Shares of the contract chip manufacturer GlobalFoundries Inc. edged higher in the after-hours trading session today following a strong earnings and revenue beat.

The stock ticked upward, even though investors were likely to have been disappointed by the company’s mixed outlook. The company reported second-quarter earnings before certain costs such as stock compensation of 38 cents per share, easily beating Wall Street’s consensus estimates of 29 cents per share. As for revenue, it declined 12% from a year earlier, to $1.63 billion, but came in ahead of the analysts’ target of $1.61 billion.

All told, GlobalFoundries delivered net income of $155 million in the quarter, down from $237 million a year earlier. However, the total was up sequentially, with the chipmaker reporting a profit of just $134 million three months earlier.

GlobalFoundries is believed to be the third-biggest contract chip fabrication plant operator in the world, after Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co. Ltd. The company doesn’t make its own, branded chips, but instead manufactures them under contract for well-known chipmakers such as Advanced Micro Devices Inc. and Qualcomm Inc. It operates five chip fabs globally, and counts more than 15,000 employees at those sites.

Although its customers are mostly well-known, GlobalFoundries’ fabs are not equipped to make the most advanced, cutting-edge chips on the market. Instead, its operations are focused on lower-end commodity chips for industries such as the automotive, industrial and personal computer markets. In those areas, it’s having to deal with a cyclical downturn in business.

GlobalFoundries Chief Executive Thomas Caulfield (pictured) hailed the company’s performance in the most recent quarter, saying it exceeded the midpoint of its own guidance range on both earnings and revenue. “We remain focused on a disciplined capex strategy and strong cash flow,” he said.

Unfortunately for forward-looking investors, GlobalFoundries didn’t offer them much to get them excited about. The company said it’s looking at third-quarter earnings of between 28 and 38 cents, with the midpoint of that range coming in below the Street’s target of 35 cents. It’s eyeing sales of between $1.7 billion and $1.75 billion, with the midpoint coming in just ahead of the Street’s consensus of $1.72 billion.

Holger Mueller of Constellation Research Inc. said some may question why GlobalFoundries is seeing its revenue decline amid an artificial intelligence boom that has pushed other chipmaker’s stocks into orbit.

“The answer is that GlobalFoundries doesn’t really participate in the AI boom due to its focus on older commodity chips,” the analyst said. “However, it delivered a solid quarter given the overall trends in the markets in which it operates, doing well to maintain profitability thanks to better cost management. Profits fell by $87 million, but that’s not bad considering its revenue declined by $213 million. For investors, the question is when can Thomas Caulfield and team get those revenues back up again? The future will tell.”

GlobalFoundries’ bottom line may explain why investors appeared to be in a forgiving mood, as its stock gained more than 2% in extended trading.

Photo: GlobalFoundries