The European chipmaker STMicroelectronics NV (STM) has announced an upward revision to its full-year revenue target for its data center business, citing sustained strong demand driven by AI infrastructure and progress in expanding production capacity.
The company now anticipates its data center segment revenue will reach approximately $1 billion by 2026. This represents a near doubling from its previous guidance of "well above $500 million."
In a statement, STMicroelectronics indicated that if the current growth trajectory continues and based on secured business partnerships, revenue could potentially double again by 2027. Its prior target for that year was "well above $1 billion."
This marks the second time in the past three months that the company has raised its AI-related business outlook. The initial upward revision was made public by management at the Morgan Stanley European TMT Conference in late March, where the 2026 target was lifted to "significantly above €500 million" and the 2027 target to "well above €1 billion."
The primary growth drivers were identified as opportunities in 800-volt power architectures and optical networking. Management also projected that production volume for its PIC100 photonic chips would triple by 2027.
Unlike companies focused on GPUs for training AI models, STMicroelectronics' data center strategy centers on providing the surrounding infrastructure needed to power and manage these GPUs, akin to supplying the "skeleton and circulatory system" for data centers. This includes power semiconductors for AI server power management, photonic integrated circuits for optical networking, and microcontrollers and analog chips for intelligent infrastructure management.
CEO Jean-Marc Chery emphasized in the statement that the company has established a unique strategic position to continuously benefit from the wave of AI-driven data center infrastructure construction. The company noted that the revised revenue target also reflects advancements in factory capacity ramp-up.
The explosive growth in the data center business has attracted significant attention from Wall Street analysts, leading to multiple target price and rating upgrades.
Morgan Stanley upgraded its rating on the stock from "Equal-weight" to "Overweight" and raised its price target from €24 to €36. The firm cited surging data center demand and early signs of recovery in the industrial market. Morgan Stanley forecasts the company's data center-related revenue will reach $560 million in fiscal 2026, jump to $1.67 billion in 2027, and hit $2.52 billion in 2028, representing a compound annual growth rate of 108% from 2025 to 2028. In an optimistic scenario, Morgan Stanley sets a price target of €53.
Mizuho Securities issued a report on May 19, assigning an "Outperform" rating and raising its price target from $56 to $68, a 21.4% increase. This was based on the logic that AI demand is spreading to the memory and analog chip markets.
Analyst Vijay Rakesh pointed out that channel checks indicate analog chips are benefiting from accelerated AI server deployment, with "supply tightness expected to persist into the first half of 2027."
Bank of America also raised its price target from €32/$38 to €35/$41 while maintaining a "Neutral" rating, citing an improved growth outlook and greater exposure to the AI cycle. The bank forecasts STMicroelectronics' Q1 2026 revenue at $3.09 billion and earnings per share at $0.19, both exceeding prior guidance.
UBS increased its price target to €49, noting the company delivered its largest earnings beat in nearly three years during the first quarter, suggesting a potential cyclical recovery in the industry may be underway.
Regarding stock performance, STMicroelectronics has seen significant gains this year. The share price reached a 52-week high of $71.07 on May 26 and has continued an upward trend following its earnings report, driven by a wave of bullish sentiment from institutional analysts.
Comments