Berenberg: STMicroelectronics 'Resets' Margin Expectations Amid Factory Expansion; Price Target, Estimates Up

05:21 AM EDT, 07/27/2026 (MT Newswires) -- Berenberg said Monday that STMicroelectronics' (STMMI.MI, STMPA.PA) near-term gross margin expectations have been "reset" due to fabrication plant expansion costs, even as a broader recovery continues in non-artificial-intelligence-related markets. "STMicroelectronics (STM) guided Q3 2026 revenue to $3.7bn (up by 6% qoq), falling short of the expected 10% qoq growth, and the Q3 gross margin guidance of 37% matched expectations. While Q4 2026 revenue guidance of $4bn was in line with consensus, we believe the company is not likely to achieve a 40% gross margin in Q4 2026," according to a Monday note. "The company stated that, despite sequential improvements in Q4 2026, gross margins still face headwinds. Specifically, [underutilization] charges will remain in place in Q4 as the company brings new fabs online (particularly in China)." Analysts anticipate technology transfer expenses related to the company's manufacturing overhaul will continue at third-quarter 2026 levels. Consequently, Berenberg believes reaching a 40% gross margin is "unlikely to be achieved" until the restructuring is finalized in the fourth quarter of 2027, while the long-term goal of $4 billion in revenue at a 40% margin stays intact. The research firm also noted that the European semiconductor manufacturer lifted its full-year 2027 AI revenue guidance again to "well above" $2 billion. In its first-quarter earnings report, STMicroelectronics targeted data center revenue of "well above" $1 billion. Amid the ongoing recovery in non-AI end markets and the company's upgraded AI revenue outlook, Berenberg raised the buy-rated stock's price target to 68 euros from 53 euros and increased its earnings forecasts for 2026 to 2028.