STMicroelectronics shares plunged 15.10% to €49.47 on July 23 after Q2 core profit fell to $679 million versus $797.7 million expected, driven by impairment charges, restructuring, product phase-out costs and accounting related to its NXP sensor acquisition, and management guided Q3 revenue of about $3.70 billion ±3.5% versus $3.72 billion consensus. Management raised data-center revenue targets to above $1 billion in 2026 and above $2 billion in 2027 and expects Q4 revenue >$4 billion, which could support AI and infrastructure adoption relevant to crypto and DeFi services but does not remove near-term margin and guidance concerns.

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STMicroelectronics Shares Sink

STMicroelectronics shares fell sharply on Thursday after the chipmaker reported weaker-than-expected second-quarter profitability and issued a third-quarter revenue forecast that came in slightly below analyst estimates.

The stock was trading at €49.47, down 15.10%, shortly after midday on July 23. The shares closed the previous session at €58.27. Despite the steep daily decline, STMicroelectronics stock is still more than 110% higher since the beginning of the year.

STMicroelectronics stock price (Source: Google Finance)

Investor disappointment centered on the company’s second-quarter core profit. Earnings before interest, taxes and depreciation reached $679 million, which was way below the $797.7 million expected by the market.

STMicroelectronics attributed the weaker result to impairment charges, restructuring expenses, product phase-out costs and accounting effects connected to its acquisition of an NXP sensor business. These expenses overshadowed stronger-than-expected quarterly revenue and signs of improving demand in the company’s markets.

The Franco-Italian semiconductor manufacturer also forecast third-quarter revenue of approximately $3.70 billion, with a range of plus or minus 3.5%. Analysts surveyed by LSEG expected revenue of around $3.72 billion.

Press release from STMicroelectronics

Jefferies analysts suggested that the slightly weaker guidance may be linked to a slower ramp-up of Apple’s anticipated iPhone 18. However, they pointed out that STMicroelectronics’ gross margin guidance and fourth-quarter outlook could point to stronger performance heading into 2027.

Data Center Revenue Forecast Raised

Although the near-term results disappointed investors, STMicroelectronics presented an optimistic outlook for its data center business. The company now expects data center revenue to exceed $1 billion in 2026 and rise to well above $2 billion in 2027. That forecast assumes current demand conditions and customer programs develop as expected.

Chief Executive Jean-Marc Chery said demand increased even more during the quarter, supported by strong bookings across all of the company’s end markets. STMicroelectronics also noticed improving visibility and signs of supply constraints in several product categories.

Management expects revenue growth to accelerate during the fourth quarter, mainly because of customer programs related to artificial intelligence data centers and low-Earth-orbit satellite communications. STMicroelectronics forecasts fourth-quarter revenue of more than $4 billion. This means that the company expects momentum to improve after its relatively cautious third-quarter projection.

For investors, the big question will be whether STMicroelectronics’ expanding data center operations can offset the weakness affecting its automotive and industrial businesses.

Read the article at Coinpaper