European diversified semiconductor groups are heading into first-quarter reporting with markedly different demand patterns across their end-markets, according to a Bank of America Global Research note. Automotive market pressure is evident, but industrial demand is showing firming momentum, and AI-related growth is increasingly central to the sectors trajectory.
BofA adjusted its view on STMicroelectronics by lifting the price objective to c35/$41 from c32/$38 while keeping a Neutral rating. The brokerage projects STMicroelectronics (STM) to report first-quarter revenue of $3.09 billion, about 1-2% above both street consensus and the company's guidance of $3.04 billion. BofA's model points to first-quarter EPS of $0.19, roughly 12% ahead of consensus estimates.
Looking to full-year 2026, BofA's revenue forecast for STM sits at $13.6 billion, about 1% higher than consensus and implying 15.1% year-on-year growth. The bank also sits roughly 5% above consensus on EPS for the year.
Within the automotive segment, BofA highlights a slowing backdrop for EV sales growth. The brokerage expects global electric vehicle sales to expand 8% year-on-year in 2026, with battery electric vehicles growing 11% and plug-in hybrids rising 3%. Against that outlook, the note points to BYD's sales falling 20% year-on-year and 30% year-to-date through March as an example of current weakness in the space.
Memory pricing has added another layer of headwind for vehicle manufacturers, with BofA estimating that memory costs could amount to roughly 1% of an auto OEM's bill-of-materials. That magnitude would translate into an approximate 50 basis point hit to OEM gross margins, according to the bank's calculations.
On the industrial side, the data cited in the note suggest improving activity. Global purchasing managers' indices registered 51.3 in March, the second-highest reading since June 2022, and China's fixed asset investment expanded 1.8% year-on-year in January-February 2026, reversing a 15% decline in December 2025.
The note also details recent shifts in market share across several semiconductor segments. In automotive microcontrollers, Infineon increased its share to 37% in 2025 from 33% in 2024, extending its lead over second-placed Renesas at 23%. STMicroelectronics' share in that area slipped to 7% from 9% over the same interval.
By contrast, STM made gains in industrial microcontrollers, rising to 17% from 16%, while market leader Microchip's share fell to 23% from 27%. In discrete semiconductors, Infineon lost share to 15% from 16%, Asia-Pacific vendors increased to 13% from 12%, and STM's slice declined to 5% from 7%.
Valuation and earnings momentum have also diverged across the diversified group. The sector trades at 11.9x 12-month forward EV/EBITDA, representing a 33% and 13% premium to its five-year and ten-year medians, respectively. The group has rerated 13% year-to-date, coincident with an average share-price gain of 23%.
Consensus 12-month forward EPS estimates have moved higher year-to-date for a number of names cited in the note - up 10% for Infineon and 14% for STM - while Osram and Melexis have experienced downward revisions of 59.3% and 9.5%, respectively.
Inventory dynamics remain a notable area of focus. Diversified semiconductor inventory days were roughly 54% above pre-COVID averages in the fourth quarter of 2025, with Melexis the most stretched at nearly double pre-COVID levels. STMicroelectronics guided inventory days of approximately 140 at the end of first-quarter 2026, up from 134 days in fourth-quarter 2025. Infineon is targeting roughly 150 days by year-end.
The combination of uneven end-market demand, shifting market shares, stretched inventories and elevated valuation multiples creates a complex backdrop for investors as European diversified semiconductor companies report first-quarter results. BofA's note highlights both pockets of strength - particularly where AI exposure and industrial demand are supportive - and material risks tied to automotive demand and component-cost pressure.
Article source data: BofA Global Research note dated Wednesday, company guidance and consensus estimates as cited in the note.