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The US chip maker outperformed its earnings projections but fell short on its guidance for Q2.

GlobalFoundries (GF) stock prices dropped more than 9% this week. This is despite the company having posted better-than-expected first-quarter earnings, according to a report in SiliconANGLE.

The reason the company’s shares fell, according to the report, was that its guidance on performance for the second quarter fell short of expectations.

GlobalFoundries operates four chip plants that produce processors for multiple industries. GF has in the past been most heavily active in producing RF front-end chips for the mobile industry. These ICs receive the radio signals from cell towers and process them into digital form for processing by the phone.

Unexpected growth in the auto sector

The first quarter of this year saw some positive changes in the GF order base, however. According to SiliconANGLE, the company’s sales to the mobile sector declined, while its business in the auto sector more than doubled. GF sales to the auto industry surged from only 4% of its total output to 10%.

As a result, the auto unit generated an unexpected $180 million (€164 million) in revenue during the first three months of 2023, helping GF to beat its earnings projections for the quarter.

The jump in revenue was no doubt welcomed by GF management, who had been issuing layoff warnings as recently as November.

Good news and bad news

The good news: GlobalFoundries’ adjusted net income reached $290 million (€265 million) in the first quarter. That amounts to adjusted earnings of 52 cents per share, which was more than the 50 cents per share projected by the Zacks consensus estimate.

The bad news: GF’s second-quarter guidance 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. Taken at the midpoint, this means the chip maker’s revenue range fell short of the Refinitiv consensus estimate.

That shortfall in its Q2 projections is what caused GlobalFoundries shares to tumble.