STMicroelectronics N.V. (STM) shares took a hit on Thursday after the company revealed a significant decline in its third-quarter revenue. The semiconductor giant reported net revenues of $3.25 billion, representing a 26.6% year-over-year decrease. While this figure marginally surpassed analyst expectations of $3.247 billion, it reflects the challenging market conditions impacting the industry.
STMicroelectronics attributed the revenue slump to a softening demand across its core segments. Sales to original equipment manufacturers (OEMs) dipped by 17.5%, and distribution sales plummeted by 45.4%. The company’s Analog products, MEMS, and Sensors (AM&S) segment witnessed a 13.3% decline in revenue, primarily driven by weakness in Imaging and Analog sectors. Similarly, Power and Discrete products (P&D) segment revenue decreased by 18.4%, and Microcontrollers (MCU) segment revenue fell by 43.4%.
Despite the challenging revenue performance, STMicroelectronics managed to outperform expectations in the Personal Electronics sector, experiencing a less-than-anticipated decline in the Industrial sector. However, the Automotive sector fell short of expectations.
To address the current market headwinds and position itself for future growth, STMicroelectronics announced a company-wide restructuring program. This initiative will focus on optimizing its manufacturing footprint, accelerating its wafer fab capacity for 300mm Silicon (Agrate and Crolles) and 200mm Silicon Carbide (Catania), and adjusting its global cost base. The company expects this program to result in significant cost savings, reaching the high triple-digit million-dollar range by the end of 2027.
Looking ahead, STMicroelectronics anticipates fourth-quarter net revenues to be $3.32 billion, representing a 2.2% sequential increase. However, the company acknowledges the ongoing market uncertainty and forecasts a revenue decline between the fourth quarter of 2024 and the first quarter of 2025, exceeding normal seasonality.
Overall, STMicroelectronics’ third-quarter results highlight the ongoing semiconductor market slowdown. The company’s restructuring plans and its cautious outlook demonstrate the challenges it faces in navigating these difficult times. However, its commitment to optimizing operations and focusing on future growth positions it to capitalize on opportunities when the market conditions improve.
