St’s share price plummets; results are positive for AI and data centres but guidance disappoints

 (Il Sole 24 Ore Radiocor) - Second-quarter results, which were better than expected, and the upward revision of revenue forecasts for data centres for 2026 and 2027 are not enough to support the share price of Stmicroelectronics, which plunged at the opening on the Milan Stock Exchange following third-quarter revenue guidance that disappointed the market. The shares, which failed to set a price at the opening bell due to excessive decline, subsequently began trading at levels not seen since last May. It is worth noting that ST had hit a record high of €70.86 in recent weeks and is still up 119% so far in 2026.

“ST reported second-quarter revenue broadly in line with expectations (+26% to $3.487 billion, compared with a consensus of $3.457 billion), but the operating profit for the period and, above all, the revenue guidance for the third quarter (3.7 billion, +16.2% year-on-year) are slightly below the consensus, whilst that for the fourth quarter is slightly above expectations”, write Citi’s analysts. It should be noted that, historically, ST’s share price tends to react very sharply – both negatively and positively – to news concerning the group and that, given the strong growth performance of recent years, market expectations are always very high. Furthermore, adding pressure on the share price is the fact that Alphabet and Texas Instruments have reported results that beat forecasts, yet both are trading sharply lower in after-hours trading on Wall Street (down 3 per cent and 3.9 per cent respectively).

Turning to ST, in the second quarter it reported a net profit of $222 million, compared with a loss of $97 million in the same period last year, and revenue of 3.487 billion, “driven by higher revenue in CECP (Communication Equipment and Computer Peripherals) and the automotive sector”, as CEO Jean-Marc Chery stated, emphasising that “during the second quarter demand increased further, with robust order bookings across all end markets. “We have observed greater visibility and signs of limited supply across several product categories. Retail stock levels are now below our standard target.”

For the third quarter, ST expects net revenue of $3.7 billion, representing an increase of approximately 6.2 per cent compared with the previous quarter and approximately 16.2 per cent year-on-year. The gross margin is expected to be around 37 per cent, including approximately 70 basis points of charges relating to under-utilisation of production capacity. For the fourth quarter, revenue is forecast to exceed $4 billion, representing growth in the second half of the year compared with the first half that is 15 per cent higher than normal seasonal trends.

Thanks to continued strong demand from data centres for artificial intelligence, ST has also raised its revenue target for the data centre sector: “We now expect revenues to exceed one billion dollars in 2026 and, assuming the current momentum continues and taking into account our current commitments, they could well exceed two billion dollars in 2027,” said Chery.