This Tech Stock Has Printed Money for Patient Investors for 5 Years, and It's Still Cheap

Most investors chasing artificial intelligence (AI) hype names right now are focused on big chip names. Few are thinking about the machines that make sure those chips actually work, and that gap in knowledge is exactly where Onto Innovation (NYSE: ONTO) has been compounding for half a decade.

Onto Innovation makes semiconductor process control equipment: inspection, metrology, and lithography tools that chip manufacturers use before, during, and after production to detect defects and verify quality at the nanometer scale. In a world where a single defective layer on an AI accelerator can render a $10,000 chip useless, this is an essential product.

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Five years of consistent execution

The company's track record is grounded in numbers. Onto hit full-year revenue of $1.005 billion in 2025 (a record), capping a run of multiyear growth that has pushed shares up more than 220% since 2022. In the company's earnings release for a 52/53‑week fiscal year, the "full year 2025" revenue of about $1.005 billion is defined as covering the twelve months ended Jan. 3, 2026, which is their fiscal year 2025 rather than the strict calendar year 2025.

In the 2026 first quarter (Q1), it reported preliminary revenue of $292 million, above its own guidance range of $275 million to $285 million. Management then set Q2 2026 guidance at $320 million to $330 million -- an 8% increase above prior outlook -- and guided full-year 2026 revenue growth of more than 30%.

CEO Mike Plisinski has been consistent on the thesis for several years: Onto is not a generic equipment maker riding a broad semiconductor cycle. It is concentrated in the high-growth segments, advanced packaging, high-bandwidth memory, and advanced nodes, which are disproportionately tied to AI infrastructure spending.That positioning is a deliberate product strategy that is now translating into backlog.

Onto's Dragonfly inspection platform is the core of the AI story. In Q4 2025, the company closed a volume purchase agreement worth more than $240 million with a leading high-bandwidth memory (HBM) manufacturer for Dragonfly 2D inspection and 3D bump metrology, running through 2027 -- a contracted revenue line that already locks in a portion of the near-term growth case.

In May 2026, the company disclosed that the next-generation Dragonfly G5, designed for 2.5D advanced AI packaging, had completed customer qualification and would ship its first units in June 2026. Management expects total Dragonfly platform demand to grow more than 50% in 2026 compared with 2025. That product ramp matters because it targets 2.5D packaging, the architecture that stitches together multiple chiplets.

Every AI cluster built around chiplet-based designs needs inspection tools capable of handling the complexity of multi-die packaging. Dragonfly G5 is built for that job, and it is just entering commercial production. Industry analysts estimate that demand for AI-specific advanced packaging inspection will grow over the next few years, and Onto is the leading independent vendor in that market.

Why the stock still has room to run

Despite the 85% year-to-date move, the consensus analyst price target sits at roughly $334, against a current price near $277, implying more than 10% additional upside at the mean -- and that target has not yet been fully updated for the raised Q2 guidance or the Dragonfly G5 qualification. The company also reached its Q4 2025 operating cash-flow target ahead of schedule and is targeting a Q4 2026 operating margin above 30% -- a level that would represent meaningful expansion from today's margins.

It's important to note that Onto's customer concentration is a material risk. A large portion of its HBM revenue runs through a small number of manufacturers, and if HBM spending cools -- either from oversupply or a slowdown in AI training workloads -- order volumes could fall faster than the backlog suggests. The equipment cycle is also inherently lumpy: Onto missed its Q4 2025 EPS estimate, and a single quarter of order timing shifts can send the stock down sharply even when the long-term trajectory is intact.

Applied Materials and KLA compete across overlapping segments with deeper resources, and both are investing in advanced packaging inspection capabilities that could erode Onto's positioning over time. But Onto's structural setup is hard to argue with.

Onto Innovation has compounded for five years by doing the unglamorous work of making sure AI chips actually function. The Dragonfly G5 ramp, the $240 million HBM purchase agreement, and the 30%-plus revenue growth guidance for 2026 suggest that work is accelerating.

Micah Zimmerman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Applied Materials. The Motley Fool has a disclosure policy.