Onto Innovation Inc. ONTO

The business

Onto Innovation designs and services process-control tools that semiconductor fabs and advanced-packaging assembly houses use to measure and inspect during manufacturing. The portfolio spans front-end metrology (optical critical-dimension and thin-film measurement inside the wafer fab), macro-defect inspection (the Firefly and Dragonfly families across wafer, panel, and substrate), and packaging lithography (the JetStep tools for fan-out and 2.5D bridge structures). The engine is the Systems and Software line, which carried $848M of FY25's $1.005B in revenue, about 84% of the total, with parts ($84M) and service ($73M) the recurring annuity underneath. Within that systems line, advanced packaging is the growth driver: management guided advanced-packaging revenue to grow above 50% in CY26 on high-bandwidth-memory and 2.5D logic demand, anchored by a multi-year volume purchase agreement from a single HBM customer that runs through 2027.

The qualitative fact the financials understate is the split personality of the franchise. Onto wins on the advanced-packaging side, where it holds dominant macro-defect-inspection and panel-lithography share and competition is light, while it has been losing front-end optical-CD metrology share to KLA's broader metrology franchise across new node qualifications. That dynamic is what dragged FY25: revenue held flat at $1.005B versus FY24, but operating income fell from $187M to $133M and gross margin slipped from 52.2% to 49.7% as front-end mix weakened and R&D ran ahead of the March 2026 Dragonfly G5 launch. The strategic response is the April 2026 Rigaku equity stake (a roughly $710M, 27% position tying Onto's Ai Diffract software to Rigaku's CD-SAXS X-ray platforms), a hybrid optical-plus-X-ray metrology capability aimed at defending the front-end position that KLA does not match.