Onto Innovation Q1 2025: Navigating Contradictions in HBM Demand, Advanced Packaging, and Margin Expectations

HBM demand and capacity additions, advanced packaging revenue outlook, TSMC's COO expansion, advanced nodes performance and growth expectations, and gross margin improvement expectations are the key contradictions discussed in Onto Innovation's latest 2025Q1 earnings call.



Revenue Growth and Market Expansion:
- Onto Innovation reported record revenue of $267 million for Q1 2025, a 17% increase year-over-year.
- Revenue growth was driven by expansions in advanced nodes and packaging for AI compute engines and investments in cloud and enterprise servers.

Strategic Manufacturing Adjustments:
- The company is accelerating manufacturing capability in Asia due to U.S. tariffs impacting incoming costs and potential retaliatory tariffs.
- Shipments are expected to begin in the second half of 2025, with half of the product volume able to be shipped from Asia by early 2026.

Advanced Nodes and Metrology Performance:
- Revenue from the advanced nodes segment increased by 96% over Q4, contributing to 35% of total revenue.
- Growth was driven by increased process control capital intensity and the performance of new products like Iris films Metrology and IMPULSE 5 Integrated Metrology.

Specialty Devices and Advanced Packaging Decline:
- Revenue from specialty devices and advanced packaging decreased by 24% from Q4, representing 48% of total revenue.
- The decline was attributed to delayed investments and tool allocation changes in AI packaging, particularly in 2.5D packaging.

Q2 Guidance and Market Outlook:
- Onto Innovation expects revenue for Q2 to be between $240 million and $260 million, reflecting a decline in advanced node investments and revenue from specialty devices and advanced packaging.
- The company anticipates revenue growth to resume in the fourth quarter, supported by anticipated broad-based expansions in advanced nodes and a recovery in memory spending.