onsemi (NASDAQ:ON) Beats Q1 Sales Targets But Inventory Levels Increase

Analog chips maker onsemi (NASDAQ:ON) reported revenue ahead of Wall Street’s expectations in Q1 CY2026, with sales up 4.7% year on year to $1.51 billion. On top of that, next quarter’s revenue guidance ($1.59 billion at the midpoint) was surprisingly good and 3.5% above what analysts were expecting. Its non-GAAP profit of $0.64 per share was 4% above analysts’ consensus estimates.

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“We exceeded expectations as demand strengthened through the quarter and we have moved beyond the cyclical trough on a path to recovery. Our AI data center business accelerated, growing more than 30% sequentially.”

Company Overview

Spun out of Motorola in 1999 and built through a series of acquisitions, onsemi (NASDAQ:ON) is a global provider of analog chips specializing in autos, industrial applications, and power management in cloud data centers.

Revenue Growth

A company’s long-term performance is an indicator of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, onsemi’s 2.1% annualized revenue growth over the last five years was tepid. This was below our standards and is a poor baseline for our analysis. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions.

We at StockStory place the most emphasis on long-term growth, but within semiconductors, a half-decade historical view may miss new demand cycles or industry trends like AI. onsemi’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 13.8% annually.

This quarter, onsemi reported modest year-on-year revenue growth of 4.7% but beat Wall Street’s estimates by 1.7%. Adding to the positive news, onsemi’s growth inflected positively this quarter, news that will likely give some shareholders hope. Company management is currently guiding for a 7.9% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 6.6% over the next 12 months. Although this projection indicates its newer products and services will spur better top-line performance, it is still below average for the sector.

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Product Demand & Outstanding Inventory

Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business’ 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 200, which is 33 days above its five-year average, suggesting that the company’s inventory has grown to higher levels than we’ve seen in the past.

Key Takeaways from onsemi’s Q1 Results

It was great to see onsemi’s revenue guidance for next quarter top analysts’ expectations. We were also glad its EPS outperformed Wall Street’s estimates. On the other hand, its inventory levels increased. Overall, we think this was a solid quarter with some key areas of upside. The market seemed to be hoping for more, and the stock traded down 4.7% to $98.14 immediately after reporting.

Is onsemi an attractive investment opportunity at the current price? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here (it’s free).