GlobalFoundries Gains Analyst Upgrade, Eyes Growth In Automotive And AI-Powered Data Centers

Zinger Key Points

GlobalFoundries Q4 revenue declined 1% to $1.83B, beating estimates, with adjusted EPS of $0.46 surpassing expectations
Analyst upgraded GlobalFoundries to Buy, citing 2025 growth in automotive, data centers, and geopolitical tailwinds
Get real-time earnings alerts before the market moves and access expert analysis that uncovers hidden opportunities in the post-earnings chaos.

GlobalFoundries Inc GFS stock gained after Needham analyst Quinn Bolton upgraded the stock from Hold to Buy and a price target of $50.

On Tuesday, GlobalFoundries reported a fiscal fourth-quarter 2024 revenue decline of 1% to $1.83 billion, beating the analyst consensus estimate of $1.829 billion.

The adjusted EPS of 46 cents beat the analyst consensus estimate of 44 cents.

Also Read: SoftBank Q3 Earnings: Revenue Rises, Vision Fund Takes $2.33 Billion Hit As Investments Falter

Bolton noted the outlook for GlobalFoundries is improving as the semiconductor industry emerges from the cyclical downturn. The analyst forecasts a return to growth in 2025 driven by strength in Automotive and Communications/Data Centers.

Management targets exiting fourth-quarter 2025 with gross margin at ~30%, well above Bolton’s previous estimate of 26.8%. The most significant driver of improving gross margin will be increased utilization levels as the company returns to growth in 2025.

The company is taking several actions to reduce variable costs, and depreciation will decline by ~15% Y/Y (~$250 million) as depreciation on legacy equipment rolls off and reflects a $935 million impairment charge on legacy long-lived assets in the fourth quarter of 2024. Additionally, the pricing environment has primarily stabilized, consistent with comments made over the last few quarters.

GlobalFoundries expects to return to growth in 2025, driven by positive catalysts in its end markets. In Automotive, management believes the company has sufficient design wins to support a similar level of growth as seen in fiscal 2024 (+15% Y/Y), despite weakness in the broader environment. Communication Infrastructure and Data Centers will likely grow significantly, driven by demand for optical transceivers, SATCOM applications, and partnerships with AI companies such as Groq.

Smart Mobile Devices will likely be ~flat despite expectations of the broader market to improve modestly. Bolton noted that an AI refresh cycle will drive the upside in Smart Mobile Devices. In Home and Industrial IoT, management is starting to see pockets of strength. This segment bottomed in 2024 and will likely post modest growth in 2025.

Bolton noted that holding GlobalFoundries is a good hedge against the political uncertainty between the U.S. and China. Excessive tariffs benefit GlobalFoundries in terms of onshore production and manufacturing. Management revealed they have already discussed diversifying their supply chains and multi-sourcing with customers.

Bolton projected fiscal 2025 revenue of $7.05 billion and EPS of $1.70.

Price Action: GlobalFoundries stock is up 7.96% at $43.28 at the last check on Wednesday.

Also Read: