Key Takeaways
STMicroelectronics' data centre business is no longer a rounding error — it's on track to become a $1 billion revenue stream in 2026, with potential to double again in 2027.
STMicroelectronics NV (NYSE: STM) raised its data centre revenue target to about $1 billion for 2026, up from a prior forecast of "nicely above $500 million," citing sustained demand tied to AI infrastructure and progress in factory capacity expansion. The Franco-Italian chipmaker now expects revenue could double to roughly $2 billion in 2027, compared with an earlier target of "well above $1 billion."
"The higher revenue target reflected progress in factory ramping capacity," the company said in a statement Tuesday, without disclosing specific customer commitments. STMicroelectronics' data centre exposure is concentrated not on the graphics processors that train AI models but on the surrounding infrastructure — high-bandwidth connectivity, mixed-signal processing, and power management chips that regulate energy consumption in hyperscale data centers.
The revised outlook follows a Q1 2026 earnings beat that sent shares up more than 33% in the subsequent 30 days. STM reported net revenues of $3.10 billion for the quarter, up 23% year over year and above the consensus estimate of about $3.05 billion. Non-GAAP gross margin reached 34.1%, above the midpoint of the company's guidance range, though non-GAAP diluted EPS of $0.13 missed analyst expectations of $0.18 as unused manufacturing capacity charges weighed on profitability.
STMicroelectronics' data centre push is anchored by a multi-year, multi-billion-dollar strategic collaboration with Amazon Web Services, positioning the chipmaker as a key supplier of power and connectivity silicon for AWS's global fleet of AI servers. The partnership gives STM a direct line into the fastest-growing segment of cloud capital expenditure, which major hyperscalers are expected to push past $250 billion combined in 2026.
The company's stock has returned roughly 165% over the past 52 weeks and about 159% year to date, far outpacing the S&P 500 Information Technology Index's 29% gain over the same period. The rally reflects a recovery in automotive chip demand, normalizing distributor inventories, and the market's growing recognition of STM as a beneficiary of AI infrastructure spending — a narrative that has historically been dominated by Nvidia Corp. and memory makers like SK Hynix.
STMicroelectronics employs about 49,000 people and serves more than 200,000 customers across automotive, industrial, personal electronics, and cloud computing markets. The company is targeting carbon neutrality across all direct and indirect emissions by the end of 2027.
For investors, the question is whether the data centre ramp can offset structural headwinds in STM's automotive and industrial segments, which together account for the majority of revenue. The company's Q1 operating margin recovered meaningfully year over year, but unused capacity charges tied to manufacturing footprint optimization remain a drag on near-term profitability. If data centre revenue reaches $2 billion by 2027 as projected, it would represent roughly 15% of total revenue at current run rates — enough to shift the company's growth profile and valuation multiple.
This article is for informational purposes only and does not constitute investment advice.
