STMicro shares slump despite raised AI data center goal
Shares of SpaceX supplier STMicroelectronics slumped more than 15% even as the chipmaker raised its AI data center sales goal for a second time this year. Management now expects data center revenue above $1 billion in 2026 and well above $2 billion in 2027, fueled by optical connectivity demand.
Key Takeaways
- STM shares fell more than 15% despite another lift to the AI data center revenue target.
- ST now sees data center sales above $1 billion in 2026 and well above $2 billion in 2027.
- Q2 revenue hit $3.49 billion, with demand accelerating across AI, industrial, auto and communications.
- Q3 revenue is guided at $3.7 billion; Q4 is expected above $4 billion on AI and satellite programs.
- Growth is tied to 800G and 1.6T optics, silicon photonics and strong optical-connectivity bookings.
Why Did Shares Fall If the Data Center Outlook Improved?
According to Dow Jones reporting tied to the Wall Street Journal story on the move, investors still punished the stock: shares in the European chipmaker shed more than 15% even though ST raised its data-center revenue target again in 2026.
That split reaction matters for anyone tracking AI infrastructure plays. A higher multiyear data center ambition did not automatically calm markets focused on the path from bookings to nearer-term results and margins.
On the earnings call, as detailed by Yahoo Finance, second-quarter net revenue was $3.49 billion and topped the midpoint of ST’s outlook. Gross margin was 34.8%, and non-U.S. GAAP diluted EPS was $0.31. Bookings were strong, with an overall book-to-bill ratio close to 2.
How Big Is STMicro’s AI Data Center Opportunity Now?
CEO Jean-Marc Chery said ST now expects data center revenue above $1 billion in 2026 and, if current dynamics and customer engagements hold, “well above $2 billion” in 2027. Management said 2026 is already covered by backlog and that capacity is not currently the constraint.
Rémy Wazzan, who leads microcontrollers, digital ICs and RF, pointed to faster adoption of 800G and 1.6 terabit-per-second pluggable optics. He cited a large share in control-plane microcontrollers, rising electronic ICs on ST’s BiCMOS technology, and a growing silicon-photonics contribution beginning in 2027.
Communication equipment, computers and peripherals revenue rose 13% sequentially and 50% year over year, helped by optical connectivity. For more Future Tech & AI coverage, see the Future Tech & AI Wonders hub on BlasterPost.
What Else Is Driving STMicro’s Revenue Outlook?
ST guided third-quarter revenue to $3.7 billion, plus or minus 350 basis points, with gross margin around 37%. Chery said fourth-quarter revenue should exceed $4 billion, with sequential improvement better than normal seasonality, mainly from engaged customer programs in AI data centers and low Earth orbit satellite communication.
Automotive revenue rose 14% sequentially and 16% year over year. Industrial revenue jumped 20% sequentially and 34% year over year. Free cash flow turned positive at $75 million, inventory days fell to 126, and 2026 net capital expenditures are now expected at the high end of a $2 billion to $2.2 billion range to support growth areas such as cloud optical interconnect.
Chery also said ST remains confident in an $18 billion revenue target in 2028, with AI data centers among the key growth drivers, calling the data center business accretive to gross margin if manufacturing reshaping stays on track.