STMicroelectronics Q4 Earnings Call Highlights

STMicroelectronics (NYSE:STM) executives outlined a challenging 2025 marked by automotive and industrial inventory corrections, but said trends improved in the second half and returned to year-over-year revenue growth in the fourth quarter. On the company’s fourth-quarter and full-year 2025 earnings call, CEO Jean-Marc Chery and CFO Lorenzo Grandi also discussed a manufacturing reshaping program, near-term margin pressure from unused capacity charges, and growth drivers management expects to support organic growth in 2026.

Fourth-quarter performance: revenue above outlook midpoint, but reported loss

ST reported fourth-quarter revenue of $3.33 billion, which Chery said was above the midpoint of the company’s outlook range. The outperformance was driven primarily by higher revenues in personal electronics and, to a lesser extent, communication equipment and computer peripherals and industrial, while automotive was below expectations.

Gross margin was 35.2%, also above the midpoint of guidance, with management attributing the result mainly to a better product mix. Excluding impairment, restructuring and other related phase-out costs, ST posted non-GAAP diluted EPS of $0.11, though management noted the quarter included negative one-time expenses. The company also highlighted progress reducing inventories and generated $257 million of free cash flow in the quarter.

On a reported basis, ST posted a net loss of $30 million in Q4, compared with net income of $341 million in the year-ago quarter. Grandi said the quarter included $141 million of impairment, restructuring and other related phase-out costs, as well as $163 million of one-time non-cash income tax expenses.

Segment and end-market trends: communications strength, automotive softness

Grandi detailed fourth-quarter revenue performance by product segment and end market. Year over year, analog products, MEMS and sensors increased 7.5%, RF and optical communication rose 22.9%, and embedded processing increased 1.2%. Power and discrete products declined 31.6%.

By end market, communication equipment and computer peripherals and personal electronics each grew by about 17% year over year, industrial grew about 5%, and automotive declined about 15%.

Sequentially, communications equipment and computer peripherals rose 23%, industrial was up 5%, and automotive increased 3%, while personal electronics declined 2%. Grandi said power and discrete was the only product segment to fall sequentially, down 3.9%.

Chery said automotive revenue grew sequentially in Q4, but the quarter came in slightly below expectations due to what he described as “pulling from inventory a little bit lower than expected from some tier one.” He characterized legacy automotive applications as “pretty soft,” while pointing to longer-term drivers tied to new electronic architectures and software-defined vehicles. In response to an analyst question, Chery also discussed the competitive landscape in China and said the partnership with Sanan will be a “key success factor” for competing in that market as facilities begin ramping.

Full-year 2025: revenue down 11.1%, margins compressed

For full-year 2025, ST reported net revenues of $11.8 billion, down 11.1% from 2024. Management said the decline was driven mainly by a strong decrease in automotive and, to a lesser extent, industrial, while personal electronics and communications grew.

Gross margin for 2025 was 33.9%, down from 39.3% in 2024. Grandi attributed the contraction mainly to lower manufacturing efficiencies, along with price and mix, lower capacity reservation fees, currency effects, and higher unused capacity charges. Reported operating income fell to $175 million from $1.68 billion in 2024; excluding $376 million of impairment, restructuring and phase-out costs, non-GAAP operating margin was 4.7%.

Reported net income for 2025 was $166 million (EPS $0.18), while non-GAAP net income was $486 million (non-GAAP EPS $0.53).

ST generated $2.15 billion in operating cash flow and invested $1.79 billion in net capital expenditures, producing $265 million in positive free cash flow for the year. Inventory ended the year at $3.14 billion, with days sales of inventory at 130 days. The company paid $321 million in dividends and executed $367 million of share buybacks in 2025. Grandi said ST ended December 2025 with a net financial position of $2.79 billion.

Outlook: Q1 2026 revenue decline, margin pressured by unused capacity

For the first quarter of 2026, management guided revenue of $3.04 billion, down 8.7% sequentially, with a range of plus or minus 350 basis points. ST expects gross margin of about 33.7% (plus or minus 200 basis points), including about 220 basis points of unused capacity charges. Chery noted the outlook excludes any impact from potential additional changes to global tariffs versus the current situation.

In the Q&A, Grandi said management expects Q1 gross margin to be the low point of the year and anticipates improvement as unused capacity charges decline and as second-half seasonality supports higher revenue. Later in the Q&A, Chery reiterated his expectation that Q4 2026 gross margin should be better than Q4 2025.

Strategic priorities: manufacturing reshaping, targeted CapEx, and growth drivers

ST said it plans about $2.2 billion of net CapEx in 2026, aimed at capacity additions for select growth drivers such as cloud optical interconnect and to support its manufacturing reshaping plan.

Management described the manufacturing reshaping program as reducing capacity in certain areas (including 6-inch and 150mm silicon carbide and 200mm silicon) while shifting production to 8-inch silicon carbide and 300mm silicon. Grandi said the reduction in unused capacity charges is “mechanical” as capacity is taken out, while broader manufacturing efficiency benefits are expected more in 2027 and 2028. He also said the program is progressing in line with expectations, including OpEx savings already visible in 2025.

Chery highlighted several growth drivers he believes can support organic growth in 2026 and beyond, including ADAS ASICs in automotive, a recovery in silicon carbide power devices after a difficult 2025, demand in MEMS and imaging sensors (along with the planned acquisition of NXP’s MEMS sensor business, expected to close in H1 2026), and general-purpose microcontrollers in industrial. He also emphasized data center opportunities, including cloud optical interconnect (photonics ICs, BiCMOS ICs, and high-performance microcontrollers), and continued momentum in low Earth orbit satellite communications.

On personal electronics, Chery said ST’s visibility remains primarily tied to its largest customer and that the company expects continued growth in 2026 driven by increased silicon content. In industrial, he said book-to-bill was “well above parity” and that point-of-sale data was growing at a low-teens to mid-teens pace, while distribution inventory pockets were expected to normalize by the end of Q2.

About STMicroelectronics (NYSE:STM)

STMicroelectronics is a global semiconductor company headquartered in Geneva, Switzerland, formed through the 1987 merger of SGS Microelettronica and Thomson Semiconducteurs. The company designs, develops and manufactures a broad range of semiconductor products and solutions that serve multiple end markets worldwide. ST’s offerings span from basic components to integrated systems, emphasizing energy-efficient and high-performance devices for modern electronics.

Product categories include microcontrollers (notably the widely used STM32 family), analog and mixed-signal ICs, power MOSFETs and power-management devices, MEMS and sensors, image sensors, and discrete semiconductors.