Onto Innovation (ONTO) 28th Annual Needham Growth Conference Virtual summary

Industry trends and market outlook

• AI is a major growth driver, with industry demand expected to grow at a 40% CAGR over the next few years, fueling factory expansions and supply chain opportunities.

• 61% of 2025 revenue is tied to the AI supply chain, with a stronger outlook for 2026, projecting at least 10% growth in the first half over the second half of 2025.

• Growth is driven by advanced nodes, packaging, and strong demand for HBM and 3DI metrology, with AI influencing both front-end and back-end markets.

• OSATs are gaining importance in AI packaging, with high-end applications and 3D metrology driving volume orders.

• Panel-level packaging markets are recovering, with funded expansions expected in the next 12–24 months.

Product innovation and technology

• Dragonfly G3 and G5 platforms offer significant improvements in resolution, throughput, and application range, with G5 nearly doubling the speed of G3.

• New charge metrology capability from the SDI acquisition enables early detection of electrical defects, providing a competitive edge in chiplet architectures and power semiconductors.

• The JetStep lithography system's wide-field, high-resolution optics are unique in the industry, supporting large package printing without stitching.

• Firefly metrology tools are gaining traction due to their affordability and critical role in inline process control.

• The company is qualified at two of three HBM memory manufacturers for 3DI metrology, with further growth expected in 2026.

Operational strategy and financial performance

• Manufacturing shift to Asia has reached 50% of production, targeting 80% by mid-2024, optimizing costs and supply chain resilience.

• SDI and Semilab acquisitions are margin accretive, with new products and applications contributing to higher margins.

• At least a 30% improvement in operating margin and net income is projected for 2026, driven by factory moves, product mix, and acquisition synergies.

• Value to customers is quantified by the ability to solve critical problems with high speed and precision, justifying premium pricing and improved margins.