GlobalFoundries reported fourth-quarter and full-year 2023 results, citing important infrastructure changes in demand that contributed to the decline in revenue. In the server and mobile segments, customers are migrating to more advanced technological processes that the company cannot offer, so the revenues of this chip manufacturer are falling.
Image Source: GlobalFoundries
In particular, in the fourth quarter, the company’s revenue decreased by 12% to $1.85 billion, and for the entire last year it decreased by 9% to $7.4 billion. The company’s operating profit increased by 5% to $303 million in the fourth quarter, and net profit decreased by 58% to $278 million. At the end of the year, operating profit dropped by only 3% to $1.1 billion, and net profit decreased by 30% to $1.1 billion. At the same time, the company managed to increase its profit margin from 27 .6 to 28.4%.
Negative impact on revenue last year, as explained by Reuters, the continued overstocking of warehouses after the pandemic also had an impact. In the segment of telecommunications and server components, demand has begun to shift to more modern technological processes, which GlobalFoundries does not have, so new orders from some clients simply go to the company’s competitors. Let us recall that at one time it refused to develop the 7-nm process technology, citing the high capital costs required for this, preferring to focus on improving technological standards up to 12 nm inclusive. According to analysts, large clients such as AMD and Qualcomm are showing more interest in modern lithography, and this has begun to harm GlobalFoundries’ business.
While some chip manufacturers for the automotive sector have begun to complain about signs of market saturation, GlobalFoundries is pinning its hopes on this line of business for a return to positive revenue dynamics. At least this year, the automotive sector should increase the company’s core revenue, according to management. Moreover, last year this market segment brought the chip manufacturer more than $1 billion in revenue.
For the current quarter, GlobalFoundries expects revenue to range from $1.5 billion to $1.54 billion, which is lower than analysts’ expectations of $1.76 billion. For the full year 2024, the company’s management adheres to a cautious forecast, since the macroeconomic situation, combined with the continued overstocking of warehouses, does not allow radiate excessive optimism. GlobalFoundries’ revenue last quarter was in line with analysts’ expectations, but modest guidance for the current period caused the company’s stock price to decline 4% after the report.