GFS (GFS.US) third quarter performance exceeds expectations, with increased demand for automotive and communication chips driving up gross profit margins.

Although the demand for traditional processors is not balanced, GFS's performance in the third quarter exceeded Wall Street's expectations. The financial report shows that the company's revenue in the third quarter reached $1.69 billion, a decrease of 2.9% year-on-year, exceeding expectations by $10 million; non-GAAP earnings per share were $0.41, exceeding expectations by $0.03. After the performance was announced, the stock rose in pre-market trading, up 7.76% to $37.51 as of the time of writing. GFS CEO Tim Breen said, "The company's performance in the third quarter was strong, with revenue, gross margin, operating profit margin, and earnings per share all at the high end of the expected range. For the fourth consecutive quarter, we achieved strong year-on-year growth in the automotive and communication infrastructure as well as data center end markets. As we continue to optimize our product portfolio and enhance business profitability, both gross margin increase quarter-on-quarter and year-on-year. In addition, we have seen strong customer growth momentum in key growth applications such as silicon photonics and FDX platforms, which is encouraging." The adjusted gross margin climbed to 26%, thanks to the company's increased focus on profitability and smarter product mix. Strong orders from automotive manufacturers and telecommunications infrastructure companies have driven growth, indicating that the company's strategic initiatives in high-growth chip areas are paying off. At quarter-end, cash, cash equivalents, and marketable securities were $4.2 billion. Looking ahead to the fourth quarter, GFS expects revenue to be $1.8 billion, with a fluctuation of $25 million; adjusted earnings per share are expected to be $0.47, with a fluctuation of $0.05; gross margin is expected to be 28.5%, with a fluctuation of 100 basis points. Analysts had previously projected revenue of $1.79 billion and adjusted earnings per share of $0.47.