Weak 1Q24 guidance as customers switching to advanced processes, clear inventory
- 4Q23 revenue in line while EPS beat estimates; guiding for a weaker 1Q24, as customers continue to clear inventory and switching to advanced processes
- Still positive on automotive, signed new multi-year supply agreement with Infineon; awarded funding for GaN chips.
- Maintain BUY, TP: $79.70, supported by the long-term contracts with key customers such as Qualcomm and Infineon
4Q23 revenue in line; EPS beat estimates; guiding for a weaker 1Q24. GlobalFoundries (GFS) reported $1.85bn in revenue for 4Q23, -12% y-o-y, while EPS of $0.64 was 56% lower vs last year. 4Q23 revenue was inline with consensus but EPS was higher than market estimate of $0.59. This set of results also exceeded the mid-point of the guidance ranges provided by the company. For FY23, revenue was down 9% to $7.4bn while EPS dropped 28% y-o-y to $2.24. Customers in end markets such as communications infrastructure and data center have been working on reducing existing chip inventory, thus weighed on demand for GFS. Furthermore, the accelerated node migration of data center and digital-centric customers to more advanced nodes, which GFS does not support, further affected the group. GFS expects its 1Q24 revenue to be in the range of $1.50bn to $1.54bn, below consensus estimate of about $1.76bn. Adjusted EPS is projected to be in the range of 18 cents to 28 cents, way below consensus estimate of 46 cents.
Still positive on automotive, signed new multi-year supply agreement with Infineon; awarded funding for GaN chips. GFS said it expects automotive revenue growth to continue in 2024 due to increased semiconductor content across the vehicle architecture. GFS and Infineon announced a new multi-year agreement on the supply of Infineon’s leading 40nm automotive safety controller as well as power management and connectivity solutions through 2030. GFS was awarded $35m in federal funding to accelerate the manufacturing of GFS’s differentiated gallium nitride (GaN) on silicon semiconductors at its facility in Essex Junction, Vermont. This funding brings GFS closer to large-scale production of GaN chips, which are unique in their ability to handle high voltages and temperatures. Maintain BUY, TP: $79.70 supported by the long-term contracts with key customers such as Qualcomm and Infineon.