2 days ago
17
Onsemi just delivered a quarter that most chipmakers would kill for, and Bank of America responded by cutting its price target. Welcome to the semiconductor sector, where exceeding expectations and getting downgraded can happen in the same breath.
BofA Securities analyst Vivek Arya trimmed his price target on onsemi (NASDAQ: ON) to $120 from $138, even as the company posted Q2 2026 revenue of $1.604 billion, a 9% jump year-over-year, and non-GAAP diluted earnings per share of $0.74, beating the consensus estimate of $0.71. He kept the Buy rating intact.
The numbers tell a different story than the target cut
Onsemi’s quarter was genuinely impressive by almost any metric. Free cash flow quadrupled year-over-year to $425.4 million.
Revenue from AI data center applications provided the standout performance. The company’s “other” segment, which captures this AI-adjacent business, recorded 34% sequential growth, pushing AI and data center revenue to roughly $400 million.
Non-GAAP gross margins came in at 39.3%, and the company used its cash position aggressively, repurchasing $332 million in shares during the quarter.
Arya’s adjustment reflects updated modeling that incorporates both recent performance and forward-looking commentary around AI growth trajectories.
Why the adjustment matters less than it looks
BofA had previously lifted onsemi’s price target to $138 back in May 2026, and the stock responded positively to that upgrade.
Onsemi specializes in power and analog solutions, the components that manage electricity in everything from electric vehicles to server racks. That positioning in automotive, industrial, and now AI infrastructure gives onsemi exposure to three capital-intensive secular trends. Electrification of vehicles requires dramatically more power semiconductor content per car compared to internal combustion engines, and AI data centers, with their enormous power consumption, need exactly the kind of power management solutions onsemi manufactures.
What investors should watch
The price target reduction from $138 to $120 represents roughly a 13% haircut in BofA’s expected upside. The maintained Buy rating is arguably more significant than the target number itself. Arya is essentially saying the thesis is intact while the math has shifted.
Sequential growth of 34% is striking, but if onsemi can maintain even a fraction of that growth rate in its AI-related revenue, the roughly $400 million quarterly run rate starts to become a pillar of the business.
Repurchasing $332 million in a single quarter, funded by $425.4 million in free cash flow, means onsemi is returning the vast majority of its cash to shareholders while still retaining enough for reinvestment. That balance works when revenue is growing at 9% annually.
Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy.
English (US) ·