GlobalFoundries Q1 Earnings Call Highlights

Key Points

• GlobalFoundries reported Q1 revenue of $1.634 billion and a first-quarter record 29% gross margin (up 510 bps YoY), with operating margin 16.6%, net income ~ $227M (EPS $0.40), $542M cash from operations, $400M of share repurchases, and Q2 guidance of roughly $1.76B revenue (±$20M) and ~28.5% gross margin.
• Management emphasized silicon photonics and SiGe as strategic growth engines — with SiGe capacity at the Vermont fab said to be oversubscribed through well into 2027 — and noted the SCALE optical platform is OCI MSA-capable while Q1 design wins rose 50% YoY, including a multi‑billion dollar partnership with Renesas plus automotive MRAM and Micro‑LED wins.
• Reporting updates show ~87% of Q1 revenue from "manufacturing services" and ~13% from "technology services," which management expects to grow toward the high end of a 10–12% range in 2026; they raised communications/data‑center growth targets to the high‑30s% for 2026 but warned of planned price adjustments in late‑2026/2027 and an incremental ~0.5 percentage‑point quarterly margin impact from supply-cost actions tied to Middle East risks.

GlobalFoundries NASDAQ: GFS reported first-quarter 2026 results that Chief Executive Officer Tim Breen said marked “a strong first quarter,” with all non-IFRS profitability metrics “at or above the high end of their respective guidance ranges.” Breen attributed the performance to execution and to progress in what he described as a multi-year effort to improve revenue quality, lower structural costs, and scale production across the company’s fabs.

Chief Financial Officer Sam Franklin said revenue landed at the high end of guidance, while gross and operating margins came in “well above the high end” of the company’s ranges. He also said the quarter produced a first-quarter record gross margin and more than 500 basis points of year-over-year improvement, which he called the largest expansion in three years.

Technology roadmap focus: silicon photonics and SiGe for optical networking

Breen highlighted optical networking as a key proof point for GlobalFoundries’ technology strategy, pointing to silicon photonics and silicon germanium (SiGe) capabilities as the market adopts optical solutions for scale-out and scale-up networks. He said the company’s SiGe technology is a critical enabler in data center networks, used in transimpedance amplifiers and drivers that convert high-speed electrical and optical signals.

According to Breen, demand for SiGe has been strong, with capacity at the company’s Vermont fab “oversubscribed through well into 2027.” He added that the company is expanding SiGe capacity and described the offerings as “meaningfully margin accretive.”

Breen also discussed recent optical networking developments tied to an industry standard for co-packaged optics (CPO). He said founding members of the Optical Compute Interconnect Multi-Source Agreement (OCI MSA) include AMD, Broadcom, Nvidia, Meta, Microsoft, and OpenAI, and that the standard aligns with capabilities the company has developed over several years. He noted GlobalFoundries announced a complete optical module solution for near- and co-packaged optics called SCALE (Silicon Photonics Co-packaged Advanced Light Engine), and said the platform is OCI MSA-capable and exceeds the MSA requirements.

During the quarter, Breen said GlobalFoundries saw “new tape-outs in Malta, New York, for a pair of CPO design wins” that support the OCI standard. He also cited partner-related announcements at the Optical Fiber Communications Conference in March, including demonstrations and ecosystem showcases with SENKO, Corning, and EXFO, and a strategic partnership with Silic Tech to mass-produce 200G-per-lane receiver photonic ICs for pluggable optical transceivers.

Design win momentum and customer partnerships

Breen said first-quarter design wins increased 50% compared with the prior-year period, spanning all four major end markets. He highlighted a multi-billion dollar strategic partnership with Renesas, which he said expands Renesas’ access to GlobalFoundries technologies including FDX, BCD, and feature-rich CMOS with integrated non-volatile memory, targeting applications such as data center power and automotive systems.

In automotive, Breen said the company is seeing strong momentum for an auto-grade embedded MRAM capability on FDX, describing “industry-leading 100 MHz class access times” and endurance and reliability “up to 150 degrees C.” He said lead customers have taped out with the feature and cited growing engagement with tier-one suppliers including Bosch as it moves toward production.

In smart mobile devices, Breen said the company secured two new design wins on its FDX platform for Micro-LED backplanes used in smart glasses. He also pointed to a partnership with Inova Semiconductors to deliver a robotics control reference platform combining MIPS open RISC-V compute and mixed-signal technologies with Inova’s communication links.

Manufacturing footprint and onshoring activity

Breen emphasized the company’s “three continent manufacturing footprint across the U.S., Germany and Singapore,” and said GlobalFoundries has invested in cross-qualifying fungible capacity across its fab network so customers can design once and manufacture across regions. He said the company is seeing increased customer engagements tied to onshoring and cited Apple’s announcement of a collaboration with Cirrus Logic and GlobalFoundries to bring new process technologies to the Malta, New York fab for components used in Face ID systems.

He also referenced support frameworks such as CHIPS grants and investment tax credits in the U.S. as important to the company’s long-term roadmap.

Q1 financial results, mix shift, and revised revenue terminology

Franklin reported first-quarter revenue of $1.634 billion, down 11% sequentially and up 3.1% year-over-year, with shipments of approximately 579,300 300mm-equivalent wafers, down 6% sequentially and up 7% year-over-year.

He said the company has updated how it categorizes revenue:

• “Wafer revenue” is now reported as revenue from manufacturing services.
• “Non-wafer revenue” is now reported as revenue from technology services.

Franklin said manufacturing services represented about 87% of first-quarter revenue, while technology services represented about 13% and included IP, licensing, software, reticles, non-recurring engineering, and other items. He said technology services upside was driven by higher mask and reticle activity as tape-outs ramped, alongside momentum from IP licensing and software as the company integrates MIPS. Franklin said the company now expects technology services to comprise a greater portion of 2026 revenue “closer to the high end” of its original 10% to 12% range.

On profitability, Franklin said the company delivered $474 million of gross profit for about 29% gross margin, up 510 basis points year-over-year. Operating profit was $271 million for an operating margin of 16.6%. Net income was approximately $227 million, with diluted earnings per share of $0.40 based on about 561 million shares.

Cash flow from operations was $542 million, net CapEx (after grant proceeds) was $309 million, and adjusted free cash flow was $233 million. Franklin said the free cash flow result was driven by favorable working capital movements expected to reverse in the second quarter. The company ended the quarter with about $3.8 billion in cash, equivalents, and marketable securities, $1.1 billion of debt, and a $1 billion undrawn revolver. Franklin said the company repurchased $400 million of shares in the quarter, with $100 million remaining on the current authorization.

End-market performance and Q2 outlook

Franklin provided end-market detail for the first quarter and 2026 expectations. Communications infrastructure and data center represented about 14% of revenue and rose 32% year-over-year, marking the “6th consecutive quarter of double-digit” year-over-year growth, he said. Franklin noted silicon photonics drove growth and remains on track to roughly double in 2026 versus 2025. He also pointed to a “healthy revenue contribution” from Advanced Micro Foundry, acquired in November, and said the acquisition is “already gross margin accretive.” Franklin raised the company’s 2026 outlook for communications infrastructure and data center to “high 30s%” year-over-year growth from roughly 30% previously.

Automotive was about 23% of revenue, up 24% year-over-year, and Franklin said the company expects automotive revenue to deliver “low double-digit” growth in 2026. Smart mobile devices accounted for about 34% of revenue, down 5% year-over-year, and Franklin cited industry forecasts calling for a low double-digit decline in overall smartphone units in 2026; he said GlobalFoundries expects a high single-digit revenue decline in this end market. Home and industrial IoT was about 16% of revenue, down 22% year-over-year, with the decline driven by shipment timing that the company expects to reverse in the second quarter; Franklin said the company still expects 2026 to be a growth year for IoT at a mid-single-digit rate.

For the second quarter, Franklin guided to revenue of $1.76 billion plus or minus $20 million, gross margin of about 28.5% plus or minus 100 basis points, and operating margin of 15.7% plus or minus 180 basis points. He said operating expenses excluding share-based compensation are expected to be $225 million plus or minus $10 million as the company ramps R&D in the second half of 2026 to strengthen differentiation in areas including custom silicon photonics and advanced packaging.

In Q&A, Breen said GlobalFoundries plans price adjustments for a smaller, more dynamically priced portion of its portfolio, with changes expected “towards the back end of 2026” and into 2027. Franklin also said the company has taken steps to shore up supplies of certain gases and chemicals due to the conflict in the Middle East, noting incremental costs expected to have “about a half point of margin impact for each quarter” through the rest of 2026.

The company also reiterated expectations for adjusted free cash flow margin of about 10% for full-year 2026, “with a skew towards the second half,” and said it expects net CapEx to rise in the second quarter due to tool deliveries and grant timing while maintaining a full-year CapEx range of 15% to 20% of revenue.

About GlobalFoundries NASDAQ: GFS

GlobalFoundries, Inc NASDAQ: GFS is a leading contract semiconductor manufacturer that provides wafer fabrication and related services to semiconductor companies and systems manufacturers. The company operates as a pure-play foundry, producing integrated circuits across a range of process technologies for customers in markets such as automotive, communications, consumer electronics, industrial, and aerospace. Its service offering spans process development, manufacturing, test and packaging support, and design enablement including process design kits (PDKs) and intellectual property (IP) libraries to help customers bring designs to production.

GlobalFoundries focuses on a portfolio of differentiated and specialty process nodes, offering technologies for radio-frequency (RF) and wireless, analog and mixed-signal, power management, embedded non-volatile memory, and silicon-on-insulator (SOI) process families.

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