STMicroelectronics shares dropped on Wednesday following the announcement of a delay in its long-term financial goals.
The semiconductor giant extended its target of reaching $20 billion in revenue with a gross margin of around 50% to 2030, revising its earlier timeline of 2025-2027. To address market uncertainties, the company introduced interim goals for 2027-2028, reflecting a more cautious stance amidst persistent industry challenges.
STMicro now anticipates achieving approximately $18 billion in revenue by 2027-2028, with a gross margin between 44% and 46%. Analysts at Morgan Stanley attributed this adjustment to challenges in the adoption of wide bandgap semiconductors like silicon carbide (SiC), which has faced delays this year.
Management identified the automotive sector as a central growth driver, citing the increasing shift to electric vehicles and advanced driver-assistance systems (ADAS). The company also highlighted its focus on 300mm wafer manufacturing and innovative materials like SiC and gallium nitride (GaN) as key elements of its long-term strategy.
To align with its revised targets, STMICRO announced plans to optimize its manufacturing operations, scaling back certain facilities—primarily overseas—and concentrating capital expenditures on strategic priorities. This “rightsizing” initiative is expected to generate high triple-digit million-dollar savings by 2027, supporting an operating margin goal of 22%-24% for the period.
The updated outlook represents a significant shift from 2022, when STMicro predicted it would hit $20 billion in revenue by 2025-2027, driven by strong growth in car electrification, IoT, and foundry services.
Previously, STMicroelectronics projected that 10% of its revenue would come from wide bandgap semiconductors, 32% from 300mm wafer production, and 20% from its foundry business. These estimates also included a free cash flow margin of at least 25%, driven by improved efficiency through a stronger product mix and higher pricing.
“We anticipate the company will not only reaffirm the timeline for its cost reduction program but also provide specifics on which manufacturing facilities might be scaled back—likely overseas—and where capital expenditures will be concentrated,” Morgan Stanley analysts noted in a report.
STMicro’s emphasis on cost optimization and strategic investments is intended to support growth beyond 2025-2026.
Barclays analysts added, “We expect further details in the future, but the intermediate guidance indicates that the growth cycle should gain full momentum by 2027/28, given the extended timeline of the current lan.”
