STMicroelectronics N.V. ( STM ) shares are trading lower on Thursday after the company reported net revenues of $3.25 billion, representing a year-over-year decrease of 26.6%, marginally beating the consensus of $3.247 billion.

The company stated that net revenues aligned with the midpoint of the company’s business outlook. Sales to OEMs decreased by 17.5%, and Distribution sales fell by 45.4%.

Analog products, MEMS, and Sensors (AM&S) segment revenue declined 13.3% to $1.185 billion, mainly due to a decreases in Imaging and in Analog. 

Power and Discrete products (P&D) segment revenue decreased 18.4% to $807 million. Microcontrollers (MCU) segment revenue fell 43.4% to $829 million, mainly due to a decrease in GP MCU.

Digital ICs and RF products (D&RF) segment revenue fell 29.7% to $426 million due to a decrease in ADAS. Revenue performance exceeded the company’s expectations in Personal Electronics, declined less than anticipated in Industrial, but fell short in Automotive.

Gross margin contracted 980 bps year over year to 37.8% owing to product mix and sales price and higher unused capacity charges. Operating margin fell 1.63 ppt to 11.7% in the quarter. EPS of $0.37 exceeded the consensus of $0.33.

STMicroelectronics’ operating cash flow more than halved to $723 million, and free cash flow fell sharply to $136 million. STMicroelectronics’ net financial position was $3.18 billion as of September 28, compared to $3.20 billion as of June 29, and reflected total liquidity of $6.30 billion and total financial debt of $3.12 billion.

Jean-Marc Chery, ST President & CEO, commented: “We are launching a new company-wide program to reshape our manufacturing footprint accelerating our wafer fab capacity to 300mm Silicon (Agrate and Crolles) and 200mm Silicon Carbide (Catania) and resizing our global cost base.”‘

“This program should result in strengthening our capability to grow our revenues with an improved operating efficiency resulting in annual cost savings in the high triple-digit million-dollar range exiting 2027.”

Outlook: STMicroelectronics ( STM ) expects, at the mid-point, fiscal fourth-quarter net revenues to be $3.32 billion, an increase of 2.2% sequentially, plus or minus 350 basis points, and a gross margin of 38%, plus or minus 200 bps.

STMicroelectronics ( STM ) currently expects FY24 revenues of $13.27 billion vs. $13.366 billion consensus. This represents a 23.2% year-over-year decrease, in the low-end of the range indicated in the previous quarter, and a gross margin slightly below that provided in such indication.

“Based on our current customer order backlog and demand visibility, we anticipate a revenue decline between Q4 2024 and Q1 2025 well above normal seasonality,” Chery added.

Price Action: STM shares are trading lower by 1.25% at $27.21 at the last check on Thursday.

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