Onto Innovation Inc. ONTO used its second-quarter 2026 earnings call to raise expectations for the second half, citing stronger advanced packaging demand, broader advanced-node adoption and record customer visibility.
Management's key forward signal was backlog above $1.1 billion, with orders increasingly reaching into 2027 as customers secure capacity for AI-driven packaging and next-generation semiconductor production.
ONTO Raises Second-Half Growth Outlook
Chief executive officer Michael Plisinski said second-half revenues should grow 25% or more from the first half, up from the prior 15% expectation, with fourth-quarter revenues above the third quarter.
Chief financial officer Brian Roberts guided third-quarter revenues to $380-$400 million. He said the 25% second-half growth level serves as a floor, putting fourth-quarter revenues in the low $400 million at the third-quarter midpoint.
CFO Roberts said margins should continue expanding. The third-quarter outlook calls for gross margin of 57.3% to 57.8% and non-GAAP operating margin of 31.5% to 32.5%, while non-GAAP EPS is projected at $2.18 to $2.38.
ONTO Targets Further Margin Leverage
ONTO’s second-quarter non-GAAP EPS of $1.93 exceeded the Zacks Consensus Estimate of $1.68, while revenues of $343.13 million topped the Zacks Consensus Estimate of $325.6 million. Non-GAAP gross margin reached 57%, and operating margin was 30%.
Plisinski expects 350 basis points of gross-margin expansion and more than 750 basis points of operating-margin improvement in 2026. Roberts tied much of the progress to extended factories and operating productivity.
A B. Riley Securities analyst asked about 2027 margin potential. Roberts said a larger Dragonfly G5 mix can support gross margin through higher average selling prices, while extended factories should continue scaling.
Onto Sees Backlog Extending Into 2027
Plisinski said customers are committing earlier than historical norms to secure supply. He estimated 60% to 70% of backlog is tied to 2026, and 30% to 40% covers 2027.
Plisinski highlighted more than $200 million of Dragonfly orders from one OSAT partner, with most deliveries scheduled for 2027. Demand is strongest in HBM and heterogeneous packaging for AI applications.
An Oppenheimer analyst asked whether backlog growth was still accelerating. Plisinski said large orders arrive unevenly around volume purchase agreements, but backlog is growing while shipments also increase.
ONTO Lifts Advanced Packaging Expectations
Plisinski raised the 2026 advanced packaging growth outlook to about 80% from 50% last quarter, citing stronger HBM demand, higher OSAT volumes and broader Dragonfly adoption across 2.5D logic and heterogeneous packaging.
Plisinski also expects panel-level packaging revenues to more than double year over year, supported by JetStep lithography, Firefly process control and Discover software.
Silicon photonics adds another growth vector. Plisinski said Onto has received more than $50 million of related orders, with roughly two-thirds scheduled for 2027, and expects its served addressable market to exceed $500 million by 2030.
Onto Broadens Advanced-Node Adoption
Roberts said advanced-node revenues rose 50% sequentially to about $120 million. Memory represented about 60% of the total and grew roughly 60% sequentially, while logic increased more than 40%.
Plisinski credited expanded Atlas G6 adoption, including new DRAM customer demand. Multiple systems are expected to ship to a major DRAM customer in the second half, while Iris films and integrated metrology are on track for record 2026 revenues.
A Jefferies analyst asked about the breadth of the gains. Plisinski said growth spanned NAND, DRAM and logic, with Atlas G6 adoption expanding into new applications and DRAM customers.
Onto Keeps Focus on Execution and Visibility
Plisinski said management was not ready to issue a formal 2027 plan, but identified advanced packaging, broader metrology adoption, silicon photonics and the Rigaku X-ray partnership as growth opportunities.
Plisinski also said Onto is not capacity constrained after adding extended-factory capability comparable with its previously stated $2 billion in-house capacity. Management is pairing that flexibility with supply-chain management and targeted product investment.
ONTO's Zacks Rank and Style Score Signals
ONTO sports a Zacks Rank #1 (Strong Buy), the top rating in a system designed to identify stronger one-to-three-month performance potential through earnings estimate revisions. Its Value Score is F, Growth Score is D, Momentum Score is F and VGM Score is F. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks framework treats Style Scores as a complement to the Rank, with A and B scores providing stronger confirmation for top-ranked stocks. ONTO's combination is mixed, and the Zacks Rank can change as analysts revise estimates after the just-reported results.
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Onto Innovation Inc. (ONTO): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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