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Research Alert: On: Trending Slightly Ahead Of Expectations; Data Centers A New Vertical

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CFRA, an independent research provider, has providedwith the following research alert. Analysts at CFRA have summarized their opinion as follows:

ON posted Q1 revenue of $1,513M, declining 1% sequentially but growing 5% Y/Y and beating consensus of $1,488M, with non-GAAP gross margins of 38.5% expanding 250 bps sequentially. Operating income grew 10% Y/Y while revenue increased 5%, highlighting 2x operating leverage built into the business model. AI data center growth more than doubled Y/Y with 30% sequential acceleration, emerging as a significant long-term catalyst for both revenue growth and margin expansion given premium application nature. Q2 guidance projects revenue of $1,535M-$1,635M and EPS of $0.65-$0.77, slightly ahead of consensus expectations of $1,532M revenue and $0.67 EPS. We agree with management's assessment that ON has moved beyond the cyclical trough and is positioned for continued margin expansion, supported by aggressive capital returns of $346M in share repurchases (160% of $217M free cash flow) and a strong balance sheet with $2.4B in cash providing flexibility for growth investments.

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