Key facts
- STMicroelectronics has significantly increased its revenue forecasts for its data center chip business.
- The company now projects $1 billion in data center revenue for 2026, up from previous expectations of "nicely above $500 million."
- STMicro anticipates its data center revenue could double in 2027, exceeding prior estimates of "well above $1 billion."
- The chipmaker reaffirmed its medium-term revenue target of $18 billion and a gross margin of nearly 45%.
- Morningstar Equity Research raised its fair value estimate for STMicroelectronics to $72 per share.
- STMicro has informed customers of upcoming price increases due to tightening capacity.
STMicroelectronics has significantly boosted its revenue projections for its data center chip business, now anticipating $1 billion in revenue for 2026, a substantial increase from previous estimates of "nicely above $500 million." The company also indicated that this revenue could double in 2027, surpassing earlier expectations of "well above $1 billion." These upward revisions are attributed to the burgeoning artificial intelligence boom, which is driving demand for advanced semiconductor components.
At a recent investor conference, STMicro reaffirmed its medium-term financial ambitions, targeting $18 billion in revenue and a gross margin close to 45%. Morningstar Equity Research views these targets as now achievable due to the AI surge. The firm has consequently raised its fair value estimate for STMicroelectronics to $72 per share, citing higher projections for the company's data center and low-Earth-orbit satellite businesses. Morningstar's 2027 revenue estimate has been increased to $17.8 billion, exceeding the FactSet consensus of $16.3 billion, with the expectation that STMicro's own AI revenue projection of $2 billion for 2027 might be conservative.
STMicro's exposure to silicon photonics and high-voltage power semiconductors is seen as a key advantage in the AI infrastructure buildout. The company has also recently communicated potential price increases to customers, which are expected to support gross margins as capacity tightens. Morningstar believes any such windfalls will bolster future profits.