Onto Innovation (NYSE:ONTO) FY Conference Transcript

Onto Innovation (NYSE:ONTO) FY Conference Summary Company Overview - Company: Onto Innovation (NYSE:ONTO) - Event: 28th Annual Needham Growth Conference - Date: January 13, 2026 Key Industry Insights - AI Impact: AI is a significant driver in the semiconductor industry, with NVIDIA projecting a 40% CAGR over the next few years, influencing demand and supply dynamics [6][7] - Revenue Ties: In 2025, 61% of Onto's revenue was derived from customers directly supporting the AI supply chain, indicating a strong correlation with AI growth [7] - Market Outlook: The outlook for 2026 is expected to be at least 10% stronger in the first half compared to the second half of 2025, reflecting improved customer sentiment [7] Product and Technology Developments - AI Value Chain: Onto is positioned in several areas of the AI value chain, including Gate-All-Around nodes, advanced packaging inspection, and 3D metrology [8][9] - New Technologies: The company is focusing on co-packaged optics and charge metrology, which are expected to contribute significantly to revenue growth, with an estimated additional opportunity of $1 billion [10][12] - Dragonfly Platform: The Dragonfly G3 has seen less decline than expected, with new applications being added. The upcoming Dragonfly G5 is expected to enhance resolution and throughput significantly [14][15] Financial Performance and Projections - Operating Margin Improvement: Onto aims for at least a 30% improvement in operating margin for 2026, driven by overseas manufacturing, new product value, and synergies from the SDI acquisition [18][19] - Revenue Growth Drivers: Growth is anticipated from advanced nodes and packaging, particularly in HBM and AI-related applications [21][30] Market Position and Competitive Landscape - OSAT Engagement: Onto is benefiting from the outsourcing of capabilities to OSATs, which are increasingly involved in AI packaging, enhancing Onto's market position [23][24] - Lithography Business: The JetStep system for panel-level packaging is gaining traction, with customers recognizing the importance of inline process control [25][27] Geopolitical Considerations - China Exposure: Onto's limited exposure to China provides some protection against geopolitical volatility, while the shift of manufacturing to Asia is expected to enhance engagement with Chinese customers [32][34] Customer Engagement and Value Proposition - Value Quantification: Onto emphasizes the importance of solving customer problems through reliable measurements and faster processing, which justifies their pricing strategy [36] - Sustainable Advantage: The company's understanding of customer challenges and its ability to address complex issues in packaging and inspection are seen as key differentiators in maintaining a competitive edge [37] Conclusion Onto Innovation is strategically positioned to leverage the growth in AI and advanced semiconductor technologies, with a strong focus on enhancing product capabilities and improving operational efficiencies. The company is optimistic about its growth trajectory in 2026, driven by innovative technologies and a robust market demand.