The News: GlobalFoundries (GF) reported revenue of $1.852 billion for third quarter (Q3) 2023 ending September 30, in announcing its preliminary Q3 2023 financial results. Read the earnings press release on the GlobalFoundries website.
GlobalFoundries Q3: Resilient Performance Amid Macro Uncertainties
Analyst Take: GF reported revenue of $1.852 billion for Q3 2023 ending September 30, delivering financial results at the upper end of the guidance ranges that the company provided in its August earnings release. Key GF Q3 2023 financial highlights include:
- Gross margin of 28.6% and adjusted gross margin of 29.2%
- Operating margin of 14.1% and adjusted operating margin of 17.4%
- Net income of $249 million and adjusted net income of $308 million
- Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $667 million
- Cash, cash equivalents, and marketable securities of $3.4 billion
GF president and CEO Dr. Thomas Caulfield highlighted that the company delivered financial results at the upper end of the guidance ranges provided in its August earnings release. GF produced such results amid global economic and geopolitical uncertainties, attesting to the company’s ability to work diligently with customers in meeting inventory reduction objectives in full alignment with cultivating partnerships to power differentiation and innovation across vital end markets. As a result, GF’s shares surged after its Q3 earnings beat estimates due primarily to resilient demand driving performance across the upper range of its August guidance.
GF’s top Q3 2023 business highlights included the US Department of Defense awarding GF a new 10-year, $3.1 billion contract for a supply of securely manufactured, US-made semiconductors for use across a wide range of critical aerospace and defense applications. The deal aligns with GF’s September 2023 application for US CHIPS and Science Act funding, consisting of two full applications submitted to the CHIPS Program Office of the US Department of Commerce for capacity expansion and modernization of GF’s US fabs. Also, GF enlarged its global operations with official openings at its fabrication plant in Singapore and new operations support facility in Penang, Malaysia, which generated a total of 1,300 high-value jobs.
Notably, GF announced its most advanced RF technology, 9SW RFSO1, that will offer substantial improvements in performance and integration for 5G and wireless communication applications. We observe that GF’s 9SW technology can offer a low-cost, low-power, highly flexible solution for RF Front End Applications, improving on 8SW with advantageous switching, low-noise amplifiers (LNA), and logic processing capabilities. The technology features significant reduction in standby currents for longer battery life, creating products over 10% smaller than previous generations with more than 20% enhancement in efficiency through lower on-resistance and off-capacitance.
The 9SW technology is more energy efficient, lowering power consumption in both inactive and active states. It is designed to provide the features customers demand – ultra-fast downloads and longer battery life with improved quality and longer-range connectivity. The advanced 9SW technology will be manufactured on GF’s 300 mm production line at its fabrication site in Singapore and is expected to provide the mobile ecosystem with manufacturing capacity to meet expected market demand.
Plus, the alliance with Microchip, through its Silicon Storage Technology (SST) subsidiary, advances the SST ESF4 third-generation embedded SuperFlash non-volatile memory (NVM) solution in the GF 28SLPe foundry process. We find the ongoing collaboration further strengthens GF’s integral role in broadening the adoption of Node Version Manager (NVM) solutions for microcontroller, smartcard, and IoT chip technologies.
The advancements to its 22FDX (22nm FD-SOI) platform, unveiled at GF’s Annual Tech Summit in Europe, introduced what we view as a suite of new innovative capabilities and enhancements. These enhancements signify a strategic response to the growing demand for improved power efficiency and top-tier performance in both automotive and IoT and applications.
From our view, GF is benefiting from the US government’s prioritization of ensuring stability across semiconductor supply chains through funding that is aimed at advancing national security and domestic economic goals. For instance, GF secured $35 million in US government funding for a Vermont semiconductor facility to facilitate mass-scale production of gallium nitride chips to use in aerospace and defense, cellular communications, automobiles, and industrial IoT (IIoT).
GlobalFoundries’ Q3 2023 Financials: Key Takeaways
We anticipate that ongoing and projected uptake in the automotive segment can boost GF’s overall performance, fueled by growing geopolitical demand for diversification of manufacturing facilities in domestic and stable environments located outside China and Taiwan. As such, GF has the market vison and national security credentials key to maintaining the company’s continued disciplined prioritization of ensuring its global teams are focused on managing costs while developing differentiated solutions that directly fulfill customer needs.
GF delivered a robust Q3 performance given geopolitical and macroeconomic uncertainties, underlining a somewhat more cautious outlook in the company’s fourth quarter (Q4) guidance. As a result, longer term, we believe GF is well positioned for growth with both broad geographic manufacturing capabilities and process specialization across strategically vital legacy nodes.
Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.
Other insights from The Futurum Group:
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Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
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An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
Ron is an experienced, customer-focused research expert and analyst, with over 20 years of experience in the digital and IT transformation markets, working with businesses to drive consistent revenue and sales growth.
Ron holds a Master of Arts in Public Policy from University of Nevada — Las Vegas and a Bachelor of Arts in political science/government from William and Mary.
