Shares of GlobalFoundries Inc. dropped more than 9% today after it posted better-than-expected first-quarter earnings but missed projections with its guidance.

The chipmaker also announced a leadership team reshuffle. GlobalFoundries has appointed former Amazon Web Services Inc. executive Tim Stone as chief financial officer and Niels Anderskouv as chief business officer. Anderskouv was earlier a senior vice president at chipmaker Texas Instruments Inc. 

GlobalFoundries operates four chip plants, or fabs, that produce a variety of processors for customers. The company has a particularly significant presence in the mobile industry. It’s one of the top suppliers of RF front-end chips, which help handsets turn radio signals from cell towers into electricity to facilitate processing. 

GlobalFoundries’ revenue declined 5% year-over-year, to $1.84 billion, during the first quarter ended March 31. Nevertheless, it managed to top the Refinitiv consensus estimate by more than $10 million. GlobalFoundries’ top line was impacted by a slowdown in chip demand that has also weighed on the earnings of Intel Corp. and other market players.

Each silicon wafer that GlobalFoundries processes at its fabs is turned into dozens or hundreds of chips. According to the company, the number of 300-millimeter wafers it shipped during the first quarter declined 18% year-over-year, to 511,000. Its key smartphone chip business, in turn, experienced a double-digit revenue drop. 

The company makes chips for not only handsets but also data center equipment and carrier networks. Additionally, it’s a major silicon supplier to the auto sector. Its fabs produce chips that power advanced driver-assistance systems and other vehicle components.

In the first quarter of 2022, auto products accounted for 4% of the company’s revenue. That number more than doubled to 10% in the first three months of 2023 even as the company’s smartphone business experienced headwinds. As a result, the auto unit generated $180 million in revenue during the quarter. 

“In the first quarter, amidst a continued uncertain macroeconomic and cyclical backdrop, GF delivered solid results,” said Chief Executive Officer Thomas Caulfield. “Despite a challenging business environment, GF’s gross margins for the quarter have increased year-over-year due to our continued disciplined focus on profitability by our global team who effectively manage costs, while driving a richer mix of business to our customers.”

GlobalFoundries’ adjusted net income reached $290 million in the first quarter. That amounts to adjusted earnings of 52 cents per share, more than the 50 cents per share projected by the Zacks consensus estimate.

The second-quarter guidance, in contrast, fell short of expectations. The company is forecasting net income of $206 million to $259 million on between $1.81 billion and $1.85 billion in revenue. At the midpoint, GlobalFoundries’ revenue range fell short of the Refinitiv consensus estimate.

Intel, Samsung Electronics Co. Ltd. and other semiconductor makers expect that chip demand will start to rebound in the second half of the year. If the sales increase materializes, it could benefit GlobalFoundries’ third-quarter and full-year results.

In the longer term, GlobalFoundries’ revenue growth is also likely to benefit from its ongoing efforts to add more chip production capacity. Last year, the company teamed up with STMicroelectronics NV to build a new $5.7 billion fab in France. The fab is set to come online in 2026 and will have a production capacity of 620,000 wafers per year once it becomes fully operational.

Image: GlobalFoundries