Onto Innovation rides AI packaging wave to record backlog
A demand inflection in advanced packaging
Onto Innovation's Q2 2026 call was a tour de force of upward revisions and order-book disclosure. Revenue hit $343 million, up 35% year-over-year, and the company raised second-half growth to 25%+, up from the 15% guided last quarter. The most striking metric is a $1.1 billion record backlog, which now covers a substantial portion of 2027. As CEO Michael Plisinski put it, “we set new quarterly revenue records with advanced nodes growing 50% quarter-over-quarter, and our inspection business dominated by Dragonfly systems growing by 30%.” — Michael P. Plisinski, Chief Executive Officer · 2026-08-06 The advanced packaging segment, in particular, has become the company's engine, with growth expectations raised from 50% to approximately 80% for the full year.The inflection is being felt across the entire packaging value chain. “We were pleased to have won orders totaling over $200 million for Dragonfly technology from a single OSAT partner,” — Michael P. Plisinski, Chief Executive Officer · 2026-08-06 he added, underscoring both the magnitude and the multiyear visibility. The company also revealed silicon photonics as a nascent but meaningful opportunity, with over $50 million in orders and a served addressable market projected to reach $500 million by 2030. In parallel, panel level packaging is expected to more than double revenues this year, with further growth in 2027.
The Dragonfly G5 platform: a share-gaining catalyst
Central to this optimism is the Dragonfly G5, the high-resolution inspection platform that is opening new applications across HBM, 2.5D logic, and front-end metrology. In the prepared remarks, Plisinski noted, “with the successful launch of the Dragonfly G5, we’re experiencing unprecedented demand across an expanding set of customers.” — Brian K. Roberts, Chief Financial Officer · 2026-08-06 The product has now secured design wins in several DRAM and logic accounts, including a major DRAM customer slated for second-half shipments. The company's hybrid metrology collaboration with Rigaku is also gaining traction, with a $1 billion X-ray technology market opportunity on the horizon. The shift is not just about new products — it is about a structural change in how AI-driven packaging demand translates into visibility. As Plisinski explained in Q&A, “the backlog is a strong indicator of our customers’ confidence more than anything else.” — Michael P. Plisinski, Chief Executive Officer · 2026-08-06 Historically, packaging spending was more consumer-driven and difficult to forecast; now it is tied to hyperscaler capital expenditure plans that extend well into 2027.This demand surge is also translating into clear operational leverage. CFO Brian Roberts highlighted a 57% gross margin in Q2, up 250 basis points from Q4 2025, and an operating margin of 30%, up nearly 500 basis points from the start of the year. The company is targeting an additional 50 basis points of gross margin expansion per quarter in H2, and an exit operating margin of 33%+. On the call, Roberts emphasized,
With the surging demand environment, coupled with strong operational execution, we are raising our revenue, margin and earnings per share expectations for the second half of 2026.
The numbers and what they mean
The financials confirm the narrative, though it is important to note that GAAP gross margin remains lower than the non-GAAP figures cited on the call. Per our fundamentals, revenue has grown from $254M in 2022Q2 to $343M in 2026Q2, a 35% y/y increase in the latest quarter. Operating margin on a GAAP basis is still expanding, but the company's non-GAAP metrics point to an even more dramatic inflection. The extended-factory model in Asia is bearing fruit, enabling higher margins with significantly lower capital intensity. The stock, despite a -14% pullback over the past 90 days, remains up over 2000% from 2010, reflecting a strong rerating on AI tailwinds.The company is also deliberately growing its own TAM through new product insertions and partnerships. Prior calls had telegraphed this. In the May 2026 call, Plisinski had already noted, “we shipped several systems in Q1, we are shipping more into Q2, and even more in Q3 and Q4” — Michael P. Plisinski, CEO · 2026-05-05 for the Dragonfly G5, and in February he had pointed to a “$2 billion run rate” — Michael Plisinski, CEO · 2026-02-19 capacity. What is new today is the sheer magnitude of the backlog and the elevated confidence in 2027. The company is no longer just a tool vendor; it is positioned as a strategic enabler in the AI capex supercycle, with high-growth applications spanning HBM, 2.5D logic, silicon photonics, and panel-level packaging.