STMicroelectronics (STM) reduced its sales outlook for fiscal 2024 after posting a decline in Q1 revenue and net profit.
Despite this, the company’s shares rose 1.7% in premarket trading Thursday.
Earnings per share (EPS) for the quarter were reported at $0.54, missing the consensus estimate $0.63.
STMicro reported a Q1 revenue drop of 18% to $3.47 billion, below the $3.64 billion anticipated by analysts. Net profit also fell, halving from $1.04 billion to $513 million.
Gross profit for the quarter decreased to $1.44 billion from $2.11 billion, resulting in a gross margin of 41.7%.
As a result, the European semiconductor manufacturer has revised its financial outlook for the year downward.
It now expects annual revenues to be between $14 billion and $15 billion, a reduction from the previously projected range of $15.9 billion to $16.9 billion.
Further, gross margins are anticipated to stabilize in the low 40s percentage range, a shift from earlier forecasts of low to mid-40s.
For the upcoming quarter, STMicroelectronics has set a revenue target of $3.2 billion and a gross margin goal of 40%.
“We have been cautious on STM into these results in anticipation of significant cuts, especially due to severe weakness in the company's general purpose MCU business. However, the level of cuts exceeds our expectations,” analysts at Jefferies said in a note.
“We would also not rule out some price pressure in the MCU business in the channel in H2-24. While we are likely to be at or close to the bottom in terms of revenues and margins, we remain somewhat cautious on the slope of recovery into H2-24 and 2025,” they added.
In their own comments on the report, analysts at Citi said they concluded that demand deteriorated “materially” toward the end of the quarter and through April.
“We look for further detail on this morning’s call as to whether this is the proverbial final, albeit major, cut to numbers,” they wrote.