ON Semiconductor Corporation

02/09/2026 | Press release | Distributed by Public on 02/09/2026 15:24

Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion in conjunction with our audited consolidated financial statements, including the notes thereto, which are included elsewhere in this Form 10-K. Management's Discussion and Analysis of Financial Condition and Results of Operations contains statements that are forward-looking. These statements are based on current expectations and assumptions that are subject to risk, uncertainties, and other factors and speak only as of the filing date. Actual results could differ materially because of the factors discussed in "Risk Factors" and elsewhere in this Form 10-K.
Executive Overview
This executive overview presents summarized information regarding our business and operating trends only. For further details, please read "Management's Discussion and Analysis of Financial Condition and Results of Operations" in its entirety.
onsemi Results
Our revenue for the year ended December 31, 2025 was $5,995.4 million, representing a decrease of 15.3% from $7,082.3 million for the year ended December 31, 2024. During 2025, we reported net income attributable to onsemi of $121.0 million compared to $1,572.8 million in 2024. Our operating income totaled $84.2 million during 2025 compared to $1,767.7 million during 2024. Our gross margin decreased by approximately 1,230 basis points to 33.1% in 2025 from 45.4% in 2024. Our operating results were significantly impacted by restructuring, asset impairment and other charges resulting from our 2025 Manufacturing Realignment Program. See Note 7: ''Restructuring, Asset Impairments and Other, net'' for additional information. We also continued to experience decreased demand in our automotive and industrial end-markets resulting in lower sales volumes and the corresponding underutilization of our manufacturing facilities. See discussion under "Results of Operations" for the reasons for the fluctuations year-over-year.
Business and Macroeconomic Environment
The semiconductor industry has traditionally been highly cyclical, and has often experienced significant downturns in connection with, or in anticipation of, declines in general economic conditions. During 2025, the semiconductor industry continued to experience a softening demand and uncertainty due to macroeconomic factors and the geopolitical environment. In this environment, we have focused on operational excellence and cash flow generation. Given the conditions, we are actively managing and have taken corrective actions in our manufacturing capacity and spending to align with the forecasted demand. We intend to continue these actions during 2026.
We continue to implement cost-saving initiatives to be able to align our overall cost structure, capital investments and other expenditures with our expected revenue, spending and capacity levels to help offset softening demand and increased manufacturing and operating costs. We have taken, and continue to take actions, including but not limited to, exiting product lines that do not enhance gross margin or satisfy strategic objectives. We made meaningful progress in aligning internal manufacturing capacity and resources to external demand.
See Note 7: ''Restructuring, Asset Impairments and Other, net'' in the notes to our audited consolidated financial statements included elsewhere in this Form 10-K for information relating to our most recent cost-saving initiatives.
Results of Operations
Comparison of the years ended December 31, 2025 and 2024
A discussion of our results of operations for the year ended December 31, 2025 compared to December 31, 2024 is included below.
Operating Results
The following table summarizes certain information relating to our operating results that has been derived from our audited consolidated financial statements (in millions):
Year ended December 31,
2025 2024 Change
Revenue $ 5,995.4 $ 7,082.3 $ (1,086.9)
Cost of revenue 4,011.5 3,866.2 145.3
Gross profit 1,983.9 3,216.1 (1,232.2)
Operating expenses:
Research and development 583.6 612.7 (29.1)
Selling and marketing 255.9 273.5 (17.6)
General and administrative 348.9 376.3 (27.4)
Amortization of intangible assets 44.4 52.0 (7.6)
Restructuring, asset impairments and other, net 666.9 133.9 533.0
Total operating expenses 1,899.7 1,448.4 451.3
Operating income 84.2 1,767.7 (1,683.5)
Other income (expense), net:
Interest expense (70.9) (62.3) (8.6)
Interest income 95.1 111.4 (16.3)
Other income, net 22.9 20.6 2.3
Other income (expense), net 47.1 69.7 (22.6)
Income before income taxes 131.3 1,837.4 (1,706.1)
Income tax provision (7.7) (262.8) 255.1
Net income 123.6 1,574.6 (1,451.0)
Less: Net income attributable to non-controlling interest (2.6) (1.8) (0.8)
Net income attributable to ON Semiconductor Corporation $ 121.0 $ 1,572.8 $ (1,451.8)
The following table summarizes certain information relating to our segment results (in millions):
2025 As a % of Total 2024 As a % of Total Dollar Change
Revenue:
PSG $ 2,805.1 46.8 % $ 3,348.2 47.3 % $ (543.1)
AMG 2,261.9 37.7 % 2,609.1 36.8 % (347.2)
ISG 928.4 15.5 % 1,125.0 15.9 % (196.6)
Total $ 5,995.4 100.0 % $ 7,082.3 100.0 % $ (1,086.9)
Cost of revenue:
PSG $ 2,117.6 52.8 % $ 1,963.8 50.8 % $ 153.8
AMG 1,105.4 27.6 % 1,302.8 33.7 % (197.4)
ISG 788.5 19.6 % 599.6 15.5 % 188.9
Total $ 4,011.5 100.0 % $ 3,866.2 100.0 % $ 145.3
Gross profit: (1)
PSG $ 687.5 24.5 % $ 1,384.4 41.3 % $ (696.9)
AMG 1,156.5 51.1 % 1,306.3 50.1 % (149.8)
ISG 139.9 15.1 % 525.4 46.7 % (385.5)
Total $ 1,983.9 33.1 % $ 3,216.1 45.4 % $ (1,232.2)
(1)Gross profit margin as a percent of respective segment revenue balances
Revenue
Revenue was $5,995.4 million and $7,082.3 million for 2025 and 2024, respectively. The decrease from 2024 to 2025 of $1,086.9 million, or 15.3%, was attributable primarily to lower sales volumes across all reportable segments, which are further explained below. We had one customer, a distributor, whose revenue accounted for approximately 11% and 10% of the total revenue for the years ended December 31, 2025 and 2024, respectively, with sales across all reportable segments.
Revenue from PSG
Revenue from PSG decreased by $543.1 million, or approximately 16.2%, during 2025 compared to 2024. This was driven by a decrease in revenue of $438.0 million and $120.2 million in the automotive and industrial end-markets, respectively, which was partially offset by increased revenue of $15.1 million in other end-markets which include AI data centers.
Revenue from AMG
Revenue from AMG decreased by $347.2 million, or approximately 13.3%, during 2025 compared to 2024. This was driven by decreases in revenue of $204.1 million and $161.5 million in the automotive and other end-markets, respectively, which was partially offset by an increase of $18.4 million within the industrial end-market. The decrease in the other end-market primarily related to the reduction of manufacturing services revenue at our EFK location.
Revenue from ISG
Revenue from ISG decreased by $196.6 million, or approximately 17.5%, during 2025 compared to 2024. This was driven by decreases in revenue of $177.9 million and $24.2 million in the automotive and industrial end-markets respectively, which was partially offset by increased revenue of $5.5 million in other end-markets.
Revenue by Geographic Location
Revenue by geographic location, based on sales billed from the respective country or region, was as follows (dollars in millions):
2025
As a % of
Revenue (1)
2024
As a % of
Revenue (1)
Hong Kong $ 1,634.8 27.3 % $ 1,779.3 25.1 %
United Kingdom 1,347.0 22.5 % 1,637.8 23.1 %
Singapore 1,252.4 20.9 % 1,733.2 24.5 %
United States 1,230.6 20.5 % 1,307.5 18.5 %
Other 530.6 8.8 % 624.5 8.8 %
Total Revenue $ 5,995.4 $ 7,082.3
(1)Certain of the amounts may not total due to rounding of individual amounts.
Gross Profit and Gross Margin
Gross profit was $1,983.9 million and $3,216.1 million for 2025 and 2024, respectively, representing a decrease of $1,232.2 million or approximately 38.3%. We recorded excess and obsolete inventory charges of $268.2 million, of which $230.3 million related to inventory primarily considered work in progress within the ISG reportable segment, as a result of changes in business strategy due to the 2025 Manufacturing Realignment Program. See Note 7: ''Restructuring, Asset Impairments and Other, net'' for additional information. We also continued to experience a decline in sales volume across end-markets.
Our gross margin decreased by 12.3 percentage points from 45.4% for the year ended December 31, 2024 to 33.1% for the year ended December 31, 2025, primarily due to the impact of the factors explained in the segment gross margin sections below.
PSG gross profit decreased by $696.9 million, primarily driven by the decline in sales volume in the automotive and industrial end-markets. Also contributing to the decrease in gross profit was the $43.9 million write-off of consumables and manufacturing supplies associated with the manufacturing capacity reduction actions taken under the 2025 Manufacturing Realignment Program. PSG gross margin decreased by 16.8 percentage points to 24.5% from 41.3%, primarily as a result of the decline in sales volume, underutilization of our manufacturing facilities, the related impact of unfavorable product mix, and the impact of the consumables and manufacturing supplies write-off discussed above.
AMG gross profit decreased by $149.8 million, primarily driven by the decline in sales volume in the automotive and industrial end-markets. AMG gross margin increased by 1.0 percentage point to 51.1% from 50.1%, primarily due to the reduction in the lower-margin manufacturing services revenue at our EFK location.
ISG gross profit decreased by $385.5 million, primarily driven by the $230.3 million excess and obsolete inventory charges discussed above. The decline in sales volume in the automotive and industrial end-markets also added to the decrease. ISG gross margin decreased 31.6 percentage points to 15.1% from 46.7%, primarily due to the excess and obsolete inventory charges resulting from certain strategy changes in connection with the 2025 Manufacturing Realignment Program.
Operating Expenses
Research and Development
Research and development expenses were $583.6 million and $612.7 million, or approximately 10% and 9% of revenue for 2025 and 2024, respectively, representing a decrease of $29.1 million, or approximately 5% year-over-year. The decrease was primarily due to a decrease in production supplies, outside services and payroll-related expenses as a result of the restructuring program.
Selling and Marketing
Selling and marketing expenses were $255.9 million and $273.5 million, or approximately 4% of revenue for both 2025 and 2024, representing a decrease of $17.6 million, or approximately 6% year-over-year. The decrease was primarily related to a decrease in payroll-related expenses as a result of the restructuring program.
General and Administrative
General and administrative expenses were $348.9 million and $376.3 million, or approximately 6% and 5% of revenue for 2025 and 2024, respectively, representing a decrease of $27.4 million, or approximately 7% year-over-year. The decrease was primarily due to a decrease in consulting fees and payroll-related expenses as a result of the restructuring program.
Other Operating Expenses
Amortization of Intangible Assets
Amortization of intangible assets was $44.4 million and $52.0 million for 2025 and 2024, respectively, representing a decrease of $7.6 million, or approximately 15%, year-over-year due to previously acquired assets becoming fully amortized during 2025.
Restructuring, Asset Impairments and Other Charges, net
Restructuring, asset impairments and other charges, net was $666.9 million and $133.9 million for 2025 and 2024, respectively, representing an increase of $533.0 million. Amounts incurred during 2025 primarily represent severance and asset impairment charges associated with the 2025 Manufacturing Realignment Program. Charges in 2024 related primarily to the 2024 business realignment efforts. For additional information, see Note 7: ''Restructuring, Asset Impairments and Other, net'' in the notes to our audited consolidated financial statements included elsewhere in this Form 10-K.
Other Income and Expenses
Interest Expense
Interest expense increased by $8.6 million, or approximately 14%, to $70.9 million during 2025 compared to $62.3 million in 2024. Our average gross amount of long-term debt balance during 2025 and 2024 was $3,379.9 million and $3,379.9 million, respectively. Interest expense increased due to an increase in our average interest rate on our long-term debt. Our weighted average interest rate was 2.1% and 1.8% per annum in 2025 and 2024, respectively.
Interest income
Interest income decreased by $16.3 million, or approximately 15%, to $95.1 million during 2025 compared to $111.4 million in 2024, primarily attributable to lower interest rates on cash and cash equivalents and short-term investments.
Other income, net
Other income, net was $22.9 million and $20.6 million in 2025 and 2024, respectively. The increase was primarily driven by slightly higher dividend income in 2025.
Income Tax Provision
We recorded an income tax provision of $7.7 million and $262.8 million in 2025 and 2024, respectively, representing effective tax rates of 5.9% and 14.3%. The change in the effective tax rate was primarily driven by lower income before income taxes, which increased the rate impact of discrete items.
For additional information, see Note 16: ''Income Taxes'' in the notes to the audited consolidated financial statements included elsewhere in this Form 10-K.
Comparison of the years ended December 31, 2024 and 2023
A discussion of our results of operations for the year ended December 31, 2024 compared to December 31, 2023 is included below.
Operating Results
The following table summarizes certain information relating to our operating results that has been derived from our audited consolidated financial statements (in millions):
Year ended December 31,
2024 2023 Change
Revenue $ 7,082.3 $ 8,253.0 $ (1,170.7)
Cost of revenue 3,866.2 4,369.5 (503.3)
Gross profit 3,216.1 3,883.5 (667.4)
Operating expenses:
Research and development 612.7 577.3 35.4
Selling and marketing 273.5 279.1 (5.6)
General and administrative 376.3 362.4 13.9
Amortization of intangible assets 52.0 51.1 0.9
Restructuring, asset impairments and other, net 133.9 74.9 59.0
Total operating expenses 1,448.4 1,344.8 103.6
Operating income 1,767.7 2,538.7 (771.0)
Other income (expense), net:
Interest expense (62.3) (74.8) 12.5
Interest income 111.4 93.1 18.3
Loss on debt refinancing and prepayment - (13.3) 13.3
Loss on divestiture of businesses - (0.7) 0.7
Other income (expense), net 20.6 (7.2) 27.8
Other income (expense), net 69.7 (2.9) 72.6
Income before income taxes 1,837.4 2,535.8 (698.4)
Income tax provision (262.8) (350.2) 87.4
Net income 1,574.6 2,185.6 (611.0)
Less: Net income attributable to non-controlling interest (1.8) (1.9) 0.1
Net income attributable to ON Semiconductor Corporation $ 1,572.8 $ 2,183.7 $ (610.9)
The following table summarizes certain information relating to our segment results (in millions):
2024 As a % of Total 2023 As a % of Total Dollar Change
Revenue:
PSG $ 3,348.2 47.3 % $ 3,880.4 47.0 % $ (532.2)
AMG 2,609.1 36.8 % 3,057.1 37.0 % (448.0)
ISG 1,125.0 15.9 % 1,315.5 16.0 % (190.5)
Total $ 7,082.3 100.0 % $ 8,253.0 100.0 % $ (1,170.7)
Cost of revenue:
PSG $ 1,963.8 50.8 % $ 2,058.5 47.1 % $ (94.7)
AMG 1,302.8 33.7 % 1,635.8 37.4 % (333.0)
ISG 599.6 15.5 % 675.2 15.5 % (75.6)
Total $ 3,866.2 100.0 % $ 4,369.5 100.0 % $ (503.3)
Gross profit: (1)
PSG $ 1,384.4 41.3 % $ 1,821.9 47.0 % $ (437.5)
AMG 1,306.3 50.1 % 1,421.3 46.5 % (115.0)
ISG 525.4 46.7 % 640.3 48.7 % (114.9)
Total $ 3,216.1 45.4 % $ 3,883.5 47.1 % $ (667.4)
(1)Gross profit margin as a percent of respective segment revenue balances.
Revenue
Revenue was $7,082.3 million and $8,253.0 million for 2024 and 2023, respectively. The decrease from 2023 to 2024 of $1,170.7 million, or 14.2%, was attributable primarily to lower sales volumes across all segments, which are further explained below. We had one customer, a distributor, whose revenue accounted for approximately 10% of our total revenue for the year ended December 31, 2024, with sales across all reportable segments. There was no customer whose revenue exceeded 10% of total revenue for the year ended December 31, 2023.
Revenue from PSG
Revenue from PSG decreased by $532.2 million, or approximately 13.7%, during 2024 compared to 2023. This was driven by a decrease in revenue of $168.3 million, $267.7 million and $96.2 million in the automotive, industrial and other end-markets, respectively.
Revenue from AMG
Revenue from AMG decreased by $448.0 million, or approximately 14.7%, during 2024 compared to 2023. This was driven by a decrease in revenue of $182.3 million, $119.7 million and $146.0 million in the automotive, industrial and other end-markets, respectively. The decrease in the other end-market primarily relates to the reduction of manufacturing services revenue at our EFK location.
Revenue from ISG
Revenue from ISG decreased by $190.5 million, or approximately 14.5%, during 2024 compared to 2023. This was driven by a decrease in revenue of $68.5 million, $90.2 million and $31.8 million in the automotive, industrial and other end-markets, respectively.
Revenue by Geographic Location
Revenue by geographic location, based on sales billed from the respective country or region, was as follows (dollars in millions):
2024
As a % of
Revenue (1)
2023
As a % of
Revenue (1)
Hong Kong $ 1,779.3 25.1 % $ 2,168.6 26.3 %
Singapore 1,733.2 24.5 % 1,938.8 23.5 %
United Kingdom 1,637.8 23.1 % 1,753.4 21.2 %
United States 1,307.5 18.5 % 1,573.7 19.1 %
Other 624.5 8.8 % 818.5 9.9 %
Total Revenue $ 7,082.3 $ 8,253.0
(1)Certain of the amounts may not total due to rounding of individual amounts.
Gross Profit and Gross Margin
Gross profit was $3,216.1 million and $3,883.5 million for 2024 and 2023, respectively, representing a decrease of $667.4 million or approximately 17.2%.
Our gross margin decreased by 1.7 percentage points from 47.1% for the year ended December 31, 2023 to 45.4% for the year ended December 31, 2024, primarily due to the impact of the factors explained in the segment gross margin sections below.
PSG gross profit decreased by $437.5 million, primarily driven by the decline in sales volume in the automotive and industrial end-markets. PSG gross margin decreased by 5.7 percentage points to 41.3% from 47.0%, primarily as a result of the decline in volume, underutilization of our manufacturing facilities, and the related impact of unfavorable product mix.
AMG gross profit decreased by $115.0 million, primarily driven by the decline in sales volume in the automotive, industrial, and other end-markets. AMG gross margin increased by 3.6 percentage points to 50.1% from 46.5%, primarily due to the reduction in the lower-margin manufacturing services revenue at our EFK location.
ISG gross profit decreased by $114.9 million, primarily driven by the decline in sales volume in the automotive and industrial end-markets. ISG gross margin decreased 2.0 percentage points to 46.7% from 48.7%, primarily driven by lower sales volumes and the related impact of unfavorable product mix.
Operating Expenses
Research and Development
Research and development expenses were $612.7 million and $577.3 million, or approximately 9% and 7% of revenue for 2024 and 2023, respectively, representing an increase of $35.4 million, or approximately 6% year-over-year. The increase was primarily due to an increase in payroll-related expenses and production supplies, partially offset by a decrease in variable compensation.
Selling and Marketing
Selling and marketing expenses were $273.5 million and $279.1 million, or approximately 4% and 3% of revenue for 2024 and 2023, respectively, representing a decrease of $5.6 million, or approximately 2% year-over-year. The decrease was primarily related to a decrease in sales commissions and variable compensation.
General and Administrative
General and administrative expenses were $376.3 million and $362.4 million, or approximately 5% and 4% of revenue for 2024 and 2023, respectively, representing an increase of $13.9 million, or approximately 4% year-over-year. The increase was primarily due to increased consulting fees associated with information technology initiatives partially offset by a decrease in the bad debt provision with a strategic business partner which was recorded in the prior year.
Other Operating Expenses
Amortization of Intangible Assets
Amortization of acquisition-related intangible assets was $52.0 million and $51.1 million for 2024 and 2023, respectively, representing an increase of $0.9 million, or approximately 2%, year-over-year. Expenses were consistent between periods as there were no significant acquisitions or divestitures.
Restructuring, Asset Impairments and Other Charges, net
Restructuring, asset impairments and other charges, net was $133.9 million and $74.9 million for 2024 and 2023, respectively, representing an increase of $59.0 million. Amounts incurred during 2024 primarily represent severance and asset impairment charges associated with the 2024 business realignment efforts. Charges in 2023 related primarily to the business realignment efforts during 2023. For additional information, see Note 7: ''Restructuring, Asset Impairments and Other Charges, net'' in the notes to our audited consolidated financial statements included elsewhere in this Form 10-K.
Other Income and Expenses
Interest Expense
Interest expense decreased by $12.5 million, or approximately 17%, to $62.3 million during 2024 compared to $74.8 million in 2023. The decrease was primarily due to the pay down of higher variable-rate debt and replacement by the 0.50% Notes in 2023. Our average gross amount of long-term debt balance (including current maturities) during 2024 and 2023 was $3,379.9 million and $3,304.1 million, respectively. Our weighted average interest rate on our gross amount of long-term debt (including current maturities) was 1.8% and 2.3% per annum in 2024 and 2023, respectively.
Interest income
Interest income increased by $18.3 million, or approximately 20%, to $111.4 million during 2024 compared to $93.1 million in 2023, primarily due to higher interest rates and increased balances in interest-bearing accounts.
See "Key Financing and Capital Events" below and Note 9: ''Long-Term Debt'' in the notes to our audited consolidated financial statements included elsewhere in this Form 10-K for a description of our indebtedness and our refinancing activities.
Loss on Debt Refinancing and Prepayment
There were no debt refinancing or prepayment transactions during 2024. We recorded a loss on debt refinancing and prepayment of $13.3 million during 2023 due to the write-off relating to the repayment of the Term Loan "B" Facility. See "Key Financing and Capital Events" below and Note 9: ''Long-Term Debt'' in the notes to our audited consolidated financial statements included elsewhere in this Form 10-K for a description of our indebtedness and our refinancing activities.
Other income (expense), net
Other income (expense), net was income of $20.6 million in 2024, compared to expense of $7.2 million in 2023. We received $9.5 million of dividend income in 2024 with no corresponding amounts in 2023. Actuarial gains on pension plans were $12.2 million in 2024 compared to losses of $4.0 million during 2023 and fluctuations in foreign currencies resulting in increased transaction gains.
Income Tax Provision
We recorded an income tax provision of $262.8 million and $350.2 million in 2024 and 2023, respectively, representing effective tax rates of 14.3% and 13.8%.
For additional information, see Note 16: ''Income Taxes'' in the notes to the audited consolidated financial statements included elsewhere in this Form 10-K.
Liquidity and Capital Resources
Overview
Our principal sources of liquidity are cash on hand, cash generated from operations, available borrowings under our Revolving Credit Facility as well as new debt and/or equity issuances. In the near term, we expect to fund our cash requirements by utilizing any or a combination of these principal sources. Our cash and cash equivalents and short-term investments were approximately $2,147.6 million and $400.0 million, respectively, as of December 31, 2025 and our Revolving Credit Facility had approximately $1.5 billion available for future borrowings as of December 31, 2025.
We require cash to: (i) fund our operating expenses, working capital requirements, outlays for strategic acquisitions and investments; (ii) service our debt, including principal and interest; (iii) incur capital expenditures; and (iv) repurchase our common stock. During the ordinary course of business, we evaluate our cash requirements and, if necessary, adjust our expenditures to reflect the current market conditions and our projected sales and demand. Future capital expenditures may be impacted by events and transactions that are not currently forecasted.
We believe that the key factors that could adversely affect our internal and external sources of cash include:
•changes in demand for our products, competitive pricing pressures, supply chain constraints, effective management of our manufacturing capacity, our ability to achieve further reductions in operating expenses, our ability to make progress on the achievement of our business strategy and sustainability goals, the impact of our restructuring programs on our production and cost efficiency and our ability to make the research and development expenditures required to remain competitive in our business; and
•the debt and equity capital markets could impact our ability to obtain needed financing on acceptable terms or to respond to business opportunities and developments as they arise, including interest rate fluctuations, macroeconomic conditions, sudden reductions in the general availability of lending from banks or the related increase in cost to obtain bank financing and our ability to maintain compliance with covenants under our debt agreements in effect from time to time.
Sources and Uses of Cash
The following are the significant sources and uses of cash during 2025:
•Cash flows from operating activities of $1,759.8 million.
•Payments for property, plant & equipment of $341.2 million.
•Repurchases of approximately 27.9 million shares of common stock for an aggregate purchase price of approximately $1,375 million under the Share Repurchase Program.
•Repayment of $375.0 million of borrowings on the Revolving Credit Facility.
Operating Activities
Our long-term cash generation is dependent on our ability to generate cash from our operations. Our cash flows from operating activities were $1,759.8 million, $1,906.4 million and $1,977.5 million for the years ended December 31, 2025, 2024 and 2023, respectively. Our operating cash flows for the year ended December 31, 2025 decreased by $146.6 million, or 7.7%, compared to the year ended December 31, 2024 and was primarily attributable to a reduction in net income driven by lower end-market demand for our products partially offset by the timing of cash receipts and payments related to working capital balances.
Our ability to maintain positive operating cash flows is dependent on, among other factors, our success in achieving our revenue goals and meeting manufacturing and operating cost targets. Management of our assets and liabilities, including both working capital and long-term assets and liabilities, also influences our operating cash flows.
Investing Activities
Our cash flows used in investing activities were $538.5 million, $1,009.8 million and $1,737.9 million for the years ended December 31, 2025, 2024, and 2023, respectively. The decrease of $471.3 million for the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily attributable to a significant decrease in capital expenditures, the net impact of purchases and maturities of short-term investments. During the years ended December 31, 2025, 2024, and 2023, we paid $341.2 million, $694.0 million and $1,539.1 million, respectively, for capital expenditures. Cash paid towards capital expenditures as a percent of revenue for the years ended December 31, 2025, 2024, and 2023 was approximately 6%, 10%, and 19%, respectively. In 2026, based on current plans, we expect capital expenditures to be approximately 5% of revenue.
Financing Activities
Our cash flows used in financing activities were $1,763.8 million, $683.8 million and $686.5 million for the years ended December 31, 2025, 2024 and 2023, respectively. We used cash to repay $375.0 million of borrowings on the Revolving Credit Facility and for share repurchases of $1,377.6 million for the year ended December 31, 2025 compared to $654.1 million in 2024.
In November 2025, the Board of Directors approved a New Share Repurchase Program under which the Company may repurchase up to an aggregate of $6.0 billion of the Company's common stock (exclusive of fees, commissions and other expenses). Under the New Share Repurchase Program, which does not require the Company to purchase any minimum amount of common stock or at all, the Company may repurchase shares from January 1, 2026 through December 31, 2028.
Through February 4, 2026, we acquired 2.9 million shares for $175.6 million under the New Share Repurchase Program, subject to a 10b5-1 trading arrangement. We expect to continue to opportunistically repurchase our shares of common stock under our New Share Repurchase Program subject to market conditions, the price of our shares and other factors (including liquidity needs). The New Share Repurchase Program may be modified, suspended or terminated by the Board of Directors at any time without prior notice.
See Part I, Item 1A "Risk Factors" included elsewhere in this Form 10-K for additional information related to liquidity matters.
Debt
As of December 31, 2025, we were in compliance with the indentures relating to our 0% Notes, 0.50% Notes and 3.875% Notes and with the financial covenants included in the Credit Agreement. The 0% Notes, 0.50% Notes and 3.875% Notes are senior to the existing and future subordinated indebtedness of onsemi and its guarantor subsidiaries, rank equally in right of payment to all of our existing and future senior debt and, as unsecured obligations, are subordinated to all of our existing and future secured debt to the extent of the assets securing such debt. Failure to comply with any of our covenants or any other terms of our Credit Agreement could result in higher interest rates in our borrowings or the acceleration of the maturities of our outstanding debt. In order to remain in compliance with the various financial covenants contained in our debt agreements and to fund working capital, our capital expenditures and business development efforts will depend on our ability to generate cash from operating activities, which is subject to, among other things, our future operating performance, as well as financial, competitive, legislative, regulatory and other conditions, some of which may be beyond our control.
As of December 31, 2025, there was outstanding $804.9 million aggregate principal amount of the 0% Notes, $1,500.0 million aggregate principal amount of the 0.50% Notes and $700.0 million aggregate principal amount of 3.875% Notes. As noted above, we repaid $375.0 million for borrowings on the Revolving Credit Facility during 2025 and had approximately $1.5 billion available for future borrowings as of December 31, 2025. The associated interest expense related to our indebtedness will continue to have a significant impact on our results of operations.
See Note 9: ''Long-Term Debt'' in the notes to our audited consolidated financial statements included elsewhere in this Form 10-K for additional information.
Key Financing and Capital Events
Overview
We continually evaluate our debt and capital structure and, when appropriate, we have completed various measures to secure liquidity, repurchase shares of our common stock, reduce interest costs, amend or replace existing key financing arrangements and, in some cases, extend a portion of our debt maturities to continue to provide us additional operating flexibility.
2025 Financing Events
•Repayment of $375.0 million of borrowings on the Revolving Credit Facility.
•Repurchases of approximately 27.9 million shares of common stock for an aggregate purchase price of approximately $1,375 million, excluding fees, commissions, and excise tax, under the Share Repurchase Program.
2024 Financing Events
•Repurchases of approximately 9.1 million shares of common stock for an aggregate purchase price of approximately $650 million under the Share Repurchase Program.
2023 Financing Events
•Issuance of $1.5 billion of 0.50% Notes on February 28, 2023, the net proceeds of which were used to repay $1,086.0 million of the existing indebtedness under the Term Loan "B" Facility, the related transaction fees and expenses and to pay approximately $171.5 million net cost of the related convertible note hedges.
•Entering into a new Credit Agreement consisting of a $1.5 billion Revolving Credit Facility and draw-down of $375.0 million to repay the entire outstanding balance under the Revolver due 2024 in the second quarter of 2023.
•Repurchases of approximately 7.6 million shares of common stock for an aggregate purchase price of approximately $564 million under the Share Repurchase Program.
•Repayment of the 1.625% Notes amounting to $119.6 million in cash upon maturity and issuance of approximately 4.5 million shares of common stock to settle the excess over the principal.
See Note 9: ''Long-Term Debt'' in the notes to our audited consolidated financial statements included elsewhere in this Form 10-K for additional information.
Critical Accounting Policies and Estimates
The accompanying discussion and analysis of our financial condition and results of operations is based upon our audited consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. We believe certain of our accounting policies are critical to understanding our financial position and results of operations. We utilize the following critical accounting policies in the preparation of our financial statements. In addition to our critical accounting policies below, see Note 2: ''Significant Accounting Policies'' in the notes to our audited consolidated financial statements included elsewhere in this Form 10-K.
Use of Estimates.The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements and the reported amount of revenue and expenses during the reporting period. We evaluate these estimates and judgments on an ongoing basis and base our estimates on experience, current and expected future conditions, third-party evaluations and various other assumptions that we believe are reasonable under the circumstances. Significant estimates have been used by management in conjunction with the following: (i) calculation of future payouts for customer incentives and amounts subject to allowances and returns; (ii) valuation and obsolescence relating to inventories; (iii) measurement of valuation allowances against deferred tax assets, and evaluations of uncertain tax positions; (iv) assumptions used in business combinations and the valuation of assets held-for-sale; and (v) testing for impairment of long-lived assets and goodwill. Actual results may differ from the estimates and assumptions used in the consolidated financial statements.
Revenue Recognition.We generate revenue from sales of our semiconductor products to direct customers and distributors. We also generate revenue, to a much lesser extent, from product development agreements and manufacturing services provided to customers. We apply a five-step approach in determining the amount and timing of revenue to be recognized: (i) identifying the contract with a customer; (ii) identifying the performance obligations in the contract; (iii) determining the transaction price; (iv) allocating the transaction price to the performance obligations in the contract; and (v) recognizing revenue when the performance obligation is satisfied. We allocate the transaction price to each distinct product based on its relative stand-alone selling price. In determining the transaction price, we evaluate whether the price is subject to refund or adjustment to determine the net consideration to which we expect to be entitled.
We recognize revenue when we satisfy a performance obligation in an amount reflecting the consideration to which we expect to be entitled. Substantially all of our revenue is recognized at the time control of the products transfers to the customer. For sales agreements, we have identified the promise to transfer products, each of which is distinct, to be the performance obligation. For product development agreements, we have identified the completion of a service defined in the agreement to be the performance obligation. We recognize revenue from manufacturing services when we satisfy the performance obligation by transferring the promised goods or services to the customer. Depending on the terms of the applicable contractual agreement with the customer, revenue is recognized at the point in time when the customer obtains control of the promised goods or service, or over time when the created asset has no alternate use to us and there is an enforceable right to payment for the performance to date.
Sales to certain distributors, primarily those with ship and credit rights, can be subject to price adjustment on certain products. We develop an estimate of their expected claims under the ship and credit program based on the historical claims data submitted by product and customer and expected future claims, which requires the use of estimates and assumptions related to the amount of each claim as well as the historical period used to develop the estimate. Although payment terms vary, most distributor agreements require payment within 30 days.
Our direct customers do not have the right to return products other than pursuant to the provisions of our standard warranty. Sales to distributors, however, are typically made pursuant to agreements that provide return rights and stock rotation provisions permitting limited levels of product returns. Provisions for discounts and rebates to customers, estimated returns and allowances, ship and credit claims and other adjustments are provided for in the same period the related revenue is recognized, and are netted against revenue. For non-quality related returns, we recognize a related asset for the right to recover returned products with a corresponding reduction to cost of goods sold. Payment terms for direct customers generally require payment within 30 days but can extend up to 90 days. We record a reserve for cash discounts as a reduction to accounts receivable and a reduction to revenue, based on the experience with each customer.
Inventories.We carry our inventories at the lower of standard cost (which approximates actual cost on a first-in, first-out basis) or net realizable value and record provisions for potential excess and obsolete inventories based upon a regular analysis of inventory on hand compared to historical and projected end-user demand. The determination of projected end-user demand requires updated assumptions regarding customer requirements, market conditions, product transition plans, projected unit sales, and impacts from restructuring-related strategic changes. These provisions can influence our results from operations. For example, when demand falls for a given part, all or a portion of the related inventory that is considered to be in excess of anticipated demand is reserved, impacting our cost of revenue and gross profit. The majority of product inventory that has been previously reserved is ultimately discarded. Although we do sell some products that have previously been written down, such sales have historically been consistently insignificant and the related impact on our margins has also been insignificant.
Income Taxes.Income taxes are accounted for using the asset and liability method. Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which these temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided for those deferred tax assets for which we cannot conclude that it is more likely than not that such deferred tax assets will be realized.
In determining the amount of the valuation allowance, estimated future taxable income, feasible tax planning strategies, future reversals of existing temporary differences and taxable income in prior carryback years, if a carryback is permitted, are considered. If we determine it is more likely than not that all or a portion of the remaining deferred tax assets will not be realized, the valuation allowance will be increased with a charge to income tax expense. Conversely, if we determine it is more likely than not to be able to utilize all or a portion of the deferred tax assets for which a valuation allowance has been provided, the related portion of the valuation allowance will be recorded as a reduction to income tax expense.
We recognize and measure benefits for uncertain tax positions using a two-step approach. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that the tax positions will be sustained upon audit, including resolution of any related appeals or litigation processes. For tax positions that are more likely than not to be sustained upon audit, the second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon settlement. No tax benefit is recognized for tax positions that are not more likely than not to be sustained. Our practice is to recognize interest and/or penalties related to income tax matters in income tax expense. Significant judgment is required to evaluate uncertain tax positions. Evaluations are based upon a number of factors, including changes in facts or circumstances, changes in tax law, correspondence with tax authorities during the course of tax audits and effective settlement of audit issues. Changes in the recognition or measurement
of uncertain tax positions could result in material increases or decreases in income tax expense in the period in which the change is made, which could have a material impact on our effective tax rate.
Business Combinations.We use estimates and assumptions in allocating the purchase price of acquired businesses by utilizing established valuation techniques appropriate for the technology industry to record the acquired assets and liabilities at fair value. We utilize the income approach, cost approach or market approach, depending upon which approach is the most appropriate based on the nature and reliability of available data. If the income approach is used, the fair value determination is predicated upon the value of the future cash flows that an asset is expected to generate over its economic life and involves significant assumptions as to cash flows, associated expenses, long-term growth rates and discount rates. The cost approach takes into account the cost to replace (or reproduce) the asset and involves assumptions relating to the asset's value of physical, functional and/or economic obsolescence that has occurred with respect to the asset. The market approach is used to estimate value from an analysis of actual transactions or offerings for economically comparable assets available as of the valuation date. Determining the fair value of acquired technology assets is judgmental in nature and requires the use of significant estimates and assumptions, including the discount rate, revenue growth rates, projected gross margins, and estimated research and development expenses.
Impairment of Goodwill and Long-Lived Assets:
Goodwill
We evaluate our goodwill for potential impairment annually during the fourth quarter and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. Our impairment evaluation consists of a qualitative assessment, and if deemed necessary, a quantitative test is performed which compares the fair value of a reporting unit with its carrying amount, including goodwill.
Determining the fair value of our reporting units is subjective in nature and involves the use of significant estimates and assumptions, including projected net cash flows, discount and long-term growth rates. We determine the fair value of our reporting units based on an income approach, whereby the fair value of the reporting unit is derived from the present value of estimated future cash flows. The assumptions about estimated cash flows include factors such as future revenue, gross profit, operating expenses, and industry trends. We consider historical rates and current market conditions when determining the discount and long-term growth rates to use in our analysis. We consider other valuation methods, such as the cost approach or market approach, if it is determined that these methods provide a more representative approximation of fair value.
Long-Lived Assets Held and Used
We evaluate the recoverability of the carrying amount of long-lived assets whenever events or changes in circumstances indicate that the carrying value of an asset group may not be fully recoverable. For assets to be held and used, we group a long-lived asset or assets with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Estimates of future cash flows used to test the recoverability of a long-lived asset group include only the future cash flows that are directly associated with and that are expected to arise as a direct result of the use and eventual disposition of the asset group. A potential impairment charge is evaluated when the undiscounted expected cash flows derived from an asset group are less than its carrying amount. Impairment losses, if applicable, are measured as the amount by which the carrying value of an asset group exceeds its fair value. Judgment is used when applying these impairment rules to determine the timing of the impairment test, the undiscounted cash flows used to assess impairments and the fair value of the asset group.
Assets Held-for-Sale
We classify assets as held-for-sale in the period when all of the following conditions are met: (i) management, having the authority to approve the action, commits to a plan to sell the assets; (ii) the assets are available for immediate sale in their present condition subject only to terms that are usual and customary for sales of such assets; (iii) an active program to locate a buyer and other actions required to complete the plan to sell the assets have been initiated; (iv) the sale of the assets is probable, and transfer of the assets is expected to qualify for recognition as a completed sale within one year, except if events or circumstances beyond our control extend the period of time required to sell the assets beyond one year; (v) the assets are being actively marketed for sale at a price that is reasonable in relation to their current fair value; and (vi) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. The Company evaluates the probability of sale within one year, considering current market conditions for semiconductor equipment and the status of active marketing efforts. If disposal does not occur within 12 months, the Company reassesses whether delays are caused by factors outside its control.
The assets that are classified as held-for-sale are initially measured at the lower of their carrying value or fair value less any costs to sell. The determination of the fair value less costs to sell may require management to make judgments on significant estimates and assumptions including, but not limited to, indicative sales values, current market conditions and available data for transactions for similar assets. We may use third-party valuation specialists to assist in the determination of such estimates. Any impairment loss resulting from this measurement is recorded in Restructuring, asset impairments and other, net on the Consolidated Statements of Operations and the assets held-for-sale are recorded as a separate line within the Consolidated Balance Sheets. Gains or losses are not recognized on assets held-for-sale until the sale date, when control transfers to the counterparty.
Contingencies.We are involved in a variety of legal matters that arise in the normal course of business. Based on the available information, we evaluate the relevant range and likelihood of potential outcomes and we record the appropriate liability when the amount is deemed probable and reasonably estimable.
Recent Accounting Pronouncements
For a discussion of recent accounting pronouncements, see Note 4: ''Recent Accounting Pronouncements and Other Developments'' in the notes to our audited consolidated financial statements included elsewhere in this Form 10-K.
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