STMicroelectronics (NYSE:STM), a key semiconductor supplier to prominent technology companies including Apple Inc. and Tesla, Inc., disclosed its fourth-quarter 2025 financial outcomes on Thursday, revealing a nuanced performance with both encouraging sales figures and profit challenges.
During the quarter, the company generated net revenues totaling $3.329 billion, a modest 0.2% increase compared to the same period last year. This top-line achievement slightly surpassed analysts’ consensus forecast of $3.298 billion and edged above the midpoint of the firm’s previously communicated revenue target of $3.280 billion.
Disaggregating sales by customer category, net revenues to Original Equipment Manufacturers (OEMs) grew by 0.6% year over year, whereas the distribution channel experienced a slight decline of 0.7%. This mixed performance reflected varied demand across STMicroelectronics’ market segments.
Despite the revenue uptick, the company encountered significant margin pressures. Adjusted earnings per share came in at 11 cents, substantially trailing the consensus estimate of 25 cents. Gross margin for the quarter was reported at 35.2%, exceeding guidance midpoint by 20 basis points but down 250 basis points relative to the prior year. The decline in margin was attributed primarily to inefficiencies in manufacturing processes, adverse effects from currency fluctuations, and a decline in capacity reservation fees.
Operating profitability was further constrained, with operating margin contracting by 730 basis points to 3.8%. The firm posted a net loss of $30 million, despite recording operating income of $125 million. This operating income incorporated a charge of $141 million arising from impairment, restructuring, and phasing out activities related to the company’s comprehensive program to optimize its manufacturing footprint and global cost structure. When excluding these one-off expenses, adjusted operating income was stated at $266 million.
On the segment level, results reflected divergent trajectories across product categories. The Analog Products, MEMS, and Sensors segment registered notable revenue growth of 7.5%, reaching $1.45 billion. Likewise, the Embedded Processing unit expanded revenue by 1.3% to $1.02 billion. However, the Power and Discrete Products division suffered a sharp decline in revenue by 31.6%, totaling $412 million. Conversely, the Radio Frequency and Optical Communications segment increased revenues by 22.9% to $449 million.
Chief Executive Officer Jean-Marc Chery highlighted that STMicroelectronics had surpassed the midpoint of its revenue guidance, driven primarily by stronger sales in Personal Electronics and, to a lesser extent, consumer electronics and industrial applications. Conversely, automotive sector sales lagged behind expectations. Looking ahead, management announced plans for capital expenditures between $2 billion and $2.2 billion in 2026, signaling continued investment in capacity and technology.
During the quarterly earnings call, Chery characterized 2025 as a transitional year impacted by a challenging end-market environment and persistent inventory adjustments within automotive and industrial sectors. While acknowledging difficulties in the first half of the year, he noted a positive shift in the latter half, culminating in a return to year-over-year revenue growth in Q4. This improvement has furnished the company with enhanced visibility and a more optimistic outlook entering 2026, supported by an improving distribution channel and healthier market dynamics compared to the previous year.
Although formal guidance for full-year 2026 was withheld, Chery expressed confidence in the company’s capacity for organic growth. He emphasized that excess inventories are expected to be fully resolved by the end of the second quarter, setting the stage for a stronger performance in subsequent periods.
Financially, STMicroelectronics generated operating cash flow of $674 million during the quarter, a slight decline from the $681 million recorded in Q4 2024. Free cash flow increased to $257 million from $128 million a year earlier. As of December 31, 2025, the company maintained a robust net cash position of $2.79 billion, with total liquidity standing at $4.92 billion against financial debt of $2.13 billion.
Turning to near-term outlook, the company projects Q1 2026 net revenues at approximately $3.04 billion, representing an 8.7% sequential decrease with a variation range of plus or minus 350 basis points. This forecast remains slightly above the consensus estimate of $3.00 billion. Gross margin for the upcoming quarter is anticipated to recover somewhat, projected near 33.7%, plus or minus 200 basis points.
In premarket trading subsequent to the earnings release, STMicroelectronics shares experienced a modest rise, increasing 0.53% to $30.49.