Onsemi has spent several years working through weakness in its core automotive and industrial markets, and its latest quarter gave Wall Street a clearer look at where the next leg of growth could come from.
The chipmaker reported second-quarter results on Aug. 3 that showed improving revenue, profitability and free cash flow. Onsemi (ON) also said its AI data-center business remains its fastest-growing operation, broadening a growth story long centered on autos and industrial chips.
In a note given to TheStreet, Bank of America analyst Vivek Arya reiterated a Buy rating on Onsemi while lowering the firm’s price objective to $120 from $138. Based on the $80.40 share price listed in the note, the new target still implied roughly 49% upside.
The target cut came alongside higher earnings estimates, creating an unusual setup: BofA is using a lower valuation multiple while arguing that Onsemi’s long-term earnings power could become substantially larger.
Onsemi earnings strengthen the AI growth case
Onsemi reported second-quarter revenue of $1.604 billion, up 9% from a year earlier. Non-GAAP diluted earnings rose to $0.74 per share from $0.53 a year ago, while GAAP diluted EPS came in at $0.56.
Free cash flow reached $425.4 million, roughly quadrupling from the prior-year period, while cash from operations increased 150%. CEO Hassane El-Khoury said revenue, gross margin and EPS finished above the midpoint of guidance, with strengthening demand particularly visible in AI-driven applications.
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Management now expects AI data-center revenue to more than double in 2026, while highlighting expanded participation in Nvidia‘s MGX ecosystem and additional AI data-center platform wins.
Onsemi guided third-quarter revenue to between $1.65 billion and $1.75 billion, with non-GAAP EPS between $0.81 and $0.93. The $1.70 billion revenue midpoint and $0.87 EPS midpoint both sit above the consensus figures cited in BofA’s note.
Bank of America sees much bigger earnings power ahead
BofA’s longer-term model goes well beyond the latest earnings beat. Arya raised his 2026 EPS estimate to $3.20 from $3.12 and his 2027 estimate to $4.57 from $4.26. The analyst forecasts EPS reaching $6.15 in 2028 and roughly $12 by 2030.
BofA estimates revenue can rise from about $6.54 billion in 2026 to roughly $12.67 billion in 2030, an 18% compound annual growth rate.
AI is the most aggressive piece of the forecast. Arya models AI and data-center sales climbing from roughly $250 million in 2025 to about $4.68 billion in 2030, representing a 67% CAGR. Automotive and industrial revenue are also expected to return to sustained growth.
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Margins provide another lever. BofA believes gross margin can eventually reach 53%, helped by higher factory utilization, product mix, restructuring, and divestitures. Operating margin could approach 40% by 2030 in the firm’s model.
Despite those higher estimates, BofA lowered the price target because it now applies a 20-times multiple to estimated 2028 earnings, down from the prior methodology of 32 times estimated 2027 earnings.
Arya pointed to recent semiconductor-sector multiple contraction while arguing Onsemi still trades below its historical mid-teens range on 2028 estimates.
Onsemi still has risks to work through
BofA sees rising input costs, including substrates and gold, as one potential pressure on gross margin. The analyst also pointed to legacy consumer and mobile exposure and execution risk tied to Onsemi’s planned Synaptics acquisition.
Onsemi agreed in June to acquire Synaptics in an all-stock deal valued at roughly $7 billion. The company expects the transaction to close in mid-2027, subject to shareholder and regulatory approvals, and said the deal would expand its capabilities in connected compute and edge AI.
For BofA, the latest quarter provides evidence that the earnings recovery has started, but the larger call stretches several years beyond one earnings report. The $120 target is still bullish, while the more consequential forecast is the possibility that AI growth and margin expansion could push Onsemi toward roughly $12 in annual earnings per share by 2030.
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