STMicroelectronics Prior peak gross margins should be possible. Upside not enough to be more bullish here. Maintain Neutral.

Research evidence excerpt

STMicroelectronics Prior peak gross margins should be possible. Upside not enough to be more bullish here. Maintain Neutral.

Sandeep Deshpande AC Europe Equity Research

(44-20) 7134-5276 29 June 2026 J P M O R G A N

sandeep.s.deshpande@jpmorgan.com

Growth drivers

AI & Data centers

STMicroelectronics is exposed to AI data centers via optical connectivity and analog &

power offerings. The company expects ~$1bn of data center revenue in 2026 with

indications that the revenue could double in 2027.

• Optical connectivity (70-80%): The company expects optical connectivity to

represent 70% of its AI revenue in 2026 and ~80% in 2027, with products coming

from the MDRF business. STMicro provides the three components of pluggable

transceivers used for optical connectivity (targeting 800Gb/s and 1.6Tb/s

interconnects), namely

• A high performance MCU to control transceiver operations

• An Electronic IC (EIC) driving the optical source and amplifying signals in

reception BiCMOS platforms (B55X for high performance analog/RF enabling

optical transceivers and linear optics)

• A Photonic IC (PIC) that converts light to electronic signals and vice versa.

STMicro acts as a foundry for Silicon Photonics (SiPho) technology for

transceivers, competing with Global Foundries and Tower Semiconductor. Major

customers include AWS and Innolight.

• The company expects to profit from the move towards NPO, LPO or CPOs

where STMicro can leverage its TSV and advanced packaging capabilities to

provide a more integrated offering. Additionally, the addressable market is

expected to increase with the move towards NPO and CPO where optical

connectivity gets adopted for scale-up.

• In terms of market share, STMicro believes it has ~40% market share in MCUs

and 30% in BiCMOS.