STMicroelectronics Sees AI Data-Center Revenue Surging Past $2 Billion in 2027

STMicroelectronics expects data-center revenue to exceed $1 billion this year and rise to well above $2 billion next year, reflecting demand across thermal, power and connectivity applications. The largest contribution is expected to come from connectivity products, including silicon photonics, microcontrollers and BiCMOS electronic integrated circuits used in optical transceivers. The connectivity segment is expected to account for roughly 80% of the company’s data-center billings next year, with the remaining 20% coming from applications serving thermal and power flows. The company’s power opportunity in AI infrastructure is more long-term. STMicroelectronics is building a portfolio for new 800-volt power architectures and expects power-related revenue to become meaningful after 2028. In the near term, data-center growth will be driven primarily by connectivity. Customers are seeking long-term agreements that lock in capacity, volumes and pricing, with some agreements including cash advances. STMicroelectronics believes it has a leading position through its technology, including its PIC100 platform. The company plans to invest to meet demand, using its 300-millimeter manufacturing infrastructure to increase capacity. Investments supporting silicon photonics can also be used for other technologies, such as microcontrollers, giving the company flexibility if product demand changes.

STMicroelectronics expects more than 400 basis points of gross-margin improvement from closing two older 200-millimeter factories and two 150-millimeter silicon-carbide fabs, with the main benefit arriving in late 2027 or early 2028. Strong bookings, lean inventories and demand exceeding available capacity are supporting pricing, while automotive and silicon-carbide demand remain robust; silicon-carbide revenue is expected to grow double digits this year and return to roughly $1.01 billion next year.

The chipmaker continues to see strong bookings, lean inventory and improving demand visibility across its end markets, with particular strength in artificial intelligence infrastructure, automotive and industrial applications. Conditions have remained broadly unchanged since the company’s second-quarter earnings report. The booking is still very strong, with the company’s book-to-bill ratio remaining “well above 1x” across the markets it serves.

Demand for AI infrastructure has become a particularly visible trend, while automotive and industrial demand also remains robust. Lead times for some industrial products have risen to as much as 50 weeks, compared with a substantially different environment last year, when the industry was still dealing with elevated distribution inventories. Inventory at distributors is now “super lean,” especially for those products.