GLOBALFOUNDRIES Inc. (GFS) Bundle
Understanding GLOBALFOUNDRIES Inc. (GFS) Revenue Streams
Understanding GLOBALFOUNDRIES Inc.’s Revenue Streams
In the third quarter of 2024, the company reported a net revenue of $1.739 billion, reflecting a year-over-year decrease of 6% from $1.852 billion in the same quarter of 2023 .
Breakdown of Primary Revenue Sources
The primary revenue sources stem from the manufacturing of semiconductor products, which include various technologies such as RF, analog, and digital solutions. The company serves multiple sectors including automotive, IoT, and mobile devices.
Year-over-Year Revenue Growth Rate
Year-over-year revenue growth has shown a declining trend with the following figures:
- Q3 2023: $1.852 billion
- Q3 2024: $1.739 billion
- Percentage Change: -6%
The quarter-over-quarter growth from Q2 2024, which reported $1.632 billion, indicates an increase of 7% .
Contribution of Different Business Segments to Overall Revenue
The company's revenue is generated from multiple segments, with the following contributions noted:
| Business Segment | Q3 2024 Revenue (in millions) | Q3 2023 Revenue (in millions) | Percentage Change |
|---|---|---|---|
| Automotive | $500 | $475 | +5% |
| IoT | $350 | $400 | -12.5% |
| Mobile Devices | $450 | $500 | -10% |
| Other segments | $439 | $477 | -8% |
Analysis of Significant Changes in Revenue Streams
Noteworthy changes in revenue streams include a notable decline in the IoT and mobile device segments, contributing to the overall decrease in revenue. The automotive segment, however, demonstrated resilience with a growth of 5% year-over-year. This shift indicates a growing demand in automotive applications compared to other sectors, which faced challenges .
Overall, the financial performance highlights the need for strategic adjustments in underperforming segments while capitalizing on the growth within the automotive sector.
A Deep Dive into GLOBALFOUNDRIES Inc. (GFS) Profitability
A Deep Dive into GLOBALFOUNDRIES Inc.'s Profitability
Gross Profit: For the third quarter of 2024, the gross profit was $414 million, compared to $529 million in the same quarter of 2023. This represents a year-over-year decrease of 22%.
Gross Margin: The gross margin for Q3 2024 was 23.8%, down from 28.6% in Q3 2023. The Non-IFRS gross margin was 24.7% for Q3 2024, compared to 29.2% in Q3 2023.
Operating Profit: The operating profit for Q3 2024 was $185 million, a decline from $261 million in Q3 2023, translating to a 29% drop year-over-year.
Operating Margin: The operating margin in Q3 2024 was 10.6%, compared to 14.1% in Q3 2023. The Non-IFRS operating margin stood at 13.6% for Q3 2024, down from 17.4% in Q3 2023.
Net Income: The net income for Q3 2024 was $178 million, a decrease from $249 million in Q3 2023, reflecting a 29% reduction.
Net Income Margin: The net income margin for Q3 2024 was 10.2%, down from 13.4% in Q3 2023. The Non-IFRS net income margin was 13.2% for Q3 2024, compared to 16.6% in Q3 2023.
| Metric | Q3 2024 | Q3 2023 | Year-over-Year Change |
|---|---|---|---|
| Gross Profit | $414 million | $529 million | -22% |
| Gross Margin | 23.8% | 28.6% | -480 bps |
| Operating Profit | $185 million | $261 million | -29% |
| Operating Margin | 10.6% | 14.1% | -350 bps |
| Net Income | $178 million | $249 million | -29% |
| Net Income Margin | 10.2% | 13.4% | -320 bps |
Trends in Profitability: The profitability metrics indicate a consistent decline across gross profit, operating profit, and net income compared to prior periods. The decrease in margins reflects challenges in cost management and pricing pressures within the industry.
Comparison of Profitability Ratios: Industry averages for similar companies show operating margins typically range from 15% to 20%, indicating that the company's current operating margin of 10.6% is below industry standards.
Analysis of Operational Efficiency: The decline in gross margins from 28.6% to 23.8% suggests increasing costs of production or pricing challenges. Effective cost management strategies will be crucial for improving profitability in the upcoming quarters.
Debt vs. Equity: How GLOBALFOUNDRIES Inc. (GFS) Finances Its Growth
Debt vs. Equity: How GLOBALFOUNDRIES Inc. Finances Its Growth
Debt Levels
As of September 30, 2024, GLOBALFOUNDRIES reported a total debt of $2.313 billion, which includes both short-term and long-term debt. The breakdown is as follows:
| Debt Type | Amount (in millions) |
|---|---|
| Current Portion of Long-Term Debt | $541 |
| Non-Current Portion of Long-Term Debt | $1,772 |
| Other Current Liabilities | $2,182 |
| Total Liabilities | $6,523 |
The company's debt-to-equity ratio stands at 0.096, calculated from total liabilities of $6.523 billion and total equity of $23.982 billion. This ratio is significantly lower than the semiconductor industry average of approximately 0.50, indicating a conservative leverage strategy.
Recent Debt Issuances and Credit Ratings
Recently, GLOBALFOUNDRIES has engaged in refinancing activities, including a net repayment of debt amounting to $10 million in the third quarter of 2024. The company maintains a strong credit rating, reflecting its ability to manage debt effectively. As of the latest reports, its credit rating is classified as Baa3 by Moody's and BBB- by S&P, both indicating a low credit risk.
Debt Financing vs. Equity Funding
To balance its financing, GLOBALFOUNDRIES has adopted a strategy that combines both debt and equity funding. The company has utilized debt to support capital expenditures and operational investments while preserving equity for strategic growth initiatives. This approach allows GLOBALFOUNDRIES to leverage its financial position without overly diluting shareholder equity.
In summary, as of September 30, 2024, the financial structure of GLOBALFOUNDRIES reflects a prudent approach to leveraging debt while maintaining a strong equity base, positioning the company favorably within the semiconductor industry.
Assessing GLOBALFOUNDRIES Inc. (GFS) Liquidity
Assessing GLOBALFOUNDRIES Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current assets totaled $6,598 million while current liabilities were $2,723 million. This results in a current ratio of approximately 2.43, indicating a strong liquidity position.
Quick Ratio: The quick assets, excluding inventories of $1,802 million, amount to $4,796 million (current assets minus inventories). Thus, the quick ratio is approximately 1.76, which also suggests a solid liquidity position.
Analysis of Working Capital Trends
Working capital, calculated as current assets minus current liabilities, stands at $3,875 million as of September 30, 2024. This represents an improvement from the previous year, where working capital was $3,228 million as of September 30, 2023, reflecting an increase of 20%.
| Period | Current Assets (in millions) | Current Liabilities (in millions) | Working Capital (in millions) |
|---|---|---|---|
| September 30, 2024 | $6,598 | $2,723 | $3,875 |
| September 30, 2023 | $6,327 | $3,099 | $3,228 |
Cash Flow Statements Overview
For the three months ended September 30, 2024, the cash flow from operating activities was $375 million, compared to $416 million for the same period in 2023. The decline is attributed to a net change in working capital of $(263 million) in 2024 versus $(218 million) in 2023.
In terms of investing activities, cash used was $(263 million) in 2024, down from $(313 million) in 2023. Financing activities showed a net cash outflow of $(12 million) in 2024, compared to $(53 million) in 2023.
| Cash Flow Activities | Q3 2024 (in millions) | Q3 2023 (in millions) |
|---|---|---|
| Operating Activities | $375 | $416 |
| Investing Activities | $(263) | $(313) |
| Financing Activities | $(12) | $(53) |
Potential Liquidity Concerns or Strengths
Despite a slight decline in cash provided by operating activities, the overall liquidity position remains strong with significant cash reserves amounting to $2,286 million at the end of Q3 2024, up from $1,880 million in Q3 2023. The company also holds marketable securities of $1,187 million, further enhancing its liquidity readiness.
The financial health is demonstrated by the ability to cover current liabilities comfortably, with current assets exceeding current liabilities by a substantial margin. Future liquidity concerns may arise from ongoing capital expenditures, which totaled $(162 million) in Q3 2024, but the cash flow from operations is expected to remain robust.
| Liquidity Metrics | Value (in millions) |
|---|---|
| Cash and Cash Equivalents | $2,286 |
| Marketable Securities | $1,187 |
| Total Current Assets | $6,598 |
| Total Current Liabilities | $2,723 |
| Working Capital | $3,875 |
Is GLOBALFOUNDRIES Inc. (GFS) Overvalued or Undervalued?
Valuation Analysis
Price-to-Earnings (P/E) Ratio
The current P/E ratio stands at 22.5, reflecting a valuation that is moderately high compared to industry averages.
Price-to-Book (P/B) Ratio
The P/B ratio is currently 4.7, indicating that the stock is trading at a significant premium over its book value.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is 14.3, suggesting that investors are willing to pay a premium for the company's earnings before interest, taxes, depreciation, and amortization.
Stock Price Trends
Over the past 12 months, the stock price has experienced fluctuations, starting at approximately $50 and reaching a high of $70 before settling around $62 as of the latest close.
Dividend Yield and Payout Ratios
Currently, the company does not pay a dividend, resulting in a dividend yield of 0%.
Analyst Consensus
The consensus among analysts is a Hold rating, with a target price range from $60 to $75 per share.
| Metric | Value |
|---|---|
| P/E Ratio | 22.5 |
| P/B Ratio | 4.7 |
| EV/EBITDA Ratio | 14.3 |
| Current Stock Price | $62 |
| 52-Week Low | $50 |
| 52-Week High | $70 |
| Dividend Yield | 0% |
| Analyst Consensus | Hold |
| Analyst Target Price Range | $60 - $75 |
Key Risks Facing GLOBALFOUNDRIES Inc. (GFS)
Key Risks Facing GlobalFoundries Inc.
GlobalFoundries Inc. is exposed to several internal and external risks that could impact its financial health and operational performance. Understanding these risks is crucial for investors looking to gauge the company's stability and future growth potential.
Industry Competition
The semiconductor industry is characterized by intense competition. GlobalFoundries faces competition from established players such as TSMC, Intel, and Samsung, which can affect market share and pricing strategies. In Q3 2024, GlobalFoundries reported a net revenue of $1.739 billion, down from $1.852 billion in Q3 2023, indicating pressure in maintaining revenue streams amid competitive pricing and innovation efforts .
Regulatory Changes
Changes in trade policies, particularly regarding exports to China, pose significant risks. The ongoing geopolitical tensions can lead to restrictions that affect supply chains and operational capabilities. Such regulatory changes could impact the company's ability to deliver products efficiently, potentially leading to increased costs or delays in production.
Market Conditions
Global economic conditions, including inflation and interest rates, can significantly influence demand for semiconductor products. As of September 30, 2024, the cash and cash equivalents stood at $2.286 billion, reflecting a cautious financial posture amid uncertain market conditions .
Operational Risks
Operational risks include potential disruptions in manufacturing processes, supply chain issues, or technological failures. In Q3 2024, the operating profit was reported at $185 million, a decrease from $261 million in the same quarter of the previous year, highlighting the operational challenges faced by the company.
Financial Risks
Financial risks are associated with the company's capital structure and cash flow management. In Q3 2024, GlobalFoundries reported net income of $178 million, down from $249 million year-over-year. This decline raises concerns about profitability and the ability to manage operational costs effectively.
Strategic Risks
Strategic risks involve the potential failure to execute business strategies or adapt to market changes. The company's expansion plans, particularly under the U.S. CHIPS and Science Act, may be jeopardized if expected government funding is delayed or not received. For example, in Q3 2024, the Non-IFRS adjusted free cash flow was reported at $779 million, which could be impacted if strategic initiatives do not materialize as planned.
Mitigation Strategies
To address these risks, GlobalFoundries has implemented various mitigation strategies. The company actively engages with stakeholders to navigate regulatory environments and is investing in technology to enhance operational efficiency. Moreover, the focus on diversification of supply chains aims to reduce dependency on specific regions, thereby mitigating geopolitical risks.
| Risk Factor | Description | Impact on Financials |
|---|---|---|
| Industry Competition | Intense competition from major semiconductor manufacturers | Revenue decline from $1.852 billion to $1.739 billion |
| Regulatory Changes | Potential trade restrictions affecting supply chains | Increased costs and production delays |
| Market Conditions | Economic conditions affecting demand for products | Cash and cash equivalents of $2.286 billion as of Sept 2024 |
| Operational Risks | Disruptions in manufacturing processes | Operating profit decreased from $261 million to $185 million |
| Financial Risks | Challenges in capital structure and cash flow | Net income fell from $249 million to $178 million |
| Strategic Risks | Failure to execute business strategies and adapt | Non-IFRS adjusted free cash flow of $779 million |
Future Growth Prospects for GLOBALFOUNDRIES Inc. (GFS)
Future Growth Prospects for GlobalFoundries Inc.
Product Innovations: The company has been actively enhancing its technology capabilities, particularly in advanced semiconductor processes. In Q3 2024, the company reported net revenue of $1.739 billion, with a gross margin of 23.8% and a Non-IFRS gross margin of 24.7% . This indicates strong operational efficiency and effective cost management in product development.
Market Expansions: GlobalFoundries has entered into a strategic technology development and licensing agreement with Finwave Semiconductor, focusing on GaN technology, which is expected to enhance its offerings in power-efficient solutions. This collaboration aims to optimize and scale GaN-on-Si technology to volume production at the company's 200mm fab in Burlington, Vermont .
- Collaborations: The company has partnered with NXP Semiconductors to leverage its 22FDX® process technology platform, targeting automotive, IoT, and smart mobile devices .
- Technology Summit: Over 1,000 customers and partners attended the annual Technology Summit, emphasizing the company's focus on innovation and customer engagement .
Future Revenue Growth Projections and Earnings Estimates
The company is projecting its fourth quarter 2024 net revenue to be between $1.800 billion and $1.850 billion . The earnings estimates reflect a diluted EPS of $0.29 to $0.43 . For the full year, it is anticipated that the company will achieve approximately a threefold increase in Non-IFRS adjusted free cash flow by the end of 2024, expected to be around $779 million .
| Quarter | Net Revenue ($ billions) | Gross Margin (%) | Non-IFRS Adjusted Free Cash Flow ($ millions) | Diluted EPS |
|---|---|---|---|---|
| Q3 2024 | 1.739 | 23.8 | 779 | 0.32 |
| Q4 2024 (Projected) | 1.800 - 1.850 | Mid-point 24.3 | N/A | 0.29 - 0.43 |
Strategic Initiatives or Partnerships
GlobalFoundries is focused on expanding its manufacturing capabilities and partnerships. The collaboration with NXP Semiconductors is a significant initiative aimed at optimizing performance across various applications . Additionally, the company is set to benefit from the U.S. CHIPS and Science Act funding, which is expected to enhance its capital expenditures and R&D efforts.
Competitive Advantages for Growth
The company has established a robust manufacturing footprint across the U.S., Europe, and Asia, which provides a competitive edge in supply chain management and customer service. As of September 30, 2024, GlobalFoundries reported cash, cash equivalents, and marketable securities totaling $4.3 billion, enabling it to invest in growth initiatives .
Moreover, the company’s strategic focus on advanced technologies, such as its 22FDX® process technology, positions it well in high-growth markets like automotive and IoT . The company is also experiencing strong demand in its wafer shipments, with 549 thousand 300mm equivalent wafers shipped in Q3 2024, reflecting a 6% increase from the previous quarter .
| Financial Metrics | Q3 2024 | Q2 2024 | Q3 2023 |
|---|---|---|---|
| Net Revenue ($ billion) | 1.739 | 1.632 | 1.852 |
| Gross Profit ($ million) | 414 | 395 | 529 |
| Operating Profit ($ million) | 185 | 155 | 261 |
| Net Income ($ million) | 178 | 155 | 249 |
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Updated on 16 Nov 2024
Resources:
- GLOBALFOUNDRIES Inc. (GFS) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of GLOBALFOUNDRIES Inc. (GFS)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View GLOBALFOUNDRIES Inc. (GFS)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.