ON Semiconductor (NASDAQ: ON), a leading player in the analog chip market, has faced significant challenges following its disappointing fourth-quarter 2024 earnings report and a weak outlook for the first quarter of 2025. The company’s stock has tumbled as analysts downgraded their forecasts, reflecting concerns over declining revenues, missed earnings targets, and an uncertain business environment. This article examines the key drivers behind ON Semiconductor’s earnings miss, its implications for the semiconductor industry, and the outlook for the company moving forward.

Overview: ON Semiconductor’s Q4 Performance

ON Semiconductor’s Q4 2024 results fell short of market expectations, marking a challenging end to the year for the company:

• Revenue: $1.72 billion (down 14.6% YoY), missing estimates of $1.76 billion.
• Adjusted EPS: $0.95, below the forecasted $0.97.
• Segment Performance: Automotive revenue dropped 18%, industrial revenue fell 29%, while silicon carbide and intelligent sensing segments showed growth driven by demand for solar energy and industrial imaging solutions.

CEO Hassane El-Khoury acknowledged the challenges posed by a market downturn but emphasized the company’s structural improvements over recent years to navigate prolonged volatility.

Key Drivers Behind the Earnings Miss

Revenue Decline Across Segments

ON Semiconductor experienced significant revenue declines in key segments:

• Automotive Revenue: Fell 18% YoY due to weaker demand from electric vehicle manufacturers amid inventory corrections.
• Industrial Revenue: Dropped 29% YoY as global industrial activity slowed.
• Power Solutions Group: Revenue fell 16% to $809 million.

Despite these declines, growth in silicon carbide and intelligent sensing businesses partially offset losses, driven by demand in renewable energy and imaging applications.

Weak Q1 2025 Guidance

ON’s guidance for Q1 2025 further disappointed investors:

• Revenue: Projected at $1.35–$1.45 billion versus analyst expectations of $1.69 billion.
• EPS: Estimated at $0.45–$0.55 compared to consensus estimates of $0.89.

This weak outlook reflects ongoing challenges such as excess inventories, slowing demand across key end markets, and macroeconomic uncertainties.

Analyst Downgrades and Stock Reaction

Following the earnings miss and weak guidance, analysts significantly revised their forecasts for ON Semiconductor:

• Revenue Forecast: Analysts now project full-year 2025 revenue at $6 billion (down from prior estimates of $7.2 billion), representing a 16% decline from 2024.
• EPS Forecast: Expected to drop by 40% to $2.24 in 2025 (previously forecasted at $3.88).

As a result, ON’s stock price has fallen sharply:

• Shares dropped nearly 8% following the earnings announcement on February 10, reaching their lowest level since June 2022.
• Over the past three months, ON’s stock is down over 23%, underperforming both its peers and broader market indices.

Broader Semiconductor Industry Challenges

ON Semiconductor’s struggles reflect broader challenges facing the semiconductor industry:

1. Market Downturn: Slowing demand across automotive and industrial sectors has impacted revenues for many chipmakers.
2. Excess Inventories: High inventory levels have led to pricing pressures and reduced order volumes.
3. Geopolitical Risks: Trade tensions and export restrictions on advanced chips have disrupted global supply chains.
4. Competition: Rivals like Texas Instruments and Analog Devices continue to gain market share in key segments.

Despite these challenges, long-term demand drivers such as AI infrastructure, data centers, renewable energy adoption, and electric vehicles remain strong growth opportunities for the industry.

Long-Term Outlook for ON Semiconductor

While ON Semiconductor faces near-term headwinds, its long-term prospects remain tied to structural trends in power management and intelligent sensing solutions:

• Silicon Carbide Growth: Demand for silicon carbide chips in renewable energy applications is expected to grow significantly over the next decade.
• AI & Data Centers: ON is well-positioned to benefit from increasing investments in AI infrastructure requiring advanced power management solutions.
• Operational Resilience: CEO Hassane El-Khoury highlighted ongoing efforts to streamline operations and maintain financial discipline during market downturns.

However, the company must address challenges related to declining revenues in core segments while capitalizing on emerging opportunities in high-growth markets.

Key Takeaways

• ON Semiconductor reported Q4 2024 revenue of $1.72 billion, down 14.6% year-over-year and below analyst expectations of $1.76 billion.
• Adjusted EPS came in at $0.95, missing the consensus estimate of $0.97.
• Q1 2025 guidance disappointed investors, with projected revenue of $1.35–$1.45 billion and EPS of $0.45–$0.55, far below Wall Street expectations of $1.69 billion and $0.89, respectively.
• Automotive and industrial revenues fell sharply, while growth in silicon carbide and intelligent sensing segments provided some positive momentum.
• Analysts have revised revenue and EPS estimates downward for 2025, with ON expected to underperform relative to the broader semiconductor industry.

Conclusion

ON Semiconductor’s recent earnings miss underscores both company-specific challenges and broader headwinds facing the semiconductor industry in early 2025. While weak guidance has dampened investor sentiment in the short term, ON’s focus on high-value segments like silicon carbide positions it for recovery as market conditions improve.

For investors, patience will be key as ON navigates this period of uncertainty while leveraging long-term growth opportunities in renewable energy, AI infrastructure, and advanced sensing technologies.