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

Industry trends and market outlook

• AI is driving significant industry growth, with a projected 40% CAGR over the next few years, and 61% of 2025 revenue tied to the AI supply chain.

• Outlook for 2026 is at least 10% stronger in the first half compared to the second half of 2025, with additional growth expected from the SDI acquisition.

• Advanced nodes and packaging, especially gate-all-around and HBM, are key growth drivers, with strong demand for Dragonfly and 3DI platforms.

• Panel-level packaging markets are heating up, with excess capacity being absorbed and funded expansions planned over the next 12–24 months.

• China strategy includes shifting manufacturing to Asia and leveraging SDI’s strong local presence to deepen engagement and expand product offerings.

Product innovation and technology leadership

• Dragonfly platform offers significant improvements in throughput and resolution, with new applications added in 2025 and strong customer traction.

• New Dragonfly G5 platform preserves sensor capabilities while enhancing performance, targeting front-end applications and gaining rapid adoption.

• Charge metrology, enabled by the SDI acquisition, provides unique capabilities for chiplet architectures and power semiconductors, opening $1B in new opportunities.

• JetStep lithography system’s wide-field, high-resolution optics are unique in the industry, supporting large packages without stitching.

• Firefly tool is gaining traction for inline process control, offering a cost-effective solution for both R&D and production lines.

Financial performance and operational strategy

• Aggressive shift to Asian manufacturing partners has achieved 50% overseas production, targeting 80% by mid-year, optimizing costs and supply chain.

• New products and applications are delivering higher margins, with SDI and Semilab acquisitions being margin accretive.

• Combined operational improvements are expected to drive at least a 30% increase in operating margin and net income by 2026.

• Value to customers is quantified by the ability to solve critical problems with better cost of ownership, justifying higher prices for advanced tools.