Compare moats
Up to three covered companies, band by band. Every call is a curated editorial judgment, never a disclosed figure — and every band carries its cited basis.
| Microsoft | Onto Innovation | |
|---|---|---|
| Moat rating | wide The FY2026 10-K (filed 2026-07-29) restates both structural mechanisms verbatim. On cost: the cloud business 'benefits from three economies of scale' — datacenters with 'significantly lower cost per unit than smaller ones', demand aggregation, and multi-tenancy that lowers maintenance labor. On ecosystem: 'A well-established ecosystem creates beneficial network effects among users, application developers, and the platform provider that can accelerate growth.' Both are load-bearing at the new scale — 'Microsoft Cloud revenue increased 27% to $214.4 billion' and 'Commercial remaining performance obligation increased 84% to $678 billion.' Rated wide but held below full confidence because the same filing still cautions that 'Barriers to entry in many of our businesses are low.' | narrow The FY2025 10-K (filed 2026-02-24) describes the industry's switching cost: once a chipmaker has selected one vendor's equipment for a production-line application, it 'typically relies upon that capital equipment and, to the extent possible, subsequent generations of the same vendor's equipment for the life of the application'. Onto holds 423 granted or exclusively licensed patents and had over 190 customers in 2025, and its investor site (https://investors.ontoinnovation.com/) reports a 53% GAAP gross margin for Q2 2026. That protects Onto's installed positions, but independent sources do not show it leading its core front-end market. SemiAnalysis (2022-09-06) wrote that 'KLA has generally owned the thin film metrology and inspection market, with over 90% share of this market for certain tool types'. Robert Castellano of The Information Network (2025-09-10, https://drrobertcastellano.substack.com/p/onto-innovations-strategic-drift) wrote that Onto's OCD segment, 'once Onto's backbone, has been losing share to KLA', and that in non-metal thin film metrology Onto 'has slipped into the single digits'. The 10-K itself says Onto has 'from time to time, selectively reduced prices on our systems in order to protect our market share'. The rating is therefore narrow, not wide. |
| Moat type | network effects The FY2026 10-K keeps the ecosystem passage scoped to the firm: 'An important element of our business model has been to create platform-based ecosystems on which many participants can build diverse solutions. A well-established ecosystem creates beneficial network effects among users, application developers, and the platform provider that can accelerate growth.' That remains the one moat mechanism the filing asserts about Microsoft as a whole; the cost-of-scale passage stays scoped to 'our cloud business'. | switching costs The 10-K risk factors state the mechanism directly: 'Once a vendor's equipment has been installed in a production line application, a semiconductor device manufacturer must often make substantial technical modifications and may experience production-line downtime in order to switch to another vendor's equipment.' Process-control tools enter early. The 10-K says Onto's metrology equipment 'is generally installed prior to the installation of the actual process equipment' at a new node. The same switching cost cuts against Onto where a rival is installed, because 'it is sometimes difficult for us to win new customers from our competitors even if our systems are superior to theirs'. Onto also cites IP: 423 granted or exclusively licensed patents and 312 pending applications covering metrology, macro-defect detection and classification, lithography, automation, AI and machine learning. But the 10-K adds that 'There can be no assurance that our intellectual property will provide us competitive advantage'. |
| Leadership | co leader The FY2026 10-K asserts leadership nowhere. Its AI offerings 'compete with AI products from hyperscalers, as well as products from other emerging competitors and other open-source offerings, many of which are also current or potential partners' — one of a small set at hyperscale in cloud and AI, an incumbent in productivity and PC operating systems. | at parity Onto does not lead its main markets on any independent source found. The Information Network's 2021 post on SemiWiki (https://semiwiki.com/forum/threads/kla-still-top-of-semiconductor-metrology-inspection-but-smaller-competitors-gain-share-in-2020.13803/latest) says 'KLA is the dominant metrology/inspection market leader with a share of more than 50% in 2020', and calls Camtek 'the leader in inspection and metrology in advanced packaging'. In non-metal thin film metrology, Castellano's 2025 share table has Nova in 'a steady secondary position' and Onto 'slipped into the single digits'. Onto competes as a sizeable follower in each segment. The most recent independent source, Castellano (2025), describes Onto's OCD segment as 'losing share to KLA' and Onto as 'often brought in as a second vendor for diversification, which caps its share', so the band is at_parity rather than fast_follower. SemiAnalysis (2022) reported, 'Based on our sources', that Onto was 'already the POR provider for this type of tool for all 3 leading-edge fabs', referring to the Atlas V OCD line the article discusses, and the 10-K names KLA and Camtek as its principal advanced-packaging inspection rivals. |
| Pricing power | strong The FY2026 10-K reports 'Gross margin increased $31.6 billion or 16% with growth across each of our segments', with 'Microsoft 365 Commercial revenue ... mainly affected by a combination of continued installed base growth and average revenue per user expansion'. The honest caveat: gross margin percentage 'decreased slightly driven by continued investments in AI infrastructure and growing AI product usage', with Microsoft Cloud gross margin down to 66%. | moderate Onto's investor site reports a 53% GAAP gross margin for Q2 2026 on quarterly revenue of $343M. The 10-K shows the limits: 'We have, from time to time, selectively reduced prices on our systems in order to protect our market share, and competitive pressures may necessitate further price reductions.' SemiAnalysis (2022) wrote that, even if KLA caught up on software, 'Onto's tools are generally cheaper due to their less expensive service contracts'. Buyers are concentrated: three customers took 20%, 15% and 14% of revenue in the year ended January 3, 2026. |
| Summary | One repeated model across segments — build a platform, attract developers and partners, monetize the ecosystem that forms — now compounding through the AI wave: FY2026 revenue rose 18 percent 'driven by growth in Microsoft Cloud', Azure and other cloud services grew 41 percent, and the commercial remaining performance obligation reached $678 billion, while the filing still concedes low barriers to entry in many businesses. | Onto Innovation makes process-control equipment and software for wafer makers, chip fabs and advanced-packaging manufacturers. Its lines are Atlas automated OCD and thin-film metrology, IMPULSE integrated metrology, macro-defect inspection (F30, NSX, Firefly, Dragonfly G3), MetaPULSE and Echo opaque-film metrology, JetStep lithography steppers for packaging panels and wafers, and process-control and yield-management software. In the fourth quarter of 2025 it acquired Semilab USA, adding the FAaST, CnCV and MBIR lines. The 10-K names KLA and Nova as its principal competitors in thin film and OCD metrology, KLA and Camtek in advanced-packaging inspection, Ushio and Canon in packaging lithography, and PDF Solutions in software. It adds that AI applications have generated 'significant demand and new technology requirements' in both advanced nodes and advanced packaging. Unlike node-driven metrology, Onto says packaging revenue 'is generally driven by assembly volumes'. Independent analysts split on the front end. SemiAnalysis reported in 2022 that Onto was 'slightly outgrowing KLA' in standalone OCD tools. Castellano wrote in 2025 that the segment 'has been losing share to KLA', while calling the Dragonfly 3Di packaging platform 'a key enabler' and saying Onto 'is increasingly seen as a packaging company rather than a metrology company'. The exposures are concentration (three customers took 20%, 15% and 14% of revenue in the year ended January 3, 2026), U.S. export controls that the 10-K says 'have negatively impacted our ability to compete for the business of domestic customers in China', and competitors with 'greater financial, engineering, manufacturing and marketing resources'. |
| Chain position | Hyperscale AI-infrastructure buyer and platform distributor: monetizes upstream compute through Azure, Microsoft 365 Copilot, and the developer ecosystem. | Upstream process-control equipment supplier to silicon-wafer makers, chip fabs ('front-end') and advanced-packaging and test facilities ('back-end'). Over 190 customers in more than 25 countries bought Onto tools or software in 2025. |
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| Long-horizon vote | +0.35 at weight 0.20 · swarm bullish Editorial prior, not backtested. | +0.06 at weight 0.20 · swarm neutral Editorial prior, not backtested. |