ON Semiconductor sold fewer chips and still protected its gross margin.
Revenue fell 2.4% to $1.5 billion in the quarter ended April 3, 2026, compared with the prior-year period. Gross margin edged up to 38.5% from 37.9%, helped by product mix and better results in parts of the portfolio.
That sounds like a business absorbing softer demand without giving away much on each sale. The income statement was less forgiving: operating income swung from $264.4 million to a $53.4 million loss, while net income moved from $255.0 million to a $33.4 million loss.
The filing's explanation for the loss focuses on charges below gross profit. ON Semiconductor continued its manufacturing realignment programs, including accelerated depreciation and amortization on abandoned right-of-use assets and related improvements. Cash also fell to $2.0 billion from $2.5 billion, while capital spending dropped 92% year over year.
Management described the charge comparison this way:
"Net loss for the quarter ended April 3, 2026 improved compared to the prior‑year period, primarily due to lower non‑cash asset impairment and restructuring‑related charges, partially offset by accelerated depreciation and amortization expense for ROU assets and related improvements that were abandoned in connection with the 2025 and 2026 Manufacturing Realignment Programs."
10-Q, May 4, 2026
In plain English, the loss was less burdened by some old restructuring and impairment charges, but the factory reset still created fresh accounting costs. That means the reported loss does not by itself isolate the chip business, while also making the reset impossible to ignore.
The strongest operating improvement came from PSG, where revenue increased 14% on increased demand. Its gross margin rose to 27.2% from 19.1%, partly because a $43.9 million prior-year write-off of consumables and manufacturing supplies was absent this time.
The company said:
"PSG gross margin increased by 8.1 percentage points to 27.2% from 19.1%, primarily due to the absence of a $43.9 million write‑off of consumables and manufacturing supplies charges during the quarter ended April 4, 2025, as well as improved utilization and operating leverage on higher volumes during the quarter ended April 3, 2026."
10-Q, May 4, 2026
The comparison includes both a higher reported margin and the absence of a prior-year charge. AMG revenue fell about 5% because of lower demand in certain end-markets, and its gross profit declined as automotive and other demand weakened. The smaller ISG line grew about 1%.
The balance-sheet detail adds another unresolved wrinkle. Inventory was essentially flat, up 0.1%, while revenue declined, so inventory intensity increased. ON Semiconductor does not disclose the reason in the supplied filing facts. Free-cash-flow margin was 14.4%, down 6.5 percentage points, despite sharply lower capital investment.
The annual record supplies the backdrop without settling the current question: revenue fell from $8.3 billion in 2022 to $6.0 billion in 2025, while operating margin declined from 30.8% to 1.4%. At the latest close of $81.58, the shares carried a 277.6x trailing P/E, a valuation that puts unusual weight on how much of the manufacturing reset is already reflected in future earnings.
The next quarterly report's treatment of realignment charges, abandoned assets, and inventory will show how much of this period's operating loss belonged to the reset rather than the ongoing chip operation.
Have the 2025 and 2026 Manufacturing Realignment Programs stopped producing new charges?