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 seven cents from the same quarter last year and ahead of Wall Street’s consensus estimate of 62 cents. Revenue for the period rose 22% from a year ago, to a record $2.07 billion. Wall Street had been looking for sales of $2.05 billion.
Tallied up, the numbers resulted in 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 third-largest chip fab operator in the world, with five plants globally and more than 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 on 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, there’s a shortage of some kinds of chips, such as automotive and “internet of things” processors.
Constellation Research Inc. analyst Holger Mueller told SiliconANGLE that GlobalFoundries delivered impressive results, breaking the $2 billion revenue mark for the first time on the back of strong demand for chips from the automotive and IoT industries.
“We’re still seeing a demand gap in those sectors at the moment, and GlobalFoundries’ financial discipline has been strong too with good cost control,” Mueller said. “The company is therefore looking well-set for the coming quarters.”
That said, he noted that the chip business is “a roller coaster and demand could wane at some point. The question for GlobalFoundries then is where to invest next, so that any potential future downturns can be minimized or even avoided altogether.”
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. Shipments of 300-millimeter-equivalent wafers of 637,000 was a record for the company, he noted, and an increase of 5% year-over-year.
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 $1.05 per share on revenue of $2.09 billion.