Tower Semiconductor Ltd (NASDAQ: TSEM) kicked off the new year with a strong financial performance, exceeding analysts’ expectations for its fiscal third-quarter 2024 earnings. The Israel-based contract chipmaker reported a 3.4% year-on-year revenue growth, reaching $370.51 million, slightly surpassing the consensus estimate of $370.33 million. This positive momentum was further reflected in the company’s adjusted earnings per share (EPS), which came in at $0.57, beating the analyst consensus estimate of $0.53. The stock price responded positively to these results, gaining in value following the announcement.
Tower Semiconductor’s success wasn’t limited to revenue growth. The company also witnessed an improvement in its gross profit, which climbed by 7.1% year-over-year to $93.06 million, resulting in a margin expansion of 86 basis points to 25.1%. However, operating profit experienced a decline of 84.6% year-on-year, reaching $55.76 million, mainly due to the exclusion of a $314 million Intel Corp INTC merger contract termination fee that was included in the previous year’s profit. Despite this, the company demonstrated strong cash flow generation, achieving $125 million in operating cash flow during the quarter and holding $1.21 billion in cash and equivalents as of September end.
Looking ahead, Tower Semiconductor is making significant strategic investments to capitalize on the growing demand for its key technologies. The company has unveiled a $350 million investment plan aimed at boosting its capacity and strengthening its Silicon Photonics (SiPho) and Silicon Germanium (SiGe) capabilities. This expansion will involve ramping up and qualifying for a 200mm capacity at its San Antonio and Migdal Haemek sites, as well as its 300mm facility in Uozu. This move is strategically aligned with the company’s focus on meeting the increasing customer demand in high-growth markets.
Tower Semiconductor CEO, Russell Ellwanger, highlighted the company’s consistent quarter-over-quarter revenue growth, including the positive outlook for the fourth quarter. He attributed this success to strong double-digit year-over-year gains across key technology platforms, such as advanced 300mm RF SOI, 65nm Power BCD, and next-generation Silicon Photonics and Silicon Germanium technologies. Ellwanger also emphasized the rising demand for SiGe and SiPho technologies, leading the company to invest in multiple factories to expand its capacity. This strategic move aims to solidify Tower Semiconductor’s position as a leading provider of essential components for AI-driven data center markets, particularly optical transceivers.
For the upcoming fourth quarter, Tower Semiconductor anticipates revenue to reach $387 million, with a potential range of 5% upward or downward deviation from the consensus estimate of $379.23 million. The company’s positive performance and strategic investments have contributed to a significant surge in its stock price, with TSEM stock experiencing an over 42% year-to-date gain. As of Wednesday’s premarket trading, TSEM stock was up 8.70% at $46.85.
