US Chips Act Beneficiary GlobalFoundries Stock Soars On Q1 Earnings - What's Going On?

GlobalFoundries Inc GFS stock gained after it reported its quarterly earnings Tuesday.

The company’s fiscal first-quarter 2024 revenue declined 16% year-on-year to $1.55 billion, beating the analyst consensus estimate of $1.52 billion.

The semiconductor manufacturer’s adjusted EPS of $0.31 beat the analyst consensus estimate of $0.23. 

The adjusted gross margin declined by 240 bps to 26.1%, and the adjusted operating margin decreased by 560 bps to 12.1%.

The adjusted EBITDA margin improved by 160 bps Y/Y to 37.2%. 

GFS generated $488 million in operating cash flow and held $4.2 billion in cash and equivalents as of March 31, 2024.

CEO Dr. Thomas Caulfield said, “As pockets of the semiconductor industry begin to emerge from the inventory correction, our teams are driving foundry innovation and differentiation for our customers across their essential end-markets. We are delighted with the awards from both the U.S. Department of Commerce and New York State to expand our manufacturing capability in the United States, which will complement our unique global capacity offering.”

Outlook: GFS expects second-quarter revenue of $1.59 billion – $1.64 billion versus the $1.59 billion estimate. The company expects adjusted EPS of $0.24-$0.34 versus the $0.28 estimate.

The contract chipmaker became the first government grant recipient under the Biden administration’s Chips Act. It bagged $1.5 billion to support the expansion of its production facility in Malta, New York and expand capacity at its Vermont plant. The company looks to invest more than $12 billion over the next decade to keep pace with demand for chips from the automotive, aerospace, defense and artificial intelligence industries.

Globalfoundries stock lost close to 10% in the last 12 months. Investors can gain exposure to the stock via Innovator Deepwater Frontier Tech ETF LOUP and Invesco PHLX Semiconductor ETF SOXQ.

Price Action: GFS shares traded higher by 7.16% at $53.29 at the last check Tuesday.

Photo Courtesy Globalfoundries