ON Semiconductor's Q1 2025 Earnings: Navigating Challenges in a Neutral Landscape

Investors are set to scrutinize ON Semiconductor (NASDAQ:ON) when the company reports Q1 2025 earnings on May 5, 2025. With the stock down 41% over the past year and analysts maintaining a Neutral rating, the quarter will test whether the company’s strategic moves—such as its silicon carbide (SiC) expansion and hybrid manufacturing model—can offset near-term headwinds.

Key Metrics Under the Spotlight

Analysts project an EPS of $0.50 for Q1, within the company’s own non-GAAP guidance range of $0.45 to $0.55. This estimate reflects cautious expectations amid -14.65% YoY revenue growth in Q4 2024 and a projected 25% sequential decline in automotive revenue due to soft demand in China and geopolitical uncertainties.

The Bulls’ Case: Long-Term Strengths

ON Semiconductor’s $1.2 billion in free cash flow in 2024 and its acquisition of Qorvo’s SiC business signal a strategic push into high-growth markets like EVs and renewable energy. The Treo platform, designed for AI and data center applications, also represents a potential revenue driver. Meanwhile, its Fabrite hybrid manufacturing model aims to stabilize margins by blending in-house fabrication with outsourced capacity.

The Bears’ Concerns: Near-Term Weakness

Despite these positives, Q1’s results could highlight lingering challenges. The automotive sector, a key revenue pillar, faces inventory corrections in China and supply chain disruptions. Gross margins are expected to narrow to 39-41%, down from 42% in Q4, as pricing pressures and lower utilization rates take hold. If margins fall toward the lower end of the range, it could reignite concerns about the company’s cost discipline.

Peer Comparisons and Valuation

ON Semiconductor’s Neutral rating contrasts sharply with peers like First Solar (FSLR) (Outperform) and Astera Labs (Buy), which benefit from tailwinds in solar and AI infrastructure. However, ON’s $57.15 average price target—implying a 44% upside from its May 1 price of $39.6—suggests analysts believe the stock is undervalued if execution improves.

Conclusion: A Crossroads for ON Semiconductor

The Q1 earnings report is a pivotal moment for ON Semiconductor. Meeting or exceeding the $0.50 EPS estimate could boost confidence in management’s ability to navigate automotive headwinds and defend margins. A strong cash flow update and clarity on SiC ramp-up timelines would further alleviate concerns.

However, if the results disappoint—particularly in automotive revenue or margins—the stock’s bearish momentum could persist. With the Neutral rating anchored by mixed performance metrics, investors will need to see tangible progress in executing the Fabrite model and capturing growth markets to justify the $57.15 price target.

In short, Q1 is less about hitting a single quarter’s numbers and more about proving that ON Semiconductor’s long-term strategies are resilient enough to outlast cyclical downturns. The next 48 hours will determine whether the stock’s valuation gap begins to close—or widens further.

Data as of May 1, 2025.