Onto Innovation (NYSE: ONTO) closed its acquisition of a 27% minority stake in Rigaku Holdings Corporation on August 10 for approximately $720 million, purchasing the shares from Atom Investment, L.P., an affiliate of Carlyle. The transaction builds on a collaboration first announced in April aimed at developing X-ray-based tools for controlling chip manufacturing processes. The deal closed four days after Onto reported a record quarter on August 6, with revenue up 35.3% year over year. Taken together, the two announcements depict a company spending aggressively while its core business accelerates.

A Backlog That Keeps Growing

On August 6, Onto Innovation reported second-quarter revenue of $343.1 million, up from $253.6 million in the second quarter of 2025 and nearly 18% higher than the prior quarter. Revenue, gross margin, operating margin, and earnings per share all exceeded the high end of the company's own guidance. Advanced Nodes revenue grew 50% sequentially to a new record, driven by broader demand from logic and memory customers, while the Specialty Devices and Advanced Packaging business also reached an all-time high on demand tied to 2.5D logic, high-bandwidth memory, and silicon photonics. Backlog crossed $1 billion for the first time in the company's history, an indication that customers are locking in orders well ahead of delivery.

The Rigaku investment aligns with that demand story. Chief Executive Mike Plisinski said customers are grappling with more complex 3D chip architectures and exotic materials, and that the deepened partnership should allow Onto to offer more complete process control tools as those chips move into high-volume production. The push into X-ray inspection follows a broader industry shift: as chipmakers stack devices and adopt advanced packaging, traditional optical inspection faces limits on opaque, multilayer structures, and X-ray methods — an area where Rigaku has long-standing expertise in materials analysis instrumentation — are one route the metrology sector is pursuing to fill that gap. Onto backed that confidence with third-quarter guidance of $380 million to $400 million in revenue and non-GAAP diluted earnings per share of $2.18 to $2.38, and said it expects demand trends to extend into 2027.

Growth With Thinner Margins

Not everything is expanding as quickly as the headline growth. For the first six months of 2026, net income fell to $93.9 million from $98.0 million a year earlier, even as revenue rose 22.1% to $635.1 million. GAAP operating margin for the first half came in at 15.3%, down from 18.3% in the same period of 2025, meaning costs climbed at least as fast as sales.

The Rigaku purchase adds another variable. Onto is paying roughly $720 million for a stake it will not consolidate, booking the position under the fair value option method, and receiving one board seat in return for the capital committed. That represents a large sum tied up in a minority position with limited operating control, even if the technology rationale makes sense. Under the fair value option, the investment's value will move with Rigaku's worth rather than Onto's own operating results, adding a line of earnings variability that shareholders will see play out in future quarters.

What the Numbers Say

Hedge fund ownership climbed from 67 funds in the prior quarter to 75 in the most recent one, indicating accumulating institutional conviction. Short interest stands at 6.63% of float, a level modest enough that organized skepticism appears limited for now. The stock carries a forward price-to-earnings ratio of 21.41 as of September 4, a multiple that already assumes the current growth pace continues.

The Tension Still Unresolved

Onto Innovation heads into the second half of 2026 with a growing backlog, record segment results, and a freshly enlarged bet on X-ray technology it believes chipmakers will need next. Margins narrowed even as revenue climbed, and the company has just committed hundreds of millions of dollars to a stake it cannot fully control. The backlog and the demand commentary stretching into 2027 are the strongest argument that the spending will pay off. How the second-half results land against that guidance, and how the Rigaku stake is marked in coming quarters, are the markers to watch next.

Source: Yahoo Finance