onsemi (ON, Financial) surpassed Q1 2025 EPS and revenue expectations through disciplined cost management, favorable product mix, and optimized manufacturing, despite a tough market. However, a 22% year-over-year revenue drop to $1.45 billion across all segments—Power Solutions Group (PSG), Analog and Mixed-Signal Group (AMG), and Intelligent Sensing Group (ISG)—along with a cautious Q2 outlook, led to a sharp decline in share value.

• Structural cost reductions, including workforce adjustments and fab rationalization, helped maintain ON's margins, with a non-GAAP gross margin of 45.2%, slightly down from 46.8% last year. Free cash flow surged 72% year-over-year to $231.6 million, with 66% returned to shareholders via share repurchases.
• PSG revenue fell 26% year-over-year to $645.1 million due to weak demand in automotive and industrial applications. The segment faces lower demand for power switching and circuit protection products as auto OEMs reduce production amid inventory corrections and macroeconomic uncertainty.
• PSG's focus on SiC-based power solutions for electric vehicles and renewable energy grids remains a growth driver, though potential tariffs on automotive supply chains pose risks to recovery.
• AMG revenue dropped 19% to $566.4 million, affected by reduced demand for analog and mixed-signal ICs in automotive and consumer electronics, along with distributor destocking. Weakness in mobile and computing end-markets and competitive pricing pressures in analog products further impacted revenue.
• ISG revenue decreased by 20% to $234.2 million due to lower demand for CMOS image sensors and single-photon detectors in ADAS and consumer applications. Delays in new product ramps and inventory adjustments by customers also contributed to the decline.

Despite the EPS beat driven by cost discipline, strong free cash flow, and a strategic focus on high-margin SiC and automotive platforms, the significant revenue declines, cautious Q2 guidance, and broader semiconductor market challenges are overshadowing the positive earnings, leading to a selloff in the stock.