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ON Semiconductor price target raised as AI data center growth stays on track
The company expects third-quarter non-GAAP gross margin of 40% to 42%, up from 39.3% in the second quarter.
ON Semiconductor delivered stronger-than-expected second-quarter earnings and issued third-quarter guidance above Wall Street expectations, while reaffirming that its AI data center revenue is on track to more than double in 2026, Yahoo Finance reports. The outlet highlights that CEO Hassane El-Khoury reiterated the longer-term AI outlook alongside the near-term guidance.
RBC analyst Tristan Gerra of Robert W. Baird became more constructive, raising his price target to $108 from $100 on August 3 while keeping a Neutral rating, according to Yahoo Finance. The analyst pointed to improving momentum across AI data centers, industrial markets, electric vehicles, and China, along with higher factory utilization and a more favorable product mix.
Baird expects gross margins to improve, with Gerra arguing that the company could push gross margins above 50% during this cycle, the outlet says. Management guidance also supports the view, with third-quarter non-GAAP gross margin expected at 40% to 42% versus 39.3% in the prior quarter.
Despite the positive setup, Yahoo Finance notes Gerra kept the rating at Neutral due to concerns about market share losses in industrial, automotive, and analog markets. The article cites that peers such as Texas Instruments and STMicroelectronics grew faster in the second quarter of fiscal 2026, while ON Semiconductor revenue rose 9% year over year compared with 23% at Texas Instruments and 26% at STMicroelectronics.