Skip to content
    GFS
    Earnings call· Dec 2024(Q4 FY24)

    GLOBALFOUNDRIES Q4 FY24 earnings call GFS

    Feb 11, 2025 Source

    Executive summary

    GLOBALFOUNDRIES Q4 FY24 — Exceeding FCF Targets and Return to Growth in 2025

    GLOBALFOUNDRIES navigated a challenging 2024, exceeding its adjusted free cash flow target and laying the groundwork for a return to growth in 2025. The company's strategic focus on differentiated, sole-source design wins, particularly in Automotive and emerging AI/data center applications, positions it for disproportionate growth as macroeconomic headwinds moderate. Management anticipates continued sequential revenue growth and significant gross margin expansion throughout 2025, driven by improved utilization and structural cost optimizations.

    Highlights

    5

    • Q4 results exceeded midpoints of guidance for revenue, gross margin, and EPS.

    • Adjusted free cash flow significantly exceeded the $1 billion target for 2024, reaching $1.1 billion, and is expected to grow further in 2025.

    • Achieved record level of design wins across all end markets, with almost 90% secured on a sole-source basis.

    • Automotive revenue grew 15% year-over-year in 2024, reaching a new annual record and exceeding $1 billion, with similar growth expected in 2025.

    • Expects a return to year-over-year revenue growth in Q1 2025 (approx. 2%) and for the full year 2025, with adjusted gross margins targeted at 30% by Q4 2025.

    Concerns

    5

    • Full year 2024 revenue declined 9% year-over-year due to prolonged industry downturn and weak economic conditions, leading to factory utilization in the mid-70s.

    • Q4 Smart Mobile revenue declined approximately 15% sequentially and 4% year-over-year, driven by ASP declines and mix.

    • Full year IoT revenue declined 21% year-over-year due to inventory management across industrial and consumer applications.

    • Full year Communications Infrastructure and Data Center revenue declined 33% year-over-year due to continued platform transitions for compute applications.

    • Incurred a one-time $935 million impairment charge on long-lived assets at Fab 8 in Malta, New York, related to legacy investments.

    Guidance & targets

    17
    CategoryTargetConfidence
    Total GF revenue
    $1.55 billion to $1.6 billion
    high materiality
    High
    Non-wafer revenue as % of total revenue
    approximately 10%
    medium materiality
    High
    Gross profit
    $341 million and $384 million
    high materiality
    High
    Total OpEx (excluding share-based compensation, including AMITC benefit)
    $170 million and $190 million
    medium materiality
    High
    Operating profit
    $151 million and $214 million
    high materiality
    High
    Share-based compensation
    approximately $52 million
    low materiality
    High
    Net interest income and other income
    $0 and $8 million
    low materiality
    High
    Income tax expense
    $16 million and $33 million
    low materiality
    High
    Net income
    $135 million and $189 million
    high materiality
    High
    Earnings per share
    $0.24 and $0.34
    high materiality
    High
    Non-IFRS net CapEx
    approximately $700 million
    high materiality
    High
    Operating expenses (SG&A and R&D)
    roughly in line with 2024
    medium materiality
    High
    Adjusted gross margins
    approximately 30%
    high materiality
    High
    Adjusted free cash flow
    grow above the $1 billion target
    high materiality
    High
    Full year revenue
    return to growth
    high materiality
    High
    Automotive revenue growth
    similar growth rate to 2024
    high materiality
    High
    Communications Infrastructure and Data Center revenue growth
    meaningful revenue growth
    high materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Smart Mobile devices
    Represented approximately 40% of Q4 total revenue. Full year 2024 revenue for smart mobile devices represented approximately 45% of the year's total revenue, increasing 1% year-over-year. Q4 decline principally driven by ASP declines and mix, partially offset by volume growth. Longer term, well positioned to capture opportunities for increased silicon content in handsets, including RF front end, power, display and imaging. Expects modest year-over-year growth in 2025 for premium smart mobile devices.
    		approximately 40%declined roughly 4%declined approximately 15%—
    Home and Industrial IoT
    Represented approximately 19% of Q4 total revenue. Q4 marked the second consecutive quarter of sequential growth. Full year home and industrial IoT revenue represented approximately 19% of the year's total revenue, declining 21% year-over-year. Q4 decline principally driven by lower volumes, partially offset by ASP and mix improvements. Full year decline due to inventory management. Expects customer inventory adjustment to start to stabilize throughout 2025 and return to growth.
    		approximately 19%declined 13%grew approximately 15%—
    Automotive
    Represented approximately 23% of Q4 total revenue. Full year Automotive revenue represented approximately 18% of the year's total revenue, up from just 2% in 2020. Full year revenue grew roughly 15% year-over-year and achieved a new record, exceeding the $1 billion milestone in 2023. Q4 growth principally due to higher volumes, ASP and mix dynamics as semiconductor content increases. Expects another year of meaningful revenue growth in 2025.
    		approximately 23%approximately 30%approximately 62%—
    Communications Infrastructure and Data Center
    Represented approximately 9% of Q4 total revenue. Full year 2024 revenue represented approximately 9% of total revenue, declining 33% year-over-year. Q4 growth primarily due to growth in volume and ASP. Full year decline due to continued and expected platform transitions for compute applications. Bottomed at about $0.5 billion of revenue on an annual basis in 2024. Expects meaningful revenue growth in 2025 driven by upside in AI accelerators, optical networking for data centers and satellite communication.
    		approximately 9%18%approximately 28%—

    Operational metrics

    20
    Non-GAAP gross margin
    25.4%
    Q4 FY24

    Gross profit of $464 million.

    Non-GAAP gross margin
    25.3%380 basis point decline from 2023
    FY24

    Gross profit of $1.709 billion.

    Non-GAAP operating margin
    15.6%510 basis points lower than the year ago period
    Q4 FY24

    Operating profit of $285 million.

    Non-GAAP operating margin
    13.6%490 basis points decrease year-over-year
    FY24

    Operating profit of $920 million.

    Cash and investments balance
    $4.2 billionnet of an approximately $350 million term loan maturity payment in Q4
    Q4 FY24

    Combined total of cash, cash equivalents and marketable securities.

    Revolving credit facility
    $1 billion
    Q4 FY24

    Remains undrawn.

    Wafer revenue as % of total revenue
    92%
    Q4 FY24

    Non-wafer revenue accounted for approximately 8% of total revenue.

    300-millimeter equivalent wafers shipped
    595,0008% increase from the prior year period
    Q4 FY24

    Volume metric for wafer shipments.

    300-millimeter equivalent wafers shipped
    2.1 million4% decrease from 2023
    FY24

    Volume metric for wafer shipments.

    ASP per wafer
    decreased approximately 5%year-over-year
    Q4 FY24

    Mainly driven by changes in product mix shipped and reduction in underutilization payments from customers.

    ASP per wafer
    slightly downyear-over-year
    FY24

    Overall trend for the full year.

    R&D expenses
    $110 milliondecreased sequentially
    Q4 FY24

    Part of total operating expenses.

    SG&A expenses
    $69 milliondeclined sequentially
    Q4 FY24

    Part of total operating expenses.

    Total operating expenses
    $179 million
    Q4 FY24

    Includes a $17 million benefit related to the advanced manufacturing investment tax credit for 2024 qualifying expenses.

    Net CapEx
    $625 million
    FY24

    For the full year 2024.

    Term loan A facility prepayment
    $664 million
    Q1 FY25

    Prepaid on outstanding balance, to be reflected in Q1 FY25 financials.

    Depreciation and Amortization reduction
    approximately 15%compared to 2024
    2025

    Expected reduction, with the majority coming from natural runoff of depreciation schedule for Malta, and partly from the Q4 FY24 impairment charge.

    Underutilization benefit
    $80 million
    Q1 FY24

    This benefit was included in Q1 FY24 results and is now less relevant for future periods.

    Inventory benefit
    $200 million
    Q4 FY24

    Experienced in the fourth quarter, which helped the free cash flow result for the year.

    Impairment charge
    $935 million
    Q4 FY24

    One-time charge on long-lived assets relating to legacy investments in Fab 8 in Malta, New York, related to technology diversification strategy.

    Industry KPIs

    6
    MetricValueDetails
    Ai data center revenueMeaningful revenue growth
    Fab capacity utilizationMid-70s%
    Design wins socket pipelineRecord level
    Node platform ramp schedule22FDX platform, 40-nanometer auto-grade offerings, 12-nanometer FinFET, RF SOI, silicon photonic technologies
    Wafer shipments foundry ASP595,000300-millimeter equivalent wafers
    End market segment revenue mixSmart Mobile devices: ~40% (Q4), ~45% (FY24); Home and Industrial IoT: ~19% (Q4), ~19% (FY24); Automotive: ~23% (Q4), ~18% (FY24); Communications Infrastructure and Data Center: ~9% (Q4), ~9% (FY24)%

    Product announcements

    2
    ProductTypeDetails
    22FDX platform for Automotiveupdate
    Next-generation smart card technology (28ESF3 platform)update

    Deals & partnerships

    2
    NXPCollaboration to deliver low-power, high-performance chips using GF's 22FDX platform for automotive applications.

    The 22FDX platform is qualified for automotive grade 1 and 2 applications, ensuring reliability and optimizing energy management to deliver up to 50% higher performance and 70% less power compared to prior planar CMOS technologies.

    IDEMIACollaboration to deliver next-generation smart card technology.multiyear

    The technology offers improved data retention, low read latency, and enhanced power efficiency. It will be 100% manufactured and tested in Europe on GF's 28ESF3 platform, ensuring trusted profits.

    Capital programs

    2
    Fab 8 Malta Technology Diversificationunderway

    Benefit: Diversify existing technology portfolio with 22FDX platform, 40-nanometer auto-grade offerings, complementing 12-nanometer FinFET, RF SOI, and silicon photonic technologies.

    These transfers are part of long-term capacity investments, including partnering closely with governments and securing incentive packages to offer customers differentiated technologies in geographically strategic regions. This is consistent with the technology transfer strategy mentioned earlier by Tom and as discussed on prior earnings calls.

    Advanced Packaging and Photonics Center at Maltaannounced
    Funding: grants from New York State and the U.S. Department of Commerce

    Benefit: Meet growing demand for U.S.-made essential chips used in AI, automotive, aerospace and defense, and communication applications.

    A first-of-a-kind center for advanced packaging and test capabilities to be housed at the Malta facility, supported by government grants.

    Risks & headwinds

    4
    Prolonged industry downturn and weak economic conditions2024

    Full year 2024 revenue down 9% year-over-year; factory utilization levels in the mid-70s.

    Mitigation: Focused on strong execution, multiyear investments in capacity, and quick reaction to market conditions; building foundations for longer-term growth with record design wins.

    Elevated inventory levels at customers2024, stabilizing in 2025

    Smart Mobile devices revenue declined approximately 4% YoY in Q4; Home and Industrial IoT revenue declined 21% YoY in FY24.

    Mitigation: Customers cautiously managed down inventory levels in 2024; expectations for consumer end demand and unit shipments to show modest growth in 2025; IoT inventory adjustments expected to stabilize throughout 2025.

    Platform transitions for compute applications2023 and 2024 (largely concluded)

    Communications Infrastructure and Data Center revenue declined 33% year-over-year in 2024.

    Mitigation: Accumulated design wins are expected to deliver revenue in new areas like optical transceivers, satellite communication, and AI inference, driving meaningful growth in 2025.

    Legacy investments at Fab 8 MaltaQ4 2024

    One-time $935 million impairment charge on long-lived assets incurred in Q4 2024.

    Mitigation: Diversification of the Malta Fab's technology platform roadmap to align with expected customer demand, positioning the company for long-term sustainable growth and profitability. This also contributes to a 15% reduction in D&A in 2025.

    What to watch in Q1 FY25

    5

    Q1 FY25 Revenue Growth

    Q1 FY25
    CurrentQ4 FY24 revenue declined 1% YoY
    Target~2% YoY growth (7% normalized for LTA revenue)

    Why it matters

    Verifies the company's stated return to year-over-year growth after a challenging 2024, indicating market recovery and GF's outperformance.

    Our guidance for the first quarter of 2025 indicates a modest return to year-over-year revenue growth, and we expect the full year 2025 to mark a return to growth across key revenue and profitability metrics.

    Q&A highlights

    8

    What are the expectations for Q1 by end market, and will automotive strength continue?

    Tom Caulfield confirmed Q1 FY25 revenue growth of ~2% year-over-year (7% normalized for LTA revenue) and expects 2025 to be a growth year. Automotive is expected to grow for the fifth consecutive year, driven by content growth and ramping design wins, even with sluggish auto sales. Comms Infrastructure and Data Center is also expected to see meaningful growth from its 2024 bottom due to satellite communications and Photonics platform strength.

    “if you compare our Q1 revenue year-over-year to other companies in this diversified space, we're showing growth as we said, whether it's roughly 2% or the normalization of 7 where many others, the vast majority were showing decreasing year-over-year mid-single digits.”

    asked by Chris Caso · answered by Thomas Caulfield

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Capacity & Technology Transfers

    GLOBALFOUNDRIES is actively transferring essential chip technologies like 22FDX and 40-nanometer auto-grade offerings into its Fab 8 facility in Malta, New York. This diversification complements existing 12-nanometer FinFET, RF SOI, and silicon photonic technologies, aiming to meet customer demand for differentiated technologies in geographically strategic regions and enhance supply chain resilience. These transfers are part of long-term capacity investments, including securing incentive packages from governments.

    02

    Advanced Packaging and Photonics Center

    The company announced a new, first-of-a-kind center for advanced packaging and test capabilities to be housed at its Malta facility. This initiative is supported by grants from New York State and the U.S. Department of Commerce. The Advanced Packaging and Photonics Center will help meet the growing demand for U.S.-made essential chips used in AI, automotive, aerospace and defense, and communication applications, reinforcing geographic resilience in the supply chain.

    03

    Design Win Momentum

    2024 was a pivotal year for design win momentum, with a record level of wins across all end markets. Almost 90% of these design wins were secured on a sole-source basis, setting the stage for increasing content growth and penetration of essential chip technology. New opportunities support the expansion of critical applications such as autonomous vehicles, satellite communications, optical networking, and power delivery in the data center.

    04

    Free Cash Flow Generation

    The company significantly exceeded its 2024 adjusted free cash flow target, generating $1.1 billion, which was approximately 3x the adjusted free cash flow of 2023. This achievement is attributed to strong execution, multiyear investments in capacity, and quick adaptation to market conditions. Management expects to grow adjusted free cash flow further in 2025, continuing this 'flywheel' of generation while maintaining capacity growth objectives.

    05

    Malta Fab Impairment and Depreciation Impact

    In Q4 2024, GLOBALFOUNDRIES incurred a one-time📎 $935 million impairment charge on long-lived assets related to legacy investments in its Fab 8 facility in Malta, New York. This action was taken to rightsize the carrying value of the assets, aligning with the diversification of the Malta Fab's technology platform roadmap. This impairment, along with the natural runoff of depreciation schedules, is expected to reduce depreciation and amortization in 2025 by approximately 15% compared to 2024, representing about $250 million in improvement.

    06

    Leadership Transition

    Effective April 28, Tom Caulfield will transition from CEO to Executive Chairman of the Board. Tim Breen will assume the role of CEO, and Niels Anderskouv will become President and COO. This leadership change is framed as a new chapter for growth and opportunity, leveraging the team's talent, essential chip technologies, and diverse global manufacturing footprint.

    AI-generated summary of the company’s earnings call. Not investment advice.