onsemi Beats Q2 Expectations as AI Data Center Pivot Drives Margin Growth
The chipmaker reports $1.60 billion in revenue and projects a massive surge in AI infrastructure content per rack by 2030.
ON Semiconductor (onsemi) outperformed Wall Street expectations in the second quarter of 2026, signaling a successful strategic shift toward AI infrastructure. The company reported revenue of $1.60 billion, representing a 6% sequential increase, and a non-GAAP earnings per share (EPS) of $0.74.
Financial performance was highlighted by a non-GAAP gross margin of 39.3%, marking the fourth consecutive quarter of expansion. Looking ahead, onsemi provided optimistic guidance for the third quarter of 2026, projecting revenue between $1.65 billion and $1.75 billion. The company expects further margin improvement in Q3, with non-GAAP gross margins forecasted to reach between 40.0% and 42.0%.
Strategic Pivot to Intelligent Power
These results come as onsemi undergoes a fundamental transformation to prioritize intelligent power and sensing technologies. Under its "Fab Right" initiative, the company is optimizing its manufacturing network by exiting non-core business lines to focus on high-growth sectors, specifically electric vehicles, industrial automation, and AI data centers. This pivot is designed to align the company's capabilities with the most challenging customer problems in power delivery.
The AI Infrastructure Opportunity
The most significant growth driver is the company's expansion into AI data centers. onsemi projects that its AI data center revenue will more than double in 2026 compared to 2025 levels. This growth is underpinned by a massive projected increase in addressable content per server rack, which is expected to climb from approximately $15,000 today to $115,000 by 2030.
This trajectory reflects a critical industry transition from 54V to 800V DC bus architectures in data centers. By positioning itself as a primary provider for these high-voltage power delivery chains, onsemi is evolving from a traditional automotive and industrial supplier into a vital component of the AI hardware ecosystem. The market responded positively to this trajectory, with shares rising over 5% in after-hours trading following the announcement.
Future Outlook
Investors will now be watching to see if onsemi can maintain its streak of margin expansion as it scales its AI-related production. While the short-term guidance for Q3 remains strong, the long-term success of the company depends on its ability to capture the projected rack-level content growth over the next four years. The company continues to focus on innovation in power sensing to maintain its competitive edge in the evolving data center landscape.