Onto Innovation Inc. ONTO is positioning itself for another strong growth year as rising AI infrastructure spending fuels demand for advanced semiconductor packaging and process control solutions. ONTO’s backlog has more than doubled, rising from nearly $500 million reported after the fourth quarter of 2025 to $1.1 billion in the second quarter of 2026, reflecting stronger customer commitments and improved visibility into future demand.
Management attributed the increase to customers placing orders earlier than historically typical to secure equipment supplies for their expansion plans. ONTO expected to deliver 60–70% of the backlog in the remainder of 2026, with the balance covering 2027. Customers are placing orders earlier to secure capacity for multi-year expansion plans, especially in advanced packaging where visibility has historically been shorter. Management raised its second-half 2026 revenue outlook to growth of more than 25% over the first half compared with the prior expectation of 15%.
Discussions with customers remain constructive for 2027 and volume purchase agreement negotiations are beginning for that year. This combination of broader end-market exposure, longer order visibility and rising customer commitments supports a more durable growth profile and provides a clearer base for capacity planning decisions. ONTO’s Dragonfly inspection business is driven by 2.5D packaging and HBM demand, prompting management to raise its 2026 advanced packaging growth outlook to approximately 80%. The company secured more than $200 million in Dragonfly orders from a single OSAT partner, mostly for 2027 delivery.
Adoption of the Atlas G6 platform and more than $50 million in silicon photonics orders, alongside a potential served market exceeding $500 million by 2030, provide additional growth opportunities. With Dragonfly G5 gaining traction, advanced packaging demand accelerating and new opportunities emerging in silicon photonics, ONTO expects its growth momentum to extend into 2027.
Intensifying Rivalry Tests ONTO’s Growth Potential
KLA Corporation KLAC is well-positioned to outperform as AI infrastructure spending broadens demand for process control across leading-edge logic, memory and advanced packaging. KLA now expects 2026 wafer fabrication equipment spending in the low-$150 billion range, up from $135-$140 billion at its March Investor Day. Management has discussed a roughly $190 billion scenario for 2027 and expects growth at least comparable with 2026. Backlog exceeded $12 billion in August, supporting shipment visibility through 2027 and, in some cases, early 2028. KLA’s differentiated portfolio, operating leverage and capital-return framework support long-term earnings growth.
Applied Materials AMAT is receiving longer planning signals from customers as advanced semiconductor supply remains tight. Its largest customers are providing rolling eight-quarter forecasts, and some discussions now extend to 2030. AMAT has nearly doubled manufacturing space over the past several years and plans to double quarterly system output from current levels by 2028. It added more than 1,500 manufacturing and AGS support employees in the fiscal third quarter and is planning further capacity for demand through 2030. This visibility can improve supply-chain readiness and execution across customer ramps. It now expects advanced packaging revenue to grow more than 70% in 2026, up from its prior outlook of more than 50%.
ONTO Price Performance, Valuation and Estimates
ONTO’s shares have soared 141.2% in the past year compared with the Zacks Nanotechnology industry’s growth of 149%. The Zacks Computer and Technology sector and the S&P 500 composite have risen 32.1% and 21.3%, respectively, in the period.
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In terms of forward price/earnings, ONTO’s shares are trading at 26.89X, higher than the industry’s 5.4X.
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The Zacks Consensus Estimate for ONTO has moved up for both 2026 and 2027 over the past 60 days.
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Onto Innovation currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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