GlobalFoundries NASDAQ: GFS reported second-quarter fiscal 2026 revenue of $1.786 billion, up 9% sequentially and 6% from a year earlier, as demand for communications infrastructure and data-center applications helped drive growth and margin expansion.
Chief Executive Officer Tim Breen said revenue and non-IFRS profitability measures were at or above the high end of the company’s guidance ranges. The company shipped about 625,000 300-millimeter equivalent wafers, up 8% both sequentially and year over year.
Manufacturing services represented about 89% of quarterly revenue, while technology services—including IP, licensing, software, reticles, non-recurring engineering and other items—accounted for about 11%.
Margins Expand as Data-Center Demand Accelerates
Chief Financial Officer Sam Franklin said GlobalFoundries generated gross profit of $534 million, translating to a non-IFRS gross margin of about 29.9%, an increase of 470 basis points from the prior-year period. The company attributed the improvement to a richer revenue mix, manufacturing cost improvements and higher utilization.
Operating profit was $298 million, or a 16.7% operating margin, while net income totaled approximately $256 million. Diluted earnings were $0.46 per share, based on about 556 million fully diluted shares.
Communications infrastructure and data center represented approximately 16% of second-quarter revenue. Revenue in that end market rose 20% sequentially and 62% year over year, fueled by demand for silicon photonics and silicon-germanium products used in optical networking.
GlobalFoundries increased its full-year 2026 outlook for the segment and now expects communications infrastructure and data-center revenue to grow 50% to 60% from a year earlier, compared with its previous expectation for growth in the high-30% range.
Breen said silicon photonics revenue is now expected to more than double in 2026. The company is engaged with four of the five largest optical transceiver suppliers, he said, and is expanding capacity within its existing manufacturing footprint. GlobalFoundries also said it is oversubscribed for silicon-germanium capacity through 2027 and is expanding output at its Vermont facility.
During the quarter, the company secured seven optical-networking design wins across transceiver suppliers, hyperscalers and networking companies. It also taped out a SCALE-platform design win related to near-packaged or co-packaged optics and expects another tape-out in the third quarter.
Other End Markets Show Mixed Trends
Automotive revenue, representing about 19% of quarterly sales, declined 13% sequentially and 10% year over year, principally due to customer shipment timing. Nevertheless, GlobalFoundries maintained its expectation for low-double-digit automotive revenue growth for the full year, with greater weighting toward the fourth quarter.
Smart mobile devices accounted for about 36% of revenue. Sales rose 15% sequentially but fell 6% year over year. Franklin said handset forecasts have been reduced due to memory pricing and shortages, and GlobalFoundries now expects smart-mobile revenue to decline by a low-teens percentage rate in 2026.
Home and industrial IoT, which represented about 19% of revenue, increased 30% sequentially and 10% year over year. The company raised its full-year growth outlook for the segment to 10% to 15%, from a prior expectation for mid-single-digit growth.
Acquisitions and Government Partnerships Support Growth Plans
GlobalFoundries completed its acquisition of Synopsys’ ARC Processor IP Solutions business in June and acquired the custom power team from Photeon Technologies in July. Breen said the ARC acquisition, combined with MIPS, expands the company’s processor IP, software-development tools and custom-silicon capabilities for automotive, industrial, robotics and edge-AI applications.
Franklin said MIPS and the ARC IP acquisition are expected to contribute $100 million to $120 million in technology-services revenue in 2026, up from the company’s prior estimate of $60 million to $100 million. He said these businesses are R&D-intensive but carry gross margins above GlobalFoundries’ corporate targets.
The company also highlighted quantum computing as a longer-term opportunity. Breen said GlobalFoundries’ Quantum Technology Solutions organization has initiated four customer-specific engagements since its launch in May. The company expects quantum-related revenue over the next one to three years to be primarily engineering work reported within technology services, with manufacturing-services revenue potentially ramping closer to the end of the decade as customer platforms reach volume production.
GlobalFoundries cited an expected $375 million U.S. Department of Commerce grant for quantum manufacturing capacity and a separate letter of intent for a $300 million Commerce Department award supporting next-generation silicon-photonics development, including materials, modulators and packaging.
Third-Quarter Outlook and Capital Returns
For the third quarter, GlobalFoundries forecast revenue of $1.885 billion, plus or minus $25 million. It expects non-IFRS gross margin of approximately 30.5%, plus or minus 100 basis points, operating expenses excluding share-based compensation of $260 million, plus or minus $10 million, and diluted earnings per share of $0.51, plus or minus $0.05.
The company said it implemented pricing increases across several technology corridors during the second quarter, with the adjustments expected to begin affecting revenue in 2027. It plans to continue assessing pricing through the second half of 2026.
Cash flow from operations was $405 million in the second quarter, while capital expenditures net of government-grant proceeds totaled $408 million. Adjusted free cash flow was negative $3 million. GlobalFoundries ended the quarter with approximately $3.3 billion in cash equivalents and marketable securities and $1.1 billion in debt.
The company paid its first quarterly cash dividend of $0.12 per share on July 14 and announced another $0.12-per-share quarterly dividend payable Oct. 9 to shareholders of record on Sept. 23. GlobalFoundries also had approximately $100 million remaining under its share-repurchase authorization.
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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