STMicroelectronics: 2Q26 Preview: Should report in line with 3Q revenue guided better than normal seasonal trends; gross margin trajectory a key variable

Research evidence excerpt

STMicroelectronics: 2Q26 Preview: Should report in line with 3Q revenue guided better than normal seasonal trends; gross margin trajectory a key variable

Sandeep Deshpande AC Europe Equity Research

(44-20) 7134-5276 13 July 2026 J P M O R G A N

sandeep.s.deshpande@jpmorgan.com

Investment Thesis, Valuation and Risks

STMicroelectronics (Neutral; Price Target: €71.50)

Investment Thesis

STMicro has had a strong run in 2026. The reasons for the move include market expectations

that the semis cycle has 'turned', particularly in industrial semis to which STMicro is

significantly exposed; STMicro’s deal with AWS got STMicro the AI exposure the

company lacked and which had held back the stock (both power and optical exposure); and

lastly, STMicro has exposure to the LEO satellite companies, which is also a strong growth

market. That STMicro will see strong revenue growth when the cycle turns was never under

question. Less certain, however, is how significantly the company’s gross margin will

improve. The extent of gross margin improvement will be the key flex on EPS. With our

estimates already forecasting a 2028 gross margin that is ~860 bps higher than 2025, we

believe investors will need to see evidence of more significant scaling of the gross margin

to turn substantially more bullish hence our continued Neutral rating.

Valuation

STMicroelectronics has traded between 13.1x and 22.0x (inter-quartile range) in the past 10

years with an average/median multiple of 18.2x/18.6x. Given ST’s exposure to structurally

growing markets (optical connectivity inside data centres and LEO satellites), the company

should be trading at a premium to its historical average. Thus, we value the stock based on

a 20x forward P/E on our ‘28 EPS estimates, which implies a Dec-27 price target of $81.5,