Shares of Onto Innovation Inc (ONTO) surged 5.13% in Friday's trading session following the company's better-than-expected third-quarter earnings report and optimistic outlook for the growing artificial intelligence (AI) chip market. The semiconductor equipment manufacturer's strong performance and strategic positioning in advanced packaging technologies have caught investors' attention.
Onto Innovation reported adjusted earnings of $0.92 per share for the quarter ended September 30, 2025, surpassing the average analyst estimate of $0.87 per share. While revenue fell 13.5% year-over-year to $218.19 million, it was slightly ahead of the company's guidance midpoint. The firm's focus on cost control led to an operating margin of 21.1%, exceeding the top end of its guidance range.
Following the earnings release, several analysts expressed confidence in Onto Innovation's prospects. Stifel raised its price target for the company from $120 to $126, reflecting growing optimism about Onto's market position. The current Wall Street median 12-month price target stands at $150.00, suggesting a potential upside of about 12.2% from the last closing price.
Onto Innovation's CEO, Michael Plisinski, highlighted the company's progress in strategic initiatives, including new product adoption and offshoring activities. The firm is set to ship its next-generation Dragonfly inspection system to a leading AI packaging customer in the coming weeks, with additional memory customer shipments expected in December. Moreover, the company's 3DI technology has completed full qualification at two high bandwidth memory customers, positioning Onto Innovation to capitalize on the booming AI chip market.
Looking ahead, Onto Innovation provided an upbeat forecast for the fourth quarter, projecting revenue between $250 million and $265 million, representing a 15% to 21% sequential growth. The company expects this growth to be primarily driven by strength in advanced packaging, particularly in AI-related applications. With the semiconductor industry's increasing focus on AI infrastructure investments, Onto Innovation appears well-positioned to benefit from the expanding market for advanced chip packaging and inspection technologies.