Plunged over 17%! Semiconductor giant suddenly dives! External markets collectively fell
Share prices of European chip manufacturers plummeted! On Thursday (July 23) local time, on the European securities market, STMicroelectronics’ stock price fell by more than 17%. The direct cause of STMicroelectronics' decline was that the company's third-quarter sales forecast announced that day was lower than analysts' expectations. This news overshadowed its increase in data center business revenue targets. The market originally hoped that the demand for artificial intelligence data centers would drive a faster recovery of the chip industry, but this guidance was lower than expected, frustrating this expectation.
Share prices of European chip manufacturers plummeted! On Thursday (July 23) local time, on the European securities market, STMicroelectronics’ stock price fell by more than 17%. The direct cause of STMicroelectronics' decline was that the company's third-quarter sales forecast announced that day was lower than analysts' expectations. This news overshadowed its increase in data center business revenue targets. The market originally hoped that the demand for artificial intelligence data centers would drive a faster recovery of the chip industry, but this guidance was lower than expected, frustrating this expectation. Dragged down by STMicroelectronics' decline, French and Italian stock indexes fell collectively. As of press time, the French CAC40 index fell by more than 1.50%, and the FTSE Italian MIB index fell by more than 2%. In addition, other European stock indexes also fell. The European Stoxx 50 Index and the German DAX30 Index fell by more than 1%, and the British FTSE 100 Index fell by 0.71%. STMicroelectronics shares plummet During trading on Thursday, STMicroelectronics’ stock price fell by more than 17%, the largest drop in a year. As of press time, the company's stock price still fell 16.33%. According to the latest disclosed financial report, STMicroelectronics’ net revenue in the second quarter was US$3.49 billion, with a gross profit margin of 34.8%, operating profit of US$187 million, net profit of US$222 million (loss of US$97 million in the same period last year), and diluted earnings per share of US$0.24; the company’s non-GAAP net profit reached US$291 million, and diluted earnings per share were US$0.31. The company said in a statement on Thursday that third-quarter revenue would increase about 16% year over year to $3.7 billion at the midpoint of guidance. Analysts on average expected $3.79 billion, according to data compiled by Bloomberg. In other words, STMicroelectronics’ third-quarter revenue guidance was lower than market expectations. "The outlook shows that various end markets are in the process of building a cyclical recovery and AI/data center growth continues to accelerate, but its stock price has more than doubled since January and has already reflected the growth expectations." Citi analysts including Andrew Gardner wrote in a report, "If there is no current motivation to raise expectations, the stock may be under pressure in the short term." The ongoing construction of artificial intelligence infrastructure has increased demand for all kinds of data center chips, from Nvidia's most cutting-edge GPUs to STMicroelectronics' semiconductor products for power management and connectivity. That's boosted the Franco-Italian chipmaker's business, as CEO Jean-Marc Chery has been pushing to expand beyond its core consumer electronics and automotive industries into faster-growing areas. "We expect revenue growth to accelerate in the fourth quarter, mainly due to our customer cooperation projects in the fields of AI data centers and low-orbit satellite communications." Sherry wrote in the statement. The company expects fourth-quarter revenue to exceed $4 billion, a year-over-year increase of more than 20%, while analysts expected about $4.03 billion. Data center business revenue forecast raised STMicroelectronics' customers include Apple, Elon Musk's Tesla and SpaceX. The company separately disclosed AI-related revenue guidance for the first time in April, and in June nearly doubled its forecast for the business in 2026. STMicroelectronics said Thursday that revenue from its data center business will exceed $1 billion this year and well over $2 billion next year, compared with previous guidance of about $1 billion in 2026 and about $2 billion in 2027. Some analysts pointed out that there are signs that the mature semiconductor industry is experiencing a broader turnaround. STMicroelectronics rival Texas Instruments on Wednesday gave a sales forecast that topped expectations on industrial, data center and automotive demand. However, shares of the U.S. company Texas Instruments fell in after-hours trading after rising 70% so far this year. "The power density of AI racks is getting higher and higher." Bloomberg Industry Research Analyst Charles Schum wrote in a report before the earnings release that there is strong demand for power semiconductors and other products produced by STMicroelectronics.
STMicroelectronics signed a deal this year to supply semiconductors to Amazon.com Inc's AWS. Sherry said in April that the contract, which includes power management chips, will drive growth over the next three to five years. The company has struggled in recent years with weak demand in the automotive and consumer sectors as customers have digested inventory accumulated after chip shortages during the coronavirus pandemic. But the data center boom has helped STMicroelectronics, a supplier to Tesla Inc. and Apple Inc., turn around its business. STMicroelectronics is seeking to profit from demand for semiconductors in the low-Earth orbit satellite industry as it continues to grow in the coming years. Such satellites can provide network connectivity to devices in remote areas. STMicroelectronics expects supplying equipment for use in space to generate revenue of well over $3 billion between 2026 and 2028, a forecast that currently excludes potential benefits from orbiting data centers. "While third-quarter revenue guidance may fall short of expectations due to slower iPhone 18 shipments, strong gross margin guidance and fourth-quarter outlook point to better-than-expected 2027." Jefferies analysts wrote in a preliminary review report. Jefferies said STMicroelectronics "has once again raised its data center revenue forecast," and that improved visibility, signs of tight supply across multiple products, and inventories below target levels all point to strengthening fundamentals. However, a combination of high pre-earnings valuations, failure to exceed the market's high-expected third-quarter guidance range, and softening global stock market conditions caused STMicroelectronics to suffer one of the sharpest single-day losses in recent years. The stock traded in a range of 48.50 euros to 50.68 euros on Thursday, which was well below the previous day's closing price of 58.25 euros, highlighting the severity of the post-earnings valuation reset, even as the company's long-term AI and data center growth narrative remains intact.
STMicroelectronics signed a deal this year to supply semiconductors to Amazon.com Inc's AWS. Sherry said in April that the contract, which includes power management chips, will drive growth over the next three to five years. The company has struggled in recent years with weak demand in the automotive and consumer sectors as customers have digested inventory accumulated after chip shortages during the coronavirus pandemic. But the data center boom has helped STMicroelectronics, a supplier to Tesla Inc. and Apple Inc., turn around its business. STMicroelectronics is seeking to profit from demand for semiconductors in the low-Earth orbit satellite industry as it continues to grow in the coming years. Such satellites can provide network connectivity to devices in remote areas. STMicroelectronics expects supplying equipment for use in space to generate revenue of well over $3 billion between 2026 and 2028, a forecast that currently excludes potential benefits from orbiting data centers. "While third-quarter revenue guidance may fall short of expectations due to slower iPhone 18 shipments, strong gross margin guidance and fourth-quarter outlook point to better-than-expected 2027." Jefferies analysts wrote in a preliminary review report. Jefferies said STMicroelectronics "has once again raised its data center revenue forecast," and that improved visibility, signs of tight supply across multiple products, and inventories below target levels all point to strengthening fundamentals. However, a combination of high pre-earnings valuations, failure to exceed the market's high-expected third-quarter guidance range, and softening global stock market conditions caused STMicroelectronics to suffer one of the sharpest single-day losses in recent years. The stock traded in a range of 48.50 euros to 50.68 euros on Thursday, which was well below the previous day's closing price of 58.25 euros, highlighting the severity of the post-earnings valuation reset, even as the company's long-term AI and data center growth narrative remains intact.