GlobalFoundries predicts second-quarter revenue and profit above estimates due to chip market recovery

(Reuters) – GlobalFoundries expects second-quarter sales above Wall Street estimates on Tuesday, betting on an improvement in semiconductor demand after a years-long slump caused by excess inventories among its customers.

Shares of the contract chipmaker rose 4.2% before the bell.

The upbeat forecast is the latest positive sign for the sector after earnings from chip companies including NXP Semiconductors and Texas Instruments showed demand picking up, helped by orders from the industrial sector.

“Semiconductor industry pockets” have begun to emerge from inventory corrections, GlobalFoundries CEO Thomas Caulfield said in a statement.

The company expects current quarter revenue to be between $1.59 billion and $1.64 billion, with the midpoint higher than LSEG estimates of $1.59 billion.

Adjusted earnings per share forecast for the second quarter between 24 cents and 34 cents also exceeded analyst expectations of 27 cents.

GlobalFoundries – the world’s third-largest chipmaker – won $1.5 billion in US government grants earlier this year, which it plans to use to build a new semiconductor manufacturing facility in Malta, New York and expanding existing operations there and in Burlington, Vermont.

For the first quarter, the company reported revenue of $1.55 billion, which exceeded expectations of $1.52 billion. Adjusted earnings per share of 31 cents also exceeded expectations.

(Reporting by Aditya Soni in Bengaluru; Editing by Shilpi Majumdar)