How is Onto Innovation Capitalizing on Advanced Packaging Demand?
Onto Innovation Inc.ONTO is capitalizing on rising advanced packaging demand by expanding its inspection and metrology portfolio, accelerating new product adoption and strengthening its position across high-performance AI compute applications. On the last earnings call, management highlighted that strong demand for AI compute is driving momentum across both front-end and advanced packaging, contributing to first-quarter revenue that exceeded its original guidance and supporting expectations for continued growth throughout 2026.
Management also expects customer expansions, new product adoption and a growing backlog to sustain this momentum. The company believes its broad optical process control portfolio provides customers with actionable manufacturing intelligence that supports increasingly complex packaging requirements.
A major contributor to this strategy is the qualification and adoption of the Dragonfly G5 inspection system at a leading 2.5D logic customer, following earlier wins in high-bandwidth memory for both 2D inspection and 3D metrology. Onto Innovation stated that the new platform delivers improved sensitivity, high throughput and the flexibility of multiple sensors, creating a differentiated value proposition for customers. Shipments are running ahead of plan, while the company is actively engaging with new customers and applications. With more than 15 distinct applications across over 10 customers in the pipeline, management views Dragonfly G5 as an opportunity to gain share in existing markets while expanding into new ones.
Onto Innovation is also benefiting from advanced packaging trends, with rising 3DI adoption, growing OSAT orders and JetStep qualification for panel-level packaging amid increasing AI-driven demand.
Management expects advanced packaging revenue to grow more than 50% in 2026, supported by contributions from both established and emerging products. While Dragonfly G5 currently represents a relatively small portion of advanced packaging revenue, the platform is ramping steadily, with shipments expected to nearly double each quarter throughout the year. The company also indicated that demand for the Dragonfly G3 continues to increase.
Additionally, Onto Innovation sees growing opportunities in surface charge metrology as chiplet architectures become more mainstream, as well as in panel-level packaging solutions through JetStep and Firefly, reflecting expanding demand across multiple advanced packaging technologies.
Taking a Look at ONTO’s Competitors
Applied MaterialsAMAT is benefiting from AI-driven demand that is shifting wafer fabrication equipment spending toward leading-edge foundry-logic, DRAM and advanced packaging, where it holds leading process positions. Applied Materials expects its packaging revenues to grow more than 50% in calendar 2026, with investments shifting toward its leadership positions in 3D stacking. This outlook is reinforced by Applied Materials’ intent to acquire NEXX, which would add panel-level electrochemical deposition capabilities and broaden its portfolio for larger-body AI accelerator packages. Management framed packaging as one of the most enabling parts of AI compute systems, which can extend the duration of packaging investment beyond a single memory build cycle.
KLA CorporationKLAC continues to benefit from AI-driven spending in leading-edge foundry/logic, high-bandwidth memory and advanced packaging, supporting market share gains in process control and steady services growth that helps anchor cash generation. Management expects its semiconductor process control advanced packaging portfolio revenue to grow from about $635 million in 2025 to about $1 billion in 2026, and it sees the wafer equipment market, including advanced packaging, exceeding $140 billion in 2026 with faster growth in 2027. For the fourth quarter of fiscal 2026, KLA expects revenues of $3.575 billion plus or minus $200 million.
ONTO Price Performance, Valuation and Estimates
ONTO’s shares have soared 226.1% in the past year, underperforming the Zacks Nanotechnology industry’s growth of 242.1% but surpassing the Zacks Computer and Technology sector and the S&P 500 composite’s growth of 49.2% and 31.6%, respectively.
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In terms of forward price/earnings, ONTO’s shares are trading at 38.34X, higher than the industry’s 7.99X.
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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 carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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