Thank you, Moira, and thank you everyone for joining our second quarter 2026 financial results call. Hosting the call today is Jean-Marc Chery, ST President and Chief Executive Officer.

Joining Jean-Marc on the call are Lorenzo Grandi, President and CFO; Marco Cassis, President Analog, Power & Discrete, MEMS and Sensors Group, and Head of STMicroelectronics Strategy, System Research and Application, and Innovation Office; and Remi El-Ouazzane, President Microcontrollers, Digital ICs and RF Products Group. This live webcast and presentation materials can be accessed on ST Investor Relations website.

A replay will be available shortly after the conclusion of this call. This call will include forward-looking statements that involve risk factors that could cause ST results to differ materially from management expectations and plans.

We encourage you to review the Safe Harbor statement contained in the press release that was issued with the results this morning, and also in ST most recent regulatory filing for a full description of these risk factors. Also, to ensure all participants have an opportunity to ask questions during the Q&A session, please limit yourself to one question and a brief follow-up.

Now I'd like to turn the call over to Jean-Marc Chery, ST President and CEO.

Thank you, Jérôme. Good morning everyone, and thank you for joining ST for our Q2 2026 earnings conference call.

I will start with an overview of the second quarter, including business dynamics, and I will hand over to Lorenzo for the detailed financial overview. I will then comment on the outlook and conclude before answering your questions.

Starting with Q2, our second quarter net revenues of $3.49 billion came in above the midpoint of our business outlook range, driven by higher revenues in communication equipment, computer and peripherals, and automotive. Gross margin was 34.8%, and non-U.S.

GAAP gross margin was 35.2%. Both were in line with the midpoint of our business outlook range.

Non-U.S. GAAP diluted earnings per share was $0.31.

During the second quarter, inventory in our balance sheet remained flattish. In distribution, inventory further decreased and is now below our standard target.

We generated a positive $75 million free cash flow. Let's now discuss our business dynamics during Q2.

During the quarter, demand increased further with strong bookings and book-to-bill close to 2 overall. We were well above 1 in all end markets and significantly above 2 in communication equipment, computer and peripherals, mostly driven by optical connectivity, including silicon photonics.

We saw improved visibility and signs of tight supply in several product categories. In automotive, revenues came in better than expected, increasing 14% sequentially and 16% year-over-year.

This growth was driven by our solid position on application-specific ICs and sensors for conventional applications, electrical powertrain, and ADAS. Automotive design momentum continued to build across multiple OEM and tier 1 ecosystems.

We secured design wins across hybrid, electric, and conventional vehicles, including applications in onboard chargers, powertrain, and active suspensions. These wins were across our application-specific ICs and sensors.

Specifically, our smart power ICs wins include custom devices for airbags, electronic stability control, and suspension applications based on our proprietary BCD technologies manufactured in our Agrate 300 wafer fab. We have progressed well with the integration of NXP MEMS sensors business acquired in February.

As we anticipated, the complementary technology and product portfolio is strengthening our automotive sensor business with awards at key players for active safety application and tire pressure monitoring. Industrial improved 20% sequentially and 34% year-over-year.

Importantly, inventory in distribution further decreased and is now below our standard target. This solid growth was driven by our general-purpose microcontrollers and by analog with their wide ecosystems, and by our application-specific analog products complemented by power conversion products.

We are strongly positioned to support the ongoing transformation of factory automation, robotics, and power and energy infrastructure. Our portfolio is uniquely addressing the emerging needs of physical AI, where intelligent sensing, real-time control, and efficient power management are increasingly critical.

During the quarter, we saw design wins across industrial automation, power systems, building automation, and home appliances. We continued to introduce new advanced sensors for these applications.

We launched a new series of industrial MEMS sensors with embedded AI tailored for the fast-growing industrial condition monitoring market. We also announced a new compact 3D LiDAR module delivering AI-ready output data for low-compute edge AI systems running on microcontrollers and high-performance sensing in applications such as robotics, industrial automation, smart buildings, AR/VR, and healthcare.

This is in line with our strategy to move beyond standalone sensors and deliver integrated sensing systems that support real-world edge AI. Finally, we announced a further expansion of our collaboration with NVIDIA to accelerate physical AI.

As a partner in NVIDIA Isaac for robotics, an end-to-end functional safety system for industrial and humanoid robots, ST is bringing its microcontrollers, sensors, motor control, and security solutions to support Isaac readiness across chips, evaluation kits, software, and reference designs. For personal electronics, second quarter revenues were up 3% sequentially and 20% year-over-year.

This growth was driven by increased content by device in our engaged customer programs and better than normal seasonality. During the quarter, we introduced a secure chip that helps smartphone and personal electronics manufacturers prepare for quantum-ready security requirements.

It combines post-quantum cryptography acceleration with NFC, secure element, and eSIM functions on a single die for use cases such as digital identity, payments, and digital car keys. We also introduced a new generation of ultra-low-power global shutter image sensors that deliver high-quality, always-on vision to compact devices operating on batteries or harvested energy, such as wearables, AR/VR and XR headsets, smart home appliances, and medical devices.

They are engineered to deliver rich visual context and AI-ready data under tight constraints on power, size, and cost. With the depth-sensing technologies I mentioned earlier and this device for AI vision, ST delivers a complete perception stack for edge AI to customers.

For communication equipment, computer and peripherals, second quarter revenues were above expectations, showing increase of 13% sequentially and 50% year-over-year. This growth was driven by our engaged customer programs with our custom design products, boosted by our microcontrollers for optical connectivity.

Indeed, ST is a core enabler for the cloud AI era. We see strong traction on optical connectivity driven by silicon photonics ICs, electronic ICs, microcontrollers.

For the power stage of cloud AI, we are already successful with our microcontrollers and high-voltage power and analog products, and we are building a pipeline of design wins for low-voltage power and analog products. Therefore, we are raising our revenue ambition for data centers.

We now expect revenues above $1 billion in 2026, and assuming the current dynamic continues and with the current engagements we have, well above $2 billion in 2027. During the quarter, we secured multiple design wins across a range of products: from optical connectivity driven by silicon photonics ICs, electronic ICs, and microcontrollers, to silicon and silicon carbide based power solutions.

In addition, we see a growing number of non-traditional AI server companies, including players coming from industries such as solar power and battery storage, where we are leveraging strong relationships to support their expansion into this field. In May, we held a webcast on the low Earth orbit satellite communication and new space opportunity for ST, highlighting how ST is positioned as a core semiconductor enabler across this new industry.

We see a significant opportunity here, with our addressable market expected to reach around $3 billion by 2030, or about 4 times the 2025 level. ST expects to generate well above $3 billion in cumulative space revenue over the period 2026-2028, mainly with our BiCMOS, FD-SOI, and panel level packaging technologies.

Finally, in June, ST joined the €115 million Series A financing of Quobly to accelerate the industrialization of its silicon-based quantum computers and bring its first commercial product to market by the end of 2026. For ST, the scale needed by high-performance computing customers can only be achieved if breakthrough quantum systems can be industrialized and integrated with semiconductor-grade standards and backed by a robust ecosystem.

We are leveraging years of shared expertise in FD-SOI and deep technological collaboration to accelerate the commercialization of Quobly's products through our 300 silicon fab environment. In May, we held our 2026 STMicroelectronics Annual Shareholder Meeting where all resolutions were approved.

Following the AGM, ST Supervisory Board appointed Mr. Armando Varricchio as Chairman and Mr.

Nicolas Dufourcq as Vice Chairman of the Supervisory Board. Now, over to Lorenzo, who will present our key financial figures.

Thank you, Jean-Marc, and good morning everyone. Let's start with a detailed review of the second quarter, starting with revenues on a year-over-year basis.

By reportable segment, Analog Products, MEMS and Sensors grew 26%, mainly due to imaging and MEMS, and to a lesser extent, analog. Power and Discrete Products increased by 3.7%.

Embedded Processing revenues were up 35.5%, mainly due to general-purpose microcontrollers, and to a lesser extent, custom processing and connected security. RF and Optical Communication grew 32%.

By end market, communication equipment and computer peripherals grew 50%, industrial 34%, personal electronics 20%, and automotive 16%. Year-over-year, sales to OEMs and distribution increased 23.3% and 33.1%, respectively.

On a sequential basis, by reportable segment, Analog Products, MEMS and Sensors increased by 8.2%, Power and Discrete by 19.2%, Embedded Processing by 17.7%, and RF, Optical Communication by 8.6%. By end market, on a sequential basis, industrial grew 20%, automotive 14%, communication equipment, computer peripherals 13%, and personal electronics 3%.

Turning now to profitability. Gross profit in the second quarter was $1.22 billion, increasing 31.1% on a year-over-year basis.

Gross margin was 34.8%, increasing 130 basis points year-over-year, mainly due to lower unused capacity charges and better product mix. On a sequential basis, gross margin increased by 100 basis points.

Non-U.S. GAAP gross margin was 35.2%.

Q2 gross margin included about 60 basis points of negative impact resulting from non-recurring costs related to our manufacturing reshaping program. The negative impact on gross margin just mentioned, non-recurring costs, is expected to remain at similar level over the rest of the year.

Total net operating expenses, excluding restructuring, amounted to $970 million in the second quarter. Non-U.S.

GAAP OpEx stood at $960 million, in line with the expectation given in April. For the third quarter of 2026, we expect non-U.S.

GAAP net OpEx to stand at about $980 million. The sequential increase is mainly due to startup costs and employee share award expenses that are more than offsetting the positive vacation seasonality effect.

Excluding these two headwinds, Q3 '26 non-U.S. GAAP net OpEx would have been at about $920 million.

For full year 2026, we now expect non-U.S. GAAP net OpEx to be slightly above $3.8 billion, taking into account increased employee share award expenses and the temporary impact of the startup costs reducing our other income and expenses positive line.

For full year 2026, non-U.S. GAAP net OpEx are expected to increase low double-digit year-over-year.

Excluding NXP MEMS business acquisition and the exchange rate impact, like-for-like net OpEx should be up high single-digit year-over-year. Our cost-saving plan is delivering its expected benefits.

At the same time, we are accelerating our investment in new business opportunities. In the second quarter, we reported $187 million operating income, which included $58 million for impairment, restructuring charges, and other related phase-out costs.

These charges are related to the execution of the previously announced company-wide program to reshape our manufacturing footprint and resize our global cost base. Q2 operating income also included $24 million purchase price allocation effect from our acquisition of NXP's MEMS sensor business.

Excluding these items, Q2 non-U.S. GAAP operating income stood at $269 million, and non-U.S.

GAAP operating margin was 7.7%, with Analog Products, MEMS and Sensors at 10.1%, Power and Discrete at minus 21.4%, Embedded Processing at 19.7%, and RF, Optical Communication at 21.2%. Second quarter 2026 net income was $222 million compared to a net loss of $97 million in the year-ago quarter.

Diluted earnings per share were a positive $0.24 compared to a negative of $0.11 one year ago. Non-U.S.

GAAP net income stood at $291 million, and non-U.S. GAAP diluted earnings per share stood at $0.31.

Net cash from operating activities totaled $502 million in the second quarter, including $44 million outflow related to restructuring, compared to a net cash flow from operating activities of $354 million in the year-ago quarter. Net CapEx was $409 million in the second quarter compared to $465 million in the year-ago quarter.

We now expect 2026 net CapEx to be at the high end of our $2 to $2.2 billion range, reflecting accelerating investments in the selected growth drivers, including cloud optical interconnect. Free cash flow was positive at $75 million in the second quarter compared to a negative $152 million in Q2 2025.

Inventory at the end of the quarter was $3.19 billion compared to $3.17 billion in Q1 '26 and $3.27 billion in Q2 2025. Days sales of inventory at the quarter end were 126 days, in line with our expectation, compared to 140 days for the previous quarter and 166 days in the year-ago quarter.

Cash dividends paid to stakeholders in the second quarter of 2026 totaled $75 million. ST maintained its financial strength with a net financial position that remains solid at $2.01 billion as of June 27th, 2026, reflecting total liquidity of $6.03 billion and a total financial debt of $4.02 billion.

During the quarter, ST issued a new $1.5 billion dual-tranche senior unsecured convertible bond, Tranche A and Tranche B for $750 million each, due to 2031 and 2033, and announced the early redemption of its $750 million convertible bond due in 2027. Now, back to Jean-Marc, who will comment on our outlook.

Thank you, Lorenzo. Now let's move to our business outlook for Q3 2026.

We are expecting Q3 revenues of $3.7 billion, plus or minus 350 basis points at the midpoint. Our Q3 '26 net revenues will increase 6.2% sequentially and by 16.2% year-over-year.

We expect our gross margin to be about 37%, plus or minus 200 basis points, including about 70 basis points of unused capacity charges. This business outlook doesn't include any impact for potential further change global trade tariffs compared to the current situation.

To conclude, in Q2, we saw demand further accelerating, strong bookings in all end markets, and improved visibility. In Q3, revenues are expected to continue to grow sequentially and year-over-year, and gross margin to continue to improve.

As previously anticipated, personal electronics seasonality this year is different compared to previous years. Revenue growth for personal electronics is expected to be below normal seasonality in Q3, moderating ST sequential growth in the third quarter.

In Q4, we anticipate a revenue growth acceleration, mainly driven by our engaged customer programs in AI data centers and low Earth orbit satellite communication. We expect Q4 revenues to be above $4 billion, representing a sequential improvement better than normal seasonality.

This translates into a H2 versus H1 growth above our normal 15% seasonality. ST growth driver remains solid.

We continue to see strong demand in AI data centers, reflecting the success of our product and technology portfolio. We are raising our revenue ambition for data centers.

We now expect revenues above $1 billion in 2026, and assuming the current dynamic continues and with the current engagements we have, well above $2 billion in 2027. This confirms ST's strong position in the evolving AI data centers.

Thank you, and we are now ready to answer your questions.

Hi, good morning. Thanks for taking the question.

I was just looking into your second-half guidance and trying to get a feel for your gross margin trend into Q4. I know you don't want to guide on Q4, but you are talking about a bigger increase in revenue quarter-on-quarter, and we don't know how much it is, I agree, because you just said more than $4 billion.

I was wondering directionally whether you can give us any qualitative comments on how your Q4 gross margin could proceed and how you see that evolving into 2027 as well. Thanks.

Okay. Thank you for the question.

I take the question, Jean-Marc, about the gross margin and the evolution. Clearly, let's say, at the midpoint of Q3 Q3 non-GAAP gross margin or gross margin for us in Q3 will be 37%.

Now we have guided this level of gross margin that is increasing, let's say, about 180 basis points compared with the one of Q2. Clearly, starting from this Q3 gross margin at 37%, we do expect, let's say, for Q4 a sequential improvement in our gross margin, considering that our revenue will increase significantly.

You have to keep in mind that there is some headwinds as well. One is that, let's say, our level of unloading charges will not change significantly in Q4 due to the fact that we are starting some fab, in particular in China, let's say, which we will still have some negative impact on our, let's say, level of unloading.

Clearly, there is also still, let's say, these costs related to the transfer of technology related to our reshaping program in our manufacturing infrastructure that will be still there, similar to the one that we have in the current quarter, in Q3. Yes, I confirm there will be improvement, but there will be also some, let's say, headwinds that are, let's say, impacting our gross margin.

Overall, anyway, I confirm that in Q4 there will be an improvement in our gross margin, sequential improvement compared to the 37% of the of the Q3. Just

given that your revenue jump is going to be bigger, can we assume that your gross margin jump will also be bigger, or is that speculation?

As I said, will improve, let's say, compared to the 37%, but still, let's say, will be impacted by some ingredients that is related to this level of unloading that will not decrease, let's say, while when you look, let's say, the dynamic between Q2 and Q3 unloading was, let's say, decreasing, this will not be similar what it will happen in between Q3 and Q4. Let's say, and as well as don't forget when you look at the dynamic of our gross margin moving from Q2 to Q3, we had also benefit from the FX, let's say, that was improving in respect while, let's say, in Q4 this effect will not be there, will be neutral.

Yes, I repeat, there will be an increase in our gross margin, but you have to also considering in your modeling that there are some headwinds, temporary headwinds, that there will be in Q4, let's say, that will be limiting somehow the improvement of our gross margin in Q4.

Understood.

Thank you. Thank you, Janardan.

Next question, please.

Hey, guys. Thank you for taking my questions.

I guess I wanted to start with the data center number. Can you provide some more granularity on what's driving the big increase in 2027 versus the prior expectations?

How much of this is optics versus power? It did sound like there was some positivity on the power side.

I guess also is, you mentioned your capacity constraint before. Is that number greater than $2 billion assuming you're still constrained as well?

Thank you.

Before I pass the question to Remi to go in further detail, well, it is clear that our growth in 2027 will be driven both by our specific engaged customer program on this field of activity, but clearly the overall success on optical cable connectivity. Clearly, it will be the main driver of the significant growth we will do next year.

Now I let Remi comment on more in detail.

To complement what Jean-Marc said, we see clearly an acceleration in the adoption of 800-gig and 1.6-terabit-per-second pluggable optics. Those are actually generations and categories of transceivers where now we are seeing a triple effect.

This triple effect is a fairly large market share when it comes to the microcontroller taking care of the control plane, a growing share when it comes to the electronic IC driven by our BiCMOS technology, and starting from this year, but really accelerating next year, is actually a growing revenue in silicon photonics supporting photonics IC that is being part of those pluggable transceivers. Like we explained, we have a lot of scalability in terms of capacity on that technology because of the structure we have in our core factories, we are not right now gated by a capacity expansion to go and capture revenue at this stage.

Thank you both for all the color there. Maybe to follow up on that also, I totally appreciate what Lorenzo you were highlighting from the manufacturing transitions and under-loading charges.

On a like-for-like basis, should data center, as it grows, be accretive to gross margins? Thank you.

Clearly, this has been already, let's say, moving from Q2 to Q3 and will be also contributing from Q3 to Q4. Product mix is contributing in a positive way to our gross margin.

Yes, I confirm.

Thank you, Lorenzo.

Thank you, Josh. Next question, please.

Thanks for taking the question. I had a question and a follow-up.

On the pricing, could you maybe just give us a bit of an update? What are you seeing in terms of pricing tailwinds?

When do you think that might impact revenues this year?

Yes, in terms of pricing, I would say that, of course, is twofold. On one side, it's true that we see, let's say, in our input cost price increase.

Clearly, let's say, there are different materials or maybe, let's say, subcontractor activity that are increasing prices. On the other side, I would say that there is the other side that is that we confirm that in this context, let's say, of higher input cost, yes, we increasing the prices on selected products.

Clearly, let's say, this is an ongoing process that is, let's say, expanding in terms of, let's say, price increase. I would say that, at the end, what we see in our input cost is more than offset of what we do, let's say, on our top line.

I would say that, at the end, at this stage, let's say, the two impacts are more or less offsetting each other.

If I can just ask a quick clarification on your data center revenue guidance hike, was that increase driven by increased demand outlook or by a faster expansion of your capacity and supply?

It's both.

It's both. It's both because,

clearly, the above $1 billion 2026 revenue, the demand is well, well above. Thanks our capability to grow in Crolles and Bouskoura assembly and test manufacturing, so that the reason why we have increased our indication for this data center business.

Next year is the same. Next year, clearly, we will closing the gap between the demand and our capability to supply.

It is really driven first by demand. Then it is covered by engagement, backlog for this year 100% coverage, and next year, engagement are covering our expectation.

Definitely our capability to grow on this advanced 300 technology is a very important competitive factor for us.

Thank you.

Thank you, Jakob. Next question, please.

Hi. Thanks for letting me on.

Could you talk about the revenue growth guidance into Q3 and then potentially into Q4 by your segments? Because you said earlier in the call that personal electronics was weaker in the third quarter.

Can we look at how the growth was in the other segments? Based on what you are indicating for the fourth quarter at the moment of greater than $4 billion, at least directionally how to see the different segments in terms of your end markets into the fourth quarter based on your order book today?

I will take the question. Clearly, if I am starting by the key growth driver, it's clearly our verticals communication equipment, computer and peripherals.

I can say that in Q3, on a year-over-year growth, this segment will grow very similarly what we have achieved in Q2, means close to 60% growth. Definitely, where we will have in Q4 very strong acceleration, means, okay, we will be about 90% growth.

The second really positive growth verticals is industrial. Industrial, in Q2, we grew 32%, and step after step, Q3 and Q4, we will go close to 40% growth year-over-year in Q4.

Then clearly, automotive is performing above what we expect and what is the market is expecting. That for semiconductor industries, the automotive is expecting to grow about 13%, 14% year-over-year.

This is what we will achieve on this segment. PE is definitely a different profile, let's say, in the year-over-year growth, because it will be slightly negative, let's say, mid single digit during Q3 and Q4, as we anticipated in our previous call, that will put this segment at the end of the year, for the full year, growing, let's say, from low to mid single digit, that we already anticipated in the previous call.

My takeaway is really very strong growth on computer and communication moving from 60% growth in Q2 to close 90% in Q4. On industrial, after a Q2 of 30% growth year-over-year, we will go close to 40% in Q4.

Automotive, let's say, low double digit, as expected, consistently with the market. This year, okay, different profile for PE.

We will be on year-over-year negative on H2 after having been positive in H1. On the full year, it is a low to mid single digit, which is consistent with a market of smartphone that is decreasing because on the low-end, let's say, device, there is an impact because of the memory price.

This is the profile of the revenue Q3, Q4.

Thank you.

Any follow-up, Sandeep?

The question would be that you've seen this significant strength in computer and peripherals associated with the AI market. Is there not any flexibility in filling your capacity in the third quarter itself?

Why does this have to wait till the fourth quarter, given that you still remain underutilized in the third quarter? On,

let's say, all the advanced technology that are enabling our, let's say, growing industrial market and communication and computer, we are in a permanent growth and exactly at what we expect. Here, the only flexibility we could have is to continue to accelerate permanently, which is already on a really a competitive pass.

Then, clearly, where we have still some, let's say, under-loading, and even sometime, okay, in Q2, we face slight delay in our capability to ramp up, it is on legacy, pure legacy analog technologies, because if you remember, Q1, we were totally underloaded. The Q2 ramp-up was challenging.

We delayed a little bit this ramp-up that, in a certain extent, has impacted also our capability on Q3 to fully fulfill the demand on legacy technology. This is, let's say, pure temporary capability to ramp and some unloading charges specific to really legacy technology on analog that is, let's say, showing this figure.

Understood. Thank you so much.

Thank you, Sandeep. Next question, please.

Good morning. I have a follow-up on the gross margin.

In the past you were guiding, you were suggesting that at $4 billion sales per quarter, the profitability, gross margin would have been at least in the 40% range. Now you are suggesting that you will probably not be at that point in Q4.

If you are still confident to get to the level of profitability you were suggesting, and there are some specific temporary effects on Q4 that we should take into account. A follow-up on the AI data center demand and your customer engaged program, can you give a sense of how concentrated is today the demand there and the engaged program supporting your $2 billion revenues for 2027?

Maybe I take the first question about the gross margin at $4 billion in respect to our model to be, let's say, above, let's say, the 40% gross margin. Here, I have to remind all of you that, yes, this is our model, but let's say we always said that there are the two conditions that we need to achieve in order, let's say, to be above 40% when the company will be at $4 billion.

One is the revenue, of course, let's say, that is what is happening. The other point is that we complete our reshaping manufacturing program.

Means that actually we have, let's say, done this transfer from the 200 to the 300 for the silicon, closing two fabs, and let's say from the 150 to the 200 for the silicon carbide. We are not yet there.

We are, let's say, in the middle of this transformation. Clearly, here, we are not in the condition to have our manufacturing infrastructure at the right level of efficiency.

The other way around, I would say that in this moment, in this quarter, Q3 and Q4, we have some kind of extra cost that are related to this transfer, the qualification of the products, the redo of the mask of the products, all this kind of things that are impacting our gross margin, and clearly, suboptimal efficiency due to this, let's say, transition. At the end, we confirm our model to be, let's say, above 40% when the company is there, but once we have done the, let's say, transformation, when we have completed our programs that, as it will be at the end of 2027, let's say, not before.

This is the reason why, let's say, is not enough to be at $4 billion to have gross margin, let's say, at the right level of the model. For

the second question, maybe Remi, you can comment again the key growth driver that will put us on a trajectory well above $2 billion next year.

We have discussed earlier about what we're doing on the optical front, and I insist on the fact that we are now at the intersection of three main vector of growth, which is the oversized market share we have on 800-gig and 1.6-terabit-per-second MCU, the growing adoption of our B55X BiCMOS process for electronic IC, and the steep ramp-up we have on optical photonics IC platform, or silicon photonics platform, in 300, which has proven to be really, really well adopted across the board by all the major actors. I think there was also a question related to the concentration of that revenue, and we see an evolution of our revenue that is pretty consistent with market share distribution between hyperscalers, which makes us actually quite confident about the composition of our revenue.

Thank you.

Thank you, Domenico. Next question, please.

Yes, good morning. Thanks for taking my questions.

My first question is on the outlook. I think, Jean-Marc, in the prepared comments, you mentioned that your book-to-bill was close to 2, I think, overall, and above 2 in certain segments like optical interconnect in particular.

I'm just wondering, does that imply that your first quarter seasonality might be a bit better than normal? I've got a follow-up.

Thank you.

Thank you. No, yes, with this book-to-bill, what also is interesting is that out of the 100% of the booking we receive in Q2, well above 50% were for next year.

Means the customer now they have understood that they have to provide us visibility. The good news is that now our total backlog is representing about an average of 4.5 to 5 quarter of Q2 average revenue, which is clearly an improvement step, coming back to standard of visibility.

Clearly, yes, Q1 is today on a dynamic to be well loaded and clearly continuously boosted by our revenue related to AI data center.

Great. Thank you.

As a follow-up, I just wanted to make sure I got the right end of the stick on the financial model. I think in the past you were talking about 40%-plus gross margin on $18 billion, and then maybe 50% gross margin on $20 billion, obviously that's contingent on execution of the restructuring plan of manufacturing.

Just wanted to make sure that this is still the case and whether you've got increased confidence that you can deliver this sort of numbers around 2028.

No, but we confirm our confidence level to reach $18 billion in 2028. Clearly, okay, announcing the dynamic and increasing our indication on data center, it is clearly one of the key growth driver that will position our company on $18 billion by 2028.

Then second, Lorenzo already commented that this business related to AI data center is accretive our gross margin. We will have this mix effect.

Then, okay, I confirm that, assuming we complete on time our reshaping program on manufacturing and that the FX will remain, okay, our model, we should be in position, okay, to reach the gross margin target consistently with our $18 billion model. About $20 billion, okay, for the time being, let's reach together the $18 billion target, then we speak about the 20.

All right. Thanks very much.

Thank you, Didier. Next question, please.

Yes, good morning. I would love to come back on maybe the satellite, low Earth orbit opportunity.

If you can tell us what is the dynamic currently, notably with your main customer and the ramp of your second customer, and if you confirm the targets of $1 billion for this year and if you have a view for next year already. Thank you.

Thank you. I pass the question directly to Remi.

Hello, Stéphane. The dynamic is quite healthy overall.

Like Jean-Marc explained at the beginning of the discussion, we stick to our well above $3 billion over '26, '27, '28. You have noticed that and we spoke about that in the past, that it's a very much a launcher-dependent business in the context of deploying satellites, which will then deliver the services, which in itself is the fuel behind user terminal consumption.

Clearly, things are progressing in the right direction for space. Other constellation have faced a bit of a snag lately, and we expect that to be fixed in the coming quarters.

Directionally, nothing has changed. We see actually a strong '26 and an even stronger '27.

Okay. Can you comment on the level of profitability on the gross margin on this business like you did for data center?

Is it accretive?

Here clearly, let's say, is a combination of different gross margin, because clearly there are different products, the one that are going in the satellite, the one that are going in the gateway, the one that are going, let's say, in the user terminal. Anyway, when we look, let's say, at the average of the gross margin of this business, yes, I confirm that also low Earth orbit satellite is contributing, let's say, to the improvement of our gross margin.

Thank you very much.

Thank you, Stéphane. Next question, please.

Thank you very much. My first question was on the capacity front.

We see an acceleration of growth from a cyclical perspective, but also from AI data centers, and you are seeing some tightness, as you say in the release. Also TI suggested as well some tightness.

I was wondering, how do you feel about your capacity in the next, let's say, 2 to 3 years? Do you have, you think, enough capacity to deliver the different growth scenarios, or are you evaluating maybe some brownfield or greenfield expansion down the line?

The capacity of ST in the next 2 to 3 years would be helpful.

We have to see it under two angles. One angle is what is related now our capability to support AI data center.

At this stage, okay, with the dynamic, okay, we have today, okay, on optical cable and microcontroller. Clearly here, the key success factor is Crolles.

Crolles will reach 15k wafer per week and will go above to support the dynamic of this business. Where clearly we see some tightness is clearly what is related general-purpose microcontroller.

Why? Because, first of all, we have two cumulated effect.

There is first the enormous success of the microcontroller developed by Remi team for optical cable, and there is the solid recovery on the overall industrial market. Where, okay, I mentioned during my address that in distribution, the inventory are now well below our standard, and the POS dynamic is very strong.

It is here that we are facing at this moment some tension on the supply and increasing lead time. Here, basically, we have some key competitive advantage.

We have our two 300 fab, where clearly our microcontroller will be processed. The good news now is Agrate 300 certainly will reach the full build-out pretty soon before 2028, and will be capable to support the growth of microcontroller as soon as we will have qualified the 90 nm and 40 nm technology.

Then the second important lever is our China for China strategy that will start to pay back, because if you remember, we have qualified 40 nm technology in China with our main partner that will enable us, okay, to support the growth in China that is very demanding, both for industrial, in distribution, but industrial OEM, and also optical cable. On the other, let's say, technologies and product, well, clearly the challenge for us is our transition phase between technology, and we are accelerating as fast as we can in synchronization with our customer that could create time to time, okay, some temporary tightness on the supply.

This is, okay, the overall picture. Three elements: short term on microcontroller, but we have exactly in our hand our capability to grow; all the new technology driven by AI data center, we have the path to grow; some other tightness related to our reshaping, but only temporary.

Then after, we have some pocket of capacity limitation time to time with OSAT, but okay, we manage it.

Great. Thank you, Jean-Marc.

Maybe my follow-up would be on silicon carbide, actually. We see a lot of change in terms of silicon carbide demand: one driven by the Chinese EV carmakers adopting 800 volts supporting the silicon carbide growth, but also we see one of your main customer for that business, that would be great.

Thank you. I will pass the question to Marco, who is managing the product line.

Marco Cassis (President Analog, Power & Discrete, MEMS and Sensors Group, and Head of STMicroelectronics Strategy, System Research and Application, and Innovation Office): As highlighted, actually in Q2, we saw the revenue growth in the low teens year-over-year, we are back to growth year-over-year, and mid 30s in terms of quarter-over-quarter. This is also supported by a strong bookings, with book-to-bill that is well above 1, which is resulting in a growing backlog.

The dynamics are confirmed and are factual is what we see. In this context, I can confirm that this year we should grow silicon carbide revenues double digit in '26 versus '25 based on already design won and backlog which is already visible.

The dynamics are positive. Of course, we are facing the transition between the 6-inch and the 8-inch, which are sometimes creating some tightness in terms of supply because the process

Thank you.

Thank you, François. This is ending our call for this quarter.

Thank you very much everyone for joining us, and we remain at your disposal should you need any follow-up questions. Thank you.

Thank you.

Thank you.