Why Is ON Semiconductor Stock Gaining Tuesday?

ON Semiconductor Corporation (NASDAQ:ON) stock rose in premarket trading Tuesday after the company reported better-than-expected third-quarter results Monday and announced plans to acquire Ferric.

The chipmaker also raised its 2030 AI data center revenue goal by $500 million, or 20%, to more than $3 billion following the acquisition announcement.

ON Semiconductor Bets $600 Million on AI Power Technology

ON Semiconductor agreed to acquire Ferric for $600 million in cash, plus up to $175 million in additional payments tied to revenue milestones.

Ferric develops integrated voltage regulator technology that combines controllers, power switches, capacitors and magnetic components in a thin package near graphics processing units (GPUs).

The technology reduces power losses and helps address rising power demands in AI data centers.

The deal will strengthen ON Semiconductor’s position in AI processor power delivery and expand its presence in core voltage regulation, known as VCORE.

Management expects the acquisition to support long-term growth and margins. It also anticipates an earnings boost once the business reaches scale, with limited near-term impact.

The transaction is expected to close in the fourth quarter, subject to customary conditions.

Third-Quarter Earnings Beat Wall Street Estimates

ON Semiconductor reported adjusted earnings of 90 cents per share, beating the 88-cent analyst estimate.

Revenue reached $1.72 billion, topping the $1.7 billion consensus estimate, according to Benzinga Pro data.

Earnings grew four times faster than revenue year over year, driven by stronger demand, a better product mix and cost discipline.

AI Data Center Revenue Surges 175%

AI data center revenue jumped 175% year over year and 39% from the previous quarter to $180 million.

Management expects AI data center revenue to reach approximately $620 million in 2026, up 140% from a year earlier. It also forecasts revenue to double in 2027.

Meanwhile, ON Semiconductor began volume shipments for several major platforms, including Google.

The company supplies silicon carbide and silicon MOSFETs for power supply units and 54-to-12-volt power conversion applications.

Automotive Demand Remains Soft, Industrial Sales Grow

Automotive revenue fell 1% both sequentially and year over year to $777 million. The decline reflected a shift in supply toward AI data center and industrial markets.

Management expects automotive revenue to fall by a high-single-digit percentage in the fourth quarter before recovering in the first quarter as supply improves.

The company expects automotive growth in 2027 to align with its long-term goal.

Meanwhile, industrial revenue climbed 10% sequentially and 9% year over year to $467 million, driven by energy infrastructure and factory automation.

Management expects low-double-digit industrial growth in the fourth quarter.

Other end-market revenue, excluding AI data centers, rose 11% sequentially and 10% annually to $299 million.

By business group, Power Solutions Group revenue increased 7% sequentially and 21% year over year to $890 million.

Analog and Mixed Signal Group revenue rose 9% from the previous quarter and 2% annually to $597 million.

Intelligent Sensing Group revenue grew 3% sequentially and 2% year over year to $235 million.

Fourth-Quarter Outlook Signals Continued Growth

ON Semiconductor forecasts fourth-quarter adjusted earnings of 95 cents to $1.07 per share, compared with the 95-cent analyst estimate.

The company expects revenue of $1.715 billion to $1.815 billion, compared with the $1.739 billion consensus.

It also projects capital expenditures of $40 million to $50 million.

Management expects demand momentum to continue into 2027, supporting revenue growth and further gross margin expansion.

ON Price Action: ON Semiconductor shares were up 2.98% at $72.43 during premarket trading on Tuesday, according to Benzinga Pro data.

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