Onto Innovation: Riding the AI Wave with New Products and a Bold X-Ray Bet
A Step-Change in Demand
Onto Innovation (ONTO) reported a robust Q1 2026, with revenue of $292M, up 9% sequentially and above the high end of guidance. The company is riding the AI wave, with demand driven by both advanced packaging and advanced nodes. CEO Mike Plisinski opened the call with a strong statement: “This surge in demand across both front end and advanced packaging resulted in first quarter revenue above our original guidance range and is expected to continue with the heightened outlook for the second quarter revenue, which at the midpoint represents a 20% increase year over year.” — Michael P. Plisinski, CEO · 2026-05-05 This momentum is expected to carry through the year, with revenue growth of more than 30% anticipated for 2026.
The company raised its Q2 revenue outlook to $320-330M, a 28% year-over-year increase, and expects operating margin to expand to over 30% by Q4. This acceleration is driven by a record backlog and strong customer expansions.
The Rigaku Bet: Expanding the Metrology Moat
The most significant development is Onto's $710M investment for a 27% stake in Rigaku, a leader in X-ray metrology. The partnership pairs Rigaku's X-ray systems with Onto's AI Diffract software to create hybrid metrology solutions. As Plisinski explained: “The announcement of our strategic collaboration with the leader in X-ray technology, Rigaku, expands this capability significantly.” — Michael P. Plisinski, CEO · 2026-05-05 The deal is expected to close in 2026 and will be funded primarily with cash on hand. CFO Brian Roberts detailed the financial rationale:
Within a year of the close of the transaction, we would expect that the income generated from these three sources will offset any foregone interest income on cash used in the deal.
This move is company-unique and expands Onto's total addressable market into areas where optical metrology alone cannot reach, such as 3D structures and exotic materials. It also positions Onto to sell additional tools, such as the Atlas G6, to customers adopting the integrated X-ray solution.
Dragonfly G5: A New Growth Engine
The Dragonfly G5, a new high-resolution inspection platform, has already achieved a key qualification at a leading 2.5D logic customer and is shipping ahead of plan. In the Q&A, Plisinski noted: “From the G5 perspective, we are actually getting requests to pull in and serving those requests to pull in G5 shipments.” — Michael P. Plisinski, CEO · 2026-05-05 With a pipeline of over 15 applications across more than 10 customers, G5 is set to drive significant growth in advanced packaging, which the company now expects to grow over 50% in 2026. This is a major step up from the 30% growth expectation shared just three months earlier: “We'd expect to see our advanced packaging grow over 30% this year.” — Michael Plisinski, CEO · 2026-02-19
The company's own keyword track for the quarter highlights Dragonfly G5, hybrid metrology, and panel level packaging as key themes. These align with global macro trends such as high bandwidth memory and co-packaged optics, reinforcing that Onto is at the center of the AI buildout.
Financial Execution and Outlook
The fundamentals confirm the momentum. Total revenue reached $292M in Q1 2026, up 9% sequentially and 10% year-over-year, with a clear inflection point after a flat 2025. Gross margin improved to 55.7% in Q1, and management expects further expansion to 56-56.5% in Q2. The company is also benefiting from its move to extended factories, which is driving operating leverage.
However, the stock has pulled back 22% from its June peak, possibly reflecting profit-taking after a strong run. The recent 90-day return is +14%, but the drawdown from the high suggests some near-term nervousness. Still, the fundamental story remains intact, with 2026 revenue guidance of over $1.3 billion and expectations for continued margin expansion.
In summary, Onto Innovation is executing on multiple fronts: new product ramps, a strategic partnership, and a booming end-market. The Rigaku deal, if successfully integrated, could redefine the metrology landscape and extend Onto's competitive advantage. Investors should watch the Dragonfly adoption curve and the closing of the Rigaku transaction as key catalysts.