Onto Innovation Inc. Q2 FY26 Earnings Analysis

- Advanced packaging revenue expected to grow more than 50% in 2026, driven by Dragonfly G5 and panel-level packaging. - Dragonfly G5 shipments increasing steadily through 2026 quarters; strong pipeline with over 10 customers and 15 applications. - Advanced nodes business projected to grow about 25% in 2026, outpacing average WFE growth. - Silicon photonics seen as a high-growth area from a low base, with volume ramp-ups starting. - Panel-level packaging currently around $200 million revenue, with potential to increase as industry adoption grows. - Rigaku collaboration expected to generate licensing revenue and hybrid metrology sales, with software revenue growing in 2026 and 2027. - Overall, 2026 revenue forecast over $1.3 billion; visibility and backlog strong. - Gross and operating margins expected to expand through 2026, with continued margin improvement into 2027. - Company expects to outgrow WFE (Worldwide Semiconductor Equipment) spending in 2027.

- Q2 2026 earnings per share (EPS) expected at approximately $1.69, representing strong growth. - Full-year 2026 revenue projected to exceed $1.3 billion, with more than 30% revenue growth. - Gross margin expected to expand sequentially, targeting 56% to 56.5% in Q2 and improving 50 basis points per quarter thereafter. - Operating margin anticipated to increase, with Q2 guidance of 28% to 28.6% and a target exceeding 30% by Q4 2026. - Margin improvements supported by product ramps (e.g., Dragonfly G5), operational efficiencies, and managing supply chain. - EPS rose 13% sequentially in Q1 2026, indicating strong profitability trend. - Expectation to outgrow the wider wafer fab equipment (WFE) industry growth rates in 2027. - Rigaku partnership anticipated to add nearly 100% margin licensing revenue, dividend income, and incremental sales enhancing future profitability.

- Onto Innovation announced a strategic investment by purchasing a 27% stake in Rigaku for approximately $710 million, expected to close in H2 2026, primarily funded with cash on hand. - This investment strengthens long-term alignment, provides insight into X-ray technology roadmaps, and supports joint development of next-generation hybrid metrology solutions combining optical and X-ray technologies. - There is active ongoing R&D collaboration with Rigaku targeting hybrid metrology solutions for future advanced semiconductor processes, aiming for high-volume manufacturing readiness a few generations out. - The company is managing supply chain adjustments and factory expansions (extended factories) to support growth and meet customer demands, including pruning suppliers to improve scalability. - Capex likely focused on ramping new platforms like Dragonfly G5 and Atlas G6 for advanced packaging and nodes, though specific capex amounts are not detailed in the provided text.

- No mention of any new fundraising through debt or equity in the provided transcript. - The company completed a major investment by purchasing a 27% stake in Rigaku for approximately $710 million, primarily funded with cash on hand. - No indications of planned equity or debt offerings to raise additional capital were discussed during the call. - Focus is on operational execution, product ramp, margin improvement, and strategic partnerships rather than raising new external funding. - They expect income streams from Rigaku dividends, licensing, and profits to offset any foregone interest from the cash used in the Rigaku deal, implying no immediate need for further fundraising.

- Onto Innovation reported a record backlog, indicating strong orderbook visibility. - There is a healthy pipeline of application studies for Dragonfly G5, implying significant order expansion in 2027. - The partnership with Rigaku also contributes to software attach rates depending on Rigaku’s CD X-ray tool pipeline, which is described as quite healthy. - Shipments of Dragonfly G5 have been accelerating, with requests to pull in shipments and steady growth expected through all four quarters of 2026. - Orders from 10+ customers and over 15 applications for Dragonfly G5 are actively engaged and growing. - Over 10 new orders were received in the quarter for 3DI technology from OSAT customers. - JetStep has been qualified at two packaging suppliers with ramp-up expected in 2027. - Overall, strong demand and record backlog support a revenue outlook greater than $1.3 billion in 2026.