Oct 29, 2026 earnings call — Q3 results: AI datacenter growth and manufacturing reshape
ST expects Q4 2026 revenue of $4.15 billion, plus/minus 350 basis points at the midpoint.
Revenue $3.8B (est $3.7B) · EPS $0.37 (est $0.40) · Next-quarter revenue outlook $4.2B ±3.5%
Key quotes
"This supports our revenue expectation for 2026 of about $1.3 billion and assuming the current dynamic continues and with the current engagements we have, our revenue ambition of well above $2 billion in 2027 and further growth beyond."
"We remain committed to achieving the 44% to the 46% gross margin of our intermediate financial model once our manufacturing reshaping plan is completed."
"Industrial revenues improved 12% sequentially and 40% year-over-year. This solid growth was mainly driven by our general purpose microcontrollers, analog and power conversion products."
Analyst Q&A 9
Gross margin timing and datacenter revenue
Q (Joshua Buchalter · TD Cowen): Analyst asked if the 400 basis point gross margin step will happen all at once and asked for more detail on datacenter revenue mix and size next year.
A: Management said the gross margin uplift will show when legacy fabs are closed, likely late 2027 into early 2028, but margin should improve progressively from mix and manufacturing gains. They said datacenter revenue is about $1.3 billion this year and will be well above double next year, with microcontrollers growing 2x, silicon photonics becoming a significant share, and BiCMOS effects mainly visible in 2028.
Q1 gross margin and LEO satellites
Q (Francois-Xavier Bouvignies · UBS): Analyst asked the direction of Q1 gross margin and asked whether LEO satellite revenue will grow into next year.
A: Management said Q1 gross margin should be at least at current consensus. For satellites, they said demand momentum is strong across programs and that next year revenue should be as good as or better than this year, and they are working to add capacity to meet it.
"I would expect actually next year to be as good, if not better than this year in terms of revenue contribution." — Remi El-Ouazzane (PRESIDENT)
Backlog and seasonal outlook for 2027
Q (Sébastien Sztabowicz · Kepler Cheuvreux): Analyst asked how much visibility the company has now, the backlog at end of Q3, and whether seasonality for 2027 will be different.
A: Management said seasonality will change because the mix by end market is shifting (automotive about 35%, industrial 22–24%, CCP slightly above 20%, personal electronics 22%). They said book-to-bill was well above 2 and backlog is well above $20 billion, roughly five quarters of revenue, giving appropriate visibility to run operations.
"So it's representing compared Q4 midpoint of the guidance, now about 5 quarters of revenue, which start to be appropriate visibility to drive our operation." — Jean-Marc Chery (CEO)
Gross margin path and target model upside
Q (Janardan Menon · Jefferies): Analyst asked about Q1 gross margin relative to consensus and whether strong AI growth could push gross margin above the medium-term 44%–46% target.
A: Management reiterated the reshaping plan will materially affect margins toward end of next year and into 2028 and that AI and industrial mix are accretive to margin. They said inflationary input cost is a headwind but mix and efficiency and price actions are positives; for now they target their stated model and will update guidance in January.
"The point is that for the time being, we target to be at our target model, let's say." — Lorenzo Grandi (CFO)
Book-to-bill and Q1 seasonality
Q (Gianmarco Bonacina · Banca Akros): Analyst asked for more color on book-to-bill by vertical and whether Q1 seasonality might differ this cycle.
A: Management said book-to-bill is significantly above 2 overall, above 1 in every end market and well above 3 for Communication Equipment, Computer Peripheral and Industrial. They also said they feel comfortable delivering Q1 revenue and gross margin consensus despite only 86 calendar days.
"So about the book-to-bill that is significantly above 2 for ST overall." — Jean-Marc Chery (CEO)
Pricing talks and personal electronics pull-in risk
Q (Didier Scemama · BofA): Analyst asked about early indications from pricing negotiations with Tier 1 customers and whether Q3 strength in Personal Electronics was a pull-in.
A: Management said they are increasing prices on some selected products due to higher input costs and longer lead times, but discussions are ongoing and outcomes for next year are not finalized. They also said Q3 Personal Electronics strength was not a pull-in and they simply met genuine customer demand; they are comfortable delivering Q1 consensus with current visibility.
"Let's say that -- what we can say is that in terms of pricing, we confirm that in this context that this higher input cost and the increasing lead time, we are increasing pricing on some selected product." — Lorenzo Grandi (CFO)
Silicon photonics yields and OpEx outlook
Q (Jakob Bluestone · BNP Paribas): Analyst asked about silicon photonics yield progress and capacity expansion, and asked for the OpEx outlook beyond Q4.
A: Management said silicon photonics yields are excellent and customers are very happy; ST is shipping at 12-inch scale and expects steep growth and more than a 4x capacity increase year-on-year. On OpEx, management said expenses will rise next year but cost savings of about $100 million–$120 million, lower start-up costs, and higher investments will leave an improved expense-to-sales ratio.
"I can say with high confidence that our customers are very, very, very happy with the yield that our technology platform is providing." — Remi El-Ouazzane (PRESIDENT)
Satellite capacity and automotive outlook
Q (Stephane Houri · ODDO BHF): Analyst asked to separate end demand versus capacity limits for satellites and asked the view on automotive, electromobility, software-defined vehicles, and silicon carbide for 2027.
A: For satellites, management said next year should be as good or better than this year with more customers adding demand, and they expect to be capacity-gated rather than demand-gated so are working to free capacity. For automotive, they said visibility from European Tier 1s is stable, automotive should grow slightly above 10% in 2026 and continue to contribute into 2027, and silicon carbide should grow with benefits from wafer size conversion to 8-inch.
"I will state that next year, we are most likely going to be capacity gated not demand-gated." — Remi El-Ouazzane (PRESIDENT)
Breakdown of 400 bps and Q4 margin impacts
Q (Sandeep Deshpande · JPMorgan): Analyst asked how much of the 400 basis points comes from wafer size and automation versus other factors, and why AMS and Power & Discrete margins fell despite revenue growth. He also asked how much of the 39% Q4 margin is due to underloading and transfer costs.
A: Management said the 400+ basis points stems from wafer size, more automated fabs, and other elements but splitting contributors precisely is complex. They said AMS margins are hit by legacy fab transfers and extra costs now, Power & Discrete will benefit from 150mm to 200mm moves, and quantified Q4 underloading at 40 basis points and transfer-related extra costs at about 30 basis points while other inefficiency is harder to measure.
"The extra cost, let's say, related to the new mask, transfer of the process, trials and so on, we estimate in the range of 30 basis points." — Lorenzo Grandi (CFO)