(Bloomberg) -- Infineon Technologies AG shares rose after the German chipmaker said it expects a turnaround in fortunes by the end of the 2025 fiscal year, signaling that an extended slump in automotive demand may be nearing an end.
The recovery will come after a forecast drop-off in sales in the first quarter, which ends in December, the company said in a statement on Tuesday. Revenue in the current period will be around €3.2 billion ($3.4 billion), compared to €3.92 billion in the fourth quarter.
Infineon shares were up 2.9% at 1:46 p.m. in Frankfurt trading. They have fallen 19% so far this year.
The company was the first to issue 2025 guidance among Europe’s major chipmakers, which rely more heavily on automakers for their sales than the rest of the world’s semiconductor businesses. The outlook signals some relief for the region, which has been battered by weak demand for electric vehicles and has largely missed out on the artificial intelligence boom that’s propelled sales of other more advanced types of chips.
“Guidance implies a return to double-digit growth by the fourth quarter,” Citi analysts including Andrew Gardiner wrote in a note on Tuesday. Infineon is “anticipating the end of the inventory correction and a return to growth.”
The company expects 2025 revenue to “slightly decline” from the year that ended in September, when the company made €14.96 billion, according to the statement. Its first quarter revenue forecast is about 15% lower than the average estimate of €3.77 billion among analysts surveyed by Bloomberg.
“This weak guidance minimizes the risks of further cuts,” Jefferies analysts including Janardan Menon said in a note. “We also expect most segments to gradually improve through 2025.”
In the 2024 fiscal year, Infineon cut its revenue forecast three times as an expected recovery in the auto sector failed to materialize. More than half of Infineon’s sales are to the car industry.
What Bloomberg Intelligence Says
The market is unlikely to be surprised by Infineon expecting a slight decline in revenue for fiscal 2025 ending September, but the forecast for a small decrease in automotive sales appears better than the high-single-digit reduction anticipated. Guidance for 1Q sales representing a 15% miss relative to the Bloomberg consensus implies the need for a strong recovery in the rest of year, which may be challenging amid industry headwinds.
— BI Senior Industry Analyst Ken Hui
Segment result margin, a profitability metric, was 21.2% in the quarter ending in September, compared to 25.2% a year ago.
Infineon plans investments at around €2.5 billion in 2025. The focus will be on its German Dresden site, for smart power technologies for applications such as powering AI.
“We have cut our investments by 10% compared to last year,” Chief Financial Officer Sven Schneider said in an interview on Bloomberg TV. “We are focusing on the strategically relevant decisions, like our Dresden module four.”
Carmakers in Europe are struggling to compete with cheaper models from China, and the market for electric vehicles has also hurt peers STMicroelectronics NV and NXP Semiconductors NV. There is also an inventory glut of chips for the industry as demand remains weak.
At the same time, Beijing has ramped up its own semiconductor production, and the European Commission has warned that the continent’s chipmakers are at risk of losing market share for more mature types of semiconductors.
Infineon’s Chief Executive Officer Jochen Hanebeck said at a press conference Tuesday carmakers should be careful not to slash chip inventory too drastically. “Will inventories be reduced as much as before Covid? Then we would have the exact same risk again that semiconductors would become scarce during an upswing,” he said.
Last month, the European Union imposed higher tariffs on electric vehicles from China in escalating tensions that carmakers say could hurt their sales there.
(Updates with analyst comment in the seventh paragraph.)
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