ON Semiconductor's Q2 2025 Performance: Navigating Challenges and Seizing EV and AI Opportunities

The semiconductor industry in 2025 remains a mixed bag of resilience and headwinds. ON Semiconductor (onsemi), a key player in analog and power semiconductors, has navigated this landscape with a blend of operational discipline and strategic foresight. Its Q2 2025 results and forward-looking guidance provide critical insights into its revenue resilience and long-term positioning in high-growth markets like electric vehicles (EVs) and artificial intelligence (AI).

Q2 2025: A Mixed but Resilient Performance

onsemi reported Q2 2025 revenue of $1.47 billion, a 16.4% year-over-year decline but a 3.1% beat over the $1.45 billion consensus estimate. This performance reflects the company's ability to stabilize operations amid broader market volatility. Sequentially, revenue rose 2% from Q1 2025, driven by the Power Solutions Group (PSG), which saw an 8% sequential increase to $698.2 million. However, the Analog and MEMS Group (AMG) and Intelligent Sensing Group (ISG) declined by 2% and 8% sequentially, respectively, underscoring sector-specific challenges.

The company's Q3 2025 guidance of $1.47–$1.57 billion aligns closely with the $1.5 billion consensus, signaling confidence in maintaining revenue stability. Earnings per share (EPS) guidance of $0.54–$0.64 (vs. $0.58 consensus) further reinforces this clarity. While onsemi's year-over-year revenue decline is notable, its ability to exceed expectations and provide precise guidance highlights its operational agility.

Strategic Positioning in EV and AI: Silicon Carbide as a Differentiator

onsemi's long-term growth hinges on its leadership in silicon carbide (SiC) technology, a critical enabler for EVs and AI infrastructure. The company's EliteSiC product line is gaining traction in traction inverters, a key component in EVs. A collaboration with Schaeffler to integrate EliteSiC MOSFETs into plug-in hybrid electric vehicles (PHEVs) has positioned onsemi to capture 50% of new EV models in China by 2025, according to industry analysts.

In AI, onsemi's partnership with NVIDIA to develop 800V DC power systems for data centers underscores its relevance in high-performance computing. These systems leverage SiC and silicon power modules to deliver energy efficiency and compact designs, addressing the escalating power demands of AI workloads. Additionally, onsemi's recent acquisition of SiC JFET technology from Qorvo (valued at $1.3 billion in market potential over five years) accelerates its dominance in power conversion solutions.

Competitive Landscape and Financial Resilience

onsemi faces fierce competition from peers like Infineon and STMicroelectronics, both of which have stronger revenue scales but are grappling with market saturation and supply chain disruptions. While onsemi's Q1 2025 revenue fell 14.6% year-over-year, its $2.69 billion cash reserves and $1.21 billion in 2024 free cash flow provide a buffer for strategic investments. The company's 8.65% R&D spend in 2024 ($612.7 million) also underscores its commitment to innovation, particularly in SiC and intelligent power modules.

Despite challenges, onsemi's vertical integration—controlling SiC production from wafers to modules—offers a competitive edge over rivals reliant on third-party foundries. This model ensures supply chain reliability, a critical factor as automakers and data centers prioritize consistent performance.

Long-Term Outlook: Balancing Risks and Rewards

onsemi's strategic bets on EVs and AI are well-aligned with secular trends. The global EV market is projected to grow at a 20% CAGR through 2030, while AI data centers are expected to consume 30% of global electricity by 2025. onsemi's SiC technology is uniquely positioned to benefit from both. However, near-term risks persist, including macroeconomic headwinds and inventory corrections in the automotive sector.

For investors, onsemi's P/E ratio of 40.74x reflects optimism about its long-term growth potential but appears elevated given current revenue trends. A more compelling case emerges if the company can reverse its year-over-year decline in 2025 and demonstrate traction in AI data center contracts. Share repurchases (e.g., $654 million in 2024) also enhance shareholder value, though disciplined capital allocation will remain key.

Investment Advice: A High-Beta Play on Megatrends

onsemi is a high-beta stock with asymmetric upside for investors who believe in the acceleration of EV adoption and AI infrastructure spending. Its leadership in SiC, strategic partnerships, and financial flexibility position it to outperform in a recovery scenario. However, the stock's valuation and near-term revenue pressures warrant caution. A buy rating is justified for long-term horizons (12–24 months), contingent on:
1. Execution of SiC expansion plans (e.g., Stony Brook University partnership).
2. Stabilization of automotive segment revenues.
3. Successful differentiation in AI power solutions.

Historically, when onsemi has beaten earnings expectations, the stock has shown a positive response, with an 80% win rate over three days and a 4.20% average return over 30 days, according to backtest data from 2022 to 2025.

For conservative investors, a wait-and-watch approach is advisable until onsemi's Q3 2025 results confirm its ability to navigate near-term challenges. The semiconductor sector is cyclical, and onsemi's strategic positioning makes it a compelling, though volatile, long-term bet.

In conclusion, onsemi's Q2 2025 performance and strategic initiatives highlight its resilience and vision. While short-term headwinds persist, its focus on EVs and AI—backed by SiC innovation—positions it to capture significant value in the evolving semiconductor landscape. For investors with a 3–5 year horizon, the company's long-term growth story is worth the risk.