ONTO INNOVATION INC.: revenue up 87.8%, but a one-off Rigaku loss ate almost all the profit

On 9 November ONTO INNOVATION INC. reported third-quarter 2026 results. Revenue reached a record $409.7 million (+87.8% year on year), EBITDA – $120.9 million at a 29.5% margin versus 17.0% a year earlier, net income – $46.8 million (+66.0%). Growth accelerated from the second quarter (+35.3%), but an unrealised loss on the Rigaku investment of $40.8 million held net income below operating profit. Our conclusion: rather attractive – on the portal's model the upside to fair value is +23%. Our view: the share is rather attractive at the current price; upside on the portal model +23%.

Our view: is there upside

Our view in numbers

Key takeaways

— Revenue rose 87.8% on record Advanced Nodes and Advanced Packaging volumes

— EBITDA margin climbed to 29.5% on a 54.8% gross margin

— A $40.8 million unrealised Rigaku loss held net income at $46.8 million

— Leverage of 6.55x LTM EBITDA is the price of the Rigaku stake purchase

— Free cash flow of $77.2 million on capital expenditure of $1.6 million

— EV/EBITDA of 55.8 is 48% above its own three-year average of 37.7

— Q4 guidance – revenue of $430–450 million and a GAAP margin of 24.4–24.8%

Key figures, USD bn

Revenue rose 87.8% on record Advanced Nodes and Advanced Packaging volumes

Third-quarter 2026 revenue came to $409.7 million against $218.2 million a year earlier. Growth accelerated: it was 35.3% in the second quarter and 87.8% now. The company calls all three segments – Advanced Nodes, Advanced Packaging and Specialty Devices – record.

Advanced Nodes grew on the Atlas G6 optical critical-dimension system, Advanced Packaging and Specialty Devices on the Dragonfly G5 and Firefly inspection systems. Backlog rose above $1.3 billion in the quarter, and management points to visibility into customer investment plans extending out multiple years.

Nine-month revenue reached $1.045 billion, 41.5% above the same period of 2025. The company expects to finish 2026 with revenue growth above 45% year on year.

EBITDA margin climbed to 29.5% on a 54.8% gross margin

Third-quarter EBITDA came to $120.9 million, a 29.5% margin against 17.0% a year earlier. Gross margin rose to 54.8% from 50.7%, non-GAAP gross margin to 57.6% from 54.0%. The company notes non-GAAP gross margin added 60 basis points in the quarter and 300 basis points year to date.

GAAP operating income was $95.4 million, or 23.3% of revenue, against $23.7 million and 10.9% a year earlier. Non-GAAP operating income was $133.5 million, or 32.6% of revenue, against $46.1 million and 21.1%. The gap between GAAP and non-GAAP is explained by $20.3 million of intangible amortisation and $12.1 million of restructuring charges.

The margin gain came from operating leverage: revenue nearly doubled, while R&D rose to $45.1 million from $32.5 million, sales and marketing to $23.9 million from $17.1 million, and G&A to $39.2 million from $24.8 million. Each of these lines grew more slowly than revenue.

A $40.8 million unrealised Rigaku loss held net income at $46.8 million

Third-quarter net income was $46.8 million against $28.2 million a year earlier, up 66.0%. With operating income of $95.4 million and net interest income of $11.7 million, pre-tax income came to $65.0 million: it was reduced by an unrealised loss on the Rigaku investment of $40.8 million.

In August the company closed the purchase of a 27% stake in Rigaku. The loss reflects the remeasurement of that investment and currency movements; it is non-cash. Income tax was $18.1 million against $3.8 million a year earlier, lifting the effective rate to 27.9% from 11.7%.

Non-GAAP net income was $120.3 million, or $2.44 per diluted share, against $45.1 million and $0.92. Per the release reconciliation, one-off items net to a gain of $1.7 million that raised GAAP profit; the bulk of the gap is amortisation and restructuring.

Leverage of 6.55x LTM EBITDA is the price of the Rigaku stake purchase

Net debt at 30 September 2026 was $1,099.3 million against LTM EBITDA of $167.8 million. The net debt to LTM EBITDA ratio is 6.55. At the end of 2025 there was no debt on the balance sheet: in January 2026 the company issued $1.47 billion of 2031 notes.

The debt rose because of the Rigaku stake purchase. Cash, equivalents and marketable securities at quarter-end were $1.25 billion, so net debt is below gross debt. Net interest income for the quarter was $11.7 million and still covers interest expense on the notes.

The 6.55 ratio is a level, not a direction: no earlier value is in the facts, so it cannot be said whether leverage rose or fell. With LTM EBITDA of $167.8 million debt service remains manageable, but the cushion is thin.

Free cash flow of $77.2 million on capital expenditure of $1.6 million

Third-quarter operating cash flow was $78.75 million, capital expenditure $1.6 million. Free cash flow of $77.2 million covers net income of $46.8 million. Over nine months operating cash flow was $167.1 million on capital expenditure of $8.9 million.

Capex is small relative to revenue: $1.6 million is 0.4% of quarterly revenue. The company barely invests in fixed assets, and cash flow tracks profit. Inventories rose to $424.2 million from $298.3 million at the end of 2025, receivables to $384.5 million from $268.9 million.

Working-capital growth absorbs part of operating cash flow, but at revenue of $409.7 million it stays positive. The company pays no dividends, so the entire free cash flow goes to investment and debt.

EV/EBITDA of 55.8 is 48% above its own three-year average of 37.7

Market capitalisation is $9,699.1 million, EV/LTM EBITDA 55.8 against a three-year average of 37.7. The share trades 48% above its own history on this multiple. LTM P/E is 70.9, return on equity 9.6%.

The multiple is high because of the one-off Rigaku loss: LTM EBITDA of $167.8 million includes the weak quarters of late 2025, and LTM profit of $136.8 million is reduced by the unrealised loss. Excluding it, profit would be higher and P/E lower.

On the portal's model the fair value is 23% above the current price. The model is built on EBITDA growth and a target multiple; with revenue accelerating to 87.8% and Q4 guidance of $430–450 million it shows a cushion that the current multiple does not.

Q4 guidance – revenue of $430–450 million and a GAAP margin of 24.4–24.8%

For the fourth quarter of 2026 the company expects revenue of $430–450 million, gross margin of 57.7–58.3%, a GAAP operating margin of 24.4–24.8% and GAAP EPS of $1.95–2.07. Non-GAAP operating margin is 33.5–34.5%, non-GAAP EPS $2.59–2.79.

The midpoint of revenue guidance is $440 million, 7.4% above the third quarter. The GAAP margin of 24.4–24.8% is slightly above the quarterly 23.3%, so the company does not expect further margin expansion in the fourth quarter.

Guidance includes $18–22 million of restructuring charges and $19.7 million of amortisation. If fourth-quarter revenue lands near the top of the range, annual growth will exceed 45%, as management promises.

Valuation on the latest reported figures

Bottom line

The operating result was strong: revenue of $409.7 million (+87.8%), EBITDA of $120.9 million at a 29.5% margin, free cash flow of $77.2 million. The weak spot was net income of $46.8 million, held back by the $40.8 million unrealised Rigaku loss, and leverage of 6.55x LTM EBITDA after the stake purchase. The question for a holder now is whether revenue acceleration holds in the fourth quarter at guidance of $430–450 million and whether the 55.8 multiple against its own 37.7 average is justified. Our conclusion: rather attractive – on the portal's model the upside to fair value is +23%. Our view: the share is rather attractive at the current price; upside on the portal model +23%.