Why Global Foundries Stock Jumped Today

Global Foundries (GFS 14.89%) stock surged in Tuesday’s trading. The semiconductor fabrication company’s share price closed out the daily session up 14.9% and had been up as much as 16.8% earlier in the day.

Global Foundries published its third-quarter results before the market opened this morning, posting sales and earnings that beat Wall Street’s expectations. The business recorded adjusted earnings per share of $0.41 on revenue of $1.74 billion, topping the average analyst estimate’s call for adjusted per-share earnings of $0.33 on revenue of $1.72 billion.

Global Foundries’ Q3 results could point to cyclical improvement

Global Foundries’ revenue dipped roughly 5.9% year over year in the third quarter, but the performance still came in ahead of Wall Street’s expectations. While demand for artificial intelligence (AI) chips has been surging, many other parts of the broader semiconductor market are still moving through a cyclical downturn. Along with guidance for sequential sales growth in the current quarter, better-than-expected sales performance in Q3 suggests that the business may be seeing demand for smartphone chips improve.

A stronger smartphone market could power big gains for Global Foundries

For the fourth quarter, Global Foundries is guiding for sales to come in between $1.8 billion and $1.85 billion. If the business were to hit the midpoint of that guidance range, it would mean delivering sequential quarterly sales growth of roughly 6%. Meanwhile, the midpoint of the company’s guidance range suggests just a 1.5% year-over-year decline from the roughly $1.85 billion in sales posted in last year’s fourth quarter.

Global Foundries’ forward guidance suggests that the global smartphone market may be strengthening and paving the way for improved sales and earnings performance. If that winds up being the case, today’s earnings report could wind up being the kick-off point for a more sustained rally for the stock.