ON Semiconductor stock falls on declining sales despite earnings beat

ON Semiconductor (ON) shares have fallen after the chipmaker reported quarterly results, with earnings beating estimates but declining year-over-year. Seana Smith and Brad Smith break down what investors need to know on Morning Brief.

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This post was written by Naomi Buchanan.

Video Transcript

All right, let's take a look at on semiconductor.

They reported better than expected third quarter results.

The semiconductor components maker Chip Supplier here posting revenue of $1.76 billion with free free cash flow increasing 41% sequentially, was initially higher on the back of that news.

But again, as the earnings call is underway right now, we're looking at a bit of a reversal here in shares now off nearly 5%.

If you're not familiar with this company, they heavily rely on the automotive industry and lots of talk.

Going into this and really what they have seen over the last several quarters is that many of these companies ordered way too many components coming out of the pandemic.

They've been working through this inventory glut that has been something that has been weighing on this company now for quite some time.

So they did beat here, but again, it was a drop on a year over year basis.

So the fact that we did see lower earnings in the third quarter as revenue did fall despite the beat here it doesn't look like that's enough for shareholders.

Yeah, only thing I'll add to that is really the focus on more energy, more power and this company talking about that as well.

And I think that's gonna be key, especially as you hear more executives who are even engaging with or touching the semiconductor space or have reliance on the data centre businesses powering these data centres is going to be amazingly critical for how many chips are gonna be going into the future of the data centre if we get towards a A 1 million chip data centre, for instance.

And here's where the company is talking about the CEO of one semi saying.

As power demand continues to rise across their key markets, the need for greater efficiency becomes paramount.

They're investing heavily right now to win across the entire power spectrum to ensure that they are best positioned here.

That's similar to what we've heard from Oracle and Larry Ellison is similar to what we've heard from NVIDIA as well, and how companies are looking at everything from OK, where can we just get more energy, more power?

Do we need to get nuclear reactor sites?

And that's increasingly become talking, uh, becoming talked about and should be on every investors bingo card as of right now,