STMicroelectronics N.V. (NYSE:STM) reported mixed first-quarter 2026 financial results on Thursday.
The company, a supplier to major industry players including Apple Inc. (NASDAQ:AAPL) and Tesla, Inc. (NASDAQ:TSLA), reported quarterly net revenues of $3.095 billion.
The topline marked a 23.0% year-over-year growth, edging past the analyst consensus estimate of $3.039 billion.
Year-over-year net sales to OEMs and Distribution increased 24.5% and 19.2%, respectively.
Margin Compression and Profitability Headwinds
Adjusted earnings per share (EPS) of 13 cents decisively trailed the analyst consensus estimate of 17 cents.
Gross margin came in at 33.8%, beating the midpoint of the company’s guidance and increasing 40 basis points Y/Y, mainly due to lower unused capacity charges and a better product mix.
Consequently, the operating margin rose 220 bps to 2.3%.
The company reported a net income of $37 million on an operating income of $70 million for the quarter.
The reported operating income included $71 million in impairment, restructuring charges, and other related phase-out costs, predominantly associated with the previously announced company-wide program to reshape its manufacturing footprint and resize its global cost base.
Excluding these one-time items, adjusted operating income stood at $171 million.
Segment Performance
Segmental results painted a mixed picture of market demand. The Analog Products, MEMS, and Sensors (AM&S) segment grew revenue by 23.2% to $1.32 billion, and the Embedded Processing (EMP) segment rose by 31.3% to $975 million.
Conversely, the Power and Discrete products (P&D) segment saw a revenue decrease of 1.8% to $389 million, and the RF & Optical Communications (RF&OC) segment’s revenue rose by 33.9% to $409 million.
Earnings Call
STMicroelectronics (or ST) executives said stronger demand, AI-linked programs, and improving inventory trends are supporting growth, while margins and spending remain on an improving but still transitional path.
STMicroelectronics CEO Jean-Marc Chery said bookings were strong across all end markets and regions, with book-to-bill well above 1, while distribution inventory normalized.
He identified automotive, industrial microcontrollers, AI infrastructure, optical interconnect, and low-Earth-orbit satellites as key growth drivers for 2026, and reaffirmed expectations for data center revenue to come in nicely above $500 million in 2026 and well above $1 billion in 2027.
He also said ST’s agreement with Amazon.com Inc. (NASDAQ:AMZN) Amazon Web Services, and collaborations with NVIDIA Corp. (NASDAQ:NVDA) are helping expand its role in AI data centers.
CFO Lorenzo Grandi said margins should improve through 2026, with gross margin expected to rise from 35.2% in the second quarter and continue to improve in the second half as revenue grows, factory utilization improves, and the product mix remains favorable.
He added that pricing trends have improved versus a few months ago, with only a very low single-digit price decline now expected for the year and some selective price increases emerging.
On spending, Grandi said 2026 operating expenses will rise faster than previously expected as ST accelerates investment in new growth areas, including AI opportunities and the NXP MEMS sensor acquisition.
Even so, he said the expense-to-sales ratio should decline meaningfully year over year. He also noted that first-quarter net capital spending totaled $362 million, while free cash flow was negative, mainly due to the NXP acquisition payment.
Marco Cassis, who leads ST’s analog, power, discrete, MEMS, and sensors businesses, said the NXP MEMS deal should help accelerate growth in automotive sensors beyond the low single-digit pace seen historically, while also strengthening ST’s position in safety applications.
He added that ST expanded its power portfolio for AI data centers and expects those efforts to translate into stronger revenue in 2026 and especially 2027.
Liquidity And Outlook
From a cash flow perspective, quarterly operating cash flow was $534 million, a decrease from $574 million in the year-ago quarter. While it used $723 million in free cash flow, down from the $30 million it generated a year ago.
Despite this, the firm maintained a net financial position of $2.00 billion as of March 28, 2026, with total liquidity of $4.57 billion against total financial debt of $2.57 billion.
Looking ahead, STMicroelectronics projected fiscal second-quarter net revenue of $3.33 billion-$3.57 billion.
This guidance fell above the analyst consensus estimate of $3.21 billion. The gross margin for the quarter is projected to recover to 34.8%, plus or minus 200 bps.
STM Price Action: STMicroelectronics shares were up 5.46% at $47.31 during premarket trading on Thursday. The stock is trading at a new 52-week high, according to Benzinga Pro data.
Photo by Michael Vi via Shutterstock
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