GlobalFoundries
stock is losing ground Tuesday after the contract chip manufacturer posted solid results for the June quarter, but provided guidance slightly below Street estimates, amid continued weakness in some parts of the semiconductor industry.
GlobalFoundries (ticker: GFS), which produces components for a range of semiconductor companies, has been under pressure in recent quarters from excess inventory in some end-markets such as PC manufacturers. That was evident in the latest results.
CEO Thomas Caulfield noted in a statement that the results reflect “cyclical headwinds…and continued macroeconomic uncertainty.”
For the second quarter, revenue was $1.845 billion, near the top of the company’s forecast range of $1.81 billion to $1.85 billion, but down 7% from a year ago. Adjusted profits of 53 cents a share likewise were near the top of the company’s forecast range of 46 cents to 54 cents. Adjusted Ebitda, or earnings before interest, taxes, depreciation, and amortization, were $668 million, down 15% from a year ago. Silicon wafer shipments were down 9% from a year earlier.
For the third quarter, GlobalFoundries is projecting revenue of $1.825 billion to $1.87 billion, down 11% at the midpoint of the range, with adjusted profits of 46 cents to 54 cents a share. The Wall Street consensus had been for revenue of $1.88 billion and adjusted profits of 52 cents per share.
In an interview with Barron’s, Chief Financial Officer Dave Reeder said excess inventory continues at distributors, the chip companies, and at end-market device makers, for parts used in PCs, mobile phones, and consumers electronics products. But he added that “the good news is that inventory is no longer climbing.”
The situation should be resolved by year-end, he said. “The disappointing news is that everyone expected that to happen earlier in the year.”
Reeder said there are pockets of demand strength in the industrial and automotive sectors, “and of course AI.” He noted that the company makes some connectivity and power-management parts used in AI data centers.
The GlobalFoundries CFO said the company will be in the low-to-middle 80s in terms of capacity utilization for the year, below a normal level of the low-to-mid 90s. But he said the company slowly has been adding capacity, with production this year of about 2.8 million silicon wafers, heading to 3 million next year, and up from 2.6 million in 2022.
GlobalFoundries stock was 2% lower at $57.95 in Tuesday trading.
Write to Eric J. Savitz at [email protected]
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