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01/10 16:06
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents mixed signals: weak financial performance with a net income loss and negative free cash flow, but optimistic guidance with expected sequential growth in Q4 and potential year-over-year growth. The Q&A highlights temporary issues in the automotive sector and no significant changes in customer order patterns, indicating stability. While shareholder returns via buybacks and dividends are positive, the lack of clear guidance on certain projects and a slight revenue guidance miss temper expectations. Overall, the sentiment is neutral, balancing negative financials with positive future outlook.
Revenues $2.77 billion, $56 million above the midpoint of the business outlook range. Automotive slightly below expectations, offset by higher revenues in Personal Electronics and Industrial. Sequential growth in Automotive revenues by about 14%, driven by Asia Pacific (excluding China) and the Americas.
Gross Margin 33.5%, decreasing 660 basis points year-over-year. Reasons include unfavorable product mix, lower manufacturing efficiency, and higher unused capacity charges.
Analog Products, MEMS and Sensors Revenue Down 15.2% year-over-year, mainly due to a decrease in analog and imaging, while MEMS grew double digits.
Power and Discrete Products Revenue Decreased 22.2% year-over-year.
Embedded Processing Revenue Declined 6.5% year-over-year, mainly due to custom processing.
RF & Optical Communications Revenue Declined 17.9% year-over-year.
Automotive Revenue Declined by about 24% year-over-year.
Industrial Revenue Declined by about 8% year-over-year. Sequential growth of about 15%.
Personal Electronics and Communication Equipment Revenue Declined by about 5% year-over-year. Sequential growth of about 3%.
Gross Profit $926 million, decreasing 28.5% year-over-year. Reasons include unfavorable product mix, lower manufacturing efficiency, and higher unused capacity charges.
Net Operating Expenses $869 million, declining 6% year-over-year, reflecting ongoing cost discipline.
Operating Loss $133 million, including $190 million for impairment, restructuring charges, and other related costs.
Net Income Negative $97 million compared to a positive $353 million in the year-ago quarter. Excluding nonrecurring items, non-U.S. GAAP net income was a positive $57 million.
Net Cash from Operating Activities Decreased 49.6% year-over-year to $354 million.
Net CapEx $465 million compared to $528 million in Q2 '24.
Free Cash Flow Negative $152 million compared to a positive $159 million in the year-ago quarter.
Inventory $3.27 billion compared to $2.81 billion in Q2 '24. Days sales of inventory at 166 days, slightly above expectations.
Cash Dividends Paid $81 million in Q2 '25.
Share Buybacks $92 million executed in Q2 '25.
Net Financial Position $2.67 billion as of June 28, 2025, with total liquidity of $5.63 billion and total financial debt of $2.96 billion.
Car electrification: Wins with silicon carbide and silicon devices and modules for new DC-DC converter and onboard charger designs, as well as smart power and smart fuse solutions for EV power systems.
Car digitalization: Progress in automotive microcontrollers with new products launching in 2025 and 2026. Significant win for a one-box braking system with a leading EV maker in China.
Industrial sensors: Momentum in applications like container tracking, white goods, and livestock monitoring.
Embedded processing: STM32 microcontrollers gained traction with 1.5 million unique users on a 12-month rolling basis, up from 1.3 million in 2024.
Automotive market: Sequential revenue growth of 14%, driven by Asia Pacific (excluding China) and the Americas. Challenges in trade and tariffs affecting car production.
Industrial market: Q2 revenues above expectations with strong sequential growth and year-over-year improvement. Book-to-bill ratio above 1, supporting further growth in Q3.
Personal Electronics: Q2 revenues exceeded expectations, driven by increased content and expanding low earth orbit satellite market.
Manufacturing footprint reshaping: Company-wide program to reshape manufacturing footprint and resize global cost base, with expected annual cost savings in the high triple million dollar range by 2027.
Cost discipline: Net operating expenses decreased 6% year-over-year, reflecting ongoing cost discipline.
Sustainability: Recognized in Time World's Most Sustainable Companies List (ranked 25th globally and 1st in electronics category). Leadership on climate and water security acknowledged by CDP.
AI data centers: Collaboration with NVIDIA on a new high-power density DC-DC architecture for AI data centers, leveraging advanced technologies like silicon carbide and gallium nitride.
Automotive Market Uncertainty: The current situation on trade and tariffs is creating uncertainty on the level of car production, which could impact revenues and growth in the automotive sector.
Manufacturing Reshaping Program: The company is undergoing a program to reshape its manufacturing footprint, which includes restructuring charges and asset impairments. This could lead to operational disruptions and increased costs in the short term.
Gross Margin Pressure: Gross margin decreased year-over-year due to unfavorable product mix, lower manufacturing efficiency, and higher unused capacity charges. This could impact profitability.
Inventory Management: Days sales of inventory remain high at 166 days, slightly above expectations. This could tie up capital and increase holding costs.
Currency Effects: Negative currency effects are impacting gross margin and operating expenses, adding financial pressure.
Automotive Revenue Decline: Automotive revenues declined by about 24% year-over-year, driven by customer-specific dynamics and market challenges.
Economic and Market Cyclicality: The company is experiencing cyclical recovery in some sectors but remains vulnerable to broader economic and market fluctuations.
Restructuring Costs: The company reported $190 million in restructuring charges and related costs, which could strain financial resources.
Free Cash Flow Deficit: Free cash flow was negative $152 million in Q2, compared to a positive $159 million in the year-ago quarter, indicating financial strain.
Trade Tariff Risks: Potential changes to global trade tariffs could further impact operations and financial performance.
Automotive Revenue Outlook: Sequential growth expected in Q3 2025 compared to Q2 2025, with Q1 2025 confirmed as the low point for automotive revenues. New product launches in 2025 and 2026 across Arm-based Stellar and STM32A product families.
Industrial Revenue Outlook: Further sequential growth expected in Q3 2025 compared to Q2 2025, supported by increasing bookings and a book-to-bill ratio above 1. General purpose microcontrollers are back to year-on-year growth.
Personal Electronics and Communication Equipment Revenue Outlook: Growth opportunities driven by increased content in Personal Electronics and expanding low earth orbit satellite market.
Q3 2025 Revenue and Gross Margin Outlook: Revenues expected at $3.17 billion, plus/minus 350 basis points, representing a 14.6% sequential increase and a 2.5% year-over-year decrease. Gross margin projected at 33.5%, plus/minus 200 basis points, including 340 basis points of unused capacity charges.
Full Year 2025 Capital Expenditures: Net CapEx plan maintained between $2 billion and $2.3 billion, primarily for reshaping the manufacturing footprint.
Long-term Cost Savings Plan: Plan to deliver annual cost savings in the high triple million dollar range by the end of 2027.
Cash dividends paid to stockholders in Q2 '25: $81 million
Share buybacks executed in Q2 '25: $92 million
The earnings call presents mixed signals. While there is sequential growth in automotive and industrial revenues, the Q4 guidance is below seasonal averages due to key customer volume decreases and inventory reductions. Margins are improving but face sustainability challenges. The market strategy involves significant CapEx adjustments. The Q&A reveals concerns about capacity reservation fees and inventory management. Despite some positive developments, such as new product launches and cost savings plans, the overall sentiment remains neutral due to uncertainties in guidance and mixed segment performance.
The earnings call presents mixed signals: weak financial performance with a net income loss and negative free cash flow, but optimistic guidance with expected sequential growth in Q4 and potential year-over-year growth. The Q&A highlights temporary issues in the automotive sector and no significant changes in customer order patterns, indicating stability. While shareholder returns via buybacks and dividends are positive, the lack of clear guidance on certain projects and a slight revenue guidance miss temper expectations. Overall, the sentiment is neutral, balancing negative financials with positive future outlook.
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