What factors contributed to TSEM's earnings surprises in 2024?

Tower Semiconductor (TSEM) experienced an EPS surprise of $0.04 and a revenue surprise of $9.59 million in 2024, surpassing analysts' expectations. Several key factors contributed to these positive surprises: 1. **Strong Revenue Growth in Key Segments**: TSEM's revenue growth was driven by significant increases in the RF Infrastructure and Silicon Photonics segments. The RF Infrastructure revenue nearly doubled year-over-year, reaching approximately 18% of corporate revenues in Q3 2024. Silicon Photonics revenue was expected to reach about $100 million for the year, with an annualized Q4 2024 run rate of over $150 million. This growth was fueled by strong demand in AI and data center applications, where TSEM holds a leadership position in silicon photonics and RF-SOI technologies. 2. **Strategic Investments and Capacity Expansion**: TSEM made substantial capital investments to expand capacity and enhance production capabilities. These investments included $500 million for the Agrate fab in Italy, $300 million for Intel's New Mexico fab, and $350 million for SiPho and SiGe capacity expansion. These strategic moves allowed TSEM to meet the growing demand from customers and capitalize on the favorable market conditions in high-growth technology segments. 3. **Efficient Operations and Margin Management**: Despite facing challenges in capacity and market transitions, TSEM maintained efficient operations and managed margins effectively. The company reported a net profit of approximately $55 million, representing a net margin of about 15% for Q3 2024. This profitability was supported by gross profit of $93 million and operating profit of $56 million. 4. **Market Leadership and Technological Advancements**: TSEM's leadership in silicon photonics and RF-SOI technologies, particularly in AI and data center applications, positioned the company well to benefit from the increasing demand for these technologies. The company's continuous innovation and investment in new capacity and technology ensured it remained well-equipped to capitalize on emerging market opportunities. In summary, TSEM's earnings surprises in 2024 were primarily driven by strong revenue growth in key segments, strategic investments, efficient operations, and market leadership in high-growth technology areas. These factors combined to enable the company to exceed analysts' expectations and deliver robust financial performance.