In the fast-evolving semiconductor industry, Arm Holdings plc and Onto Innovation Inc. stand out as key players driving technological innovation. Arm focuses on designing and licensing microprocessor technologies, while Onto Innovation specializes in process control and inspection tools for chip manufacturing. Their overlapping influence in semiconductor advancement makes this comparison crucial. Join me as we analyze which company offers the most compelling opportunity for investors in 2026.
Table of contents
Companies Overview
I will begin the comparison between Arm Holdings plc American Depositary Shares and Onto Innovation Inc. by providing an overview of these two companies and their main differences.
Arm Holdings plc Overview
Arm Holdings plc develops and licenses central processing unit products and related technologies for semiconductor companies and original equipment manufacturers. The company’s offerings include microprocessors, systems intellectual property, graphics processing units, and software tools used across automotive, computing infrastructure, consumer technologies, and IoT markets. Founded in 1990 and headquartered in Cambridge, UK, Arm operates globally and is a subsidiary of Kronos II LLC.
Onto Innovation Inc. Overview
Onto Innovation Inc. designs, manufactures, and supports process control tools for semiconductor and advanced packaging device manufacturers. Its product portfolio encompasses macro defect inspection, optical metrology, lithography systems, and process control software. Founded in 1940 and based in Wilmington, Massachusetts, Onto serves various sectors including semiconductors, LEDs, MEMS, and data storage, providing solutions for device manufacturing and yield management.
Key similarities and differences
Both Arm and Onto operate in the semiconductor industry but focus on different stages and technologies. Arm specializes in CPU architecture and licensing intellectual property for chip design, whereas Onto provides process control tools and software for semiconductor manufacturing and testing. Arm has a significantly larger market capitalization and employee base compared to Onto, reflecting its broader global presence and product licensing model versus Onto’s manufacturing support solutions.
Income Statement Comparison
The table below compares the key income statement metrics for Arm Holdings plc American Depositary Shares and Onto Innovation Inc. for their most recent fiscal years.
| Metric | Arm Holdings plc American Depositary Shares | Onto Innovation Inc. |
|---|---|---|
| Market Cap | 111B | 10.7B |
| Revenue | 4.01B | 987M |
| EBITDA | 903M | 249M |
| EBIT | 720M | 187M |
| Net Income | 792M | 202M |
| EPS | 0.75 | 4.09 |
| Fiscal Year | 2025 | 2024 |
Income Statement Interpretations
Arm Holdings plc American Depositary Shares
Arm Holdings showed strong revenue growth from 2.03B in 2021 to 4.01B in 2025, nearly doubling over five years. Net income also rose significantly, reaching 792M in 2025. Margins remained stable, with gross margin at 94.9% and net margin near 19.8%. The 2025 year demonstrated impressive earnings growth, with net income more than doubling from 2024.
Onto Innovation Inc.
Onto Innovation’s revenue increased from 557M in 2020 to nearly 987M in 2024, a solid growth trajectory. Net income surged even faster, climbing from 31M to 202M, reflecting a strong bottom-line performance. Margins improved, with gross margin at 52.2% and net margin rising to 20.4% by 2024. The latest year showed robust expansion, with net income growth exceeding 37% year-over-year.
Which one has the stronger fundamentals?
Both companies display favorable income statement fundamentals, with consistent revenue and net income growth. Arm Holdings boasts higher gross margins and a larger scale, while Onto Innovation exhibits exceptional net income and EPS growth percentages. Arm’s margin stability contrasts with Onto’s margin improvements. Each demonstrates solid operational efficiency, supporting their fundamental strength.
Financial Ratios Comparison
The table below presents a side-by-side comparison of key financial ratios for Arm Holdings plc (ARM) and Onto Innovation Inc. (ONTO) based on their most recent fiscal year data.
| Ratios | Arm Holdings plc (ARM) | Onto Innovation Inc. (ONTO) |
|---|---|---|
| ROE | 11.6% | 10.5% |
| ROIC | 10.3% | 8.8% |
| P/E | 142 | 42 |
| P/B | 16.4 | 4.4 |
| Current Ratio | 5.20 | 8.69 |
| Quick Ratio | 5.20 | 7.00 |
| D/E | 0.052 | 0.0079 |
| Debt-to-Assets | 4.0% | 0.7% |
| Interest Coverage | 0 | 0 |
| Asset Turnover | 0.45 | 0.47 |
| Fixed Asset Turnover | 5.61 | 7.16 |
| Payout ratio | 0 | 0 |
| Dividend yield | 0 | 0 |
Interpretation of the Ratios
Arm Holdings plc American Depositary Shares
Arm Holdings shows mixed financial ratios with a favorable net margin of 19.77% and strong quick ratio at 5.2, indicating liquidity strength. However, its high PE of 141.58 and PB of 16.4 are unfavorable, suggesting potential overvaluation. The company does not pay dividends, likely focusing on reinvestment and growth.
Onto Innovation Inc.
Onto Innovation exhibits a favorable net margin of 20.43% and a strong quick ratio of 7.0, reflecting solid liquidity. Its PE ratio of 41.76 and PB of 4.37 remain unfavorable, indicating valuation concerns. Onto Innovation also does not pay dividends, which may suggest prioritization of R&D and expansion over shareholder payouts.
Which one has the best ratios?
Comparing both, Arm and Onto have an equal proportion of favorable ratios at 42.86%. Arm’s evaluation is slightly unfavorable overall, mainly due to high valuation multiples and liquidity concerns, while Onto maintains a neutral stance. Both companies face valuation challenges but display strengths in profitability and liquidity metrics.
Strategic Positioning
This section compares the strategic positioning of Arm Holdings plc American Depositary Shares (ARM) and Onto Innovation Inc. (ONTO) including market position, key segments, and exposure to disruption:
Arm Holdings plc American Depositary Shares (ARM)
- Leading semiconductor IP licensor with significant competitive pressure from global chip designers
- Key segments include licensing and royalty revenues from microprocessors, GPUs, and system IPs used across automotive, computing, and IoT
- Exposure to disruption through evolving semiconductor architectures and licensing models but with broad application markets
Onto Innovation Inc. (ONTO)
- Specialized process control tools supplier facing competition in semiconductor and packaging markets
- Focused on process control tools, optical metrology, lithography, and software for semiconductor manufacturing and packaging
- Technological disruption risk from advances in semiconductor process control and metrology, with diversification in software and hardware solutions
Arm Holdings plc American Depositary Shares (ARM) vs Onto Innovation Inc. (ONTO) Positioning
ARM operates a diversified licensing business across multiple semiconductor applications, generating significant royalty income, whereas ONTO concentrates on process control systems and software. ARM’s broad market exposure contrasts with ONTO’s specialized product focus, reflecting different scale and risk profiles.
Which has the best competitive advantage?
Based on MOAT evaluation, both companies are currently shedding value, but ONTO shows a growing return on invested capital trend, suggesting improving profitability. ARM’s stable but unfavorable ROIC indicates persistent value destruction despite scale.
Stock Comparison
The past year has shown contrasting price movements between Arm Holdings plc American Depositary Shares and Onto Innovation Inc., with Arm experiencing a notable bearish trend while Onto Innovation demonstrates a strong bullish momentum.
Trend Analysis
Arm Holdings plc ADS recorded a -21.17% price change over the past 12 months, indicating a bearish trend with deceleration. The stock fluctuated between a high of 181.19 and a low of 87.19, with volatility measured by a 19.31 standard deviation.
Onto Innovation Inc. posted a 22.07% gain over the same period, reflecting a bullish trend with accelerating momentum. Price ranged from 88.5 to 233.14, accompanied by higher volatility at a 42.61 standard deviation.
Comparing the two, Onto Innovation delivered the highest market performance with a positive price change and accelerating trend, contrasting with Arm’s declining and decelerating trend.
Target Prices
The current analyst consensus shows optimistic target prices for both Arm Holdings plc and Onto Innovation Inc.
| Company | Target High | Target Low | Consensus |
|---|---|---|---|
| Arm Holdings plc American Depositary Shares | 210 | 120 | 166 |
| Onto Innovation Inc. | 200 | 160 | 178 |
Analysts expect Arm Holdings’ stock to appreciate significantly from its current price of 105.11 USD, with a consensus target of 166 USD. Onto Innovation’s consensus target of 178 USD is below its current price of 217.85 USD, suggesting near-term valuation pressure or profit-taking potential.
Analyst Opinions Comparison
This section compares analysts’ ratings and grades for Arm Holdings plc American Depositary Shares (ARM) and Onto Innovation Inc. (ONTO):
Rating Comparison
ARM Rating
- Rating: B, rated Very Favorable by analysts.
- Discounted Cash Flow Score: Moderate score of 3 indicating fair valuation based on cash flows.
- ROE Score: Moderate score of 3 indicating average efficiency generating profit from equity.
- ROA Score: Favorable score of 4 showing effective utilization of assets to generate earnings.
- Debt To Equity Score: Favorable score of 4 indicating relatively low financial risk.
- Overall Score: Moderate score of 3 reflecting average overall financial standing.
ONTO Rating
- Rating: B+, rated Very Favorable by analysts.
- Discounted Cash Flow Score: Moderate score of 3 indicating fair valuation based on cash flows.
- ROE Score: Moderate score of 3 indicating average efficiency generating profit from equity.
- ROA Score: Favorable score of 4 showing effective utilization of assets to generate earnings.
- Debt To Equity Score: Favorable score of 4 indicating relatively low financial risk.
- Overall Score: Moderate score of 3 reflecting average overall financial standing.
Which one is the best rated?
Based strictly on the provided data, ONTO holds a slightly better rating of B+ compared to ARM’s B. Both have identical scores across key financial metrics and overall score, indicating similar financial assessments aside from the rating grade.
Scores Comparison
Here is a comparison of the Altman Z-Score and Piotroski Score for Arm Holdings plc and Onto Innovation Inc.:
Arm Scores
- Altman Z-Score: 32.4, in safe zone indicating low bankruptcy risk.
- Piotroski Score: 7, classified as strong financial health.
Onto Scores
- Altman Z-Score: 34.2, in safe zone indicating low bankruptcy risk.
- Piotroski Score: 4, classified as average financial health.
Which company has the best scores?
Both companies have Altman Z-Scores well within the safe zone, indicating low bankruptcy risk. Arm holds a stronger Piotroski Score (7) compared to Onto’s average score (4), suggesting better overall financial strength for Arm based on these metrics.
Grades Comparison
Here is a detailed comparison of the recent grades assigned to Arm Holdings plc American Depositary Shares and Onto Innovation Inc.:
Arm Holdings plc American Depositary Shares Grades
This table summarizes the recent grades from recognized grading companies for Arm Holdings plc American Depositary Shares.
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| B of A Securities | Downgrade | Neutral | 2026-01-13 |
| B of A Securities | Maintain | Buy | 2025-12-16 |
| Goldman Sachs | Downgrade | Sell | 2025-12-15 |
| Loop Capital | Maintain | Buy | 2025-11-12 |
| TD Cowen | Maintain | Buy | 2025-11-06 |
| Rosenblatt | Maintain | Buy | 2025-11-06 |
| Wells Fargo | Maintain | Overweight | 2025-11-06 |
| Mizuho | Maintain | Outperform | 2025-11-06 |
| Barclays | Maintain | Overweight | 2025-11-06 |
| UBS | Maintain | Buy | 2025-11-06 |
Overall, Arm’s grades show a predominant buy or equivalent stance, with a few recent downgrades to neutral and sell, indicating some caution among analysts.
Onto Innovation Inc. Grades
Below is a summary of the recent grades from established grading companies for Onto Innovation Inc.
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| Stifel | Maintain | Hold | 2026-01-14 |
| Needham | Maintain | Buy | 2026-01-06 |
| Jefferies | Maintain | Buy | 2025-12-15 |
| 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 |
Onto Innovation’s grades consistently indicate buy or outperform ratings with a few hold positions, showing generally positive sentiment.
Which company has the best grades?
Both Arm Holdings and Onto Innovation have a consensus “Buy” rating, but Onto Innovation exhibits a more stable and consistently positive trend with multiple “Buy” and “Outperform” grades and fewer downgrades. Arm shows a wider range of opinions including recent downgrades, which could suggest greater uncertainty for investors.
Strengths and Weaknesses
Below is a comparative overview of Arm Holdings plc American Depositary Shares (ARM) and Onto Innovation Inc. (ONTO) based on key financial and strategic criteria.
| Criterion | Arm Holdings plc (ARM) | Onto Innovation Inc. (ONTO) |
|---|---|---|
| Diversification | Moderate: Focuses on licensing and royalties primarily in semiconductor IP | Moderate: Diverse revenue streams from systems/software, parts, and services |
| Profitability | Moderate net margin of 19.77%, but ROIC below WACC indicates value destruction | Net margin slightly higher at 20.43%, with improving ROIC trend but still below WACC |
| Innovation | Strong IP portfolio but high valuation multiples (PE 141.58) pose risk | Growing profitability suggests successful innovation; PE 41.76 indicates lower valuation risk |
| Global presence | Significant global licensing presence supporting wide market reach | Global exposure through advanced semiconductor equipment sales and services |
| Market Share | Leading position in semiconductor IP licensing | Growing market share in semiconductor process equipment |
Key takeaways: ARM shows stable profitability but struggles with value creation due to high capital costs and valuation. ONTO demonstrates improving profitability and innovation with a more balanced valuation. Both companies maintain global footprints and diversified revenue streams, but investors should weigh ARM’s high valuation risk against ONTO’s growth momentum.
Risk Analysis
Below is a comparative table summarizing key risks for Arm Holdings plc (ARM) and Onto Innovation Inc. (ONTO) based on the most recent data available in 2026:
| Metric | Arm Holdings plc (ARM) | Onto Innovation Inc. (ONTO) |
|---|---|---|
| Market Risk | High beta (4.36) indicating high volatility | Moderate beta (1.46) showing moderate volatility |
| Debt level | Very low debt-to-equity (0.05), low financial risk | Extremely low debt-to-equity (0.01), minimal leverage risk |
| Regulatory Risk | Moderate, operating globally with exposure to US, China, and EU regulations | Moderate, US-centric but exposed to semiconductor industry regulations |
| Operational Risk | Medium, complexity in IP licensing and global supply chain | Medium, reliance on advanced manufacturing and process control technologies |
| Environmental Risk | Moderate, semiconductor industry has environmental impact from manufacturing | Moderate, focus on manufacturing with environmental compliance needs |
| Geopolitical Risk | High, significant exposure to China, Taiwan, and global trade tensions | Moderate, primarily US-focused but affected by global semiconductor supply chain issues |
Synthesizing the risks, ARM’s most significant concerns are its high market volatility and geopolitical exposure, especially given tensions involving China and Taiwan. ONTO’s risks are more balanced, with moderate market volatility and operational dependence on advanced manufacturing. Both companies maintain very low debt levels, which supports financial resilience, but ARM’s valuation ratios suggest caution for investors seeking value.
Which Stock to Choose?
Arm Holdings plc (ARM) shows a favorable income evolution with significant revenue and net income growth over 2021-2025. Its profitability is strong, but financial ratios are slightly unfavorable due to high valuation multiples and a high WACC. The company carries low debt and holds a very favorable rating despite mixed ratio signals.
Onto Innovation Inc. (ONTO) presents consistent favorable income growth and profitability from 2020-2024, with improving ROIC though still below WACC. Its financial ratios are neutral overall, with moderate valuation metrics and very low debt. ONTO holds a slightly higher rating than ARM, supported by solid liquidity and safe bankruptcy scores.
Investors with a tolerance for higher valuation multiples and focus on strong historical income growth may find ARM appealing, while those seeking improving capital efficiency and more moderate valuation might view ONTO more favorably. The decision could depend on preference for growth momentum versus improving economic moat.
Disclaimer: Investment carries a risk of loss of initial capital. The past performance is not a reliable indicator of future results. Be sure to understand risks before making an investment decision.
Go Further
I encourage you to read the complete analyses of Arm Holdings plc American Depositary Shares and Onto Innovation Inc. to enhance your investment decisions:
