IN Brief:
- Second-quarter revenue increased 26% year on year to $3.49bn, with gross margin reaching 34.8%.
- Demand improved across industrial, personal electronics, data-centre, and satellite applications, although automotive conditions remained mixed.
- ST expects third-quarter revenue of approximately $3.70bn as supply tightens in selected component categories.
STMicroelectronics reported second-quarter revenue of $3.49bn, an increase of 26% year on year, as semiconductor demand recovered across several end markets and inventories held by distributors continued to decline.
Gross margin reached 34.8%, while net income was $222m, reversing the $97m loss recorded during the equivalent quarter of 2025. Third-quarter revenue is expected to reach approximately $3.70bn, representing sequential growth of around 6% and a year-on-year increase of roughly 16%.
Bookings improved throughout the quarter, although the pattern remained uneven across product groups and customer markets. Industrial demand began to stabilise after a prolonged correction, personal electronics and communications infrastructure contributed further growth, and automotive customers continued to balance production requirements against inventories accumulated during earlier component shortages.
Selected component categories are now moving towards tighter supply after an extended period of destocking. The change will place greater attention on lead times and allocation discipline, particularly where automotive and industrial programmes depend on qualified devices that cannot be substituted without redesign, testing, and customer approval.
AI infrastructure is becoming a larger part of ST’s business, with data-centre revenue expected to exceed $1bn during 2026 and pass $2bn in 2027. Power management, galvanic isolation, silicon carbide, analogue devices, microcontrollers, sensors, and optical-connectivity components all sit within the expanding electronic architecture surrounding AI accelerators.
Although processors and memory attract most of the investment headlines, a high-density computing rack also requires conversion from incoming AC supplies through several regulated voltage stages, alongside protection, monitoring, timing, isolation, thermal control, networking, and increasingly optical data links. As accelerator power rises, small efficiency losses at each stage become increasingly expensive in both electricity and cooling capacity.
Demand is already reaching the European compound-semiconductor chain. IQE’s $14m wafer order from an AI data-centre customer will support optical communications, storage, and connectivity from its Newport manufacturing operation, while ST’s results show the same investment cycle spreading across a much broader component portfolio.
Satellite and low-Earth-orbit communications are contributing another source of growth. Such programmes use power-efficient radio-frequency, mixed-signal, power-management, and control devices that can tolerate demanding thermal and radiation environments. Volumes remain below those of automotive electronics, but qualification can create long programme lives and comparatively stable supplier relationships.
Broader semiconductor portfolios are also changing the competitive landscape. onsemi’s planned acquisition of Synaptics would combine power, sensing, compute, wireless connectivity, and human-machine interfaces within one organisation. ST already spans many of those layers through microcontrollers, MEMS, analogue products, power devices, security, and connectivity.
Combining more functions under one supplier can simplify reference platforms and software integration, yet industrial and automotive engineers still require flexibility at component level. Long qualification cycles, functional-safety obligations, second-source planning, and product lifetimes extending well beyond consumer generations all limit the speed at which complete architectures can be replaced.
Lead-time management will consequently return to the foreground as bookings strengthen. During the previous shortage, customers placed overlapping orders and carried larger safety stocks, obscuring underlying demand and contributing to the correction that followed. Suppliers and distributors are now rebuilding utilisation while trying to avoid another inventory cycle shaped by duplicate orders and abrupt cancellations.
Capital expenditure remains difficult to balance because ST’s markets rely on markedly different manufacturing technologies. Power devices, MEMS, analogue components, microcontrollers, and advanced packaging require different process flows, wafer sizes, and equipment sets, so spare capacity in one factory cannot necessarily address tightening supply elsewhere.
The company’s third-quarter forecast points to continued improvement rather than unrestricted growth. Automotive production remains exposed to regional variation, industrial recovery is still developing, and the rapid expansion of AI infrastructure could place pressure on selected power, analogue, and connectivity products before utilisation rises evenly across the portfolio.
ST enters the second half with stronger bookings, lower channel inventories, and expanding exposure to data-centre and satellite programmes. Sustaining that improvement will depend on converting demand into stable supply without rebuilding the excess inventory that prolonged the previous downturn.
