Infineon: Strong Demand for AI Data Center Power Solutions, Quarterly Revenue Guidance Exceeds Expectations

German chipmaker Infineon Technologies AG has benefited from the AI infrastructure construction boom. Its latest quarterly revenue guidance exceeded analyst expectations, and it raised its full-year sales outlook.

Infineon stated on Wednesday that third-quarter revenue ending in June is expected to be approximately €4.1 billion (about $4.8 billion), higher than the average analyst expectation of €4.04 billion compiled by Bloomberg. Meanwhile, the company raised its fiscal 2026 sales outlook from "moderate growth" to "significant year-over-year growth."

CEO Jochen Hanebeck stated, "The AI boom continues to heat up, and demand for our power solutions for AI data centers is extremely strong."

The news boosted market confidence in the European chip industry. Sales in Infineon's Power & Sensor Systems division grew 26% year-over-year to €1.26 billion in the second quarter. This division is regarded as the core business benefiting from the wave of AI infrastructure investment.

Second-Quarter Revenue Slightly Below Expectations, Full-Year Outlook Raised

Infineon's second-quarter revenue increased 6.2% year-over-year to €3.81 billion, slightly below the average analyst expectation of €3.83 billion. Despite the single-quarter figure being slightly weaker than expected, the company's judgment on the full-year outlook has become significantly more optimistic.

The company simultaneously raised its fiscal 2026 adjusted gross profit margin expectation to the low-to-mid range of 40% to 45%, and increased its free cash flow expectation from the previous €1 billion to approximately €1.25 billion.

CFO Sven Schneider told Bloomberg in an interview after the earnings release, "The AI cycle is clearly a major exception."

AI Data Centers Become New Growth Engine

Infineon, along with its European peers STMicroelectronics and NXP Semiconductors, had previously been under pressure due to excess inventory of automotive chips. Demand has remained sluggish in recent years, a situation stemming from overstocking triggered by the chip shortage during the pandemic.

As customer inventory is gradually digested, overall demand improved in fiscal 2026. Jean-Marc Chery, CEO of STMicroelectronics, stated last month that customers are accelerating inventory depletion.

Although the automotive market has traditionally been the most important revenue source for these three chipmakers, demand for AI infrastructure is increasingly becoming a new growth driver. Mature-node power management chips produced by companies such as Infineon can be used in data centers in conjunction with advanced AI chips from companies like NVIDIA and TSMC.

Data Center Revenue Target Significantly Increased

Infineon is accelerating its resource allocation toward the AI sector. In February this year, the company announced it would increase its AI technology investment for the current fiscal year from the previously planned €2.2 billion to approximately €2.7 billion.

In terms of revenue planning, the company expects data center-related revenue to grow from approximately €1.5 billion (about 10% of total sales) in fiscal 2026 to €2.5 billion in fiscal 2027, an increase of 67%.

The Power & Sensor Systems division has been explicitly positioned by the company as a core segment growing significantly faster than the group as a whole, with AI data center demand being its primary driver. Jochen Hanebeck also pointed out positive developments in the automotive business, particularly in the area of software-defined vehicles.

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