Infineon Raises Investments to Meet Unrelenting AI Chip Demand — 2nd Update

By Mauro Orru

Infineon Technologies said it would increase investments in the fiscal year through September to boost manufacturing as semiconductor demand for artificial intelligence keeps booming.

The German chip maker said it would now aim to invest around 2.7 billion euros ($3.19 billion) in fiscal 2026, above a previous target of 2.2 billion euros. A significant portion of investments are set to go toward a facility in the German city of Dresden that is expected to open in the summer as well as other sites to expand production capacity for semiconductors powering data centers and other AI infrastructure.

The move shows that Infineon is struggling to keep up with demand to power the technology even as some investors worry that high spending commitments are creating an AI bubble.

"At present, the focus is on power-supply solutions for AI data centers; in the coming years, the expansion of grid infrastructure will be added," Chief Executive Jochen Hanebeck said. "To serve our customers in the best possible way, we are aligning our manufacturing capacity to meet further rising demand and are bringing forward our investments in this area."

Infineon in November lifted its AI revenue target for fiscal 2026 to about 1.5 billion euros from 1 billion euros, betting that clients would place more orders for sophisticated AI semiconductors and subsequently boost sales. The company went a step further on Wednesday, saying that AI revenue should grow to roughly 2.5 billion euros in fiscal 2027.

While the company remains sanguine about AI, Infineon is still grappling with sluggish demand for chips from carmakers, a key market since its automotive business accounts for the lion's share of sales.

Carmakers amassed chips at the height of the pandemic and have been digesting those supplies in recent years, weighing on demand for new orders. Despite progress in the inventory correction, the auto industry is being cautious as a slow electric-vehicle rollout and fierce competition from Chinese rivals forced some brands to review their lineups and scale back production.

Last week, Infineon's rival STMicroelectronics--which counts Apple and Elon Musk's Tesla among its clients--said its business catering to automotive clients fared below expectations in the last three months of 2025.

Infineon on Tuesday struck an agreement with Austria-based electronics company Ams-Osram to buy its non-optical analog and mixed-signal sensor operations for 570 million euros, a deal aimed at strengthening Infineon's offering for the automotive, industrial and medical markets.

Infineon posted revenue of 3.66 billion euros for the three months through December, up 7% on year. Analysts had forecast quarterly revenue of 3.62 billion euros, according to a Vara Research consensus.

Net profit increased to 256 million euros from 246 million euros a year earlier. Its segment result--a closely watched profitability metric--grew to 655 million euros from 573 million euros, generating a 17.9% segment result margin. Analysts had forecast net profit of 290 million euros, a segment result of 607 million euros and a 16.8% segment-result margin, according to the consensus.

The company said revenue in the quarter through March should come in at roughly 3.8 billion euros, up from 3.59 billion euros a year earlier. Infineon's segment result margin is expected in a mid-to-high-teens percentage range compared with 16.7% the year-prior quarter.

For the year through September, Infineon said it continued to expect revenue to increase moderately from the 14.66 billion euros it reported for fiscal 2025, with a segment result margin in a high-teens percentage range.

Write to Mauro Orru at mauro.orru@wsj.com

(END) Dow Jones Newswires

February 04, 2026 04:12 ET (09:12 GMT)