STMicroelectronics N.V. STM emphasized accelerating demand across artificial intelligence infrastructure, industrial applications and automotive markets during its second-quarter 2026earnings call with management raising its data center revenue outlook as customer engagements expanded.
The company reported results above expectations, while executives focused more heavily on future growth drivers, manufacturing transitions and improving demand visibility.
STM Expands AI Data Center Ambition
STM’s president and CEO Jean-Marc Chery highlighted AI data centers as a major growth catalyst, and the company now expects data center revenues above $1 billion in 2026 and well above $2 billion in 2027 under current demand dynamics.
Management pointed to strength in optical connectivity, including silicon photonics, electronic ICs and microcontrollers used in AI infrastructure. Chery said that customer engagement programs and backlog coverage were supporting the revised outlook.
The company also noted that data center products are contributing positively to the product mix. CFO Lorenzo Grandi said that this business is improving gross margin trends as higher-value products gain a larger role.
STMicroelectronics Sees Broad Demand Recovery
STMicroelectronics' second-quarter revenues of $3.49 billion beat the Zacks Consensus Estimate of $3.45 billion and increased 26% year over year. The company reported adjusted earnings of $0.31 per share compared with the Zacks Consensus Estimate of $0.26.
STMicroelectronics N.V. Price, Consensus and EPS Surprise
STMicroelectronics N.V. price-consensus-eps-surprise-chart | STMicroelectronics N.V. Quote
Management said demand increased across end markets, with bookings strong and book-to-bill close to 2 overall. Distribution inventory declined below the company’s standard target.
Automotive revenues increased 16% year over year, while industrial revenues grew 34% and communications equipment and computer peripherals revenues increased 50%.
STM Details Manufacturing Transition
STM discussed ongoing manufacturing reshaping efforts, which continue to affect profitability during the transition period. The company reported non-U.S. GAAP gross margin of 35.2% in the second quarter.
Grandi explained that temporary costs related to technology transfers, product qualification and manufacturing changes are limiting near-term margin expansion. Management expects these effects to continue while the restructuring program progresses.
The company maintained its long-term model of achieving stronger margins once manufacturing efficiency improvements are completed. Management linked future profitability improvement to completion of the reshaping program.
STMicroelectronics Raises Outlook Visibility
STMicroelectronics expects third-quarter revenues of $3.70 billion at the midpoint, representing 6.2% sequential growth and 16.2% year-over-year growth. Gross margin is expected to be 37%, including unused capacity charges.
Management expects fourth-quarter revenues to exceed $4 billion, driven mainly by AI data center programs and low Earth orbit satellite communication opportunities.
Executives also highlighted improving customer visibility, noting that more than half of second-quarter bookings were for next year. The company said that its backlog represents about 4.5 to 5 quarters of average second-quarter revenues.
STM Highlights Analyst Focus Areas
A TD Cowen analyst asked about the drivers behind the higher 2027 data center outlook. Management attributed growth to optical connectivity adoption, including 800-gigabit and 1.6-terabit-per-second pluggable optics, along with silicon photonics expansion.
A JPMorgan analyst questioned whether capacity constraints could limit AI-related growth. Chery responded that advanced technologies supporting industrial and communications growth were progressing as expected, while some legacy analog capacity challenges remained temporary.
Analysts also examined future gross margins. Management reiterated that reaching targeted margin levels depends on completing manufacturing transformations rather than revenue scale alone.
STMicroelectronics Maintains Strategic Focus
STMicroelectronics ended theearnings callemphasizing growth opportunities in AI infrastructure, industrial automation, automotive electronics and satellite communications. Management highlighted partnerships and product development efforts aimed at expanding its role in emerging technology markets.
The company also maintained a strong balance sheet position, reporting $2.01 billion in net financial position and positive free cash flow of $75 million in the second quarter.
Executives balanced optimism around demand with continued focus on manufacturing execution, cost management and capacity alignment as key priorities ahead.
Zacks Rank and Style Scores Signals
Currently, STM sports a Zacks Rank #1 (Strong Buy), indicating that earnings estimate revisions are a key factor supporting the stock’s current Zacks Rank. The Zacks Rank focuses on the direction and magnitude of estimate revisions and can change after new earnings information is incorporated. You can see the complete list of today’s Zacks #1 Rank stocks here.
The stock has a Value Score of D, a Growth Score of D, a Momentum Score of B and a VGM Score of F. Zacks Style Scores use grades from A to F, with higher scores representing stronger characteristics for the specific style category.
The combination of Zacks Rank and Style Scores provides investors with separate measures of earnings revision trends and stock characteristics. Future estimate revisions following the latest results may affect the company’s Zacks Rank.
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