Onto Innovation reported record third-quarter revenue of $410 million, an increase of 88% on a year earlier, as demand for the chip inspection equipment used in artificial intelligence hardware continued to surge. The company also raised its outlook for the rest of the year.

Revenue for the quarter ended 30 September was $409.7 million, up 87.8% from $218.2 million in the same quarter of 2025 and up 19% on the previous quarter. Non-GAAP earnings per share were $2.44, beating the Zacks Consensus Estimate of $2.27 per share and more than doubling the $0.92 reported a year earlier. Revenue, operating margin and earnings per share all finished above the high end of the company's previous non-GAAP guidance.

What drove the record quarter

Onto makes process-control equipment that checks silicon wafers as chips are made, a step that becomes more important as device designs grow more complex. Its Advanced Nodes business set a quarterly revenue record on strong adoption of the Atlas G6 system, while Advanced Packaging and Specialty Devices also achieved record revenue, driven mainly by the Dragonfly G5 and Firefly inspection systems.

Chief executive Mike Plisinski said demand remained robust "as increasingly complex device architectures for next-generation AI and high-performance computing drive greater process control requirements". He added that the strength of the backlog and visibility into customer investment plans extending over multiple years gave the company "increased confidence in the durability of these demand trends".

That backlog rose to more than $1.3 billion in the quarter. Operating income reached $95.4 million, or 23.3% of revenue, compared with $23.7 million a year earlier. Net income was $46.8 million, or $0.95 per diluted share, against $28.2 million, or $0.57, in the third quarter of 2025. Non-GAAP gross margin improved to 57.6%, from 54.0% a year earlier.

Stronger guidance for the fourth quarter

For the fourth quarter ending 31 December, Onto expects revenue of $430 million to $450 million and non-GAAP diluted earnings per share of $2.59 to $2.79. Management expects to finish 2026 with revenue growth above 45% year over year and said it was well positioned for a strong 2027.

For the first nine months of 2026, revenue was $1.045 billion, up 41.5% from $738.4 million in the same period of 2025. The company generated about $79 million of cash from operations in the quarter and ended September with $1.25 billion of cash, cash equivalents and marketable securities.

In August, Onto closed its purchase of a 27% ownership interest in Rigaku, the Japanese scientific instruments group, adding to its exposure to measurement technology used in chip manufacturing.

Why the result matters for the AI trade

Onto sits one step removed from the best-known AI names, supplying the inspection and measurement tools that chipmakers need as they build more advanced processors. Its results therefore act as a check on whether spending on AI hardware is holding up beyond the headline chip designers.

On that reading, the quarter was encouraging: record revenue in its two main product areas, a backlog above $1.3 billion, and guidance pointing to a further step up in the final quarter of the year. Onto shares have added about 9.8% since the start of the year, against a 7.8% gain for the S&P 500, according to Zacks. The fourth-quarter figures, due early next year, will show whether the momentum carries into 2027 as management expects.

Source: Zacks and Onto Innovation press release (BusinessWire).