ON Semiconductor's Q2 2025: Navigating Contradictions in Capacity, Pricing, and Growth Expectations

Capacity utilization and gross margin impact, pricing strategy and market recovery, automotive recovery and growth expectations, AI data center growth and strategic investments, and gross margin expansion strategy are the key contradictions discussed in ON Semiconductor's latest 2025Q2 earnings call.



Revenue and Market Stabilization:
- ON Semiconductor reported Q2 2025 revenue of $1.47 billion, exceeding the midpoint of their guidance and growing 1.6% over Q1.
- The company is seeing signs of market stabilization across end markets, with Automotive revenue expected to grow in the third quarter.

AI Data Center and Intelligent Power Solutions:
- Revenue for ON's AI data center, reported as part of their Other bucket, nearly doubled again in Q2 over the previous year.
- This growth is driven by investments in intelligent power semiconductors, increasing power density and reducing energy loss, aligning with national priorities in AI infrastructure development.

Automotive Market and Global Diversification:
- Automotive revenue in Q2 was down 4%, but it is expected to grow in the third quarter, driven by EV ramps and global OEM engagement.
- China revenue in Q2 grew 23% sequentially, supported by EV ramps and strong traction in both BEV and PHEV platforms.

Focusing on High-Value Products and Margin Expansion:
- The company is rationalizing its product portfolio to focus on high-value, higher-margin products, aiming to improve gross and operating margins.
- This includes repositioning the ISG and end-of-life product decisions, which are expected to impact approximately 5% of 2025 revenue.