STMicroelectronics reported second quarter net revenues of $3.49 billion, exceeding the midpoint of its business outlook and analyst estimates, driven by strong performance in Automotive and Industrial segments. The company returned to profitability with a net income of $222 million, or $0.24 diluted earnings per share, compared to a net loss of $97 million in the same period last year. Gross margin improved to 34.8%, up 130 basis points year-over-year, while operating income reached $187 million, reversing a prior year loss of $133 million.

Jean-Marc Chery, President and CEO, stated that demand increased further during the quarter with strong bookings across all end markets and improved visibility. He noted that inventory in distribution is now below the standard target. The company reported adjusted earnings per share of $0.31, beating the analyst consensus estimate of $0.27. Quarterly sales of $3.487 billion exceeded the analyst consensus estimate of $3.379 billion.

Financial Performance

The company’s turnaround was supported by significant margin expansion. Operating margin increased to 5.4% of net revenues, compared to a negative 4.8% operating margin in the second quarter of 2025. Non-U.S. GAAP operating income stood at $269 million, with a corresponding margin of 7.7%. Net cash from operating activities was $502 million, and free cash flow turned positive to $75 million from a negative $(152) million in the prior year.

Segment Results

By reportable segment, the Analog, Power & Discrete, MEMS and Sensors (APMS) Product Group generated revenues of $1,890 million, up 19.6% year-over-year. Within this group, the Analog products, MEMS and Sensors (AM&S) segment revenue increased 26.0% to $1,426 million, while the Power and Discrete products (P&D) segment revenue rose 3.7% to $464 million. The Microcontrollers, Digital ICs and RF products (MDRF) Product Group reported revenues of $1,592 million, an increase of 34.5%, led by the Embedded Processing (EMP) segment which grew 35.5%.

Automotive revenues increased 14% sequentially and 16% year over year, driven by application-specific ICs and sensors. Industrial segment revenues improved by 34% year over year, driven by microcontrollers and analog products. The company secured key design wins in automotive applications and integrated NXP's MEMS sensors business.

Business Outlook

For the third quarter of 2026, STMicroelectronics projects net revenues of $3.70 billion, an increase of 6.2% sequentially, plus or minus 350 basis points. Gross margin is expected to be approximately 37.0%, plus or minus 200 basis points. The outlook is based on an assumed effective currency exchange rate of approximately $1.14 = €1.00.

Driven by continued strong demand in AI datacenters, the company is raising its revenue ambition for datacenters, now expecting revenues above $1 billion in 2026 and well above $2 billion in 2027, assuming current dynamics continue. For the fourth quarter, the company anticipates revenue growth acceleration, expecting revenues to be above $4 billion.