GlobalFoundries Exceeds Q2 Projections, Navigates High Inventory Levels In Chip Market

GlobalFoundries Inc GFS reported a fiscal second-quarter 2024 revenue decline of 12% year-on-year to $1.63 billion, beating the analyst consensus estimate of $1.62 billion.

The contract chipmaker’s adjusted EPS of 38 cents beat the analyst consensus estimate of 28 cents. 

Smartphone and mobile device revenue fell by around 3% from a year ago, while industrial IOT revenue declined 28%, Reuters reports.

The topline decline reflected high inventory levels at its customers in the Home and Industrial Internet of Things (IoT), smart mobile devices, and communications infrastructure & data center segments, as per Reuters.

The adjusted gross margin declined by 440 bps to 25.2%, and the adjusted operating margin decreased by 530 bps to 13.0%.

The adjusted EBITDA margin improved by 120 bps Y/Y to 37.4%. 

GFS generated $402 million in operating cash flow and held $4.1 billion in cash and equivalents as of June 30, 2024.

“We remain focused on a disciplined capex strategy and strong cash flow, with over $500 million of cumulative Non-IFRS adjusted free cash flow generation in the first half of 2024,” said Dr. Thomas Caulfield, president and CEO of GF.

Outlook: GFS expects third-quarter revenue of $1.70 billion–$1.75 billion versus the $1.72 billion estimate. The company expects adjusted EPS of $0.28-$0.38 versus the $0.35 estimate.

Globalfoundries stock lost 25% in the last 12 months.

Semiconductor clients are working through chip inventory they built up during the pandemic to avoid supply shortages, Reuters reports. Economic uncertainty has led enterprises to reduce spending, adding to the industry’s woes.

Price Action: GFS stock was down 1.16% at $44.23 at last check Tuesday.

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