Core Insights - Onto Innovation Inc. (ONTO) reported Q2 2025 earnings per share (EPS) of $1.25, missing the Zacks Consensus Estimate by 1.6% and down from $1.32 in the prior year [1][8] - Quarterly revenues reached $253.6 million, exceeding the Zacks Consensus Estimate by 1.5% and reflecting a 5% year-over-year increase, driven by growth in advanced nodes and AI-packaging [1][8] Revenue Breakdown - Specialty devices and advanced packaging revenues accounted for 46% of total revenues, totaling $117 million [2] - Revenues from the Advanced nodes market, which represented 35% of total revenues, were $89 million, supported by strong demand in leading-edge DRAM and NAND memory, although GAA transistor demand slowed as anticipated [2] - Software and services revenues, making up 19% of total revenues, amounted to $48 million [3] Acquisition Details - ONTO announced the acquisition of Semilab International's materials analysis business for $475 million in cash and 706,215 shares of common stock, pending regulatory approvals [4] - The acquisition is expected to generate $130 million in revenues in 2025 and enhance gross and operating margins, with non-GAAP EPS projected to increase by over 10% in the first year post-acquisition [5] Margin and Financial Performance - Operating expenses rose to $89.9 million, a 13.2% increase year-over-year [6] - Non-GAAP gross profit increased to $138.3 million, with a gross profit margin of 54.5%, up from 53.2% in the previous year [6] - Non-GAAP operating income was $65.6 million, with a non-GAAP operating margin of 25.9%, down from 26.6% year-over-year [6] Balance Sheet Overview - As of June 28, 2025, ONTO had $894.9 million in cash and marketable securities, compared to $850.6 million as of March 29, 2025 [6] - Total current liabilities decreased to $155.8 million from $174.5 million in the same period [6] - Accounts receivable stood at $285.3 million, with cash generated from operations reaching a record $58 million, reflecting a 95% cash conversion of non-GAAP net income [7] Q3 2025 Guidance - ONTO expects Q3 total revenues to be between $210 million and $225 million, with a consensus estimate of $217.8 million, anticipating a slowdown in advanced node spending [9] - Non-GAAP EPS is projected to range from 75 cents to 95 cents, while GAAP EPS is expected between 52 cents and 72 cents [10] - Non-GAAP operating margin is anticipated to be between 18% and 21% [10] Tariff Impact and Strategy - ONTO expects to incur tariff expenses of $2 million to $3 million in both Q3 and Q4 due to inbound tariffs [11] - The company is implementing a region-for-region strategy, rapidly establishing manufacturing capabilities in several Asian markets, with shipments expected to commence in the current quarter [11]

Core Viewpoint - The artificial intelligence industry is experiencing significant growth, presenting attractive investment opportunities despite inflated valuations in some tech companies due to AI hype [1] Group 1: Investment Opportunities - Taiwan Semiconductor Manufacturing (TSMC), Super Micro Computer (Supermicro), and Alphabet (Google's parent company) are identified as potential AI investment bargains due to their lower price-to-earnings (P/E) ratios compared to Nvidia [2] - The global economic uncertainty, particularly from tariff policies, has pressured the share prices of these companies, but the long-term growth potential in AI remains promising [4] Group 2: Company-Specific Insights Taiwan Semiconductor Manufacturing (TSMC) - TSMC is a leader in manufacturing chips for AI tasks, with 3-nanometer (nm) chips contributing 22% of its $25.5 billion first-quarter revenue, up from 9% the previous year [6] - The company achieved a 35% year-over-year sales growth in Q1, with a gross margin increase to 58.8% from 53.1% [7] - TSMC forecasts Q2 revenue between $28.4 billion and $29.2 billion, representing at least a 37% increase from the prior year's $20.8 billion [8] - The company received $6.6 billion in federal funding under the CHIPS Act to build semiconductor facilities in the U.S., positioning it for long-term growth [9] Super Micro Computer (Supermicro) - Supermicro specializes in servers and data storage solutions for AI systems, with Q3 fiscal 2025 revenue reaching $4.6 billion, a 19% increase year-over-year [10] - Despite growth, revenue fell short of the $5 billion forecast due to customer purchasing delays [11] - The AI market is projected to grow from $184 billion in 2024 to $826 billion by 2030, which could benefit Supermicro in the long run [12] - The company expects to close fiscal 2025 with sales between $21.8 billion and $22.6 billion, a significant increase from $14.9 billion the previous year [12][13] Alphabet (Google) - Alphabet invested $52.5 billion in capital expenditures last year to enhance its AI systems, integrating AI into all products with over 500 million users [14] - Q1 revenue reached $90.2 billion, up from $80.5 billion in 2024, driven by double-digit growth in its search engine and Google Cloud [15] - Waymo, Alphabet's self-driving car service, now provides over 250,000 rides per week, a fivefold increase from the previous year [16] - Despite facing antitrust challenges, Alphabet has opportunities to appeal, which may mitigate short-term impacts on its business [17] Group 3: Market Outlook - The current market conditions have created a buying opportunity for long-term investors in TSMC, Supermicro, and Alphabet, as their valuations are compelling amidst the ongoing expansion of the AI market [18]