What happened

Shares of Tower Semiconductor (NASDAQ:TSEM), a subsidiary of Israeli company TowerJazz, fell 21.2% today after the specialty foundry leader announced disappointing third-quarter 2018 results.

More specifically, the parent company saw revenue decline 9% year over year to $323 million, which translates to a net profit of $34 million, or $0.33 per diluted share, down from $0.54 per share in the same year-ago period. Analysts, on average, were anticipating earnings of $0.40 per share on revenue of $335 million.

Stock-market data with a red arrow line indicating losses

IMAGE SOURCE: GETTY IMAGES.

So what

TowerJazz CEO Russell Ellwanger noted the company has opted to focus on profitability by not using its capacity of lower-margin opportunities.

"This has had a greater than expected revenue impact in 2018 while building the higher value mix with some high-end replacements not having met customer forecasts," Ellwanger added. "The present overall market softness has had a recent notable impact across our business units, with a fourth quarter revenue roll-up lower than previous expectations."

Now what

Looking to the fourth quarter, TowerJazz expects revenue arriving at roughly $340 million, plus or minus 5% -- well below the $364 million most investors were modeling. To be fair, the company also anticipates margins will increase to end the year. But given its top-line shortfall in the meantime and broader industry weakness, it's no surprise to see the stock falling hard today.

Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.