STMicroelectronics (ENXTPA:STMPA) Stock Q3 Earnings Meet A Margin Debate

STMicroelectronics walked into its Q3 2026 report with a bruised share chart. The stock was down about 10.7% over the past month and roughly 8.3% over three months, even before closing at €41.88 today.

The headline result was clear. Revenue reached $3.76b and basic earnings per share landed at $0.33, while non Generally Accepted Accounting Principles earnings per share came in at $0.37. The real story for sentiment sits in profitability. A 37.3% gross margin and $351m in free cash flow present a more resilient picture than the recent price weakness suggests.

Love STMicroelectronics’ 37.3% gross margin and solid free cash flow but concerned about recent share price weakness? Compare that earnings profile with a curated list of resilient performers in our list of solid balance sheet and fundamentals stocks (202 results)

Q3 2026 Earnings Summary

• Revenue (Q3 2026 vs Q3 2025): US$3,757m vs. US$3,187m (up about 17.9%)
• Net Income (Excl. Extra Items, Q3 2026 vs Q3 2025): US$291m vs. US$237m (up about 22.8%)
• Basic EPS (Q3 2026 vs Q3 2025): US$0.33 vs. US$0.27 (up about 24.4%)
• Gross Margin (Q3 2026): 37.3% (management highlighted this as a key profitability metric for STMicroelectronics)

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STMicroelectronics: Factory And AI Ambitions Meet Early Markers

Optimists argue that STMicroelectronics can turn its AI and manufacturing push into a structurally higher earning engine.

"Execution of the manufacturing reshaping program is a key factor. This includes the ramp of 300mm silicon and 200mm silicon carbide capacity and the closure of older fabs, with the goal of turning current underutilization and loss-making lines into the margin uplift that management is targeting."

Q3 shows the reshaping is in motion rather than theoretical. Gross margin sits at 37.3% while management reiterates a 44 to 46% target and quantifies about 400 bps of expected structural uplift. Unused capacity charges of about 60 bps and higher CapEx confirm near term friction but also that fab transfers and closures are actively underway.

That disagreement has a full argument behind it. → Uncover the higher Fair Value this Narrative argues for.

STMicroelectronics Margins Improve, But Bear Fears Linger

Bearish investors worry that STMicroelectronics converts a strong order book into low quality earnings rather than a cleaner margin story.

"Although STMicroelectronics highlights strong bookings and a company wide book to bill ratio close to 2 with more than half of new bookings scheduled for 2027 and beyond, group gross margin remains in the mid 30s and Power & Discrete reported a negative non GAAP operating margin in Q2 2026 due to 6 inch silicon carbide costs and underutilization, so a large portion of the order book could convert into revenue that carries weaker than expected gross margin and earnings."

Q3’s 37.3% gross margin and Q4 guidance around 39% show some lift, yet unused capacity charges and higher CapEx confirm underutilization is still real. Power & Discrete profitability is not explicitly fixed in these numbers. Strong AI datacenter and industrial demand support volume, but the core concern that backlog may monetize at only mid 30s margins remains unresolved this quarter.

Hunt For Quiet Earnings Power

STMicroelectronics illustrates how a consistent earnings profile can still leave markets debating margin strength. The real opportunity could sit in stocks that quietly compound value before sentiment catches up.

• Company 1 - 38% below our estimate - retools its project mix toward long duration civil infrastructure, data centers and high tech industrial builds.
• Company 2 - 34% below our estimate - leans into membership, recommerce and a reverse supply chain so repeat customers trade in devices and buy refurbished hardware.
• Company 3 - 20% below our estimate - supplies the low voltage gear and digital tools contractors turn to across electrification projects, data centers and industrial automation work.

Those are three of them. See the full list of 201 companies trading below our fair value estimates →

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