(Bloomberg) -- STMicroelectronics NV said revenue for the year will come in at the low end of its forecasted range, and sales declines through the first quarter of 2025 will be worse than usual as the chipmaker’s customers scale back orders.
Sales for the year will come in at about $13.27 billion, a decrease of 23% from a year earlier, the Franco-Italian chipmaker said in a statement on Thursday. That compares to STMicro’s previous outlook for revenue of $13.2 billion to $13.7 billion.
Based on its current customer order backlog, the company said sales declines through the first quarter of next year will likely be “well above normal seasonality.” The company, which makes chips for Apple Inc. and Tesla Inc., was forced to slash estimates twice previously this year as its customers in the automotive, industrial and electronics industries scaled back orders.
“Even though we cut ’25 estimates significantly earlier this week, based on indications today that cut was perhaps not enough,” JPMorgan Chase & Co. analysts Sandeep Deshpande and Anchal Sahu said in a note after the results. “Bottom line is that the downturn is much worse than expected.”
STMicro shares fell 0.4% to €25.66 at 9:34 a.m. in Paris trading. The stock has declined 43% this year.
Third quarter net sales fell 27% from a year earlier to $3.25 billion, the company said. That compares to the average $3.24 billion analyst estimate in a Bloomberg survey. Sales in the fourth quarter are expected to be about $3.32 billion, the company said.
STMicro said it would cut costs and announced plans to change its manufacturing footprint in a program to save “high triple-digit” millions of dollars by the end of 2027.
Financial results for chipmakers have been mixed this year, with companies supplying the boom in artificial intelligence cashing in on surging demand and much of the rest of the industry struggling with weak orders. Still, STMicro’s larger US rival, Texas Instruments Inc., was more optimistic in its outlook earlier this month. The Dallas-based company said customers are working through excess inventory and the timing is right for an order recovery after several quarters of declines.
What Bloomberg Intelligence Says:
STMicroelectronics’ guidance for a significant sequential decline in 1Q25 revenue may suggest bigger-than-anticipated downside to 2025 sales. Its weaker-than-expected automotive segment in 3Q could support our view that Texas Instruments’ strength was due to market-share gain from peers including STMicro, rather than a positive read-across.
— Ken Hui, BI Senior Industry Analyst for Technology
Orders to automotive makers accounted for 46% of STMicro’s sales in the first half of the year, the company’s largest market. Chipmakers have been hit by lower-than-anticipated demand for electric vehicles after customers balked at the costs of owning them. BloombergNEF’s annual Electric Vehicle Outlook cut sales projections through 2026 by 13.5% from its outlook a year ago. Several of the world’s largest car manufacturers — including Volkswagen AG and Mercedes-Benz Group AG — have recently scaled back ambitions.
Tesla is the biggest customer for STMicro’s silicon carbide chips, a business that accounts for about 10% of STMicro’s sales, according to Bloomberg Intelligence analyst Ken Hui. Elon Musk’s carmaker said this month that its robotaxi will likely only go into production in 2026, and Hui said in a note he fears a delay to Tesla’s budget model, which may mean additional pricing pressure on its supplier.
(Updates with analyst comment in fourth paragraph and industry context from eighth paragraph)
©2024 Bloomberg L.P.