onsemi Reports Q1 FY2026: Revenue and EPS Beat Estimates, AI Data Center Growth Accelerates

onsemi's Q1 FY2026 revenue of $1.51 billion marked a 1.7% beat over the street estimate of $1.49 billion. This performance is particularly noteworthy given the challenging macroeconomic environment. The company's revenue was up 4.7% year over year, reversing a trend of year-over-year declines that had persisted for seven quarters. The sequential decline of 1.1% was better than expected, driven by strong performance in the AI data center segment.

The revenue breakdown by business unit provides further insight into the company's performance. The Power Solutions Group (PSG) reported revenue of $737 million, an increase of 2% quarter over quarter and 14% year over year. The Analog and Mixed-Signal Group (AMG) saw revenue of $540 million, down 3% sequentially but down 5% year over year. The Intelligent Sensing Group (ISG) reported revenue of $256 million, a 5% decrease quarter over quarter but a 1% increase year over year. The Other category, which includes AI data center revenue, saw a 3% increase quarter over quarter, driven by the strong performance in AI data centers.

onsemi's gross margin expanded to 38.5% in Q1 FY2026, a significant improvement from the 37.9% reported in Q4 FY2025. This marks the third consecutive quarter of gross margin expansion, reflecting the company's focus on cost optimization and product mix improvement.

The company's non-GAAP operating expenses were $294 million, a decrease of 7% from Q1 FY2025, driven by cost optimization actions. GAAP operating expenses were $637 million, including $329 million in restructuring expenses. These cost management efforts are crucial in maintaining profitability and driving shareholder value.

The automotive segment, a key focus for onsemi, reported revenue of $797 million in Q1 FY2026, roughly flat quarter over quarter and up nearly 5% year over year. This marks the first year-over-year growth in the automotive segment after seven quarters of decline, indicating a positive trend in the automotive market.

The industrial segment reported revenue of $417 million, down 6% sequentially but ahead of expectations. The Other category, which includes AI data center revenue, saw a 3% increase quarter over quarter, driven by the strong performance in AI data centers. CFO Thad Trent commented, "For the first quarter, total revenue for the Other category was $299 million, an increase of 3% quarter over quarter due to AI data center strength."

The AI data center segment was a standout performer for onsemi in Q1 FY2026. Revenue in this segment grew more than 30% quarter over quarter, nearly double the expected growth rate entering the quarter.

The company now expects to outpace the power semiconductor growth for the AI data center market in 2026, with more than 40% revenue growth year over year and a market share approaching 60%. This growth is driven by the company's rich product portfolio and strong relationships with leading hyperscalers.

onsemi's guidance for Q2 FY2026 indicates continued momentum. The company expects revenue in the range of $1.535 billion to $1.635 billion, with non-GAAP gross margin expected to be between 38% and 40%. CFO Thad Trent provided the following guidance: "We anticipate Q2 revenue will be in the range of $1.535 billion to $1.635 billion. We expect to exit an incremental $30 million to $40 million of non-core revenue in the second quarter."

The company also expects non-GAAP operating expenses to be between $287 million and $302 million, with a non-GAAP tax rate of approximately 15%. CFO Thad Trent noted, "Non-GAAP operating expenses are expected to be between $287 million and $302 million, which includes share-based compensation of $28 million. We expect our non-GAAP tax rate to be approximately 15%, and our non-GAAP diluted share count is expected to be approximately 194 million shares."

The tone of onsemi's Q1 FY2026 earnings call was notably positive, with a sentiment score of 0.31, a significant improvement from the 0.24 reported in Q4 FY2025. The guidance tone also improved, rising from 0.35 in Q4 FY2025 to 0.51 in Q1 FY2026. CFO Thad Trent's prepared remarks were less positive, with a prepared sentiment score of 0.01, down from 0.41 in Q4 FY2025. However, the Q&A session was more positive, with a QA sentiment score of 0.35, up from 0.14 in Q4 FY2025.

The call's AI optimism score decreased slightly from 0.47 in Q4 FY2025 to 0.35 in Q1 FY2026, while the uncertainty score dropped from 54.1 to 41.2. The QA evasiveness score increased from -33.2 in Q4 FY2025 to 41.4 in Q1 FY2026, indicating a more cautious approach to answering questions.

For a detailed history of onsemi's call delivery, see the tone history.

onsemi's strong performance in the AI data center segment has positive implications for its suppliers. Tower Semiconductor Tower Semiconductor, a specialty foundry for image sensors and power, and Wolfspeed Wolfspeed, a supplier of 150mm SiC wafers, are likely to benefit from the increased demand. The company's focus on cost optimization and product mix improvement will also support its relationships with these suppliers.

In the context of its peers, onsemi's Q1 FY2026 performance stands out. While the company's gross margin of 38.5% is lower than some peers like Texas Instruments (TXN) at 58.0% and NXP Semiconductors (NXPI) at 56.2%, it is higher than STMicroelectronics (STM) at 33.8% and Intel (INTC) at 39.4%. The year-over-year revenue growth of 4.7% is also competitive, with peers like Renesas (RNECY) reporting 25.4% growth and STMicroelectronics (STM) reporting 22.8% growth.

onsemi's Q1 FY2026 results demonstrate the company's ability to navigate a challenging market environment and capitalize on growth opportunities, particularly in the AI data center segment. The revenue and EPS beat, coupled with strong guidance for Q2 FY2026, positions onsemi well for continued success. The company's focus on cost optimization and product mix improvement, along with its strong relationships with leading hyperscalers, bodes well for its future performance.