The News: GlobalFoundries Inc. (GF), the international semiconductor company headquartered in Malta, NY, has announced its financial results for the June 30, 2024, second quarter. The company reported solid performance, exceeding the midpoint of its guidance ranges, driven by strong operational execution and strategic initiatives. Key highlights include a focus on disciplined capital expenditure strategy, significant free cash flow generation, and strategic acquisitions to enhance its technology portfolio.
By the Numbers:
- Revenue: $1.632 billion
- Gross Margin: 24.2%
- Operating Margin: 9.5%
- Net Income: $155 million
- Non-IFRS Adjusted EBITDA: $610 million
You can read the full press release on the GlobalFoundries site here.
GlobalFoundries Reports Second Quarter 2024 Financial Results
Analyst Take: GlobalFoundries’ Q2 2024 financial performance highlights the company’s resilience and strategic focus amidst a challenging market environment. Despite a year-over-year revenue decline, the company exceeded its financial guidance through disciplined capital management and strategic acquisitions. The financial results underscore GF’s commitment to innovation, operational excellence, and sustainable growth.
The acquisition of Tagore Technology’s Power Gallium Nitride (GaN) business, announced on July 1, is a prime example of GF’s strategic acumen. This move enhances GF’s product portfolio and positions the company to capitalize on the growing demand for high-efficiency power solutions. By integrating GaN technology, GF addresses a critical need in sectors such as automotive, telecommunications, and consumer electronics, which rely increasingly on advanced semiconductor technologies. This strategic acquisition is expected to drive significant revenue growth and strengthen GF’s competitive edge in the semiconductor market.
Moreover, GF’s strategic partnerships, such as the collaboration with BAE Systems, further demonstrate the company’s forward-thinking approach. These partnerships aim to enhance the supply chain for critical semiconductors and advance research and development in key areas like advanced packaging, silicon photonics, and GaN technology. Such collaborations provide immediate financial benefits and position GF for long-term success by fostering innovation and ensuring the company’s solutions remain at the cutting edge of technology.
GlobalFoundries’ ability to navigate market challenges and deliver strong financial results is a testament to its strategic vision and operational excellence. The company’s focus on innovation, sustainable growth, and strategic acquisitions, particularly in the GaN sector, positions it well for future success. As the semiconductor industry evolves, GF’s commitment to technological advancement and strategic growth will be key drivers of its ongoing performance and market leadership.
GlobalFoundries Q2 Financial Results
In Q2 2024, GlobalFoundries reported revenue of $1.632 billion, reflecting a 5% sequential increase from Q1 2024 but a 12% decrease year-over-year from Q2 2023. This decline can be attributed to various macroeconomic factors and shifts in market demand. Despite the revenue drop, GF’s gross margin stood at 24.2%, with a non-IFRS gross margin of 25.2%, indicating efficient cost management and operational execution.
Operating profit for the quarter was $155 million, with an operating margin of 9.5%. On a non-IFRS basis, the operating profit was $212 million, reflecting a margin of 13.0%. These figures show a significant decrease from the previous year’s operating margins, primarily due to increased operating expenses and restructuring charges. The company’s net income for Q2 2024 was $155 million, down from $237 million in Q2 2023. Non-IFRS net income was $211 million, demonstrating GF’s ability to maintain profitability through strategic financial management.
Market Context and GlobalFoundries Strategy
The semiconductor market faces challenges, including supply chain disruptions, geopolitical tensions, and fluctuating demand across various sectors. Despite these challenges, GlobalFoundries remains focused on its strategic priorities, including expanding its technology portfolio and strengthening customer relationships.
In Q2 2024, GF announced the acquisition of Tagore Technology’s Power Gallium Nitride business, enhancing its capabilities in the rapidly growing GaN power devices sector. Additionally, a new collaboration with BAE Systems aims to bolster the supply of critical semiconductors for national security programs, emphasizing GF’s commitment to innovation and strategic partnerships.
In February, GF announced that it will receive up to $1.5 billion of new funding as part of the 2022 US Chips and Science Act. Part of the funding will go to creating a high-volume GaN semiconductor manufacturing facility in Essex Junction, VT. GF acquired the original facility from IBM in 2015.
GF’s strategy also includes a disciplined approach to capital expenditure, focusing on projects that enhance capacity and technological capabilities. The company generated over $500 million in non-IFRS adjusted free cash flow in the first half of 2024, underscoring its strong financial position and ability to invest in future growth.
On the earnings call, GF CEO Thomas Caulfield stated after speaking of the last two years of poor mobile device sales, “So I would say, when I think of what’s going to be that catalyst to get real growth, we’re going to have to see if AI-enabled devices drive a refresh cycle.” Assuming that happens, we will see how much of this business GF gets compared to TSMC and Samsung Foundry.
Impact of GaN on GlobalFoundries’ Performance
Gallium Nitride (GaN) technology has emerged as a pivotal element in GlobalFoundries’ strategic growth, significantly influencing the company’s performance in Q2 2024 and promising substantial benefits in future quarters. The acquisition of Tagore Technology’s Power GaN business has fortified GF’s position in the semiconductor market, enabling the company to tap into the burgeoning demand for GaN power devices. This strategic move aligns with GF’s objectives to diversify its technology portfolio and cater to industries that require high-efficiency power solutions, such as automotive, telecommunications, and consumer electronics.
In the second quarter, integrating Tagore Technology’s GaN assets contributed to revenue and operational efficiencies. The GaN business brought in new design wins and expanded GF’s customer base, highlighting the immediate positive impact on the company’s financial performance. By incorporating advanced GaN technology, GF was able to offer enhanced products that deliver superior performance and energy efficiency, thereby attracting more clients and creating stronger customer relationships. This reinforced its reputation as a leader in innovative semiconductor solutions.
GaN technology is expected to play a crucial role in GF’s growth trajectory. The company anticipates increased adoption of GaN devices across various sectors, driven by the global shift towards more energy-efficient and high-performance technologies. As GF continues to develop and refine its GaN offerings, the company is poised to capture a larger market share, thereby driving higher revenue and profitability in the upcoming quarters. Moreover, the strategic focus on GaN aligns with GF’s long-term vision of sustainable growth and technological leadership, ensuring that the company remains at the forefront of the semiconductor industry.
Looking Forward
Looking ahead to the third quarter of 2024, GlobalFoundries has provided guidance for revenue between $1.7 billion and $1.75 billion, with a gross margin of 23.2% to 24.0%. The company expects net income to range from $100 million to $169 million, reflecting continued efforts to optimize operations and manage costs effectively.
With ongoing investments in GaN power devices, silicon photonics, and advanced packaging, technological advancements will remain a core focus for GF. The semiconductor industry is expected to witness increased demand in sectors such as automotive, healthcare, and data centers, providing growth opportunities for GF. The company’s commitment to sustainability, innovation, and customer partnerships positions it well to navigate market challenges and capitalize on emerging trends.
As GF continues to execute its strategic initiatives, stakeholders can expect robust performance driven by technological leadership and a strong operational foundation. The upcoming quarters will be crucial in determining GF’s long-term trajectory, with a focus on maintaining financial discipline, advancing technological capabilities, and fostering strategic collaborations.
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.
Daniel Newman and his co-host of The Six Five Webcast, Patrick Moorhead of Moor Insights and Strategy discusses GlobalFoundries’s earnings in their latest episode. Check it out here and be sure to subscribe to The Six Five Webcast so you never miss an episode.
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Author Information
Dr. Bob Sutor has been a technical leader and executive in the IT industry for over 40 years. Bob’s industry role is to advance quantum and AI technologies by building strong business, partner, technical, and educational ecosystems. The singular goal is to evolve quantum and AI to help solve some of the critical computational problems facing society today. Bob is widely quoted in the press, delivers conference keynotes, and works with industry analysts and investors to accelerate understanding and adoption of quantum technologies. Bob is the Vice President and Practice Lead for Emerging Technologies at The Futurum Group. He helps clients understand sophisticated technologies in order to make the best use of them for success in their organizations and industries. He is also an Adjunct Professor in the Department of Computer Science and Engineering at the University at Buffalo, New York, USA. More than two decades of Bob’s career were spent in IBM Research in New York. During his time there, he worked on or led efforts in symbolic mathematical computation, optimization, AI, blockchain, and quantum computing. He was also an executive on the software side of the IBM business in areas including middleware, software on Linux, mobile, open source, and emerging industry standards. He was the Vice President of Corporate Development and, later, Chief Quantum Advocate, at Infleqtion, a quantum computing and quantum sensing company based in Boulder, Colorado USA. Bob is a theoretical mathematician by training, has a Ph.D. from Princeton University, and an undergraduate degree from Harvard College.
He’s the author of a book about quantum computing called Dancing with Qubits, which was published in 2019, with the Second Edition released in March 2024. He is also the author of the 2021 book Dancing with Python, an introduction to Python coding for classical and quantum computing. Areas in which he’s worked: quantum computing, AI, blockchain, mathematics and mathematical software, Linux, open source, standards management, product management and marketing, computer algebra, and web standards.
