Semiconductor equipment stocks have been among the biggest beneficiaries of the AI boom, and Onto Innovation, Inc. ONTO is increasingly emerging as a compelling player in this space. The company’s flagship offerings — especially the Dragonfly G5 inspection platform and Atlas G6 metrology system — are gaining traction at a critical time when chipmakers are racing to scale advanced AI packaging and next-generation memory production.
The Dragonfly G5 is designed specifically for the increasing complexity of advanced semiconductor packaging used in AI accelerators, HBM and heterogeneous integration. Onto has secured a volume purchase agreement with an HBM customer for Dragonfly 2D and 3D bump metrology systems through 2027, valued at over $240 million, including more than $60 million for 3D systems. This agreement links Onto Innovation directly to the rapid growth of AI infrastructure, where HBM plays a vital role in enabling high-performance computing. With more than 15 applications across more than 10 customers, Dragonfly G5 has a strong growth outlook, driving both market share gains and expansion into new opportunities.
The bullish case strengthened further in April when Onto Innovation disclosed that the Dragonfly G5 had been qualified for 2.5D AI packaging applications. Management also noted that demand for the Dragonfly platform is now expected to grow more than 50% in 2026 from 2025. While Dragonfly G5 continues to capture investor focus, Atlas G6 may hold comparable long-term significance. Atlas G was selected by a second logic customer for gate-all-around metrology applications, positioning it to benefit from the semiconductor industry’s shift beyond FinFET architectures.
Adoption of Onto Innovation’s Atlas G6 is expanding across next-generation logic and DRAM applications, supported by competitive wins and new TSV metrology orders. With strength in logic, memory and improving NAND demand, the company expects advanced-nodes revenue growth of roughly 25% in 2026, outpacing broader wafer fabrication equipment (WFE) growth.
Competitive Pressure Dampening ONTO’s Growth Upside
KLA Corporation KLAC is benefiting from strong demand for leading-edge logic, HBM and advanced packaging. With healthy momentum in advanced packaging management, it now expects semiconductor process control revenue in the segment to rise from about $635 million in 2025 to nearly $1 billion in 2026, far exceeding prior forecasts. KLAC expects the semiconductor industry to witness an 11% CAGR through 2030, with the WFE market reaching roughly $215 billion. As process control becomes increasingly critical, the company believes it can continue outpacing broader wafer equipment market growth. However, extended U.S. export controls on China and tariff-related uncertainties pose concerns.
Applied Materials AMAT is riding on AI-driven semiconductor innovation, advanced packaging and market share gains in foundry logic. The emergence of data centers continues to be a major contributor to the company's top-line growth, with the growing demand for DRAM by cloud service providers. It is benefiting from AI-driven semiconductor advances, with leadership in GAA transistors, HBM, advanced packaging and silicon photonics expected to expand the WFE market and support long-term growth. AMAT is strengthening its advanced packaging leadership, driven by strong demand for hybrid bonding solutions, and expects the business to reach $3 billion in the coming years despite normalized HBM-related growth.
ONTO Price Performance, Valuation and Estimates
ONTO’s shares have soared 178.9% in the past year, outperforming the Zacks Nanotechnology industry’s growth of 176.3% as well as the Zacks Computer and Technology sector and the S&P 500 composite’s growth of 51.5% and 30.7%, respectively.
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In terms of forward price/earnings, ONTO’s shares are trading at 36.62X, higher than the industry’s 7.24X.
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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 sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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