ON Semiconductor Corp. supplies power and sensing semiconductor components and presents a mix of high reported margin economics and strong operating cash generation alongside uneven bottom-line profitability.
The company shows several clear strengths: reported gross margin sits near 49.5% and operating margin around 45.3% in the latest period, signaling substantial operating leverage and pricing power (Profit Margin Trends).
Operating cash flow on a trailing twelve‑month basis was $1.78B and operating cash flow exceeds net income by a factor of about 2.03, indicating that cash generation has historically outpaced accounting earnings (Earnings Quality Analysis).
The balance sheet and capital base also show resilience, with a current ratio of 3.07 and a debt‑to‑equity ratio of 0.41, and book value per share compounding at roughly a 15% five‑year CAGR, supporting financial flexibility.
There are important weaknesses to monitor: reported net income on a TTM basis has fallen to $121.0M and the most recent quarterly net result was a loss of $-134.0M, while reported net profit margin was just 2.0% in the latest full reporting period, reflecting pressure translating operating strength into consistent net profits (Revenue & Net Income; Profit Margin Trends).
Return on equity has declined markedly from prior peaks and was 1.6% most recently, underscoring diminished returns on shareholder capital (Return on Equity (ROE)).
Cash flow allocation also warrants attention: investing remained negative but moderate (-$538.5M TTM) while financing flows have been large net outflows with financing cash flow TTM at -$1.81B, which affects net cash deployment (Strategic Capital Allocation).
Key fundamental metrics to watch going forward include quarterly revenue trends (most recent quarter $1.51B) and the path of net income and net margin (latest net margin 2.0%), the sustainability of operating cash flow ($1.78B TTM) versus reported earnings, any recovery in ROE (1.6% most recent), and ongoing financing activity and leverage metrics as reflected in cash flow allocation and debt ratios (Revenue & EPS Growth; Earnings Quality Analysis; Return on Equity (ROE); Strategic Capital Allocation; Price-to-Earnings (PE) Ratio Trend).
The foundation of business quality and long-term value creation
ON Semiconductor Corp's revenue has fluctuated in recent quarters after a multi-quarter range near $1.7–1.9B through 2024. Revenue declined to $1.47B in the quarter ended , rose slightly to $1.55B in the quarter ended , jumped to $2.98B in the quarter ended , and then fell to $1.51B in the quarter ended . Notable inflection points include large spikes at $4.20B (quarter ended ) and $2.98B (quarter ended ), followed by the most recent drop to $1.51B.
Net income similarly showed large positive results in 2023 (e.g., $582.7M for the quarter ended and $576.6M for the quarter ended ), moderated to $338.2M for the quarter ended and $255.0M for the quarter ended , then moved to a net loss of -$134.0M for the quarter ended . The most recent quarterly revenue was $1.51B (). The most recent quarterly net income was -$134.0M ().
Why Growth Matters
Consistent revenue and earnings growth are the lifeblood of successful long-term investments. Companies that can grow their top line (revenue) and bottom line (net income) over many years demonstrate they have products or services customers value and are willing to pay for repeatedly.
Revenue Growth shows whether the company is expanding its market reach, gaining market share, or successfully launching new products.Net Income Growth demonstrates the company can convert that revenue into actual profits while managing costs effectively.
Look for steady, sustainable growth rather than erratic spikes. The best businesses compound earnings year after year, creating tremendous value for shareholders over time. Companies that can grow earnings faster than revenue are improving their profitability—a sign of operational excellence and competitive strength.
Year-over-year growth rates for revenue and earnings per share
Reading the Growth Rate Chart
This chart converts the absolute per-share figures into year-over-year percentage changes, making it easy to see whether growth is accelerating, decelerating, or reverting to trend — regardless of the company's absolute size.
Revenue per Share Growth (1-year, split-adjusted) measures how quickly the top line is expanding on a per-share basis. Sustained positive growth signals that the company continues to win customers and grow its addressable market.EPS Diluted Growth (1-year, split-adjusted) measures how quickly earnings are compounding for each shareholder. When EPS growth consistently outpaces revenue growth, operating leverage and margin expansion are at work.
Look for consistency, not just magnitude. A company that reliably grows EPS 10–15% per year is far more valuable than one that alternates between 50% spikes and deep contractions. Negative EPS growth during a period of positive revenue growth is a red flag — costs are rising faster than sales. Quarters where both lines converge near zero or go negative deserve close scrutiny.
How revenue converts to net income for the most recent annual period
Over the period Apr 2025 to Apr 2026, On Semiconductor Corp converts approximately 50¢ of every revenue dollar into gross profit (gross margin: 49.5%).The waterfall below shows how revenue flows through various expense categories.
Period Information
Report Type: Annual (10-K)
Period: Apr 2025 to Apr 2026
Analyzing long-term margin stability and competitive positioning
In the most recent quarters, ON SEMICONDUCTOR CORP's reported margins moved sharply higher. Gross margin rose to 49.5% in the period ending 2026-04-03, up from 33.1% at year-end 2025 (2025-12-31). Operating margin likewise increased to 45.3% in the period ending 2026-04-03 from 28.8% at 2025-12-31. The latest reported net profit margin in the dataset is 2.0% for the period ending 2025-12-31; no later net margin is provided.
Over the longer term gross margin has fluctuated between roughly the low 30s and about 50%, with prior peaks around 50.4% in 2017–2018 and sustained mid-40% levels through 2023–2024. Operating margin shows a similar pattern of earlier peaks in the mid-40s and a decline into 2025 before the most recent rebound in 2026. Net margins have been more variable historically—reaching double digits in 2017–2019 and declining to 2.0% in the most recent net-margin reporting period. The most recent values are: Gross Margin 49.5% (period end 2026-04-03), Operating Margin 45.3% (period end 2026-04-03), Net Profit Margin 2.0% (period end 2025-12-31).
Understanding Profit Margins
Between Apr 2025 and Apr 2026, On Semiconductor Corp converts every dollar of revenue through the following stages:
Sustainable competitive advantages reveal themselves through consistently superior profit margins over extended periods. Companies with durable economic moats maintain pricing power and operational efficiency that competitors struggle to match.
A sign of durable competitive advantage is earning sustained higher margins than competitors.Look for margins that remain stable or improve over time, especially during economic downturns. Declining margins may signal increasing competition, pricing pressure, or deteriorating business fundamentals.
Comparing reported earnings to actual cash generation
ON SEMICONDUCTOR CORP’s trailing-twelve-month net income shows a clear downward shift in the most recent data: net income peaked in the 2017–2018 period (around $810.7M in 2017 and $627.4M in 2018) and moved lower thereafter, with the most recent reported Net Income TTM at $121.0M (period end 2025-12-31). Operating cash flow on a TTM basis, where available, trended higher over the 2016–2021 window, rising from $581.2M (2016) to $1.09B (2017), $1.27B (2018) and reaching $1.78B by the 2021 year‑end, indicating operating cash generation exceeded reported earnings through those years.
The two series diverge in the later available data: operating cash flow (latest available 2021 data) remains materially higher than the most recent net income figures. The most recent Net Income (TTM) observed is $121.0M, and the most recent Operating Cash Flow (TTM) observed is $1.78B.
The Earnings vs. Cash Flow Gap
Reported earnings (Net Income) doesn't always reflect actual cash generation. Companies use accrual accounting, which recognizes revenue when earned and expenses when incurred—not when cash actually changes hands. This creates timing differences and opportunities for accounting discretion that can mask underlying business health.
Net Income (the "earnings" number) can be influenced by non-cash items like depreciation, stock-based compensation, and changes in accounting estimates.Operating Cash Flow, however, shows the actual cash the business generates from its core operations—a harder number to manipulate.
Trailing Twelve Months
What to Look For
Key Insight: Companies with durable competitive advantages typically show operating cash flow that meets or exceeds net income over time, demonstrating they convert accounting profits into actual cash that can be returned to shareholders or reinvested in the business.
Measuring management's efficiency at generating profits from shareholder capital
ON Semiconductor Corp's ROE shows a clear long-term decline from the highs of the mid-to-late 2010s into very low single digits by 2025. After a peak at 29.2% in 2017 and elevated readings of 19.8% (2018) and 18.8% (2019 Q1), ROE dropped sharply to 6.4% by the 2019 full year and continued lower in subsequent periods, reaching 1.6% in the most recent 2025 year-end. The most pronounced inflection points are the 2017 peak and the 2019 decline, followed by a persistent downtrend through 2025.
Earlier years show volatility as well: a high of 21.3% in 2010 fell to 0.8% in 2011, then rebounded into the 10–12% range from 2013–2016 before the 2017 surge. The most recent Return on Equity was 1.6%.
The Gold Standard of Profitability
Return on Equity (ROE) is a powerful measure of how effectively a company's management is using the money shareholders have invested. Calculated by dividing Net Income by Shareholders' Equity, it reveals how much profit is generated for every dollar of equity capital.
A consistently high ROE (typically above 15-20%) is often the signature of a "quality" business with a durable competitive advantage. It indicates that the company can generate high returns on its own capital, which it can then reinvest at these high rates to compound value over time.
What to Look For:
How the company generates and deploys its cash
ON SEMICONDUCTOR CORP's trailing twelve-month cash flow profile shows operating cash flow positive in the most recent operating-data period and investing activity consistently negative across the series. The latest available operating cash flow TTM in the dataset was $1.78B (period end 2021‑12‑31), up from $1.27B at 2018 year‑end in earlier data. Investing cash flow has remained an outflow over the periods shown, peaking at a large negative $1.51B in 2019 and moderating to a smaller negative level by late 2025.
Financing cash flow has trended toward larger net outflows in the most recent quarters, moving from smaller negatives (for example, -$244.0M in 2020) to progressively larger net outflows through 2024–2026, with the most recent value showing the largest financing outflow in the series. The most recent values observed were:
Understanding Company Strategy
Capital allocation refers to how management decides to spend and invest the company's cash. Analyzing the three primary categories of cash flow reveals a company's true operational strategy:
What to look for: Is the company bootstrapping (funding growth solely from operating cash)? Are they borrowing to fund aggressive expansion or dividends? Or are they capital raising by issuing new shares, potentially diluting your ownership? A healthy, mature company typically generates strong operating cash, moderately invests in growth, and returns the surplus to shareholders through financing activities.
Trailing Twelve Months
Net assets attributable to each share — the accounting floor of intrinsic value
Why Book Value per Share Matters
Book value per share is the net worth of the company — total assets minus total liabilities — divided by shares outstanding (split-adjusted). It represents the theoretical liquidation value per share if every asset were sold and every liability repaid at balance-sheet carrying values. It is the accounting foundation upon which much of equity valuation is built.
A steadily rising book value per share is one of the most reliable signals of compounding wealth creation. It means the company is retaining earnings and building net worth faster than it is returning capital or eroding it. Warren Buffett famously tracked Berkshire Hathaway's book value per share for decades as his primary measure of intrinsic value growth.
Context is essential. Asset-heavy businesses (banks, manufacturers, utilities) should be judged by book value more directly than asset-light businesses (software, consumer brands), where intangible assets like intellectual property and customer loyalty may far exceed their balance-sheet carrying values. A company trading at a large premium to book value is not necessarily overvalued — it may simply possess competitive advantages that accounting rules do not capture. Conversely, a declining book value per share — especially over multiple years — is a serious warning sign of capital destruction.
How much of the company is financed by debt versus shareholders' equity
Reading the Debt-to-Equity Ratio
The debt-to-equity (D/E) ratio compares total financial debt to shareholders' equity. A ratio of 1.0 means the company has borrowed one dollar for every dollar of equity; a ratio of 2.0 means it has borrowed twice as much as it owns. Financial leverage amplifies both returns and risk: in good times, debt turbocharges equity returns; in bad times, it accelerates losses and can threaten solvency.
Trends matter more than a single number. A rising D/E ratio can mean the company is taking on debt to fund growth — potentially value-creating if returns exceed the cost of capital. But it can also mean equity is being eroded through losses or that the business is borrowing simply to sustain operations. A falling D/E ratio generally reflects strengthening financial health: earnings are being retained, debt maturities are being paid down, or both.
Industry norms vary enormously. Capital-intensive sectors (utilities, real estate, financials) routinely carry high D/E ratios that would be alarming in, say, a technology company. Always compare against sector peers. As a rough rule of thumb, a D/E above 2× in a cyclical business warrants careful scrutiny of interest coverage and refinancing risk.
Short-term liquidity — can the company cover its near-term obligations?
Liquidity: Can the Business Pay Its Bills?
The current ratio is calculated as current assets divided by current liabilities. A ratio of 1.5 means the company has $1.50 of short-term assets — cash, receivables, inventory — for every $1.00 of obligations due within the next twelve months. It is the most direct measure of near-term financial resilience: can the business meet its obligations without needing to raise new capital or sell long-term assets at a discount?
A ratio above 1.0 is generally healthy, meaning current assets exceed current liabilities. A ratio consistently above 2.0 may indicate the company is holding excess cash or inventory that could be deployed more productively. A ratio below 1.0 is a warning sign — the company is relying on future cash generation or external financing to cover its near-term obligations, which is manageable in normal conditions but dangerous during a downturn.
Trends and context matter.A declining current ratio isn't always alarming — highly efficient businesses (e.g., large retailers with reliable daily cash flows) often run leaner balance sheets intentionally. Conversely, a rapidly rising current ratio can signal slowing sales causing inventory to build, or customers taking longer to pay. Always compare the trend against industry peers and cross-reference with the cash flow statement to assess whether the business is genuinely liquid or just holding non-cash current assets.
How much the market is paying for each dollar of company earnings
What Is the PE Ratio?
The Price-to-Earnings (PE) ratio is one of the most widely used valuation metrics in investing. It divides the current stock price by the company's earnings per share (EPS), revealing how much investors are willing to pay for each dollar of earnings. A high PE can signal that the market expects strong future growth, while a low PE may suggest undervaluation—or reflect genuine concerns about the company's prospects.
Context matters:PE ratios vary significantly across industries. High-growth technology companies routinely trade at PE ratios above 30x or 40x, while mature, low-growth sectors like utilities or financials often trade closer to 10–15x. Always compare a company's PE to its own history and its industry peers, not just an absolute number.
What to Look For:
Key Insight:The PE ratio is a snapshot of market sentiment and expectations. Tracking it over time alongside earnings trends reveals whether the market's valuation has expanded or contracted—and whether that change is justified by fundamentals.