onsemi Surges 7% as AI Data Center Chips Drive Q2 Beat

onsemi shares jump more than 7% after the power semiconductor maker posts $1.6 billion in Q2 revenue, beats on earnings per share, and says AI data center sales will more than double in 2026.

Lead

onsemi (NASDAQ: ON) reported second-quarter 2026 results after Monday's close that beat Wall Street estimates across revenue, earnings, and margins, sending shares up more than 7% in extended trading. The Phoenix-based power semiconductor company posted $1.6035 billion in revenue — up 9% from $1.4687 billion a year earlier — and non-GAAP diluted EPS of $0.74, ahead of the $0.71 consensus. The catalyst: a rapid acceleration in AI data center demand that the company now expects will more than double its full-year data center revenue compared with 2025.

What Happened

Q2 GAAP gross margin expanded 80 basis points to 38.4%, and GAAP operating margin widened to 16.1% from 13.2% in the prior-year period. GAAP net income attributable to onsemi rose roughly 33% year over year. Free cash flow reached $425.4 million, approximately four times the year-earlier level, lifting free cash flow margin from about 7% to 27%.

The Power Solutions Group, the segment most directly tied to data center and energy-infrastructure demand, led the company with revenue of $829 million — up 19% year over year — as design wins with Nvidia's MGX platform, Amazon Web Services, and China-based infrastructure supplier Great Wall accelerated shipments. Automotive revenue declined 2% sequentially, as onsemi deliberately redirected manufacturing capacity toward higher-priority AI data center customers while additional fab capacity comes online.

Market Reaction

Shares, which had retreated roughly 15% over the four weeks preceding the report, recovered sharply in after-hours trading on the combination of the Q2 beat and a forward outlook that exceeded expectations at every line. The stock's move reflects investor relief that onsemi's AI-driven recovery is structural rather than episodic: earnings per share grew four times faster than revenue year over year, signaling operating leverage that was not fully priced into consensus models.

Strategic Context

onsemi CEO Hassane El-Khoury has repositioned the company since late 2020 around what he calls the "intelligent power and sensing" opportunity — a portfolio built for applications demanding efficient, high-density power conversion: electric vehicles, industrial automation, and, increasingly, hyperscale AI infrastructure. The AI data center thesis is now the fastest-moving part of that strategy.

The company claims to be the only U.S.-based chipmaker capable of supplying silicon, silicon carbide (SiC), and gallium nitride (GaN) power semiconductors — all manufactured in-house — across the full power delivery chain of an AI data center, from the high-voltage AC/DC front end to the 48-volt intermediate bus.

AI and Technology Angle

At the heart of onsemi's data center growth is power delivery for AI accelerators, which require dense, efficient power conversion at every stage. Its expanded role within Nvidia MGX — announced in May 2026 — places onsemi devices inside a modular AI server platform used by OEMs and system builders worldwide, including emerging 800-volt DC power architectures that promise significant efficiency gains over conventional designs.

During the quarter, onsemi formally launched GaNEXUS, its gallium nitride power portfolio, which had been sampling with customers since June. Combined with its existing SiC JFET and silicon power FET lines, the launch completes what the company describes as a full AI power stack — silicon, SiC, and GaN — designed so data center operators can source an entire power tree from a single supplier.

New platform wins with AWS cover power-supply and battery-backup systems; the Great Wall design wins address power requirements for Chinese cloud and AI-infrastructure buildouts, a segment where U.S. rivals face tighter export-control constraints on logic chips but where power semiconductor content remains accessible.

Outlook

For the third quarter of 2026, onsemi guided non-GAAP EPS of $0.81 to $0.93 — a midpoint of $0.87 versus the analyst estimate of approximately $0.857 — and revenue implying roughly 6% sequential growth from Q2. Non-GAAP gross margin is guided above 40%, a threshold the company has not cleared in recent quarters and one that signals pricing discipline is holding even as the company shifts capacity between end markets.

With free cash flow margins normalized well above historical levels, AI data center revenue on pace to more than double, and a GaN product line now commercially launched, onsemi enters the second half of 2026 with its data center positioning more firmly established than at any prior point in its transformation. The near-term risk remains self-imposed: automotive and industrial customers may face extended lead times while AI demand absorbs available fab capacity.

Impact: MAJOR