Onsemi’s Q4 Earnings Fall Short Across the Board—Can Innovative Treo Turn the Tide?

TradingKey - Onsemi (ON.US), a major player in the power semiconductor industry, released a disappointing Q4 2024 earnings report, with both revenue and profitability declining. The outlook for Q1 2025 also fell short of expectations.

Q4 2024 Financial Highlights

On February 10, Onsemi reported its Q4 2024 financial results, revealing that revenue and earnings per share (EPS) missed estimates, while gross margin contracted—highlighting the challenges posed by weak market demand and intense competition.

- Earnings per share (EPS): $0.95 vs. $0.97 expected

- Revenue: $1.72 billion vs. $1.76 billion expected

All three of Onsemi’s business segments saw revenue declines:

- Power Solutions Group (PSG): ↓16%

- Advanced Solutions Group (ASG): ↓18%

- Intelligent Sensing Group (ISG): ↓2%

Weak 2025 Guidance Weighs on Investor Sentiment

Onsemi’s 2025 outlook remains weak, with significantly lower-than-expected projections:

- Q1 2025 adjusted EPS: Forecasted at $0.45–$0.55, well below the prior estimate of $0.89.

- 2025 revenue: Expected to range between $1.35 billion and $1.45 billion, missing analysts’ expectations of $1.69 billion.

In response to the weak performance and outlook, Onsemi’s stock price plunged 8.21% on February 10. Year-to-date, the stock has declined approximately 24%.

Management’s Response: Long-Term Strategies Remain in Focus

Onsemi’s leadership acknowledged ongoing market uncertainty in 2025 but reiterated their commitment to long-term growth strategies. The company plans to:

- Maintain financial discipline,

- Streamline operations, and

- Continue developing high-value, differentiated intelligent power and sensing solutions to strengthen its market position.

Still Struggling 

TradingKey analyst Petar Petrov notes that a whole set of negative indicators contributed to Onsemi's stock decline, including Q4 revenue and EPS misses, weak 2025 guidance, and shrinking margins.

Petrov highlights a key issue: Onsemi does not have exposure towards high-growth end markets related to data centers, instead their main end customers are EV automakers, industrial companies and consumer electronics manufacturers. The tepid growth in some of these end markets is the main reason why ON is seeing a decline in revenue, as end customers are still having large amounts of chip inventories, not having the need to buy more chips.

The likelihood of a demand recovery this year is starting to appear slim, particularly as the European manufacturing industry continues to struggle. This ongoing uncertainty has further dampened investor confidence in ON Semiconductor's near-term performance.

Treo: A Potential Growth Catalyst?

Petrov believes that the newly established Treo Platform is something investors can be excited for. Treo is a cutting-edge technology that can be used in creating more accurate sensor systems (something that can have strong applicability in EVs). 

- The total addressable market (TAM) for Treo is estimated at $36 billion.

- The product’s gross margins could reach 70%.

However, the development is still in a nascent stage, as the first revenue is expected to be recorded in the first half of this year. Also, we are yet to see if this technology can easily be replicated by competitors.