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onsemi (ON) delivered mostly solid 3Q25 results, edging past EPS and revenue expectations even as macro headwinds persisted. EPS of $0.63 landed near the high end of ON's prior guidance but declined 36% yr/yr, while revenue of $1.55 bln fell 12% yr/yr, marking a ninth straight quarter of annual contraction. Looking ahead, the company guided Q4 EPS to $0.57–$0.67 and revenue to $1.48–$1.58 bln, roughly in line with consensus, reflecting steady demand normalization and disciplined execution.

• Each core business unit posted yr/yr declines, with Power Solutions Group (PSG) and Analog & Mixed-Signal Group (AMG) down 11% and Intelligent Sensing Group (ISG) down 18% as softness in automotive and industrial markets, along with strategic refocusing in ISG, tempered results.
• Non-GAAP gross margin fell sharply yr/yr to 38% (GAAP 37.9%) from 28.2%, pressured by weaker utilization and mix, though margin improved 190 bps qtr/qtr as manufacturing efficiency increased and mix improved.
• Signs of stabilization are emerging across core end markets, including automotive and industrial, while AI revenue is becoming meaningful; sequentially, PSG grew 6% and AMG rose 5%, with ISG up 7% on improved design wins and AI traction.
• AI continues to scale as a key growth vector -- ON expects approximately $250 mln in AI revenue in 2025, doubling yr/yr, driven by differentiated capabilities across the power delivery stack from wall to core.

Briefing.com Analyst Insight:

ON’s Q3 results showed measured improvement, highlighted by sequential revenue growth across business units and expanding qtr/qtr margins, suggesting the worst of the downcycle may be past. Still, the ninth straight quarter of yr/yr declines and sharp margin compression underscore that the recovery remains gradual, with broader automotive and industrial end markets stabilizing rather than accelerating. The company’s differentiated AI power solutions and growing design funnel offer a compelling long-term narrative -- AI revenue doubling and reaching $250 mln this year reinforces that momentum. However, execution on capacity and inventory transitions remains critical, and valuation support likely hinges on visibility into a sustained demand reacceleration in 2026. With in-line Q4 guidance and sequential stability emerging, the stock appears more of a patient accumulation story than a near-term momentum trade.