Shares of Onto Innovation Inc. (ONTO) soared 5.13% in Friday's trading session, as investors responded positively to the company's better-than-expected third-quarter earnings report and optimistic outlook for its AI-driven advanced packaging business. The semiconductor equipment manufacturer's stock performance was further bolstered by an analyst price target increase and growing confidence in its positioning within the burgeoning artificial intelligence chip market.
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. While this represents a decline from the $1.34 per share earned in the same quarter last year, it demonstrates the company's resilience in a challenging semiconductor market. Revenue for the quarter came in at $218.19 million, slightly below analyst expectations but showing signs of stabilization with a projected strong rebound in the fourth quarter.
The company's performance and outlook caught the attention of Wall Street, with Stifel raising its price target on Onto Innovation from $120 to $126. This adjustment reflects growing confidence in the company's strategic positioning, particularly in the advanced packaging and AI chip inspection markets. The current median 12-month price target among analysts stands at $150.00, suggesting a potential upside of about 12.2% from the last closing price.
Investors were particularly encouraged by Onto Innovation's progress in its advanced packaging and AI-related business segments. The company announced successful qualifications of its 3DI (three-dimensional inspection) technology at two high bandwidth memory (HBM) customers, positioning it to capitalize on the growing demand for AI chip packaging solutions. Additionally, Onto Innovation is preparing to ship its next-generation Dragonfly inspection system to a leading AI packaging customer, with further shipments planned for memory manufacturers in December.
Looking ahead, Onto Innovation provided an optimistic outlook for the fourth quarter of 2025, projecting revenue between $250 million and $265 million, representing a significant 15% to 21% sequential growth. This growth is expected to be primarily driven by strength in advanced packaging, particularly in AI-related applications. The company's management also hinted at potential for further growth in 2026, citing early customer indications of increased tool requirements for expansions and new applications in AI chip production.
As the semiconductor industry continues to evolve with a strong focus on AI and high-performance computing, Onto Innovation appears well-positioned to benefit from these trends. The company's strategic investments in advanced inspection and metrology technologies for next-generation chip packaging are aligning well with the industry's direction, potentially setting the stage for sustained growth in the coming years.