onsemi raises AI target after Ferric deal expands power ambitions

AI power demand is moving from a promise to a larger line item for ON Semiconductor Corporation (NASDAQ:ON). The company said AI data centre revenue rose 175% year over year in fiscal Q3 2026 and 39% sequentially, prompting it to lift its 2030 target by US$500 million to more than US$3 billion.

The upgrade arrived alongside an agreement to acquire Ferric, a specialist in integrated voltage regulators, for US$600 million in cash at completion and up to US$175 million in milestone payments. The deal is intended to strengthen onsemi’s power-delivery offering for next-generation AI processors, although the company expects no meaningful near-term financial impact.

Ferric Deal Targets Power Delivery Inside AI Systems

Ferric’s technology integrates the power controller, field-effect transistors, inductors and capacitors into a compact package. onsemi said the architecture can reduce board area by 50% to 70% compared with conventional discrete voltage-regulator solutions, while placing more power closer to the processor. Those figures describe the company’s stated technology advantages, not yet a reported financial contribution.

Ferric brings more than a decade of engineering experience and a portfolio of more than 40 patents. Around 50 employees, mainly in New York and Silicon Valley, are expected to join onsemi. Completion is expected by the end of 2026, subject to customary conditions including US antitrust review, and the contingent consideration depends on specified revenue milestones.

Revenue Growth Converts Into Higher Margins and Cash Flow

For the quarter ended October 2, revenue reached US$1.722 billion, up 11% from a year earlier. GAAP gross margin increased to 41.4% from 37.9%, while GAAP operating margin rose to 22.0% from 17.0%. GAAP diluted earnings per share was US$0.79, compared with US$0.63 a year earlier; onsemi’s non-GAAP diluted EPS was US$0.90, up from US$0.63.

Cash generation was equally notable: operating cash flow rose 23% to US$516 million and free cash flow, a non-GAAP measure, increased 31% to US$489 million. The company’s fourth-quarter outlook calls for revenue between US$1.715 billion and US$1.815 billion, with GAAP diluted EPS of US$0.88 to US$1.00. Its non-GAAP EPS range is US$0.95 to US$1.07, reflecting projected special-item adjustments that are not directly comparable with GAAP earnings.

Synaptics Terms Shift Toward Cash Consideration

The quarterly update also disclosed revised terms for the planned Synaptics acquisition: approximately US$5.7 billion in cash, replacing an earlier structure valued at US$7 billion in stock. onsemi said the revised arrangement should be immediately accretive to non-GAAP EPS, but the release did not quantify the transaction’s full funding or balance-sheet effects.

That leaves two different tests for the strategy. Ferric must translate a technically differentiated power architecture into revenue milestones, while the larger Synaptics transaction must deliver the claimed earnings benefit without overwhelming the cash generation that currently supports onsemi’s expansion. The next evidence will come from deal completion, AI customer ramps and whether margin gains continue as the company takes on both opportunities.