Sensor manufacturer Sensata Technology (NYSE: ST) reported Q2 CY2025 results topping the market’s revenue expectations, but sales fell by 8.9% year on year to $943.4 million. The company expects next quarter’s revenue to be around $915 million, close to analysts’ estimates. Its non-GAAP profit of $0.87 per share was 4% above analysts’ consensus estimates.
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Sensata Technologies (ST) Q2 CY2025 Highlights:
- Revenue: $943.4 million vs analyst estimates of $933.6 million (8.9% year-on-year decline, 1.1% beat)
- Adjusted EPS: $0.87 vs analyst estimates of $0.84 (4% beat)
- Adjusted EBITDA: $212.1 million vs analyst estimates of $214.1 million (22.5% margin, 0.9% miss)
- Revenue Guidance for Q3 CY2025 is $915 million at the midpoint, roughly in line with what analysts were expecting
- Adjusted EPS guidance for Q3 CY2025 is $0.84 at the midpoint, above analyst estimates of $0.83
- Operating Margin: 14.6%, up from 12.5% in the same quarter last year
- Free Cash Flow Margin: 12.2%, up from 9.5% in the same quarter last year
- Inventory Days Outstanding: 88, down from 94 in the previous quarter
- Market Capitalization: $4.82 billion
“Our back-to-basics approach continues to deliver. We are building resiliency in our business and we are pleased to report a strong second quarter where we exceeded our revenue and earnings commitments and significantly improved our free cash flow," said Stephan von Schuckmann, Chief Executive Officer of Sensata.
Company Overview
Originally a temperature sensor control maker and a subsidiary of Texas Instruments for 60 years, Sensata Technology Holdings (NYSE: ST) is a leading supplier of analog sensors used in industrial and transportation applications, best known for its dominant position in the tire pressure monitoring systems in cars.
Revenue Growth
Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Unfortunately, Sensata Technologies’s 4.2% annualized revenue growth over the last five years was sluggish. This fell short of our benchmark for the semiconductor sector and is a tough starting point for our analysis. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions.
Long-term growth is the most important, but short-term results matter for semiconductors because the rapid pace of technological innovation (Moore's Law) could make yesterday's hit product obsolete today. Sensata Technologies’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 4.3% annually. 
This quarter, Sensata Technologies’s revenue fell by 8.9% year on year to $943.4 million but beat Wall Street’s estimates by 1.1%. Despite the beat, the drop in sales could mean that the current downcycle is deepening. Company management is currently guiding for a 6.9% year-on-year decline in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to remain flat over the next 12 months. While this projection indicates its newer products and services will catalyze better top-line performance, it is still below average for the sector.
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Product Demand & Outstanding Inventory
Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business’ capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.
This quarter, Sensata Technologies’s DIO came in at 88, which is 3 more days than its five-year average. These numbers suggest that despite the recent decrease, the company’s inventory levels are slightly above the long-term average.
Key Takeaways from Sensata Technologies’s Q2 Results
It was great to see a material improvement in Sensata Technologies’s inventory levels. We were also happy its EPS outperformed Wall Street’s estimates. On the other hand, revenue guidance was just in line. The market was likely hoping for more on the guidance front, and shares traded down 1.6% to $32 immediately after reporting.
Should you buy the stock or not? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.
