STMicroelectronics NV Earnings - Q1 2026 Analysis & Highlights
STMicroelectronics reported strong Q1 2026 results driven by AI data center momentum, successful NXP MEMS acquisition, and normalized inventory levels, with management expecting double-digit revenue growth for 2026 supported by new AI programs, automotive ADAS expansion, and emerging opportunities in silicon photonics and Low Earth Orbit satellites.
Key Financial Results
Q1 2026 net revenues were $3.1 billion, including approximately $40 million from the NXP MEMS sensor business acquisition completed during the quarter.
Excluding the NXP contribution, net revenues were above the midpoint of the business outlook range on a sequential basis, driven mainly by higher revenues in engaged customer programs in Personal Electronics and Communication Equipment & Computer Peripherals.
Gross margin was 33.8%, or 34.1% excluding Purchase Price Allocation (PPA) effects from the NXP MEMS sensor business acquisition.
Non-US GAAP diluted earnings per share was $0.13, excluding impairment, restructuring charges, and PPA effects.
Gross profit increased 24.3% year-over-year to $1.05 billion, with gross margin increasing 40 basis points year-over-year, mainly due to lower unused capacity charges and better product mix.
First quarter 2026 net income was $37 million compared to $56 million in the year-ago quarter, with diluted earnings per share of $0.04 compared to $0.06 one year ago.
Net cash from operating activities totaled $534 million in the first quarter, compared to $574 million in the year-ago quarter.
Free cash flow was negative at $723 million in the first quarter, including $895 million cash-out related to the NXP MEMS sensor business acquisition payment.
Inventory at quarter-end was $3.17 billion with days sales of inventory at 140 days, in line with expectations and compared to 130 days in the previous quarter and 167 days in the year-ago quarter.
Business Segment Results
Analog products, MEMS and sensor grew 23.2% year-over-year, mainly due to imaging and MEMS.
Power and discrete products decreased 1.8% year-over-year.
Embedded processing revenues were up 31.3% year-over-year, due to general-purpose MCU and custom processing.
RF & Optical Communication grew 33.9% year-over-year.
Communication Equipment & Computer Peripherals grew 41% year-over-year, with revenues above expectations and up 3% sequentially.
Industrial improved 26% year-over-year and decreased by 1% sequentially, with inventories in distribution now normalized.
Personal Electronics revenues were down 14% sequentially, reflecting seasonality of engaged customer programs, and up 21% year-over-year, reflecting increasing content.
Automotive revenues declined 10% sequentially but increased 15% year-over-year, marking the return to year-over-year growth.
On a sequential basis, analog products, MEMS and sensor decreased by 9.1%, Power and Discrete by 5.4%, Embedded Processing by 4%, and RF/Optical Communication by 9%.
Capital Allocation
Cash dividend paid to stockholders in the first quarter of 2026 totaled $71 million.
Net CapEx was $362 million in the first quarter compared to $530 million in the year-ago quarter.
ST maintains a solid net financial position of $2 billion as of March 28, 2026, with total liquidity of $4.57 billion and total financial debt of $2.57 billion.
Industry Trends and Dynamics
Strong booking momentum during Q1 with book-to-bill well above 1 across all end markets and regions.
Inventory in distribution has been normalized after being worked down throughout the quarter.
Design wins across electric, hybrid and traditional vehicles spanning onboard chargers, DC-DC converters, powertrain active suspension, and vehicle control electronics.
Design wins across industrial automation and robotics, building automation, power systems, healthcare, and home appliances.
ST ranked as the number one vendor worldwide for general-purpose microcontrollers for the fifth consecutive year based on Omdia research.
Reinforced position in mobile platforms and connected consumer devices supported by engaged programs and broad open-market portfolio spanning sensors, secure solutions, and power management.
Continued reinforcement as a supplier of critical semiconductors that power, cool, and connect AI data centers from the grid to the core and from the core to the user.
Low Earth Orbit satellite business strongly progressed during the quarter, with selection to develop a power amplifier controller for direct-to-cell satellites and continued ramp shipments to second largest customer.
Competitive Landscape
ST is strategically positioned to capture upside from new AI-driven programs, leveraging specialized technologies to enable evolving AI infrastructure.
ST is the unique company capable to provide silicon photonics technology on 12-inch wafers, with capability to increase capacity both in Crolles and possibly later in Agrate.
ST is a unique company capable to provide on infrastructure from photonic solutions, MEMS solutions, microcontrollers, power switches, power drivers, controllers and sensors.
Collaboration with NVIDIA to integrate ST sensors, microcontrollers, and motor control solutions with NVIDIA robotics ecosystem to help developers design, train, and deploy humanoid robots and Physical AI systems.
Support for motion sensing and secure wireless technology on Qualcomm Technologies' newly launched personal AI platform based on ST smart sensor and secure NFC controllers.
Macroeconomic Environment
Despite macroeconomic uncertainty, improving demand was observed with strong booking and normalized inventory in distribution.
Business outlook does not include any impact for potential further change to global trade tariffs compared to the current situation.
Growth Opportunities and Strategies
Expanded strategic engagement with Amazon Web Services through a multiyear, multibillion US dollar commercial engagement to enable new high-performance compute infrastructure for cloud and AI data centers.
Secured multiple design wins for silicon and silicon carbide-based power solutions supporting drive for higher power density and increased energy efficiency for next-generation AI compute and data center architectures.
Expansion of 800-volt DC AI data center power conversion portfolio with new 12-volt and 6-volt architectures in collaboration with NVIDIA.
Started high-volume production for silicon photonics-based Photonics ICs 100 (PIC100) platform used by hyperscalers for optical interconnect for data centers and AI clusters.
First batch of STM32 wafers fully produced in China for ST by partner Huahong delivered to customers in China, representing a major step forward in ST China-for-China supply chain strategy.
Announced dedicated call on May 4 on ST's Low Earth Orbit satellites, explaining how the company will achieve ambition of well above $3 billion cumulative revenues over the period 2026 to 2028 for this opportunity.
Transformation program underway to move analog technology from 200 millimeter to 300 millimeter and silicon carbide from 6 inch to 8 inch, with benefits expected more in the end of 2027 and entering 2028.
Sanan joint venture in Chongqing expected to start production and load infrastructure starting the end of 2026.
Financial Guidance and Outlook
Q2 2026 revenues expected at $3.45 billion, plus/minus 350 basis points, representing 11.6% sequential growth and 24.9% year-over-year growth at the midpoint.
Q2 2026 gross margin expected to be about 34.8%, plus/minus 200 basis points, including about 100 basis points of unused capacity charges, with non-US GAAP gross margin expected to be about 35.2%.
2026 revenues expected to show double-digit growth, driven by addressable market dynamics, engaged customer programs, and new AI programs.
Data centers revenue expected to be nicely above $500 million for 2026 and well above $1 billion for 2027.
Approximately 40% of the nicely above $500 million in 2026 AI data center revenues related to analog and power, and 60% related to microcontroller and radiofrequency, optical cable.
For full year 2026, like-for-like net OpEx expected to be up mid- to high-single digit year-over-year versus previous expectation for low-single-digit increase, as the company accelerates investment in new business opportunities.
Including NXP MEMS sensor business acquisition and exchange rate impact, net OpEx should be up low-double digit year-over-year.
Q2 2026 non-US GAAP net OpEx expected to stand between $950 million and $960 million.
Negative impact on gross margin from non-recurring costs related to manufacturing reshaping programs expected to remain at similar level over the rest of the year at about 50 basis points.
Pricing environment showing very low, low-single-digit price decline, with some selected price increases expected, representing a better situation compared to a few months ago.
Gross margin expected to improve sequentially from Q1 through Q4 2026, with path above 40% when the company reaches quarterly revenues above $4 billion.
Acquisition and Integration
Completed acquisition of NXP's MEMS sensor business in February, with acquired technology and product portfolio highly complementary to ST's and strengthening automotive sensor business.
Progressing as planned with integration of NXP MEMS business into portfolio and operational flows.
NXP MEMS business expected to accelerate growth faster than typical market growth in safety applications due to combination of NXP's strong positioning in accelerometers and ST's capabilities on 6-axis sensors.
