Financial Data and Key Metrics Changes - In 2025, the company delivered $6 billion in revenue with a non-GAAP gross margin of 38.4%, reflecting disciplined execution and alignment with long-term strategy [7] - Free cash flow increased 17% year-over-year to $1.4 billion, achieving a record free cash flow margin of 24% [17][24] - For Q4, revenue was $1.53 billion, with a non-GAAP gross margin of 38.2% and earnings per share of $0.64, exceeding the midpoint of guidance [10][23] Business Line Data and Key Metrics Changes - Automotive revenue was $798 million, up approximately 1% quarter-over-quarter, indicating stabilization in the automotive market [21] - Industrial revenue was $442 million, up approximately 4% quarter-over-quarter, marking the first quarter of year-over-year growth in industrial revenue after eight quarters of declines [21] - AI data center revenue contributed more than $250 million for the full year, with growth in Q4 [12][21] Market Data and Key Metrics Changes - The aerospace, defense, and security segment saw a 70% year-over-year revenue increase, driven by North America and Europe [12] - The company is experiencing improving order trends across core markets, contributing to a positive outlook for 2026 [10][27] Company Strategy and Development Direction - The company has evolved from a manufacturing-centric to a product-centric model, focusing on high-margin product revenue and strategic investments in technology [8] - The introduction of the Treo Platform and expansion into high-growth markets like AI data centers and automotive zonal architecture are key strategic initiatives [7][11] - The company aims to achieve margin expansion through operational efficiency and a refined product mix, with a focus on differentiated products [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about improving demand conditions across automotive, industrial, and AI infrastructure markets [15][27] - The company anticipates that the groundwork laid over the past years will enable it to benefit from improving demand conditions [15] - Management highlighted the importance of aligning manufacturing capabilities with market demands to enhance gross margins [19][88] Other Important Information - The company announced a new $6 billion share repurchase program after returning approximately 100% of free cash flow to shareholders in 2025 [18][24] - The company is reducing fab capacity by 12% to improve operational efficiency, which is expected to lower depreciation costs in 2026 [19] Q&A Session Summary Question: What was going on in the other category? - Management noted that excluding exits, the company is above seasonal trends, and the decline in the other category was due to normal seasonality and $40 million in exits [30] Question: Can you discuss the AI data center market and its potential? - Management expressed confidence in the growth of the AI data center segment, highlighting the company's unique capabilities in high-voltage power supply and its broad product portfolio [32][33] Question: What is the expected run rate for non-core exits? - Management clarified that the $50 million exit in Q1 is part of a larger $300 million total for the year, with varying quarterly impacts [37] Question: How do you expect gross margins to progress? - Management indicated that gross margins are expected to improve due to increased utilization and ongoing FabRight initiatives, with a target of reaching low 40s% in the long term [88][90] Question: What is the outlook for the automotive market? - Management expects automotive revenue to be roughly flat in Q1 due to seasonal factors, but overall stabilization is anticipated [50]

ON Semiconductor (NasdaqGS:ON) Q4 2025 Earnings call February 09, 2026 05:00 PM ET Speaker5Good day, everyone, and welcome to ON Semiconductor Caspar Coppetti's fourth quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To participate, you will need to press *11 on your telephone. You will then hear a message advising your hand is raised. To withdraw your question, simply press *11 aga ...