In the rapidly evolving semiconductor industry, two companies stand out: Applied Materials, Inc. (AMAT) and Onto Innovation Inc. (ONTO). Both firms play crucial roles in semiconductor manufacturing and innovation, yet they approach the market with distinct strategies. While AMAT focuses on comprehensive equipment and service solutions, ONTO specializes in advanced process control and metrology tools. In this article, I will analyze these companies to help you determine which might be the more compelling investment opportunity.
Table of contents
Company Overview
Applied Materials, Inc. Overview
Applied Materials, Inc. (AMAT) is a leading supplier of manufacturing equipment and services for the semiconductor industry, headquartered in Santa Clara, California. The company’s mission is to enable the transformation of the electronic industry by providing innovative solutions that enhance productivity and yield. With a market capitalization of approximately $201B, Applied Materials operates through three main segments: Semiconductor Systems, Applied Global Services, and Display and Adjacent Markets. It offers a comprehensive range of technologies, including chemical vapor deposition and metrology tools, to optimize the manufacturing processes for semiconductor chips and display technologies. Founded in 1967, Applied Materials has established a strong global presence, serving customers across the Americas, Asia, and Europe.
Onto Innovation Inc. Overview
Onto Innovation Inc. (ONTO), based in Wilmington, Massachusetts, focuses on designing and manufacturing advanced process control tools for the semiconductor industry. With a market cap of around $7B, Onto’s mission centers on enhancing semiconductor production through innovative metrology and inspection solutions, which are critical for ensuring product quality and yield. The company provides tools for macro defect inspection, lithography, and process control analytics, catering to a diverse range of clients in semiconductor and advanced packaging sectors. Onto Innovation, established in 1940 originally as Rudolph Technologies, has evolved significantly, positioning itself as a key player in the technology landscape with a commitment to driving efficiencies in semiconductor manufacturing.
Key similarities and differences
Both Applied Materials and Onto Innovation operate within the semiconductor industry, focusing on enhancing manufacturing efficiency. However, while Applied Materials offers a broader range of equipment and services across various segments, Onto Innovation specializes in process control tools and inspection technologies, highlighting a more targeted business approach.
Income Statement Comparison
The following table summarizes the most recent income statements for Applied Materials, Inc. (AMAT) and Onto Innovation Inc. (ONTO), highlighting key financial metrics that can help investors assess their performance.
| Metric | Applied Materials, Inc. (AMAT) | Onto Innovation Inc. (ONTO) |
|---|---|---|
| Market Cap | 201B | 7B |
| Revenue | 28.37B | 0.99B |
| EBITDA | 9.65B | 0.25B |
| EBIT | 9.54B | 0.19B |
| Net Income | 6.99B | 0.20B |
| EPS | 8.71 | 4.09 |
| Fiscal Year | 2025 | 2024 |
Interpretation of Income Statement
In the most recent fiscal year, Applied Materials (AMAT) saw a significant revenue increase to 28.37B, up from 27.18B the previous year, while Onto Innovation (ONTO) reported a revenue of 0.99B, reflecting a slight decline from 1B. AMAT’s net income stood robust at 6.99B, though it showed a marginal decrease from the prior year’s 7.18B, indicating a slight contraction in margins. In contrast, ONTO’s profitability improved, with net income rising from 0.22B to 0.20B, showcasing better cost management despite lower revenue. Overall, AMAT remains a stronger competitor in terms of scale and profitability, while ONTO’s stability in earnings demonstrates its potential for growth in a competitive sector.
Financial Ratios Comparison
In the table below, I present a comparative analysis of key financial metrics for Applied Materials, Inc. (AMAT) and Onto Innovation Inc. (ONTO). This data will help you assess the financial health and performance of both companies.
| Metric | AMAT | ONTO |
|---|---|---|
| ROE | 34.28% | 10.47% |
| ROIC | 22.03% | 8.74% |
| P/E | 26.78 | 41.76 |
| P/B | 9.18 | 4.37 |
| Current Ratio | 2.61 | 8.69 |
| Quick Ratio | 1.87 | 7.00 |
| D/E | 0.32 | 0.01 |
| Debt-to-Assets | 18.06% | 1.02% |
| Interest Coverage | 30.81 | – |
| Asset Turnover | 0.78 | 0.47 |
| Fixed Asset Turnover | 6.15 | 7.16 |
| Payout ratio | 19.26% | 0% |
| Dividend yield | 0.72% | 0% |
Interpretation of Financial Ratios
AMAT exhibits stronger profitability metrics with higher ROE and ROIC, indicating effective use of equity and capital. Although ONTO has a robust current and quick ratio, reflecting excellent liquidity, its higher P/E suggests overvaluation compared to AMAT. Additionally, ONTO’s lack of dividends indicates a growth-focused strategy. Investors should be cautious of ONTO’s limited profitability relative to its valuation.
Dividend and Shareholder Returns
Applied Materials, Inc. (AMAT) pays dividends with a current yield of 0.72% and a payout ratio of 19.26%, indicating a sustainable approach. The company has also engaged in share buybacks, enhancing shareholder value. In contrast, Onto Innovation Inc. (ONTO) does not distribute dividends, focusing instead on reinvestment for growth. It maintains a robust cash position, allowing for share buybacks, which may align with long-term value creation. Both companies exhibit strategies that could support sustainable shareholder returns.
Strategic Positioning
Applied Materials, Inc. (AMAT) maintains a substantial market share in the semiconductor equipment sector, leveraging its diverse product offerings and established global presence. With a market cap of $201B, it faces competitive pressure from Onto Innovation Inc. (ONTO), which, although smaller at $7B, specializes in advanced process control tools. The semiconductor industry is experiencing significant technological disruption, compelling both companies to innovate continuously to stay relevant in a rapidly evolving landscape.
Stock Comparison
In this section, I will analyze the weekly stock price movements of Applied Materials, Inc. (AMAT) and Onto Innovation Inc. (ONTO) over the past year, highlighting key price dynamics and trading behaviors.
Trend Analysis
Applied Materials, Inc. (AMAT) Over the past year, AMAT has experienced a price change of +69.3%, indicating a bullish trend. The highest price recorded was 252.25, while the lowest was 126.95, suggesting notable volatility with a standard deviation of 26.55. The trend has shown acceleration during this period.
Recently, from September 14, 2025, to November 30, 2025, the stock’s price increased by +50.33%, with a standard deviation of 21.15, reflecting continued bullish momentum.
Onto Innovation Inc. (ONTO) In the last year, ONTO recorded a price change of +5.12%, also indicating a bullish trend. The stock reached a high of 233.14 and a low of 88.5, with a standard deviation of 42.33, highlighting significant volatility. The trend has also shown acceleration.
From September 14, 2025, to November 30, 2025, ONTO’s price increased by +29.0%, with a standard deviation of 9.18. This recent performance reinforces the bullish outlook for the stock.
Analyst Opinions
Recent analyst recommendations for Applied Materials, Inc. (AMAT) indicate a strong buy with a rating of B+. Analysts highlight its robust return on equity and assets, suggesting solid financial health. In contrast, Onto Innovation Inc. (ONTO) has garnered a slightly lower rating of B, with analysts noting decent returns but potential concerns regarding its debt levels. Overall, the consensus for AMAT remains a buy, while ONTO is viewed more neutrally, leaning towards a hold for cautious investors.
Stock Grades
In this section, I will provide the latest stock ratings for Applied Materials, Inc. (AMAT) and Onto Innovation Inc. (ONTO), based on reliable grading data.
Applied Materials, Inc. Grades
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| UBS | upgrade | Buy | 2025-11-25 |
| Citigroup | maintain | Buy | 2025-11-14 |
| Mizuho | maintain | Neutral | 2025-11-14 |
| Needham | maintain | Buy | 2025-11-14 |
| Craig-Hallum | downgrade | Hold | 2025-11-14 |
| JP Morgan | maintain | Overweight | 2025-11-14 |
| Wells Fargo | maintain | Overweight | 2025-11-14 |
| B. Riley Securities | maintain | Buy | 2025-11-14 |
| Cantor Fitzgerald | maintain | Overweight | 2025-11-14 |
| Morgan Stanley | maintain | Overweight | 2025-11-14 |
Onto Innovation Inc. Grades
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| B. Riley Securities | maintain | Buy | 2025-11-18 |
| Needham | maintain | Buy | 2025-11-18 |
| Evercore ISI Group | maintain | Outperform | 2025-11-05 |
| Oppenheimer | maintain | Outperform | 2025-10-14 |
| Stifel | maintain | Hold | 2025-10-13 |
| B. Riley Securities | maintain | Buy | 2025-10-10 |
| Jefferies | upgrade | Buy | 2025-09-23 |
| B. Riley Securities | maintain | Buy | 2025-08-08 |
| Benchmark | maintain | Buy | 2025-08-08 |
| Cantor Fitzgerald | maintain | Neutral | 2025-06-24 |
Overall, both AMAT and ONTO show strong support from analysts, with multiple “Buy” ratings and upgrades reflecting positive sentiment. The trend suggests a bullish outlook for these stocks, though caution is warranted as some grades have been maintained at Neutral or Hold levels, indicating a need for careful evaluation.
Target Prices
The consensus target prices for the following companies reflect a range of analyst expectations.
| Company | Target High | Target Low | Consensus |
|---|---|---|---|
| Applied Materials, Inc. | 290 | 205 | 249.27 |
| Onto Innovation Inc. | 180 | 120 | 153.33 |
For Applied Materials, Inc. (AMAT), the current stock price of 252.31 is slightly above the consensus target of 249.27, suggesting that analysts expect a stable outlook. In contrast, Onto Innovation Inc. (ONTO), priced at 143.16, is below the consensus target of 153.33, indicating potential for growth based on analyst sentiment.
Strengths and Weaknesses
The following table outlines the strengths and weaknesses of Applied Materials, Inc. (AMAT) and Onto Innovation Inc. (ONTO) based on the most recent data:
| Criterion | Applied Materials, Inc. | Onto Innovation Inc. |
|---|---|---|
| Diversification | Strong across sectors | Focused on semiconductor tools |
| Profitability | High net profit margin (24.67%) | Moderate net profit margin (20.43%) |
| Innovation | Leading in semiconductor technology | Strong R&D focus but smaller scale |
| Global presence | Operates in multiple countries | Growing international footprint |
| Market Share | Significant in semiconductors | Smaller niche market share |
| Debt level | Low debt (18.06% of assets) | Very low debt (0.72% of assets) |
Key takeaways: Applied Materials shows strong profitability and diversification, making it a robust player in the semiconductor market. Onto Innovation, while focused and less encumbered by debt, operates in a more niche sector with lower market share.
Risk Analysis
Below is a concise overview of the risks associated with two semiconductor companies, Applied Materials, Inc. (AMAT) and Onto Innovation Inc. (ONTO).
| Metric | AMAT | ONTO |
|---|---|---|
| Market Risk | Moderate | High |
| Regulatory Risk | High | Moderate |
| Operational Risk | Moderate | Low |
| Environmental Risk | Moderate | Low |
| Geopolitical Risk | High | Moderate |
Both companies face significant market and regulatory risks, particularly due to the semiconductor industry’s volatility and the ongoing global trade tensions. Recent supply chain disruptions have intensified these challenges, demanding careful risk management strategies.
Which one to choose?
When comparing Applied Materials, Inc. (AMAT) and Onto Innovation Inc. (ONTO), both companies exhibit strong fundamentals, but they cater to different market segments. AMAT has a higher market cap of $187.41B, robust revenue growth, and superior profit margins, with a net profit margin of 24.67%. Its B+ rating reflects solid return on equity (ROE) and return on assets (ROA). Conversely, ONTO, with a market cap of $8.42B, showcases a lower but still respectable net profit margin of 20.43%. Its B rating indicates it has room for improvement, particularly in ROE.
For growth-oriented investors, AMAT appears favorable due to its strong financial metrics and market position, while conservative investors may find ONTO appealing for its lower volatility and solid cash position. However, both companies face risks from competition and market fluctuations.
Disclaimer: This article is not financial advice. Each investor is responsible for their own investment decisions.
Go further
I encourage you to read the complete analyses of Applied Materials, Inc. and Onto Innovation Inc. to enhance your investment decisions:
