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STMicro Raises 3Q, FY Guidance on Improved Market Conditions

Helene Fouquet
·2-min read

(Bloomberg) -- STMicroelectronics NV, the chipmaker that supplies Apple Inc. and Tesla Inc., raised both its third quarter and full-year revenue forecasts as it sees “improved market conditions” through the end of 2020.

The company said third-quarter revenue will be $2.45 billion with a gross margin of 36%. The average estimate was $2.26 billion and 35.36% respectively, according to data compiled by Bloomberg.

STMicro raised its full-year net revenue target to between $9.25 billion and $9.65 billion, from $8.8 billion to $9.5 billion. Growth in the second half of the year would be in the range of $610 million to $1.01 billion, it said.

Shares of STMicro were up 4% to 27.79 euros at 10:37 a.m. in Paris.

Key Takeaways

“We expect this growth to be driven by engaged customer programs, new products and improved market conditions,” STMicro Chief Executive Officer Jean-Marc Chery said of third-quarter estimates in a statement.Increased U.S.-led restrictions on Huawei equipments will impact STMicro in 4Q, Chery said on a call with analysts, which he said is included in the company’s forecast.For Chery, 2Q “is confirmed to be the bottom” in the slowdown generated by Covid-19, including in its legacy automotive branch. The inventory, which analysts were closely monitoring, was 129 days at the end of the second quarter; at the end of the third quarter it will decrease to 115 to 120 days, Chery said, and at year end to 95 to 100 days.Gaming and wearables will support sales of consumer electronics, he said.The company reported second-quarter revenue of $2.1 billion.Gross margin was 35%. Revenue compares with average analyst estimates of $2 billion and gross margin of 34.65%.Read more analyst reaction here.

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Rival Texas Instruments Inc. projected revenue in the current quarter that topped analysts’ estimates; Dutch chip equipment firm ASML beat analysts expectations for the third quarter and insisted 2020 will be a “growth year.”Analog Devices Inc. is close to an all-stock agreement to acquire Maxim Integrated Products Inc., according to people familiar with the matter. The deal would value Maxim at more than its current market capitalization of roughly $17 billion.STMicro’s share price underperformed compared with analog peers. Credit Suisse and Liberum wrote that concerns around its Huawei Technologies Co. exposure is partly responsible for this.

(Updates with shares, CEO comments in Key Takeaways)

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