ON Semiconductor (ON.US) Q3 revenue down 19.2% YoY, operating profit beats expectations
1min read ON Semiconductor (ON.US) reported its third-quarter 2024 financial results, with revenue down 19.2% YoY to $1.76 billion, in line with expectations; non-GAAP EPS of $0.99, up $0.02 YoY; adjusted operating profit of $496.5 million, topping analysts' expectations of $483.4 million. Looking ahead, the company expects EPS of $0.92 to $1.04 in Q4, versus analysts' expectations of $1.00; expects revenue of $1.71 to $1.81 billion, versus expectations of $1.78 billion.
ON Semiconductor President and CEO Hassane El-Khoury said the company would remain focused on delivering consistent performance through execution and prudent financial management in the current environment despite the beat.
Since its separation from Motorola in 1999, ON Semiconductor has developed into a global supplier of analog chips through a series of acquisitions, focusing on power management for automotive, industrial applications, and cloud data centers.
Analysts said the demand for analog chips is closely related to economic growth, as they are the core components of most electronic devices. Unlike digital chip designers, analog chip manufacturers tend to produce most chips in-house and production does not require expensive cutting-edge technologies. However, ON Semiconductor's revenue has only grown at a 5.6% CAGR over the past five years, showing weak growth.
Figure 1
The semiconductor industry is a cyclical industry that requires continuous innovation to keep up with Moore's Law. ON Semiconductor's revenue has decreased 4.4% YoY in the past two years, showing growth deceleration. The Company reported revenue down 19.2% YoY in this quarter, and management expects revenue down 12.8% YoY in the next quarter. Sell-side analysts expect revenue to remain flat over the next 12 months, but still below industry average.
Figure 2
DIO (days of inventory on hand) is an important indicator for chipmakers, reflecting the capital intensity of the business and the cyclical nature of semiconductor supply and demand. ON Semiconductor's DIO was 212 days in this quarter, 65 days higher than the five-year average, indicating high inventory levels.
Figure 3
