Key Takeaways:
- Cycle Turning: ON Semiconductor’s AI data center revenue grew 30% sequentially in Q1 2026, nearly double the expected growth rate.
- Price Projection: Based on current assumptions, ON stock could reach $144.37 by December 2028.
- Potential Gains: That target implies a total return of 18.7% from the current price of $121.62.
- Annual Return: Investors could see roughly 7% annualized growth over the next 2.5 years.
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ON Semiconductor (ON) had a rough stretch. Revenue fell 15.3% last year and contracted at a 10.4% annual rate over the past three years. But Q1 looks like a turning point.
- Revenue came in at $1.51 billion, above the midpoint of guidance and up 5% year-over-year.
- Non-GAAP gross margin expanded for the third consecutive quarter, reaching 38.5%.
- Non-GAAP EPS was $0.64.
- CEO Hassane El-Khoury called it “a clear inflection point,” and the numbers support that description.
The company also returned $346 million to shareholders through buybacks — roughly 160% of free cash flow — buying at an average price of $60.54. That was a well-timed move.
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What the Model Says for ON Semiconductor Stock
We analyzed ON through its recovery from a deep cyclical trough and the structural shifts that could drive margins meaningfully higher.
The most important near-term driver is AI data centers. ON’s power semiconductor portfolio covers the entire data center power chain — from the grid all the way to the processor.
Management now expects AI data center revenue to double year-over-year in 2026, up from an initial forecast of high-teens growth.
The company is engaged with every major hyperscaler and multiple XPU vendors through partnerships like Flex Power, which spans over 30 active programs.
Automotive is the second pillar. ON’s silicon carbide technology holds roughly 55% share of new EV models displayed at the 2026 Beijing Auto Show.
China automotive revenue grew year-over-year even as the broader China passenger vehicle market declined 6%. Q1 marked the first year-over-year automotive revenue growth after seven consecutive quarters of decline.
The third growth vector is Treo — ON’s proprietary analog and mixed-signal platform for zonal automotive architectures and AI applications.
Treo revenue grew more than 2.5x sequentially in Q1. The platform carries gross margins of 60% to 70%, well above the company average. Management is targeting $1 billion in Treo revenue by 2030.
One more thing worth noting: ON’s energy storage business is expected to grow over 40% year-over-year in 2026, with market share approaching 60%.
Using a forecast of 10.4% annual revenue growth and 27.4% operating margins, with an exit P/E of 26.2x, our model projects ON reaching $144.37 by December 2028. That’s an 18.7% total return, or 7% annualized.
The 26.2x P/E assumption sits above ON’s one-year average of 23.4x but below its five-year average of 17.8x. The higher multiple reflects the improved business mix and margin structure relative to ON’s historical profile.
Our Valuation Assumptions
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Our Valuation Assumptions
TIKR’s Valuation Model lets you plug in your own assumptions for a company’s revenue growth, operating margins, and P/E multiple, and calculates the stock’s expected returns.
Here’s what we used for ON stock:
1. Revenue Growth: 10.4%
ON’s revenues fell 15.3% last year, but the cycle is turning.
Q2 guidance calls for underlying revenue growth of approximately 7% sequentially, excluding planned noncore exits.
AI data center, automotive SiC, and energy storage are all ramping. The 10.4% assumption reflects a return to the company’s longer-term growth trajectory, supported by structural demand rather than inventory restocking.
2. Operating margins: 27.4%
Trailing EBIT margins are 18.7%, depressed by low factory utilization.
ON’s five-year average is 27.1%. Each percentage point of utilization improvement adds 25 to 30 basis points to gross margin.
As volumes recover and the higher-margin Treo platform scales, management expects sequential gross margin expansion throughout 2026 and beyond.
3. Exit P/E Multiple: 26.2x
ON’s current NTM P/E is 36x. The model assumes compression to 26.2x as the recovery matures and earnings normalize.
This is slightly above ON’s five-year average multiple of 17.8x, which is reasonable given the improved business quality today.
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What Happens If Things Go Better or Worse?
Here’s how ON stock could perform under different scenarios by December 2030:
- Low Case: With revenue growing at 9.1% and net income margins of 22.9%, investors could see a total return of 16.7% (3.5% annually).
- Mid Case: At 10.2% revenue growth and 24.4% net income margins, the total return climbs to 47.4% (8.9% annually).
- High Case: If revenue grows at 11.2% and margins reach 25.7%, total returns could hit 81.6% (14% annually).
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The spread between cases is wide because utilization recovery and Treo ramp timing are genuinely uncertain.
If AI data center demand stays strong and automotive restocking kicks in during the second half, the high case becomes plausible.
If macro conditions soften, the low case reflects a slower path back to normalized margins.
How Much Upside Does ON Semiconductor Stock Have From Here?
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All it takes is three simple inputs:
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- Operating Margins
- Exit P/E Multiple
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
