GlobalFoundries Q3 Earnings Call Highlights

Key Points

• Q3 revenue rose 13% year over year to $1.899 billion, while record non-IFRS gross margin reached 31.4%. More than two-thirds of revenue came from outside smart mobile devices, which declined 19% year over year.
• Communications infrastructure and data center revenue grew 81% year over year, driven by optical networking. GlobalFoundries expects about $500 million in silicon photonics revenue in 2026 and a roughly $1 billion annualized run rate by the end of 2027, a year ahead of its previous outlook.
• For Q4, the company forecasts $2 billion in revenue and diluted EPS of $0.59. It expects about $4 billion in net capital expenditures in 2027 to expand specialty-chip and advanced-packaging capacity, with customer prepayments expected to fund roughly one-third.

GlobalFoundries NASDAQ: GFS reported third-quarter fiscal 2026 revenue of $1.899 billion, up 6% sequentially and 13% from a year earlier, as stronger demand in communications infrastructure, data center, automotive and industrial markets continued to reshape the company’s revenue mix.

CEO Tim Breen said revenue and non-IFRS profitability metrics reached the high end of the company’s guidance ranges. The company recorded non-IFRS gross margin of 31.4%, a company record and a 540-basis-point increase from the prior-year quarter.

“For the first time in our history, more than two-thirds of our Q3 revenue came from outside smart mobile devices,” CFO Sam Franklin said. The company said the increasingly diversified mix has supported margin expansion, particularly as it ramps differentiated technologies including silicon photonics, silicon germanium, advanced packaging and technology services.

Data Center and Optical Networking Drive Growth

Communications infrastructure and data center revenue accounted for approximately 17% of third-quarter revenue. The segment grew 14% sequentially and 81% year over year, driven primarily by optical networking demand for silicon photonics and silicon germanium technologies.

Franklin said the third quarter marked the eighth consecutive quarter of double-digit year-over-year growth in communications infrastructure and data center. GlobalFoundries expects that market to grow between 60% and 70% during 2026.

Breen said the company now expects to generate about $500 million in silicon photonics revenue during 2026 and to exit 2027 at an annualized silicon photonics revenue run rate of approximately $1 billion. That milestone is expected a year earlier than the company’s previous outlook.

GlobalFoundries plans to approximately triple silicon photonics capacity during 2027 to address demand expected in 2028 and beyond. Breen said the company is actively working with more than 50 silicon photonics customers, including seven of the top 10 optical-transceiver suppliers. Active customer designs are expected to ramp in 2027 and 2028.

The company also cited demand for silicon germanium, which is used in optical transceivers for components such as transmit drivers and receive amplifiers. GlobalFoundries said it is accelerating silicon germanium capacity investments, supported by customer prepayments. Its recently announced multiyear partnership with Marvell is intended to support expansion at the company’s Burlington, Vermont, facility.

Partnerships Expand U.S. Manufacturing and Packaging Plans

During the quarter, GlobalFoundries announced several customer and government partnerships, including agreements with Marvell, Monolithic Power Systems and Taiwan Semiconductor Manufacturing Co.

Under a five-year, $2 billion manufacturing agreement with TSMC, GlobalFoundries plans to establish a U.S.-based source of silicon interposers for TSMC’s CoWoS advanced-packaging ecosystem. Volume production is expected to begin at GlobalFoundries’ Malta, New York, site in the first half of 2028.

Breen said the interposer agreement will establish a multiyear revenue stream with gross margins above GlobalFoundries’ long-term targets, while TSMC will co-invest in the capital required for the project.

The company also highlighted a U.S.-Japan fab expansion initiative for its Malta facility. Breen said the structure is intended to expand capacity without GlobalFoundries investing capital directly, relying instead on technology, construction and operations fees, cost reimbursements and EBITDA sharing. He said the arrangement is designed to produce profit per wafer comparable with a model in which the company built and owned the capacity itself.

GlobalFoundries also reached an agreement with the U.S. Department of Commerce to reallocate $955 million from its existing CHIPS and Science Act award toward investments in Malta and Burlington. The funding is aimed at silicon photonics, silicon germanium and advanced-packaging capabilities, including silicon interposers.

The company said a separate agreement will provide the U.S. government with a 4% equity stake. GlobalFoundries expects total U.S. government ownership to reach approximately 7% after all related agreements are finalized. Franklin said the expected equity issuances would increase the company’s fully diluted share count to about 600 million beginning in 2027.

Other Markets and Third-Quarter Results

• Automotive: Represented about 19% of third-quarter revenue, rising 11% sequentially and 20% year over year. GlobalFoundries continues to expect low-double-digit percentage automotive growth in 2026.
• Smart mobile devices: Represented approximately 32% of revenue, its lowest share in the company’s history. Revenue declined 5% sequentially and 19% year over year. The company maintained its expectation for a low-teens percentage decline in the market for 2026.
• Home and industrial IoT: Accounted for roughly 20% of revenue, growing 16% sequentially and 49% year over year. GlobalFoundries expects segment growth of 10% to 15% in 2026.

GlobalFoundries shipped approximately 647,000 300-millimeter equivalent wafers during the quarter, up 4% sequentially and 7% year over year. Manufacturing services represented approximately 88% of revenue, while technology services accounted for 12%.

The company reported non-IFRS operating profit of $340 million, representing a 17.9% operating margin, and net income of approximately $298 million. Diluted earnings were $0.53 per share, based on approximately 558 million fully diluted shares.

Cash flow from operations totaled $341 million, while adjusted free cash flow was $136 million. The company ended the quarter with approximately $3.2 billion in cash, cash equivalents and marketable securities, compared with $1.1 billion in debt.

Fourth-Quarter Outlook and Accelerated Investment

For the fourth quarter, GlobalFoundries forecast revenue of $2 billion, plus or minus $25 million, and non-IFRS gross margin of approximately 31.5%, plus or minus 100 basis points. The company expects non-IFRS operating margin of approximately 19.8%, plus or minus 170 basis points, and diluted earnings per share of $0.59, plus or minus $0.05.

Franklin said blended average selling prices increased about 2.5% sequentially and nearly 5% year over year in the third quarter, marking the company’s first year-over-year blended pricing improvement since 2023. He said the company expects approximately a 10% uplift in blended pricing and mix during 2027.

GlobalFoundries expects net capital expenditures of about $4 billion in 2027 as it expands capacity for silicon photonics, silicon germanium, FDX, advanced packaging and interposers. About one-third of that spending is expected to be supported by customer prepayments, according to Franklin, while government grants and investment tax credits are also expected to offset investment costs.

“We see strong paybacks inside a sort of two-year time horizon for most of those technologies,” Franklin said, adding that the company can expand much of the capacity within its existing manufacturing footprint.

About GlobalFoundries (NASDAQ:GFS)

GlobalFoundries Inc NASDAQ: GFS is a semiconductor manufacturer that operates as a contract foundry, producing chips designed by other companies. The company provides wafer fabrication and related services for customers in the automotive, communications infrastructure, aerospace and defense, industrial, and consumer electronics markets.

GlobalFoundries specializes in differentiated semiconductor technologies rather than competing primarily in the most advanced logic-processing nodes. Its offerings include radio-frequency and silicon-on-insulator technologies, embedded memory, power-management solutions, high-voltage processes, silicon photonics, and other specialty platforms used in connectivity, sensing, automotive electronics, and edge-computing applications.

The company was established in 2009 through the separation of Advanced Micro Devices' manufacturing operations, with investment from the Abu Dhabi-based Advanced Technology Investment Company.

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