Onto Innovation (NYSE:ONTO) management said the company finished 2025 with record quarterly and annual results, driven by a sharp increase in demand tied to AI-related advanced packaging. On its fourth-quarter earnings call, executives highlighted record revenue, improving margins, strong cash generation, and growing customer visibility extending into 2027, including a new multi-year volume purchase agreement (VPA) linked to high bandwidth memory (HBM) packaging.
Fourth-quarter results and full-year 2025 record
CEO Michael Plisinski said the company “ended 2025 on a high note,” pointing to orders from 2.5D packaging for AI devices that more than doubled during the quarter and helped lift revenue to a record $267 million. CFO Brian Roberts said fourth-quarter revenue was up 22% sequentially. For the full year, revenue totaled $1.005 billion, also a company record.
Management also emphasized cash generation. Plisinski said Onto set a quarterly cash generation record of $95 million, which Roberts described as roughly 150% cash conversion of non-GAAP net income. Roberts added that Onto adopted the “One Big Beautiful Bill Tax Act” in the fourth quarter, which allowed accelerated expensing of certain R&D costs for tax purposes. He said this produced $19 million of cash tax savings in 2025 and is expected to provide an additional estimated $14 million of cash savings in 2026.
Advanced packaging demand and a $240 million HBM VPA
Plisinski said the current industry environment is “incredibly positive” for Onto, citing AI-driven infrastructure investment and customer discussions that increasingly include longer-term forecasts. A major highlight was the announcement of a VPA with an HBM customer covering Dragonfly 2D and 3D bump metrology demand through 2027.
Plisinski said the agreement is valued at more than $240 million and includes over $60 million in systems for 3D bump metrology. In response to an analyst question, he said the deal was “more 2027 weighted,” suggesting roughly a 2/3, 1/3 split, but added that the company is seeing some acceleration that could move it toward a more 50/50 cadence over time. He also said Onto expects additional VPAs and is in discussions with other customers.
On product and platform direction, Plisinski said the company’s advanced packaging business grew more than 25% sequentially, driven by Dragonfly inspection and IRIS films metrology in established 2.5D applications. He said Onto is supporting four separate customer evaluations of its next-generation inspection systems at customer sites, with preliminary feedback described as positive and pointing to improved optical performance and higher throughput.
He also highlighted a growing role for 3D metrology as interconnects become smaller and denser in die stacking and fan-out packaging. The company’s pipeline for 3D metrology is expanding beyond HBM, and Plisinski said Onto received additional purchase orders in the quarter from multiple advanced packaging customers, including an OEM developing panel-level processes.
Panel-level packaging, JetStep and Firefly orders, and surface charge metrology
Plisinski said Onto is seeing investment in panel-level packaging increase as enterprise server and AI device designers seek packaging solutions with greater economies of scale via large-format panels. He positioned JetStep systems as well suited for the transition to panels, citing the ability to print large packages “without stitching” at customer-required throughput.
He also said customers are adopting Firefly process control in glass and panel fan-out applications, where yield improvements can come from feeding process metrology into the stepper for shot-by-shot adjustments. As a specific proof point, Plisinski said Onto received orders in the quarter for JetStep and eight Firefly systems to support a new large panel packaging facility, describing the orders as the first of several potential phases of expansion tied to planned demand.
In addition, Plisinski said residual charge on die is becoming a greater concern in large format heterogeneous packaging, potentially causing yield issues when die are connected. He said the surface charge metrology technology acquired from Semilab is a solution to this challenge and that Onto received its first orders addressing this “evolving market need.”
Semilab acquisition and mixed expectations in power semiconductors
Roberts said Onto completed the acquisition of Semilab in mid-November. Upon closing on November 17, he said Onto paid $445 million in cash and issued 641,771 shares of common stock. Semilab contributed about $9 million of revenue in the fourth quarter, which Roberts included within the “advanced packaging and specialty devices” category.
Looking to 2026, management indicated a tougher backdrop in power semiconductors. Plisinski said power semiconductor revenue was strong in the fourth quarter but is expected to decline seasonally in the first quarter. For 2026, he said the company expects power semi revenue to decline around 10% due to weakening demand for EVs and slowing infrastructure spending. He added that Semilab would likely see a similar decrease versus Onto’s original planning as the company works to pivot the business toward longer-term opportunities across a broader customer base.
Advanced nodes growth, backlog, and 2026 outlook
Plisinski said Onto’s advanced nodes revenue in 2025 more than doubled from the prior year, with less than 3% of total revenue coming from China. He attributed the growth to Onto’s position in optical critical dimension (OCD) metrology at leading global logic and memory manufacturers. He said the recently announced Atlas G6 is being adopted for new critical applications in Gate-All-Around and HBM for DRAM, which he expects will contribute to 2026 growth.
Roberts said advanced nodes revenue totaled $308 million in 2025 and that DRAM and logic represented about 75% of that total. In the fourth quarter, advanced nodes revenue grew sequentially by slightly over 30% to $72 million, primarily due to pilot line sales tied to a new Gate-All-Around customer.
For 2026, the company guided to first-quarter revenue of $275 million to $285 million and said it expects second-quarter revenue to exceed $300 million. Plisinski said this would represent 12% to 14% acceleration in the “core business” in the first half of 2026 compared with the second half of 2025. He also said backlog has nearly doubled over the last three months to a record level of roughly two quarters, and the company is working with customers and suppliers to manage tightening capacity and longer lead times.
On profitability expectations, Roberts said Onto aims to convert higher revenue into gross and operating margin expansion through 2026, with continued quarterly margin expansion expected in 2026. At the midpoint of first-quarter revenue guidance, he said gross margin is expected to improve about 50 basis points from fourth-quarter levels as Onto mitigates tariffs and ships more from extended factories. Operating expenses in the first quarter are expected to be about $80 million, reflecting a full quarter of Semilab costs, and operating margin is projected to be approximately 25.5% to 26.5%. First-quarter EPS is expected to be $1.26 to $1.36, assuming an estimated 16% tax rate and about 49.9 million shares outstanding.
In response to analyst questions, Plisinski said advanced packaging revenue is expected to grow more than 30% in 2026 and to be “relatively stable” between the first and second half of the year. He noted potential upside could come from the rate of adoption of Dragonfly G5, though he described the company’s planning assumptions as conservative. On advanced nodes, he said timing remains a key variable, but added he would expect performance “at least” in the 10% to 20% growth range, with the company seeking additional VPAs that could provide clearer magnitude and timing.
About Onto Innovation (NYSE:ONTO)
Onto Innovation (NYSE:ONTO) is a global supplier of advanced process control and inspection systems for semiconductor and electronics manufacturers. The company’s solutions span metrology, inspection, defect review and lithography mask repair, helping customers optimize yield, reduce costs and improve device performance. By integrating high-resolution optical and e-beam tools with sophisticated software analytics, Onto Innovation enables wafer, mask and advanced packaging producers to maintain tight process control across leading-edge nodes and specialty applications.
Key products include high-throughput wafer metrology systems, optical and e-beam defect inspection platforms, mask inspection and repair tools, and data-driven software for yield management and process optimization.
