Shares in Infineon Technologies (ETR:IFX, OTC:INFNNY) surged 10% as the German semiconductor giant posted solid quarterly results amidst a weak automotive market, but raised its outlook for the year due to demand for artificial intelligence.
Revenue came to €3.4 billion in the first quarter of its financial year, which was down 13% from the preceding quarter and down 8% year-on-year.
Segment profit was €573 million for the quarter, beating consensus forecasts of €477 million, as did profit margin of 16.7% versus 14.8%, though it was helped by a one-off of "mid double digit amount" in the Power & Sensor Systems division.
Free cash flow was negative at €237 million as inventories rose by €400 million and net debt increased to €2.98 billion at the end of December.
"Infineon has held up well in a weak market environment, closing its first quarter slightly ahead of expectations," said CEO Jochen Hanebeck.
"Against a continued uncertain economic backdrop, our business trajectory in this fiscal year is following the pattern we expected: following the expected inventory reduction, we continue to anticipate that the recovery in demand will be gradual for the current fiscal year."
Hanebeck hailed "increased use of artificial intelligence, which is driving demand for our leading power supply solutions for AI data centers. This is a prime example of our long-term growth drivers, digitalization and decarbonization."
Segment margin is forecast to be in a "mid-teens percentage range" in the second quarter, while the outlook for the whole 2025 is for revenue to be "flat to slightly up" compared to the previous guidance of a slight decline, while segment margin are expected to be in the "mid-to-high-teens percentage range".
Analysts at Stifel said the new guidance implies a 3% beat versus consensus at the segment profit level, and would have been more but for a change in forex assumptions, with Ifineon now assuming an exchange rate of US$1.05 to the euro, down from US$1.10 previously.