April 23 (Reuters) - STMicroelectronics reported first-quarter results above market expectations on Thursday, pointing to signs of recovery in its key semiconductor markets, and forecast further growth in the second quarter.
Shares of the Franco-Italian group, one of Europe's largest semiconductor manufacturers and a bellwether for the automotive and industrial chip sectors, rose up to 10% in early trading, before paring gains to be about 7.5% higher by 0927 GMT.
The chipmaker reported revenue of $3.10 billion for the first three months of 2026, versus the $3.04 billion expected by analysts polled by LSEG. Operating income was $171 million, beating expectations of $165.8 million.
STMicro has been navigating a prolonged downturn in automotive and industrial semiconductors after customers spent recent years digesting excess post-pandemic inventory and cutting orders.
But company executives said demand for automotive chips returned to year-on-year growth in the quarter, while industrial demand also improved.
"We had a strong booking momentum during Q1, with book-to-bill well above one across all end markets and regions," CEO Jean-Marc Chery said during an earnings call.
The company forecast second-quarter revenue of $3.45 billion, which was also above market expectations of $3.21 billion.
Jefferies said in a note to investors that the revenue upside appeared to come from continued strength at Apple, data centres, low Earth orbit satellite-related systems and the recent acquisition of NXP's sensor business.
STMicro's artificial intelligence-related business is becoming a more meaningful growth driver, the company said. It expects data centre revenue to be well above $500 million in 2026 and to exceed $1 billion in 2027.
Rising energy costs are not expected to materially impact the company for now, as itis partly shielded through long-term supply agreements expiring at the end of this and next year, finance chief Lorenzo Grandisaid.
STMicro is likely at the early stages of a market upturn, Jefferies analysts wrote, foreseeing further upgrades to estimates in future quarters.
(Reporting by Nathan Vifflin in Gdansk; Editing by Matt Scuffham and Milla Nissi-Prussak)
