GFS Set to Report Q2 Results: Can Revenue Growth Lift Earnings?

Factors at Play

During the quarter, GlobalFoundries strengthened its position in AI infrastructure by introducing the SCALE (Silicon Photonics Co-packaged Advanced Light Engine) optical module solution for co-packaged optics. The solution is expected to have boosted the company's silicon photonics portfolio and drive customer engagement in the AI networking domain.

GlobalFoundries also expanded its presence in Physical AI through the completion of the acquisition of Synopsys' Processor IP Solutions business. The buyout is likely to have strengthened prospects across automotive, industrial robotics and edge AI applications.

During the quarter, GlobalFoundries launched Quantum Technology Solutions, a dedicated business focused on manufacturing quantum hardware. The initiative is backed by customer engagements, government support and partnerships with leading quantum computing companies. It is expected to have enhanced the company's exposure to high-performance computing markets.

Innovative product launches and solid demand in AI infrastructure, communications and data center domains are expected to have a positive impact in the second quarter. However, weakness in the smartphone vertical and ongoing macro uncertainty remain concerns. The company faces competition from other major players in the industry such as TSMC, Tower Semiconductor and others.

Overall Expectations

For the June quarter, the Zacks Consensus Estimate for total revenues is pegged at $1.76 billion, indicating an improvement from the year-ago quarter’s reported figure of $1.69 billion. The consensus estimate for adjusted earnings per share is pegged at 44 cents, indicating growth from 42 cents reported a year ago.

Earnings Whispers

Our proven model does conclusively predict a likely earnings beat for GFS for the second quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is exactly the case here.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +0.33%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: GFS carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks to Consider

Here are some other stocks you may want to consider, as our model shows that these, too, have the right combination of elements to post an earnings beat this season:

Sandisk Corporation SNDK is set to release quarterly numbers on Aug. 5. It has an Earnings ESP of +4.13% and sports a Zacks Rank #1. 

The Earnings ESP for Arista Networks, Inc. ANET is +3.08%, and it carries a Zacks Rank of 2. The company is scheduled to report quarterly numbers on Aug. 4.

The Earnings ESP for Advanced Micro Devices, Inc. AMD is +1.56%, and it carries a Zacks Rank of 2. The company is scheduled to report quarterly numbers on Aug. 4.

Beyond Nvidia: AI's Second Wave Is Here

The AI revolution has already minted millionaires. But the stocks everyone knows about aren't likely to keep delivering the biggest profits. AI’s second wave is moving from infrastructure to implementation and these companies are at the forefront of this transition, positioned to become what Amazon and Google were to the internet era.

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This article originally published on Zacks Investment Research (zacks.com).

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