ON Semiconductor (ON.US) received widespread optimism from Wall Street analysts after reporting its second-quarter results and issuing guidance, with the stock initially rising about 7% in pre-market trading on Tuesday before paring those gains. As of writing, the stock was up 0.58% at $80.92. Multiple institutions believe the AI data center business is becoming the company's most critical growth engine, and with gradual improvements in the industrial and automotive sectors, alongside rising orders, capacity utilization, and gross margins, the company's fundamentals are poised for further enhancement.
Jefferies maintained a "Buy" rating on ON Semiconductor with a price target of $115. Analyst Blayne Curtis and his team highlighted that the AI data center business is rapidly becoming the company's core growth driver, with revenue expected to grow approximately 200% year-over-year, significantly outpacing most analog chip companies. Meanwhile, the industrial and automotive sectors are experiencing a modest recovery. Jefferies noted that the company's lead times, book-to-bill ratio, and capacity utilization are all improving, which will support sequential gross margin expansion through the remainder of the year. The firm also expressed optimism about sustained AI growth and profitability improvements, and expects the company's Analyst Day on September 16 to further elaborate on opportunities in the AI data center space.
Susquehanna also holds a positive view on ON Semiconductor, maintaining a $150 price target. Analyst Christopher Rolland and his team stated that the company's second-quarter results and third-quarter guidance both slightly exceeded market expectations, driven primarily by AI data center growth. The firm noted that overall industry conditions continue to improve, with several key cyclical indicators showing clear uptrends this quarter, including enhanced customer demand, a higher book-to-bill ratio, and increased mass-market revenue. Additionally, the average lead time extended by about five weeks, reflecting stronger market demand. Susquehanna believes this is a solid earnings report, with expanding AI data center demand providing significant upside momentum for the company's performance.
Morgan Stanley indicated that ON Semiconductor's second-quarter results were broadly in line with expectations, while the third-quarter guidance slightly exceeded estimates, again benefiting from AI data center demand. The bank noted that, consistent with industry trends, management mentioned ongoing expansion in industrial market demand, robust growth in the data center business, and stability in the automotive segment, which continues to benefit from higher chip content per vehicle. Notably, Morgan Stanley pointed out that the company shifted some capacity from automotive customers to AI data center (AIDC) solutions this quarter, but expects this to gradually normalize in the coming quarters. To meet rising demand, capacity utilization continues to improve, and the company is maintaining margins through price adjustments and targeted pricing for products in localized supply-demand tightness. Furthermore, customers have begun locking in supply for 2027 to 2028, enhancing the company's order visibility for future years and strengthening confidence in its long-term growth prospects.
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