Key Highlights

  • Revenue was USD 1.72 billion, up 7% sequentially and 11% year over year, USD 22 million above the guidance midpoint.
  • Non-GAAP gross Margin expanded 190 basis points sequentially to 41.2%, and non-GAAP Earnings were USD 0.90 per share.
  • AI Data Center Revenue grew 39% sequentially to USD 180 million, while automotive revenue was USD 777 million.
  • Free Cash Flow was USD 489 million, or 28% of revenue, and the company repurchased USD 20 million of shares.

Quarter in Numbers

ON Semiconductor Corporation (NASDAQ:ON) reported third-quarter 2026 revenue of USD 1.72 billion, up 7% from the second quarter and 11% from a year earlier, and USD 22 million above the midpoint of its guidance, with growth in industrial and AI data center markets. GAAP gross margin was 41.4%, and non-GAAP gross margin expanded 190 basis points sequentially to 41.2%, the fifth consecutive quarter of expansion, on utilization improvements earlier in the year and favorable mix toward new products. Fab utilization was flat at 83%.

Non-GAAP Earnings Per Share were USD 0.90, which the chief financial officer said grew four times faster than revenue year over year. Management described stronger demand, improved mix and disciplined execution as driving operating leverage, with earnings growth significantly outpacing revenue growth.

Markets

Automotive revenue was USD 777 million, down 1% sequentially and year over year, mainly because the company reallocated Supply to the AI data center and industrial markets. It expects automotive revenue to decrease by a high single-digit percentage in the fourth quarter. The company said it remains supply limited in certain technology segments and chose to allocate supply to markets with strong end demand, supporting automotive end Demand deliveries but not inventory replenishment backlog. It expects 2027 automotive growth in line with its long-term target.

AI data center revenue grew 39% sequentially to USD 180 million. Chief executive Hassane El-Khoury described the company's coverage of the complete power tree, from power supply units to low-voltage smart power stages near the processor, where increasing compute drives greater power density and semiconductor content. Industrial revenue came in much stronger than originally planned.

Cash Flow and Balance Sheet

Cash from operations was USD 516 million and free cash flow was USD 489 million, or 28% of revenue. Capital expenditures were USD 28 million, or 1.6% of revenue, and the company expects full-year Capital Expenditure of about 2% of revenue. Inventory rose USD 22 million sequentially but fell six days to 186 days, and distribution inventory declined to 9.9 weeks from 10.1 weeks. Cash and short-term investments were about USD 4.4 billion at October 2, 2026. Share repurchases were limited to USD 20 million because of trading restrictions related to the Synaptics Acquisition and renegotiations.

The company also closed the divestiture of a back-end Facility during the quarter, part of its Fab Right strategy.

Fourth-Quarter Guidance Markers

For the fourth quarter, management anticipates revenue of USD 1.715 billion to USD 1.815 billion, above-seasonal growth of 2.5% sequentially at the midpoint, with utilization at similar levels before increasing into 2027 as demand signals improve. By our calculation the midpoint is USD 1.765 billion, roughly 2.6% above the third-quarter figure of USD 1.72 billion. Items to track include automotive inventory replenishment, AI data center growth, supply constraints, fab utilization and the effect of the Synaptics transaction on capital returns.