ON Semiconductor (ON) is a company in the middle of a significant reset. After peaking at over $8.3 billion in annual revenue in 2022–2023 — driven by a surge in electric vehicle and industrial power management demand — revenue has fallen sharply, dropping to just under $6 billion in fiscal 2025, a three-year CAGR of roughly -10.4%. Profitability has followed a similar arc, with operating and net margins compressing dramatically. The good news is that the most recent quarter (ending July 3, 2026) shows a meaningful inflection: margins are recovering, capital expenditures have fallen to a fraction of prior levels, and the balance sheet remains conservatively levered. ON is a cyclical semiconductor business that over-invested in capacity during the boom and is now rationalizing costs — the question for investors is whether the demand recovery underway is durable.
Snapshot & Big Picture
ON Semiconductor designs and manufactures power semiconductors and sensor solutions, with a strong focus on the automotive (particularly EV) and industrial end markets. The company rode a powerful upcycle from 2020 through 2023, expanding gross margins from 33% to nearly 47% and growing revenue by more than 50%. Since then, a correction in EV and industrial demand has unwound much of those gains. Annual revenue fell from $8.25 billion in 2023 to $7.08 billion in 2024 and then to $5.995 billion in fiscal year 2025 — a stark two-year reversal. However, ON has actively managed its cost structure and dramatically pulled back capital spending, which should help stabilize free cash flow as the cycle turns.
| Fiscal Year | Revenue | Gross Margin | Operating Margin | Net Margin |
|---|---|---|---|---|
| 2016 | $3.91B | 33.3% | 6.3% | 4.7% |
| 2017 | $5.54B | 36.7% | 12.3% | 14.6% |
| 2018 | $5.88B | 38.1% | 14.4% | 10.7% |
| 2019 | $5.52B | 35.8% | 7.8% | 3.8% |
| 2020 | $5.26B | 32.7% | 6.6% | 4.5% |
| 2021 | $6.74B | 40.3% | 19.1% | 15.0% |
| 2022 | $8.33B | 49.0% | 28.3% | 22.8% |
| 2023 | $8.25B | 47.1% | 30.8% | 26.5% |
| 2024 | $7.08B | 45.4% | 25.0% | 22.2% |
| 2025 | $5.995B | 33.1% | 1.4% | 2.0% |
Latest Quarter Snapshot
The quarter ending July 3, 2026 is the most current data available and tells a more encouraging story than the annual 2025 figures. Revenue came in at $1.60 billion, with a gross margin of 38.4% — a meaningful step up from the 33.1% full-year 2025 figure. Operating margin recovered to 16.1% and net margin reached 14.1%, suggesting that the worst of the earnings compression may be behind the company. The current ratio stood at 3.46, indicating ample short-term liquidity. One especially notable data point: capital expenditures in this quarter were just $21.9 million, or about 1.4% of revenue — an extraordinarily low level compared to recent years, reflecting a deliberate pivot away from heavy capacity investment.
| Metric | Q2 2026 (ended Jul 3, 2026) |
|---|---|
| Revenue | $1.60B |
| EBITDA | $545.3M |
| Gross Margin | 38.4% |
| Operating Margin | 16.1% |
| Net Margin | 14.1% |
| Current Ratio | 3.46x |
| Debt-to-Equity | 0.62x |
| Capital Expenditures | $21.9M (1.4% of revenue) |
Profitability
ON's profitability trajectory over the past decade is a textbook semiconductor cycle story. Gross margins languished in the low-to-mid 30s from 2016 through 2020, then exploded higher as demand for power semiconductors — particularly silicon carbide (SiC) for EVs — outstripped supply. Gross margin peaked near 49% in 2022 before retreating to 33.1% in fiscal 2025 as volumes fell and fixed manufacturing costs became a larger drag. Operating margin swung from a meager 1.4% in 2025 — weighed down by restructuring charges and factory underutilization — versus a peak of 30.8% in 2023. The most recent quarter's operating margin of 16.1% suggests a recovery is underway, though it remains well below peak levels. Net margin followed a similar pattern, bottoming at roughly 2% in full-year 2025 before bouncing back to 14.1% in the latest quarter. EBITDA also compressed sharply, falling from $3.15 billion in 2023 to $770 million in 2025, before the quarterly run-rate implied by the latest quarter points toward improvement.
Financial Health & Capital Expenditures
ON's balance sheet has strengthened considerably over the past several years. Debt-to-equity has fallen from a peak of nearly 2.0x in 2016 to around 0.38x–0.43x in recent annual periods, though the latest quarterly figure ticked up slightly to 0.62x — still a conservative level for a capital-intensive industrial semiconductor manufacturer. The current ratio has improved dramatically, rising from 1.6x in 2019 to over 5.0x in 2024, and settling at 3.46x in the most recent quarter, indicating the company carries a substantial liquidity cushion.
Capital expenditure trends are a central part of ON's recent story. The company aggressively ramped investment to build out SiC and other power semiconductor capacity during the boom years, with capex reaching $1.54 billion (18.6% of revenue) in fiscal 2023 and $1.04 billion (12.4% of revenue) in fiscal 2022. As demand softened, management reversed course sharply — capex fell to $694 million (9.8% of revenue) in 2024 and $341 million (5.7% of revenue) in fiscal 2025. The most recent quarter takes this further still, with capex of just $21.9 million (1.4% of revenue), the lowest intensity in the dataset. This dramatic pullback meaningfully reduces cash outflows and should support free cash flow recovery, but it also raises a longer-term question: if demand rebounds strongly, ON may need to re-accelerate investment to maintain its competitive position in SiC.
| Period | Capital Expenditures | CapEx / Revenue |
|---|---|---|
| FY 2020 | $383.6M | 7.3% |
| FY 2021 | $444.6M | 6.6% |
| FY 2022 | $1,036.0M | 12.4% |
| FY 2023 | $1,539.1M | 18.6% |
| FY 2024 | $694.0M | 9.8% |
| FY 2025 | $341.2M | 5.7% |
| Q2 2026 (Jul 3, 2026) | $21.9M | 1.4% |
Growth
The revenue CAGR figures below capture the full arc of ON's boom-and-bust cycle. The three-year CAGR is negative, reflecting the sharp demand correction from the 2022 peak. The five-year CAGR is modestly positive, incorporating both the upcycle and the subsequent downturn. The ten-year CAGR window is not available because the company's SEC filing history in this dataset does not extend back a full ten years from the current endpoint to provide a valid starting figure.
| Window | Start Fiscal Year | End Fiscal Year | Start Revenue | End Revenue | CAGR |
|---|---|---|---|---|---|
| 3-Year | FY 2022 | FY 2025 | $8.33B | $5.995B | -10.4% |
| 5-Year | FY 2020 | FY 2025 | $5.26B | $5.995B | +2.7% |
| 10-Year | N/A | N/A | — | — | Not available (insufficient filing history in dataset) |
The -10.4% three-year CAGR makes clear that ON is in a cyclical trough, not a secular decline — the five-year figure of +2.7% shows the underlying business has grown revenue modestly over a full cycle. Whether growth accelerates from here depends heavily on the pace of EV adoption and industrial automation spending, the two key demand drivers for ON's power semiconductor portfolio.
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