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GlobalFoundries Earnings Highlights: Strong Q2 Performance Exceeds Expectations

by Team Lumida
August 7, 2024
in Equities
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GlobalFoundries Earnings Highlights: Strong Q2 Performance Exceeds Expectations
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GlobalFoundries (GF) reported robust Q2 2024 financial results, surpassing guidance ranges and demonstrating resilience amidst challenging market conditions.

Summary

GF delivered Q2 revenue of $1.632 billion, a 5% increase quarter-over-quarter, with non-IFRS gross margin of 25.2% and non-IFRS diluted EPS of $0.38. CEO Thomas Caulfield emphasized the company’s strong execution:

“I’m proud of our teams around the world as they executed to plan and we Second quarter revenue, gross profit, and EPS above the midpoint of our guidance ranges while continuing to close important design wins to support our long-term growth objectives.”

Main Themes

  • Guidance: Q3 2024 revenue expected between $1.7 billion and $1.75 billion
  • Competition: Stable pricing environment across the industry
  • Economy: Macroeconomic conditions impacting consumer spending in China and the US
  • AI References: Edge AI driving design win momentum, particularly in IoT applications
  • Market Opportunity: GaN power device sector expansion, increasing SAM by $1.6 billion by 2030

Insights

GF’s acquisition of Tagore Technologies’ gallium nitride (GaN) power business positions the company for growth in power applications across automotive, aerospace and defense, renewable energy, and data centers. The integrated GaN offering aims to provide superior power performance compared to traditional BCD technology.

Market Opportunity

GF is targeting a substantial share of the $1.6 billion SAM growth in GaN power devices by 2030. The company’s strategy focuses on integrated device solutions, potentially enabling higher-margin opportunities compared to standalone switches.

Market Commentary

The semiconductor industry is experiencing a cyclical downturn, with GF reporting utilization rates in the low to mid-70s. However, management believes Q1 2024 represented the low point for revenue, with sequential growth expected throughout the year.

Customer Behaviors

Automotive remains GF’s bright spot, with meaningful year-over-year growth expected in 2024. The company is benefiting from the ramp-up of new applications and technologies, replacing older devices in vehicles. Design win momentum remains strong across both autonomous and internal combustion engine vehicles.

Capex

  • 2024 CapEx guidance maintained at approximately $700 million
  • Focus on differentiation and new features rather than base capacity expansion

Economy Insights

CEO Thomas Caulfield provided commentary on macroeconomic conditions:

“In China, it’s real estate overhang that has consumers maybe saving a little bit more than they ordinarily will and being a little gun-shy. In the US, we’re still dealing with high interest rates as a result of high inflation.”

Industry Insights

The stable pricing environment across major foundries suggests a more constructive outlook for the industry. As capacity investments continue, foundries are likely to maintain pricing discipline to ensure reasonable returns on these investments.

Key Metrics

Financial Metrics

  • Q2 Revenue: $1.632 billion (5% QoQ increase, 12% YoY decrease)
  • Non-IFRS Gross Margin: 25.2%
  • Non-IFRS Operating Margin: 13%
  • Non-IFRS Diluted EPS: $0.38

KPIs

  • Wafer Shipments: 517,300 300mm equivalent wafers (12% QoQ increase, 10% YoY decrease)
  • Factory Utilization: Low to mid-70s
  • Long-term Agreements: $18 billion of lifetime revenue attached

Competitive Differentiators

  1. Differentiated technology platforms (e.g., 22FDX for radar applications)
  2. Integrated GaN power solutions
  3. Strong automotive sector growth and design win momentum
  4. Fungibility across manufacturing facilities
  5. Focus on high-margin, differentiated solutions rather than commodity offerings

Key Risks

  1. Continued low factory utilization impacting gross margins
  2. Dependence on macroeconomic recovery and consumer spending
  3. Potential oversupply in the semiconductor industry as capacity investments come online
  4. Execution risks associated with new technology platforms and acquisitions

Analyst Q&A Focus Areas

  1. Gross margin trajectory and impact of underutilization fees
  2. Timing and drivers of utilization improvement
  3. Long-term agreement trends and customer behavior
  4. Automotive sector growth sustainability
  5. Capital expenditure strategy and capacity expansion plans

GlobalFoundries Summary:

GF’s Q2 performance demonstrates resilience in a challenging market environment, with automotive and smart mobile devices driving growth. The company’s focus on differentiated technologies and strategic acquisitions, such as the GaN power business, position it well for long-term growth. Investors should watch for improvements in factory utilization, which will be key to driving gross margin expansion in the coming quarters. The company’s ability to capitalize on emerging opportunities in Edge AI and power management applications will be crucial for sustaining growth beyond the current cyclical downturn.

Tags: EARNINGSGlobalFoundries
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© 2025 Lumida Wealth Management LLC is an SEC registered investment adviser. Privacy Policy. Cookies Policy.
Disclaimer Important Information This site is for informational purposes only. Information presented on this site does not constitute as investment advice.

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Lumida's website (referred to herein as the "Website") is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Accordingly, the publication of the Website on the Internet should not be construed by any client and/or prospective client Lumida’s solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet.

Any subsequent, direct communication by Lumida with a prospective client will be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides.

‍Lead Capture Forms: By submitting your contact information in the forms on this site, you are not obligated to invest in Lumida's product or services.
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