STMicro nearly doubles quarterly profit, sees Q4 sales exceeding $4 billion

STMicroelectronics reported a third-quarter operating profit exceeding market expectations on Thursday, driven by demand from AI data centers and satellite operators. Operating income, excluding one-off charges, totaled $429 million, a significant increase from $400.5 million in the same period last year. Analysts had anticipated a profit of $400.5 million, making STMicro's result a notable beat.

The Franco-Italian chipmaker forecasted fourth-quarter revenue of $4.15 billion, surpassing the $3.76 billion generated in the third quarter. This projection, with a potential variation of 3.5%, was higher than the $4.10 billion expected by analysts polled by LSEG. CEO Jean-Marc Chery attributed the optimistic outlook to an expanding capacity that aligns with ST Microelectronics' strategic roadmap.

Company-specific factors, including robust demand for communication equipment, computer peripherals, and personal electronics, contributed to the profit surge. In July, the company had already projected fourth-quarter sales to exceed $4 billion. Chery highlighted that AI data center demand and low-Earth-orbit satellite communications were significant drivers during this cyclical recovery phase.

The company's gross margin improved to 37.3% in the third quarter, up from 33.2% a year earlier. This increase was attributed to a higher share of sales from more profitable chips and reduced costs stemming from idle factory capacity. STMicro anticipates this margin to climb to around 39% in the fourth quarter. Jefferies analysts are optimistic about the company's growth trajectory, predicting continued expansion into 2027.

They expect data center revenue to nearly double from this year to the next, accompanied by a notable rise in gross margins toward the end of next year.