STMicro raises data-centre expectations after profit miss, shares tank

July 23 : STMicroelectronics said it expects data-centre demand to boost revenue towards the end of the year, after reporting second-quarter core profit and a third-quarter sales forecast that missed expectations on Thursday. The shares fell 14 per cent in early trade. The Franco-Italian chipmaker, whose chips are used in cars, industrials and smartphones, has been trying to recover from a prolonged downturn in demand across its main markets, while looking to faster-growing areas such as AI-related data centres and satellite communications for growth. STMicro forecast third-quarter revenue of $3.70 billion, plus or minus 3.5 per cent, compared with analysts' average estimate of $3.72 billion, according to LSEG data. "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," STMicro CEO 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. The company reported second-quarter revenue of $3.49 billion, ahead of analysts' average estimate of $3.39 billion, according to LSEG data. However, its earnings before interest, taxes, depreciation and amortization were $679 million, well below market expectations of $797.7 million. STMicro said the hit to profit came from impairment, restructuring and other phase-out costs. It also cited accounting effects from its acquisition of an NXP sensor business. The company raised its revenue ambition for data centres, saying it now expected the business to generate more than $1 billion in 2026 and well above $2 billion in 2027, assuming current demand trends and customer engagements continue. "While the Q3 revenue guidance missed perhaps because of a slower iPhone 18 ramp, the strong gross margin guidance and Q4 outlook points to a better than expected 2027," Jefferies analysts wrote in an early take note. Jefferies said STMicro had "once again raised its revenue expectation for data centers", and that improved visibility, signs of tight supply in several products and inventories below target pointed to a strengthening backdrop.