A maker of metrology and inspection systems that help semiconductor factories spot defects on chips as they're being made, using tools like the Dragonfly G3 and JetStep X500. It was born in 2019 from the merger of Rudolph Technologies and Nanometrics, two longtime players in chip measurement. The name is a pun: its instruments are literally placed "onto" wafer-processing machines to measure them mid-production.
Onto Innovation revenue rose 35% to $343M and gross margin rebounded to 53.4% as the company issued $1.5B in convertible notes.
returned to growth after two quarters of decline. Revenue rose 35% to $343.1 million and widened 5.3 points to 53.4%, driven by higher sales of inspection and metrology systems for advanced packaging and advanced nodes. The company issued $1.5 billion in , pushing cash to $1.25 billion, but the notes introduce risk and a $710 million minority stake acquisition is pending.
Key takeaways
rose 35.3% to $343.1 million, the highest quarterly revenue in the periods shown, driven by higher sales of inspection and metrology systems for advanced packaging and advanced nodes.
widened 5.3 points to 53.4%, as a favorable shift toward higher-margin inspection and metrology product lines replaced the write-downs that compressed margins a year ago.
rose 97.1% to $63.6 million, and widened 5.8 points to 18.5%, as growth outpaced a rise in operating expenses that included $19.7 million in from the Semilab USA acquisition.
Section summaries
Management's Discussion and Analysis
Revenue rose 35% YoY to $343M on strong inspection/metrology demand; gross margin expanded 520 bps to 53.4% on favorable mix.
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Q2 FY2026 of $343.1M grew 35.3% , driven by higher sales of inspection and metrology systems for advanced packaging and advanced nodes.
Cash and equivalents rose to $1.25 billion after the company issued $1.5 billion in 2031 and terminated a $500 million commitment for the pending Rigaku minority stake acquisition.
rose 75.4% to $1.21, recovering from $0.69 a year ago when write-downs and restructuring costs weighed on the result.
What changed
rebounded to 53.4% from 48.2% a year ago and 50.1% last quarter, settling the question of whether margins could recover above 50% after the write-downs and Semilab USA integration costs that compressed them in FY2025 and Q1 FY2026.
growth accelerated to 35.3% from 9.5% last quarter, as the advanced-node DRAM and NAND weakness that drove a 14% sequential decline in Q3 FY2025 reversed into higher inspection and metrology demand.
The company deployed no share repurchases during the quarter, after repurchasing $75 million in Q3 FY2025 and $150 million in FY2025, as management shifted capital-allocation attention to the $1.5 billion issuance and the pending $710 million Rigaku acquisition.
The $1.5 billion issuance and termination of the $500 million materially altered the balance sheet, pushing cash to $1.25 billion from $252.2 million last quarter, but introducing risk from a $381.80 initial conversion price and a $509.06 capped call ceiling.
What to watch
Whether can hold above 53% as the favorable product mix toward inspection and metrology persists, or whether the Q2 FY2026 level represents a peak.
Whether the $710 million Rigaku minority stake acquisition closes in the second half of 2026 as expected, and how the company funds it after issuing $1.5 billion in .
Whether the trigger or cash outlays if the stock price approaches the $381.80 conversion price or the $509.06 capped call ceiling.
Whether share repurchases resume under the $200 million authorization now that the have been issued and cash stands at $1.25 billion.
reached 53.4%, up from 48.2% a year ago, primarily due to a favorable shift toward higher-margin inspection and metrology product lines.
Total operating expenses increased to $119.7M, with R&D up on higher headcount and engineering spend, and SG&A up on compensation and integration costs.
of intangibles rose to $19.7M from $8.4M , reflecting the Semilab USA acquisition.
Cash and equivalents surged to $1.88B after issuing $1.5B in 2031 Notes; the company terminated a $500M bridge loan commitment for the pending Rigaku Transaction.
of $87.8M for the six months declined due to higher and , partially offset by increased and accrued expenses.
Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in market risk from the information presented in Part II, Item 7A. “Quantitative and Qualitative Disclosures About Market Risk,” in the 2025 Form 10-K.
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There have been no material changes in market risk from the information presented in Part II, Item 7A. “Quantitative and Qualitative Disclosures About Market Risk,” in the 2025 Form 10-K.
For a description of our material pending legal proceedings refer to the information set forth under “Legal Matters” of Note 8, “Commitments and Contingencies,” to the Condensed Consolidated Financial Statements included in Part 1, Item 1 of this Form 10-Q. 29 Table of Contents
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For a description of our material pending legal proceedings refer to the information set forth under “Legal Matters” of Note 8, “Commitments and Contingencies,” to the Condensed Consolidated Financial Statements included in Part 1, Item 1 of this Form 10-Q.
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New convertible notes issued in May 2026 introduce material liquidity, dilution, and volatility risks not previously disclosed.
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The $381.80/share initial on the 2031 Notes could force significant cash outlays upon conversion, , or maturity, and the company may lack sufficient cash or financing to pay.
Conversion settlements may dilute existing stockholders if the company elects to pay the excess over principal in shares, with the Capped Call Transactions only offsetting up to a $509.06 cap.
Hedging and unwind activities by Capped Call counterparties could increase or decrease the common stock price and affect the value of the notes and conversion consideration.
A default by any option counterparty would leave the company as an unsecured creditor, potentially causing adverse tax consequences and greater-than-expected .
Even without conversions, accounting rules could force reclassification of the notes as current liabilities, reducing reported .