STMicroelectronics (STM.US) released its third-quarter 2026 earnings report and issued fourth-quarter guidance above market expectations, signaling a continued recovery in chip demand.
According to the data, the company's third-quarter revenue reached $3.76 billion, up 17.9% year-over-year and exceeding market expectations; Non-GAAP earnings per share came in at $0.37, slightly below market expectations.
Third-quarter net cash flow from operating activities was $1.020 billion, compared to $549 million in the same period last year; net capital expenditure was $643 million, compared to $401 million a year earlier; free cash flow was positive at $351 million, compared to positive $130 million in the prior-year period.
Looking ahead, the company expects fourth-quarter revenue at a midpoint of $4.15 billion, representing roughly 10.5% sequential growth and above the market expectation of $4.12 billion; gross margin is projected at 39.0%, versus the previously anticipated 38.2%.
AI and Satellite Communications Demand Support Growth
STMicroelectronics' customers include Apple and Tesla. CEO Jean-Marc Chery said in July that fourth-quarter revenue would accelerate, driven by demand from AI data centers and low-earth-orbit satellite communications.
Previously, the company reported results that fell short of expectations, causing its stock price to plunge as much as 17% at one point, marking its largest intraday drop in a year.
STMicroelectronics is working to diversify beyond its core automotive and industrial markets. Alongside peers such as Infineon, the company is targeting demand for power management chips arising from AI data center buildouts 鈥?chips used to support advanced processors from manufacturers like Nvidia.
As the automotive chip market recovers from a prolonged downturn, this positioning offers a potential source of growth. However, investors remain cautious about the semiconductor sector, worried about the sustainability of AI infrastructure spending and competition from Chinese chipmakers.
Competitor NXP Semiconductors saw its shares decline after issuing weaker-than-expected revenue guidance on Wednesday. JPMorgan analysts including Sandeep Deshpande wrote in a pre-earnings report that STMicroelectronics has demonstrated confidence in strong AI-related orders, which should support above-normal seasonal growth and are expected to drive gross margin improvement from the previous quarter.
Texas Instruments last week provided strong revenue guidance, citing "broad-based growth" in industrial, automotive, and data center demand, and said it plans to expand capacity to meet demand.
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