ON Semiconductor Eyes Revenue Bottom as SiC Cycle and AI Power Demand Collide

ON Semiconductor Corporation (NASDAQ: ON) is set to release first quarter fiscal year 2026 results on or around May 5, 2026, with the earnings call scheduled for May 4, 2026. After eight consecutive quarters of revenue compression, Q1 FY2026 is the period investors will scrutinize for the first signs that the inventory digestion cycle in automotive and industrial end markets has reached a floor. Management’s own guidance and Wall Street consensus both frame Q1 FY2026 as a stabilization quarter rather than a recovery quarter, but the trajectory of gross margins and any incremental commentary on AI data center power management could meaningfully shift the investment narrative.

What Analysts Expect From ON Semiconductor Q1 FY2026 — Revenue Bottom and Recovery Signals

Q4 FY2025 revenue of $1,530 million was down approximately 11% year-over-year from $1,723 million in Q4 FY2024 and represented the lowest quarterly revenue print in over two years (onsemi Q4 FY2025 Press Release, BusinessWire, February 2026). For Q1 FY2026, ON Semiconductor guided revenue to a range of $1,435 million to $1,535 million, with a midpoint of $1,485 million. The Zacks Equity Research consensus, published April 29, 2026, sits at approximately $1.49 billion, equivalent to about 2.9% year-over-year growth from the Q1 FY2025 base.

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Two important caveats apply to that headline growth figure. First, Q1 FY2025 was already a depressed quarter and included a large non-cash impairment charge that pushed GAAP net income to roughly negative $486 million, or negative $1.15 per share. Second, ON Semiconductor’s plan to exit approximately $50 million of non-core revenue in Q1 FY2026 (with a full-year FY2026 target of $300 million) creates a deliberate revenue headwind that the underlying core business must offset. Segment-level Zacks consensus estimates for Q1 FY2026 are approximately $793.61 million for Automotive (+4.2% year-over-year), $397.56 million for Industrial (-0.6%), and $298.13 million for the Other category, which captures cloud and communications applications (+5.1%). A flat-to-up sequential print versus Q4 FY2025 would be the cleanest signal that the inventory cycle is no longer deepening.

Gross Margin Recovery: The Utilization Headwind That Defines the Earnings Trajectory

The more important earnings story is gross margin. Q4 FY2025 GAAP gross margin came in at approximately 36.0%, with non-GAAP gross margin at 38.2% — a sharp step down from the 45%-plus levels reported during the 2022–2023 peak. The compression is primarily a function of manufacturing under-utilization charges on capacity built for silicon carbide growth that has not yet materialized. For Q1 FY2026, ON Semiconductor guided non-GAAP gross margin to a range of 37.5% to 39.5%. Non-GAAP earnings per share consensus for the quarter is approximately $0.62, up roughly 12.7% from $0.55 in Q1 FY2025 on a non-GAAP basis.

Management has reiterated long-term financial targets of a 53% non-GAAP gross margin, 40% non-GAAP operating margin, and 25%–30% free cash flow margin. The gap between the current 38% gross margin and the 53% target frames the magnitude of recovery still required. Q1 FY2026 capital expenditure guidance of $35 million to $45 million is materially below the heavy investment years of 2022–2023, signaling that management has paused capacity additions while existing lines absorb demand. FY2025 free cash flow of approximately $1.4 billion — a record 24% free cash flow margin on $6.0 billion of revenue — illustrates how operating leverage can compound once utilization improves.

Silicon Carbide and Automotive: When Does the Inventory Cycle Turn?

Automotive accounts for the largest share of ON Semiconductor’s revenue, and the segment has been the primary drag on results. The Automotive and Mixed-Signal Group (AMG) reported Q4 FY2025 revenue of $556.3 million, down approximately 9% year-over-year. The Power Solutions Group (PSG), which houses most of the SiC module portfolio, reported Q4 FY2025 revenue of $724.2 million, down approximately 11% year-over-year. Total inventory at quarter-end stood at 192 days on hand, with management classifying 76 days as strategic stock held for long-term customer programs. A sequential decline in total inventory days in Q1 FY2026 would be the cleanest evidence that customer pull-through is normalizing.

Design-win activity remains the leading indicator that matters for 2027 and beyond. ON Semiconductor disclosed expanded SiC collaborations with Chinese electric vehicle manufacturers, including announced engagements with NIO and Geely on next-generation 900-volt platforms, and introduced vertical gallium nitride (vGaN) products in late FY2025. Conversion of those design wins to volume revenue typically lags by 12 to 24 months, so the Q1 FY2026 commentary on booking rates and customer qualification status carries more signal value than the headline revenue print.

AI Power Management and Capital Return: The Emerging Upside Narrative

ON Semiconductor has been emphasizing intelligent power stages and high-current voltage regulators for AI server platforms as a structural diversification away from the automotive cycle. The “Other” end-market category, projected to grow approximately 5% year-over-year in Q1 FY2026, is where any AI-related ramp would surface in segment reporting. Investors will look for whether management upgrades its language on AI power demand from “early traction” to “ramping” and for any quantification of design-win volumes at hyperscale customers.

On capital return, the board authorized a new $6 billion share repurchase program in February 2026, equivalent to roughly 15% of the company’s market capitalization based on a share price near $103 in early May 2026 (Yahoo Finance, May 2, 2026). Combined with the low capex run-rate and the FY2025 free cash flow base of approximately $1.4 billion, the buyback authorization gives ON Semiconductor multiple years of runway to return capital while waiting for the cycle to turn.

Key Signals for Investors

A flat-to-up sequential revenue print versus Q4 FY2025’s $1,530 million — adjusted for the $50 million non-core exit headwind — would be the cleanest evidence that the inventory digestion cycle has bottomed.
Non-GAAP gross margin landing at or above the 38.5% guidance midpoint, with management commentary on the pace of utilization recovery, will frame how quickly the path to the 53% long-term target can resume.
A sequential decline in total inventory days from the elevated 192-day Q4 FY2025 level would confirm that automotive and industrial customer destocking is largely complete.
Any incremental disclosure on AI server power design wins or hyperscaler qualification progress would support the case that “Other” can become a third growth engine alongside Automotive and Industrial.
Continued execution of the $6 billion buyback authorization at the FY2025 free cash flow run-rate is the near-term mechanism that converts cycle patience into shareholder value while waiting for SiC demand to inflect.