STMicroelectronics (NYSE:STM) shares experienced a sharp decline on Thursday, as investor anxieties over compressed margins and a guarded outlook overshadowed the semiconductor firm’s better-than-expected third-quarter 2025 financial results.

The company, a supplier to major industry players including Apple Inc. (NASDAQ:AAPL) and Tesla, Inc. (NASDAQ:TSLA), reported quarterly net revenues of $3.19 billion.

While this marked a 2.0% year-over-year decline, it successfully edged past the analyst consensus estimate of $3.16 billion and landed slightly above the midpoint of the company’s own business outlook range of $3.17 billion.

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Strength in Personal Electronics was cited as a key driver, with Automotive and Industrial segments performing as anticipated, and CECP broadly in line with expectations.

Margin Compression and Profitability Headwinds

Adjusted earnings per share (EPS) of 29 cents decisively topped the analyst consensus estimate of 23 cents. However, the positive top-line performance was undercut by a significant deterioration in profitability.

The gross margin contracted by 460 basis points (bps) to 33.2%, falling short of the company’s outlook midpoint of 33.5% (plus or minus 200 bps).

This margin erosion was primarily attributed to lower manufacturing efficiencies, negative currency effect, lower level of capacity reservation fees ...