STMicroelectronics Stock Sinks 18%: Weak Sales Outlook Drowns Out AI Growth Story

V. (NYSE: STM ) stock fell sharply Thursday after the chipmaker issued an underwhelming third-quarter revenue outlook, overshadowing second-quarter results that topped Wall Street expectations. The semiconductor supplier to Apple Inc. (NASDAQ: AAPL ) and Tesla Inc.

38 billion, according to Pro. 1%. Margins Improve As Profitability Recovers Adjusted earnings were 31 cents per share, exceeding analysts’ estimate of 27 cents. 8%, matching the midpoint of the company’s guidance, helped by lower unused-capacity charges and a more favorable product mix.

4%. Net income totaled $222 million, while operating income was $187 million. Operating income included $58 million of impairment, restructuring and phase-out costs tied primarily to the company’s manufacturing footprint and cost-reduction program, along with $24 million of purchase price accounting effects related to the acquisition of NXP’s MEMS sensor business. Excluding those items, adjusted operating income was $269 million.

15 billion. 7% to $464 million, and RF & Optical Communications revenue climbed 32% to $445 million. Boosts Cash Flow But Issues Soft Third-Quarter Outlook Operating cash flow increased to $502 million from $354 million a year earlier. The company generated $75 million in free cash flow, compared with negative free cash flow of $152 million in the prior-year period.

02 billion. 72 billion. It expects gross margin of about 37%, plus or minus 200 basis points. STMicroelectronics Raises AI Data Center Revenue Forecast CEO Jean-Marc Chery said revenue growth is expected to accelerate in the fourth quarter, supported by customer programs in AI data centers and low-Earth-orbit satellite communications.

He said fourth-quarter revenue is expected to exceed $4 billion, resulting in second-half growth above the company’s typical 15% seasonal increase. Chery also raised the company’s outlook for its AI data center business. STMicroelectronics now expects data center revenue to exceed $1 billion in 2026, up from its prior forecast of more than $500 million. If current demand continues, the company expects revenue from the segment to exceed $2 billion in 2027, compared with its previous outlook of more than $1 billion.

Optical, Automotive And Industrial Demand Strengthen Chief Financial Officer Lorenzo Grandi said growth in 2027 will be driven by customer programs and increasing demand for optical cable connectivity. 6-terabit-per-second pluggable optics continues to accelerate. Chery said the company secured multiple design wins across silicon photonics, optical connectivity, electronic integrated circuits, microcontrollers and silicon- and silicon-carbide-based power solutions. He added that STMicroelectronics is also seeing demand from emerging AI server customers, including companies in solar power and battery storage.

The CEO said automotive revenue exceeded expectations in the second quarter, supported by application-specific integrated circuits, sensors, electric powertrain products and advanced driver-assistance systems. He also said industrial demand improved, driven by microcontrollers, analog products and power-conversion solutions. Chery highlighted the company’s expanded collaboration with NVIDIA Corp. (NASDAQ: NVDA ) to support physical AI through microcontrollers, sensors, motor-control technologies and security solutions.

Grandi said the company’s cost-saving program is delivering expected benefits. 2 billion target, reflecting increased investment in growth areas, including cloud optical interconnects. 07 at last check on Thursday, according to Pro data. Photo via Shutterstock Read Also: Why Micron, Sandisk, and SK Hynix Are Surging—And How to Play It