STMicroelectronics' Weak Forecast Triggers European Chip Sector Sell-Off

STMicroelectronics NV shares tumbled nearly 15% in Milan on Thursday after the chipmaker's third-quarter revenue guidance fell short of analyst expectations, overshadowing a strong second-quarter earnings report and sparking a broader sell-off across the European semiconductor sector.

Guidance Overshadows Q2 Beat

STMicro projected third-quarter revenue of $3.70 billion at the midpoint, which is nearly 2% below the analyst consensus of $3.76 billion. This disappointing outlook was the primary catalyst for the stock's decline, even as the company reported solid second-quarter results.

For the second quarter, STMicro posted:

• Revenue of $3.49 billion, slightly ahead of the $3.47 billion consensus.
• Non-GAAP earnings per share of $0.31, beating analyst estimates of $0.23 by 35%.
• EBIT of $269 million, exceeding consensus by almost 15%.

However, the report also contained weak spots, including an EBITDA of $679 million and free cash flow of $83 million, both of which missed market expectations, according to Investing.com.

Sector-Wide Impact

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The negative sentiment from STMicro's forecast rippled through the European technology market. Shares of German chipmaker Infineon fell as much as 4.4%, while equipment manufacturers ASM International and ASML saw their stocks decline by 1.7% and 1% respectively. BE Semiconductor Industries (BESI) also dropped 3.7% following its own mixed earnings report.

In a notable exception, French substrate maker Soitec saw its shares surge as much as 22% after it reported better-than-expected results, driven by strong demand in photonics.

Management's Long-Term View

Despite the muted near-term forecast, STMicro's management expressed confidence in future growth. Speaking on an earnings call, Chief Executive Jean-Marc Chery anticipated an acceleration in revenue growth in the fourth quarter to above $4 billion, driven by customer programs in AI data centers and satellite communications, as cited by Reuters.

The company also raised its revenue ambition for its AI data center business to over $1 billion for 2026 and well above $2 billion for 2027, signaling that it views the current softness as a temporary issue.