STMicroelectronics profit misses estimates, shares fall 14%
STMicroelectronics Q2 Earnings and Market Reaction
By Nathan Vifflin
July 23 (Reuters) - STMicroelectronics reported second-quarter core profit below market expectations and forecast third-quarter revenue slightly below analyst estimates on Thursday, sending its shares down 14%.
Investor Sentiment and Stock Performance
The results disappointed investors betting on a faster recovery at the Franco-Italian chipmaker after a prolonged downturn in its automotive and industrial markets. Including Thursday's fall, the stock is still up more than 110% this year.
Revenue Forecast and Analyst Expectations
STMicro forecast third-quarter revenue of $3.70 billion, plus or minus 3.5%, versus analysts' average estimate of $3.72 billion, according to LSEG data.
Analyst Commentary
Jefferies analysts said the third-quarter revenue guidance missed "perhaps because of a slower iPhone 18 ramp", although stronger gross margin guidance and the fourth-quarter outlook pointed to a better-than-expected 2027.
Financial Results Overview
Second-quarter earnings before interest, taxes, depreciation and amortisation came in at $679 million, well below market expectations of $797.7 million.
The misses overshadowed a second-quarter revenue beat and management's optimistic outlook for AI-related data centres and low-Earth-orbit satellite communications.
Factors Affecting Profit
The company said the profit hit came from impairment, restructuring and other phase-out costs, as well as accounting effects from its acquisition of an NXP sensor business.
Management Statements and Future Outlook
"During the quarter demand increased further, with strong bookings in all end markets. We saw improved visibility and signs of tight supply in several product categories," Chief Executive Jean-Marc Chery said in a statement.
"We anticipate a revenue growth acceleration in Q4, mainly driven by our engaged customer programs in AI datacenters and LEO satellite communication. We expect Q4 revenues to be above $4 billion," he added.
Data Centre Revenue Ambitions
The company raised its data-centre revenue ambition, saying it now expects more than $1 billion in 2026 and well above $2 billion in 2027, assuming current demand trends and customer engagements continue.
Market Analyst Reactions
J.P. Morgan analysts said STMicro had "not done enough to take the stock up significantly," adding that "the pre-announcement in June had created greater expectations" and that investors still needed to see more evidence of gross-margin improvement to become substantially more bullish.
(Reporting by Nathan Vifflin in Gdansk, editing by Milla Nissi-Prussak, Elaine Hardcastle and Matt Scuffham)
