STMicroelectronics: Third-Quarter Revenue Up 17.9%, Earnings Per Share Below Expectations
STMicroelectronics reported on October 29, 2026 third-quarter revenue of $3.76 billion, up 17.9% year-over-year and 150 basis points above the midpoint of its guidance range.
Operating income more than doubled to $367 million from $180 million a year earlier.
The quarter demonstrates a recovery that extends to profitability and not merely volumes. Gross margin expanded 410 basis points year-over-year to 37.3%, primarily due to lower charges related to unused capacity and improved product mix. Management anticipates the continuation of this trend as the year concludes.
Revenue Up 17.9% and Net Income at $291 Million
On a sequential basis, revenue increased by 7.7%. Growth was more pronounced in distribution (+38.8% year-over-year) than among major industrial customers (+10.2%). Distribution now represents 32% of sales, compared with 27% in the third quarter of 2025.
Operating margin stood at 9.8%, compared with 5.6% a year earlier, despite $55 million in impairments and restructuring charges related to the reshaping of the industrial footprint. Excluding these items and the purchase price allocation effects from the NXP MEMS business, it reaches 11.4%, compared with 6.8%.
Net income attributable to the group advanced to $291 million, or $0.31 per diluted share, versus $237 million and $0.26 per share. On a non-U.S. GAAP basis, earnings per share came in at $0.37, below the average analyst expectation of $0.40 prior to the release.
Embedded Processing and RF Communications Drive Margins
The Embedded Processing segment ($1.21 billion in revenue, +24.1%) saw operating income increase by 74.2% to $280 million for a margin of 23.1% versus 16.5%. The Optical and RF Communications segment advanced by 46.2%, with margin expanding from 16.6% to 26.2%.
Other business units are evolving differently. In analog products, MEMS and sensors, revenue increased by 8.8%, but operating margin declined from 15.4% to 14.1%. The Discrete and Power Products segment, up 11.3%, posted an operating loss of $81 million, compared with $67 million a year earlier.
On the cash flow side, operating cash flow reached $1.02 billion, compared with $549 million, and free cash flow amounted to $351 million despite net capex of $643 million. Inventory turnover days improved to 126 days, compared with 135 days a year earlier.
2026 Outlook Raised to $14.5 Billion
For the fourth quarter, the group is guiding to revenue of $4.15 billion at the midpoint, up 10.5% sequentially (plus or minus 350 basis points), and a gross margin of 39.0%.
Jean-Marc Chéry noted demand "exceeding supply" and distribution inventory levels below the group's target.
The balance sheet reflects the repayment of convertible debt due 2027, redeemed for $750 million in cash and approximately 4.2 million treasury shares. Net financial position reaches $2.11 billion, compared with $2.01 billion at end-June. The stock had declined 24% over three months as of October 21, 2026.
According to analyst consensus tracked, the stock trades at approximately 36.0 times expected earnings for the current fiscal year.
The midpoint of the outlook corresponds to annual revenue of approximately $14.5 billion, up 22.8% from $11.8 billion in 2025, with a non-U.S. GAAP gross margin target of 36.6%, representing 270 basis points higher than in 2025.
