GlobalFoundries Stock Falls After Earnings Beat. It Gets Harder From Here.

The semiconductor manufacturer GlobalFoundries faces tougher year-over-year comparisons over the next year. (Liesa Johannssen-Koppitz/Bloomberg)

Key Points

• GlobalFoundries’ third-quarter adjusted earnings of 41 cents per share and revenue of $1.69 billion exceeded analyst estimates.
• Automotive revenue increased by approximately 38% and data center revenue jumped 28%, offsetting weak smartphone-chip sales.
• The company forecasts fourth-quarter revenue of about $1.8 billion and an operating margin in a range with a midpoint of 13.3%.

Shares of GlobalFoundries fell Wednesday after the chip maker’s earnings and revenue came in higher than expected, but growth slowed in two core business segments.

The company posted adjusted earnings of 41 cents a share for the third quarter, surpassing analysts’ consensus estimate of 38 cents. Revenue totaled $1.69 billion, down 3% from the prior year but a tick above Wall Street’s call for $1.68 billion.

GlobalFoundries stock dropped 4.5% after rising sharply in premarket trading Wednesday. Shares have dropped 19% this year through Tuesday’s close because of weak financial forecasts from management and falling sales of smartphone chips, the company’s largest segment.

The smartphone business again failed to meet analysts’ expectations, falling 13% from the prior year. Automotive revenue, the company’s second-largest end market, rose roughly 20% but also came in below estimates. GlobalFoundries made up for it with solid communications infrastructure and data center revenues, which grew 32%.

GlobalFoundries has less exposure to the artificial intelligence boom than other semiconductor players like Broadcom or Taiwan Semiconductor Manufacturing , but it has cited AI as a core reason for expanding its manufacturing footprint in the U.S.

The businesses other than smartphone chips will face tougher year-over-year comparisons in the year ahead. GlobalFoundries’ data-center and automotive revenue soared in the fourth quarter last year and have flattened out since then. Wall Street expects another leap in 2026, if not next quarter.

The company anticipates revenue of $1.8 billion plus or minus $25 million in the fourth quarter, ahead of analysts’ estimates of $1.79 billion but down 2% from last year. It forecast an operating margin will land in a range with a midpoint of 13.3%, compared with 12.8% last year.

Write to Nate Wolf at nate.wolf@barrons.com