Will AI Data Center Explosive Growth Save STM Stock on Oct. 29?
STMicroelectronics shares have shed nearly half their value since a strong beat sent investors running, and the Oct. 29 earnings report may finally reveal whether its booming AI data center business can turn that skepticism around.
STMicroelectronics (NYSE: STM | STM Price Prediction) reports third-quarter results on Thursday, Oct. 29. Shares have dropped 16.09% over the past month. This report will show whether AI data center demand can support a stock that fell after its last beat.
Investors Sold a Strong Beat
Last quarter, revenue rose 24.5% year over year to $3.49 billion. Non-GAAP EPS of $0.31 beat consensus by 19.23%. Gross margin expanded 130 bps to 34.8%, and free cash flow turned positive at $75 million, compared with a $152 million loss a year earlier.
The stock still fell 18.67% on the day of the report. It traded at $67.66 when results came out and has since slipped to $44.02. Shares remain up 70.68% year to date.
On the July call, CEO Jean-Marc Chery said demand was “well above expectations,” and book-to-bill came in “close to 2 overall.” Q3 guidance calls for $3.7 billion in revenue at the midpoint, which is 16.2% year-over-year growth, with gross margin of about 37%.
Consensus Points to Sharp EPS Growth
| Metric | Consensus | YoY Growth |
|---|---|---|
| Q3 2026 Normalized EPS | $0.41 | 57.7% |
| Q3 2026 Revenue | $3.72 billion | 16.8% |
| FY 2026 Normalized EPS | $1.3446 | N/A |
| FY 2026 Revenue | $14.43 billion | 22.3% |
Data Center Orders and Q4 Guidance Matter Most
Management raised its data center target to more than $1 billion for 2026 and well above $2 billion for 2027. Backlog already covers 100% of this year’s data center contracts. Whether management repeats or raises those targets is worth watching (we highlighted seven companies riding this same AI infrastructure expansion, from power to cooling to networking, in a free report you can grab here).
Optical connectivity is the main driver. ST expects Communication Equipment and Computer Peripherals revenue to grow close to 60% year over year in Q3 and around 90% in Q4. The multi-year deal with Amazon Web Services includes warrants for up to 24.8 million shares tied to purchase targets. That makes any update on the deal worth following.
Q4 guidance could move the stock more than Q3 results. Management already expects Q4 revenue above $4 billion. UBS analysts expect Q4 guidance to come in roughly 10% above normal seasonal trends, helped by low-Earth-orbit satellite programs.
Margins are the other test. Power and Discrete posted a negative 21.4% operating margin last quarter, and costs tied to restructuring the manufacturing operations took about 60 basis points off gross margin. Management targets gross margin above 40% only after that program finishes, which it expects by the end of 2027. You should also check whether tight microcontroller supply holds back revenue.
AI Growth Has to Show Up in the Numbers
Management still expects to reach $18 billion in revenue by 2028, and data centers are a key part of that plan. After the July sell-off, investors want proof alongside the targets. If data center revenue and Q4 guidance confirm a revenue jump later this year, ST can argue that AI growth now makes up for its weaker auto and industrial markets.
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After two decades of patrolling the dark corners of suburbia as a police officer, Rich Duprey hung up his badge and gun to begin writing full time about stocks and investing. For the past 20 years, he’s been cruising the markets looking for companies to lock up as long-term holdings in a portfolio while writing extensively on the broad sectors of consumer goods, technology, and industrials. Because his experience isn’t from the typical financial analyst track, Rich is able to break down complex topics into understandable and useful action points for the average investor. His writings have appeared on The Motley Fool, InvestorPlace, Yahoo! Finance, Money Morning, and, of course, 24/7 Wall St. He has been featured in both U.S. and international publications, including MarketWatch, Financial Times, Forbes, Fast Company, and USA Today.
