the last two years. 
This quarter, onsemi reported year-on-year revenue growth of 11.1%, and its $1.72 billion in revenue exceeded Wall Street’s consensus estimates by 0.9%. Beyond the beat, the company appears to be early in an upcycle as this was the third consecutive quarter of growth, and a typical upcycle tends to last 8 to 10 quarters. Company management is currently guiding for a 15.4% year-on-year increase in revenue next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 13.1% over the next 12 months, according to S&P. While this projection indicates its newer products and services will catalyze better top-line performance, it is still below average for the sector.
Product demand & outstanding inventory
Days inventory outstanding, or DIO, is an important metric for chipmakers, as it reflects a business’s capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.
This quarter, onsemi’s DIO came in at 187, which is 12 days above its five-year average. These numbers suggest that despite the recent decrease, the company’s inventory levels remain above historical levels.
Key takeaways from onsemi’s Q3 results
onsemi delivered some key positives in Q3: EPS beat analysts’ consensus estimates, and its revenue outlook for next quarter topped Wall Street’s consensus. Investors were likely hoping for more, however, as shares fell 4.4% to $68.57 immediately after the results.
The latest quarter matters, but not as much as longer-term business quality and valuation when deciding whether to invest in the stock. Read the full research report here (it’s free).