GlobalFoundries delivers record earnings on sustained demand for lower-end commodity chips


Shares of the computer chipmaker GlobalFoundries Inc. gained ground in regular trading today after the company reported solid third quarter financial results that topped Wall Street’s expectations.

The contract chip manufacturer reported earnings before certain costs such as stock compensation of 67 cents per share, up by 7 cents from the same quarter last year and ahead of Wall Street’s consensus estimate of 62 cents. Revenue for the period came to $2.07 billion, a record for the company and up 22% from a year earlier. Wall Street had been looking for sales of just $2.05 billion.

Tallied up, the numbers resulted in a record net income of $336 million for the quarter. GlobalFoundries set some other records too, notching an impressive operating margin of 17.2% and a gross margin of 29.4%.

GlobalFoundries is an operator of chip fabrication plants, called “fabs” in industry parlance. It specializes in making silicon wafers for third-party chip suppliers and it has an impressive list of customers that includes Advanced Micro Devices Inc., Samsung Electronics Co. Ltd. and Qualcomm Inc. All told, GlobalFoundries is believed to the the third-largest chip fab operators in the world, with five plants globally and over 15,000 employees spread across those sites.

GlobalFoundries’ third quarter results were much better than feared, and investors nodded their appreciation as its stock rose more than 8% in the wake of the report. Wall Street had been worried, given some of the ugly numbers reported by GlobalFoundries’ fellow chipmakers earlier this month. Its customer Qualcomm, for example, forecast lower-than-expected revenue for the fourth quarter due to weak demand that’s causing inventory adjustments.

However, that apparently hasn’t caused too many problems for GlobalFoundries, which is mainly focused on manufacturing lower-end commodity chips that have remained in short supply even as the COVID-19 pandemic waned. Weakness in the personal computer and smartphone markets has led to reduced sales of more advanced processors, but there remains robust demand for the cheaper silicon made by GlobalFoundries. Even now, it’s said there’s a shortage of some kinds of chips, such as automotive and “internet of things” processors.

GlobalFoundries Chief Executive Thomas Caulfield said in a statement that his team executed well on its commitments despite the ongoing macroeconomic and geopolitical challenges faced by the industry. “300mm-equivalent wafer shipments of 637 thousand was a record for GF, an increase of 5% year-over-year,” he said. “Our revenue grew 22% year-over-year, and we delivered record gross, operating, and net profits, making significant progress towards our long-term financial model. We remain on track to deliver a strong year of growth and profitability.”

Caulfield’s optimism was reflected by GlobalFoundries’ guidance for the fourth quarter. The company said it anticipates earnings of between $1.24 and $1.44 per share on revenue of $2.05 billion to $2.1 billion. Wall Street is looking for earnings of just $1.05 per share on revenue of $2.09 billion.

Photo: GlobalFoundries

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