Onsemi's data center segment propels outlook as analysts highlight 140% growth

What happened

Onsemi shares edged up 3% early Tuesday after third-quarter results showed fast growth in its data center segment. Management raised its AI data center revenue outlook to 140% year-over-year growth and agreed to buy Ferric for $600 million in cash, plus $175 million tied to revenue milestones.

Confirmed

Global impact / market context

A 140% growth outlook signals data center chips are becoming a larger share of Onsemi's revenue, which can lift overall growth and profit per sale. The $600 million cash purchase uses company cash, reducing funds available for other spending unless operations generate more.

Analyst inference

Analysts at Needham and Jefferies kept Buy ratings with price targets of $116 and $115, framing data center growth as the quarter's highlight. The Ferric deal adds power technology for AI servers, placing Onsemi against chipmakers serving the same data center power needs.

Analyst inference

What to watch

1. Watch whether Onsemi closes the Ferric acquisition for $600 million in cash plus $175 million tied to revenue milestones, and how that payment affects its cash balance. Confirmed
2. Track whether Onsemi converts design wins in power tree products, vertical GaN and EPP into actual revenue, since management said the business should double off the raised base. Proposed
3. Compare data center revenue with the raised target of about $620 million and the 2030 goal of more than $3 billion, to judge whether growth supports analyst price targets. Analyst inference

Evidence

• seekingalpha.com