ON Semiconductor (ON) is seeing a cyclical recovery alongside growing AI and data center demand, though its financial results do not appear as strong as the company's broader narrative suggests, Truist Securities said in a note Tuesday.

The investment firm said rising book-to-bill ratios, longer lead times and price increases point to improving conditions, but noted automotive and industrial end markets posted only mid-single-digit year-over-year growth, which it said does not fully align with the broader cyclical recovery narrative.

Truist said the disconnect is partly explained by business exits and still-ramping supply, adding that automotive revenue, which accounts for about 49% of sales, and industrial revenue, about 26% of sales, both came in below consensus.

The investment firm said data center and AI applications drove nearly all of the company's upside in the quarter, with management now expecting that business to double in 2026.

Truist kept a hold rating on the stock but cut its price target to $91 from $101.

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