krystiannawrocki/iStock via Getty Images Onto Innovation (NYSE:ONTO) is riding the wave of AI semiconductor proliferation, as led by Nvidia (NVDA). The company is seeing a huge influx of demand for high bandwidth memory and advanced packaging products for semiconductor companies. This space of semiconductor equipment has proven to be lucrative, with companies directly involved seeing significant revenue acceleration with good visibility. Onto has recently called out strong growth in 2024 and into 2025, allo ...

Core Viewpoint - Onto Innovation (ONTO) has shown strong stock performance with a year-to-date gain of 30.3%, significantly outperforming the S&P 500 and its sub-industry [1] Financial Performance - The stock gained 12% since the announcement of second-quarter fiscal 2024 results on August 8, with ONTO surpassing estimates in the last four quarters, averaging a surprise of 6.6% [1][3] - Total revenues for the last reported quarter reached $242.3 million, exceeding the Zacks Consensus Estimate by 2.9% and reflecting a year-over-year growth of 27.1% [3] - Revenues surpassed the company's guidance range of $230-$240 million, with record revenues of $164 million from specialty and advanced packaging customers driven by AI packaging demand [4] Growth Drivers - The demand for the Dragonfly inspection system is a key growth driver, particularly for advanced packaging of AI computing devices [2][3] - ONTO secured over $300 million in volume purchase agreements from two major customers, extending through 2025, focused on AI advanced packaging and gate-all-around technologies [4] - Healthy momentum in advanced nodes sales is attributed to the success of ONTO's Atlas and Iris systems, which support emerging gate-all-around devices [5] Product Development - The introduction of the JetStep X500 lithography tool is aimed at next-generation glass substrates for panel-level packaging, enhancing data collection for process maturation [6] Future Outlook - For the third quarter, management expects revenues between $245-$255 million, with the second half of 2024 projected to be 5-10% stronger than the first half [7] - The Zacks Consensus Estimate for ONTO's revenues in 2024 and 2025 is $968.9 million and $1.1 billion, indicating growth of 18.8% and 13.4% year-over-year, respectively [9] Challenges - Weak global macro conditions, forex fluctuations, and intense competition are noted as concerns, with expected operating expenses for the third quarter ranging from $64-$66 million due to higher R&D costs [8]

Core Insights - Onto Innovation Inc (ONTO) reported strong second-quarter 2024 earnings, with earnings per share (EPS) of $1.32, exceeding the Zacks Consensus Estimate by 10.9% and significantly up from 79 cents in the prior-year quarter [1] - Revenues reached $242.3 million, surpassing the Zacks Consensus Estimate by 2.9% and reflecting a year-over-year growth of 27.1%, driven by high-performance computing and AI sector demand [2][3] Financial Performance - The revenue of $242.3 million exceeded the company's guidance range of $230-$240 million, with a record $164 million from specialty and advanced packaging customers, primarily due to AI packaging demand [3] - Advanced nodes revenues increased by 45% sequentially to $27 million, while specialty devices and advanced packaging revenues were $158 million, showing a slight sequential rise [5] - Non-GAAP gross profit rose to $129 million from $100.5 million year-over-year, maintaining a gross margin of 53% [6] Operational Highlights - The company secured over $300 million in volume purchase agreements with two major customers, extending through 2025, focusing on AI advanced packaging and gate-all-around technologies [3] - The introduction of the JetStep X500 lithography tool enhances the product portfolio for next-generation glass substrates used in panel-level packaging [4] Balance Sheet and Outlook - As of June 29, 2024, the company had $786 million in cash and equivalents, with total current liabilities of $148.4 million, indicating a solid financial position [7] - For Q3, management expects revenues between $245-$255 million and non-GAAP EPS between $1.25 and $1.35, with the Zacks Consensus Estimate at $231.1 million [8]

Financial Data and Key Metrics Changes - Second quarter revenue reached $242 million, up 6% sequentially and 27% year-over-year, exceeding guidance due to strong demand for advanced packaging and software services [8][9] - Earnings per share (EPS) increased 12% sequentially to $1.32 and up 67% year-over-year [8] - Operating cash flow was a record $65 million, representing 27% of revenues, with a significant improvement in cash generation compared to the previous year [8][10] Business Line Data and Key Metrics Changes - Specialty device and advanced packaging revenue grew 3% sequentially to a record $164 million, accounting for 68% of total revenue [9] - Advanced nodes revenue increased 21% over Q1 to $32 million, representing 13% of total revenue [9] - Software and services revenue was $46 million, up 6% over Q1, making up 19% of total revenue [9] Market Data and Key Metrics Changes - The advanced packaging market, particularly driven by AI packaging, accounted for over half of the revenue in specialty device and advanced packaging markets [4] - Orders from logic customers represented nearly half of the revenue from advanced node customers, indicating strong demand in this segment [7] Company Strategy and Development Direction - The company is focusing on expanding capabilities in advanced packaging and advanced nodes, with expectations of continued growth in these areas [12][13] - New product introductions, such as a 3D bump metrology sensor, are aimed at addressing the evolving needs of the market [5] - The company anticipates further growth in advanced nodes driven by increasing orders for memory and gate-all-around logic applications [12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the second half of 2024, expecting revenue to be 5% to 10% stronger than the first half [13] - The company is encouraged by the demand for AI packaging and the expected increase in HBM content for AI processors [13] - Management noted that supply constraints are still impacting some customers, but overall demand remains strong [15] Other Important Information - The company ended the quarter with cash and short-term investments of $786 million and plans to reduce inventory levels further [10] - A volume purchasing agreement worth over $300 million was closed with two customers, covering AI packaging and gate-all-around investments through 2025 [13][42] Q&A Session Summary Question: What improved in the outlook for advanced packaging? - Management clarified that the previous pause in AI packaging was specific to a few customers, while overall advanced packaging is expected to grow sequentially [15] Question: How is the $300 million volume purchasing agreement split among customers? - The advanced packaging portion is larger, with most revenue recognition expected to occur in 2025 [16][18] Question: What impact do reduced CapEx plans from an IDM customer have? - Management remains optimistic, expecting that the focus will shift to leading-edge technologies, potentially benefiting the company [22] Question: What is driving the delta between AI packaging and overall advanced packaging growth? - Management noted that OSATs are starting to spend more, contributing to overall advanced packaging growth despite a pause in AI-specific spending [23] Question: What is the expected decline in AI packaging revenues? - Management estimated an aggregate decline of around 10% to 15% in AI packaging revenues from the first half to the second half of the year [24] Question: How is the gross margin improvement being driven? - Management indicated that improvements in manufacturing and supply chain efficiencies are contributing to the gross margin increase [25] Question: What is the company's strategy regarding China exposure? - Management expects second half revenue from China to be up over the first half, focusing on high-end applications despite local competition [40][41] Question: When will shipments related to the $300 million VPA begin? - Initial shipments are expected in the second half of the year, with the bulk occurring throughout 2025 [42] Question: Where has the company gained the most market share? - The company has maintained a high share in AI packaging and has seen increases in adoption of its Iris planar films for gate-all-around applications [45]

Onto Innovation (ONTO) came out with quarterly earnings of $1.32 per share, beating the Zacks Consensus Estimate of $1.19 per share. This compares to earnings of $0.79 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of 10.92%. A quarter ago, it was expected that this maker of semiconductor manufacturing equipment would post earnings of $1.10 per share when it actually produced earnings of $1.18, delivering a surprise of 7.27%. O ...

Onto Innovation (ONTO) is set to report results for the second quarter of 2024 on Aug 8. The Zacks Consensus Estimate for second-quarter earnings per share (EPS) has been steady at $1.19 in the past 60 days, implying an increase of 50.6% from the year-ago quarter's figure. The company expects non-GAAP EPS in the range of $1.14-$1.26. Meanwhile, the consensus mark for revenues is pegged at $235.6 million, indicating a rise of 23.6% from the year-earlier quarter's actual. Management expects revenues in the ra ...

Company Performance - Shares of Onto Innovation (ONTO) experienced a loss of 14.01% over the previous month, underperforming the Computer and Technology sector's loss of 4.62% and the S&P 500's loss of 0.21% [1] - In the latest trading session, Onto Innovation closed at $189.08, marking a +0.15% move from the prior day, outperforming the S&P 500's daily gain of 0.08% [6] Earnings Estimates - For the upcoming earnings report on August 8, 2024, Onto Innovation is anticipated to report an EPS of $1.19, reflecting a 50.63% increase compared to the same quarter of the previous year [7] - The consensus estimate for quarterly revenue is $235.6 million, which represents a 23.57% increase from the year-ago period [7] - The Zacks Consensus Estimates for the annual period project earnings of $5.05 per share and revenue of $941.16 million, indicating shifts of +35.39% and +15.36% from the last year, respectively [2] Analyst Ratings and Industry Position - Onto Innovation currently holds a Zacks Rank of 2 (Buy), with the Zacks Rank system showing a strong track record of outperforming the market [9] - The Nanotechnology industry, which includes Onto Innovation, has a Zacks Industry Rank of 3, placing it within the top 2% of over 250 industries [4] Valuation Metrics - Onto Innovation is currently traded at a Forward P/E ratio of 37.39, which is a premium compared to the industry's average Forward P/E of 29.89 [11]

The maker of semiconductor manufacturing equipment's stock has dropped by 2.26% in the past month, falling short of the Computer and Technology sector's gain of 0.47% and the S&P 500's gain of 1.96%. Furthermore, it would be beneficial for investors to monitor any recent shifts in analyst projections for Onto Innovation. These latest adjustments often mirror the shifting dynamics of short-term business patterns. With this in mind, we can consider positive estimate revisions a sign of optimism about the comp ...

Prior to today's trading, shares of the maker of semiconductor manufacturing equipment had gained 4.48% over the past month. This has outpaced the Computer and Technology sector's gain of 4.22% and the S&P 500's gain of 3.78% in that time. Any recent changes to analyst estimates for Onto Innovation should also be noted by investors. These latest adjustments often mirror the shifting dynamics of short-term business patterns. As such, positive estimate revisions reflect analyst optimism about the company's bu ...

Core Viewpoint - The article discusses the importance of momentum investing and highlights Onto Innovation (ONTO) as a strong candidate for momentum-based investment due to its recent performance and positive earnings outlook. Group 1: Momentum Investing - Momentum investing focuses on following a stock's recent price trends, with the expectation that a stock will continue in the same direction once a trend is established [7] - The Zacks Momentum Style Score is a tool that helps identify stocks with strong momentum, incorporating metrics like price changes and earnings estimate revisions [12] Group 2: Onto Innovation Performance - Onto Innovation has shown significant price appreciation, with shares increasing by 35.36% over the past quarter and 105.12% over the last year, compared to the S&P 500's gains of 10% and 27.2% respectively [4] - The stock currently holds a Zacks Rank of 2 (Buy) and a Momentum Score of A, indicating strong potential for future performance [6] Group 3: Earnings Outlook - In the past two months, one earnings estimate for Onto Innovation has increased, raising the consensus estimate from $5.01 to $5.05 for the full year, with no downward revisions [5] - For the next fiscal year, one estimate has also moved upwards, reflecting positive sentiment regarding the company's earnings potential [5] Group 4: Trading Volume and Industry Comparison - Onto Innovation's shares have increased by 0.39% over the past week, while the Zacks Nanotechnology industry has remained flat during the same period [10] - The average 20-day trading volume for Onto Innovation is 849,238 shares, which is considered a bullish sign when combined with rising stock prices [11]