STMicroelectronics (NYSE:STM) increased its revenue expectations for its data centre business on Tuesday, citing strong momentum from artificial intelligence infrastructure investment and ongoing expansion of manufacturing capacity.
The Franco-Italian semiconductor manufacturer, which counts Tesla and Apple among its customers, now expects its data centre operations to generate approximately $1 billion in revenue during 2026. The updated target marks a significant increase from its previous forecast of more than $500 million.
Investors welcomed the announcement, sending shares more than 8% higher in Paris trading. The stock had already gained more than 164% since the beginning of the year through Monday’s close.
AI Infrastructure Expansion Drives Growth
Management said demand trends remain highly supportive, reflecting continued investment in the infrastructure required to support AI applications and services.
“Assuming the current dynamic continues and with the current engagements we have, revenues could double in 2027,” STMicro said in a statement.
The company had previously projected revenue would be “well above $1 billion” in 2027, but the latest comments suggest further upside potential if current market conditions persist.
Analysts Highlight Confidence in Capacity Expansion
Jefferies analysts said the revised outlook “reflects confidence in the execution of this capacity ramp.”
Looking ahead to 2027, the brokerage expects optical products to account for roughly two-thirds of the anticipated growth in the data centre segment, while power semiconductor products are projected to contribute the remaining one-third.
“Data centers alone will, therefore, contribute around 7% growth to STM in 2027, out of our 20.5% growth expectation,” they added.
Strategic Shift Toward High-Growth Markets
STMicro has been increasing its focus on data centres and other fast-growing technology sectors under the leadership of Chief Executive Jean-Marc Chery.
Earlier this year, the company announced a supply agreement with Amazon Web Services (AWS), covering semiconductors used in connectivity and power-management applications. The strategy reflects a broader effort to diversify beyond traditional end markets such as automotive and consumer electronics.
Rather than focusing on graphics processing units used for AI model training, STMicro’s data centre business is concentrated on the supporting hardware and semiconductor technologies that enable those systems to operate efficiently.
The company also said the improved outlook reflects progress in expanding production capacity, allowing it to meet growing customer demand.