Onto Innovation’s AI-Driven Growth Meets Valuation and Execution Risks

Onto Innovation shares rose 125.6% over the year through the period covered by the article, as the company reported record second-quarter revenue of $343.1 million. As of Friday’s close, the shares traded at $327.77, up 4.09% from the previous close.

Revenue increased 35.3% year over year, and non-GAAP earnings per share rose to $1.93 from $1.25. The company’s backlog topped $1 billion for the first time. Management said 60% to 70% of it was tied to the current year, with 30% to 40% tied to 2027.

Growth plans and risks

Onto raised its second-half 2026 revenue, margin and earnings outlook. It expects revenue to grow more than 25% in the second half, with third-quarter revenue of $380 million to $400 million and further growth in the fourth quarter.

Advanced packaging is a central growth driver. Dragonfly inspection revenue rose 30% sequentially in the second quarter, and Onto secured more than $200 million in Dragonfly orders from one outsourced semiconductor assembly and test provider, mostly for 2027 delivery. Management raised its 2026 advanced-packaging growth outlook to at least 80%, from more than 50% previously.

The company also expects advanced-nodes revenue to grow more than 35% in 2026, up from an earlier outlook of about 25%. It ended the second quarter with $1.88 billion in cash and short-term investments.

Risks include costs for materials, fuel and freight, customer concentration and acquisition integration. Four customers accounted for 57.3% of first-half 2026 revenue. Semilab recorded a $4.5 million operating loss in the second quarter.

Valuation and expectations

Onto’s forward price-to-earnings multiple was 30.23, compared with 5.83 for its industry, according to the article. KLA, Camtek and Nova had multiples of 36.23, 39.6 and 32.81, respectively. Earnings estimates for Onto’s 2026 and 2027 results had risen over the prior 60 days.

The article’s case for further gains rests on continued earnings beats, higher guidance and Dragonfly G5 order growth. It also warns that a slowdown in AI-related semiconductor spending or earnings failing to keep pace with the share price could lead to a substantial pullback.