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    GFS
    Earnings call· Mar 2026(Q1 FY26)

    GLOBALFOUNDRIES Q1 FY26 earnings call GFS

    May 5, 2026 Source

    Executive summary

    GLOBALFOUNDRIES Q1 FY26 — Strong Profitability & Optical Networking Leadership

    GLOBALFOUNDRIES delivered strong Q1 FY26 results, exceeding profitability guidance driven by robust execution and favorable mix shifts towards high-margin segments like optical networking and automotive. The company is strategically expanding capacity in high-growth areas, supported by customer and government partnerships, while navigating near-term headwinds in smart mobile devices and managing supply chain costs.

    Highlights

    6

    • Achieved Q1 revenue of $1.634 billion, up 3.1% YoY, at the high end of guidance.

    • Delivered 29% gross margin, a Q1 record and 510 bps expansion YoY, exceeding high end of guidance.

    • Operating margin reached 16.6%, above the high end of guidance, up 320 bps YoY.

    • Communications Infrastructure and Data Center revenue grew 32% YoY, marking the sixth consecutive quarter of double-digit growth.

    • Automotive revenue increased 24% YoY, on track for low double-digit growth in 2026, its sixth consecutive year of double-digit growth.

    • Silicon photonics revenue on track to roughly double in 2026 and achieve over $1 billion run rate exiting 2028.

    Concerns

    3

    • Smart Mobile Devices revenue declined 15% sequentially and 5% YoY, with an expected high single-digit percentage decline for FY26.

    • Home and Industrial IoT revenue decreased 16% sequentially and 22% YoY, though expected to reverse in Q2.

    • Geopolitical events in the Middle East are expected to result in a ~0.5 point margin impact per quarter for the rest of 2026 due to supply chain costs.

    Guidance & targets

    19
    CategoryTargetConfidence
    Total Revenue
    $1.76 billion, plus or minus $25 million
    high materiality
    High
    Gross Margin
    approximately 28.5%, plus or minus 100 basis points
    high materiality
    High
    Total Operating Expenses (excluding share-based compensation)
    $225 million, plus or minus $10 million
    medium materiality
    Medium
    Operating Margin
    15.7%, plus or minus 180 basis points
    high materiality
    High
    Net Interest and Other
    between negative $6 million and $2 million
    low materiality
    Medium
    Income Tax Expense
    between $28 million and $48 million
    low materiality
    Medium
    Diluted Earnings Per Share
    $0.43, plus or minus $0.05
    high materiality
    High
    Communications Infrastructure and Data Center Revenue Growth
    high 30s percent year-over-year
    medium materiality
    Medium
    Automotive Revenue Growth
    low double-digit growth
    medium materiality
    Medium
    Smart Mobile Devices Revenue Growth
    decline in the high single-digits percentage
    medium materiality
    Medium
    Home and Industrial IoT Revenue Growth
    mid-single-digit percentage year-over-year
    medium materiality
    Medium
    Technology Services Revenue Proportion
    closer to the high end of our original 10% to 12% range
    medium materiality
    Medium
    Silicon Photonics Revenue Growth
    roughly double
    medium materiality
    Medium
    Silicon Photonics Revenue Run Rate
    greater than $1 billion
    high materiality
    Medium
    Effective Tax Rate
    high teens percentage range
    low materiality
    Medium
    Non-IFRS Net CapEx as % of Revenue
    15% to 20%
    high materiality
    Medium
    Adjusted Free Cash Flow Margin
    approximately 10%
    high materiality
    Medium
    MIPS Revenue Contribution
    $50 million to $100 million
    medium materiality
    Medium
    Gross Margin Trajectory
    exit 2026 at or above a 30% gross margin
    high materiality
    Medium

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Communications Infrastructure and Data Center
    This marked the sixth consecutive quarter of double-digit percentage year-over-year growth. Silicon photonics drove robust growth and is on track to roughly double in 2026. Integration of Advanced Micro Foundry is progressing well, expanding photonics capabilities.
    Silicon photonics growth: RobustConsecutive quarters of double-digit YoY growth: 6
    		14% of total revenue32%2%—
    Automotive
    Revenue decreased sequentially off a strong fourth quarter but increased significantly year-over-year. The company is in the early stages of revenue ramps from design wins in smart sensors, networking, and vehicle infrastructure, diversifying offerings in camera, ethernet, radar, and power.
    		23% of total revenue24%-11%—
    Smart Mobile Devices
    Revenue declined sequentially and year-over-year. Approximately two-thirds of revenue in this end market is driven by premium handsets. Expected to gradually benefit from new AI-powered form factors like smart glasses, hearables, and wearables.
    		34% of total revenue-5%-15%—
    Home and Industrial IoT
    The decline was principally driven by the timing of certain customer shipments, which is expected to reverse in Q2. Expected to be a growth year for IoT, driven by inventory normalization and production ramp of new applications in H2 2026.
    		16% of total revenue-22%-16%—

    Operational metrics

    27
    Total Revenue
    $1.634 billionup 3.1% year-over-year, down 11% sequentially
    Q1 FY26

    At the high end of the guidance range.

    300-millimeter Equivalent Wafers Shipped
    579up 7% from prior year, down 6% sequentially
    Q1 FY26
    Manufacturing Services Revenue
    approximately 87%
    Q1 FY26

    Previously categorized as wafer revenue.

    Technology Services Revenue
    approximately 13%
    Q1 FY26

    Previously categorized as non-wafer revenue. Driven by increased mask and reticles and momentum from IP licensing and software.

    Gross Profit
    $474 million
    Q1 FY26

    This is a statement line, included as per user prompt.

    Gross Margin
    29%up 510 basis points year-over-year
    Q1 FY26

    Above the high end of the guidance range, representing the biggest expansion in 3 years. Driven by mix and cost synergies from AMF acquisition.

    R&D Expense
    $114 million
    Q1 FY26
    SG&A Expense
    $89 million
    Q1 FY26
    Total Operating Expenses
    $203 millionup 4% quarter-over-quarter
    Q1 FY26
    Operating Profit
    $271 million
    Q1 FY26

    This is a statement line, included as per user prompt.

    Operating Margin
    16.6%up 320 basis points from prior year
    Q1 FY26

    Above the high end of the guided range.

    Net Interest Income
    $5 million
    Q1 FY26

    Net of other expenses.

    Tax Expense
    $49 million
    Q1 FY26
    Net Income
    $227 millionincrease of approximately $38 million from prior year
    Q1 FY26

    This is a statement line, included as per user prompt.

    Diluted Earnings Per Share
    $0.40
    Q1 FY26

    At the high end of the guidance range.

    Fully Diluted Share Count
    approximately 561 million
    Q1 FY26
    CapEx (net of government grants)
    $309 million
    Q1 FY26
    Adjusted Free Cash Flow Margin
    approximately 14%
    Q1 FY26
    Cash, Cash Equivalents and Marketable Securities
    approximately $3.8 billion
    End Q1 FY26
    Total Debt
    $1.1 billion
    End Q1 FY26
    Revolving Credit Facility
    $1 billionundrawn
    Q1 FY26
    Share Repurchases
    $400 million
    Q1 FY26

    Part of a $500 million authorization.

    Remaining Share Repurchase Authorization
    approximately $100 million
    Q1 FY26
    Gross Margin Impact from Supply Chain Costs
    approximately 0.5 point
    Per quarter for rest of 2026

    Due to proactive steps to shore up supplies of key gases and chemicals following Middle East conflict.

    Q2 FY25 Revenue
    $1.688 billion
    Q2 FY25

    Used for year-over-year comparison of gross profit.

    Q2 FY25 Gross Profit
    $425 million
    Q2 FY25

    Used for year-over-year comparison.

    Share-based Compensation
    $71 million
    Q2 FY26

    Expected for Q2 FY26.

    Industry KPIs

    12
    MetricValueDetails
    Backlog order bookoversubscribed
    Ai data center revenueroughly double%
    Market share commentary—
    Fab capacity utilizationoversubscribed
    Bookings net order intake50%%
    Advanced packaging revenue—
    Design wins socket pipeline50%%
    Inventory channel inventorynormalization
    Node platform ramp schedule—
    Wafer shipments foundry ASP579300-millimeter equivalent wafers
    End market segment revenue mix—
    Strategic supply agreements customer prepaymentsmultibillion-dollarUSD

    Product announcements

    6
    ProductTypeDetails
    Scale (Silicon Photonics Co-packaged Advanced Light Engine)launch
    Wafer-level detachable fiber interface solution for CPOmilestone
    Complete CPO technology ecosystemmilestone
    200 gig per lane receiver photonic ICslaunch
    Robotics control reference platformlaunch
    New process technologies for Apple devicesexpansion

    Deals & partnerships

    6
    Renesasstrategic partnershipmultibillion-dollar

    Expands Renesas' access to GF technologies, including FDX, BCD, and feature CMOS with integrated nonvolatile memory. These platforms will support SoCs, power devices, and MCUs for applications such as data center power, advanced driver assistance systems, and secure industrial IoT connectivity. Tape-outs under the broadened collaboration are already underway.

    Sencopartnership

    Demonstrated a wafer-level detachable fiber interface solution for CPO, a critical breakthrough for precise and repeatable testing.

    Corning and EXFOpartnership

    Showcased a complete ecosystem of CPO technology, combining attachable fiber connectivity and automated die-level testing with high-volume silicon photonics manufacturing.

    Siltechstrategic partnership

    To mass produce 200 gig per lane receiver photonic ICs for pluggable optical transceivers using GF's process technology.

    Inova Semiconductorspartnership

    To deliver a robotics control reference platform that combines MIPS Open RISC-V compute and mixed-signal technologies with Inova's high-speed communication links.

    Apple and Broadcomjoint collaboration

    To bring new process technologies to the Malta, New York fab. This marks the first U.S. availability of the silicon platform that supports clinical functions in upcoming Apple devices, including next-generation components used in Face ID systems. GF is a founding partner in Apple's American manufacturing program.

    Capital programs

    2
    SiGe Capacity Expansionunderway

    Benefit: Increased SiGe capacity

    Expanding SiGe capacity to meet accelerating customer demand, as capacity at Vermont fab is oversubscribed through well into 2027. This is expected to be meaningfully margin accretive.

    Capacity Investments in High-Growth Technology Corridors (FDX, Silicon Photonics, High-Performance SiGe)underway
    Funding: customer prepayments, government grant and tax incentive frameworks

    Benefit: Incremental capacity in FDX, silicon photonics, high-performance SiGe

    Targeted CapEx investments are supported by robust partnerships with customers and governments to unlock sustainable accretive revenue growth. ROI is strong due to adding tools to existing footprints and quick capacity ramp.

    Risks & headwinds

    2
    Geopolitical impact on supply chain costsrest of 2026

    approximately 0.5 point margin impact per quarter

    Mitigation: Proactive steps taken in Q1 to shore up supplies of key gases and chemicals like helium, hydrogen, sulfur to ensure supply chain security.

    Smart Mobile Devices market declineFY26

    overall smartphone units in 2026 indicate a low double-digit percentage year-over-year decline

    Mitigation: GF expects to slightly outperform the overall smartphone market with an expected high single-digit percentage decline, and anticipates gradual benefit from new AI-powered form factors like smart glasses, hearables, and wearables.

    Q&A highlights

    7

    Given accelerating industry demand, supply tightness, and competitors signaling wafer price increases, how should GF's pricing profile evolve in H2 2026 and beyond? Also, with Q1 gross margins beating guidance, what are the drivers and can margins reach 33-35% by year-end?

    GF expects stable pricing for long-term agreements but will implement price adjustments for shorter-term portfolio components in late 2026 into 2027, consistent with peers. The Q1 gross margin beat was driven by favorable mix (CID, automotive, technology services) and cost synergies from the AMF acquisition. A 0.5 point margin impact per quarter is expected from increased supply chain costs due to the Middle East conflict, but the company aims to exit 2026 at or above 30% gross margin.

    “There is a component, a smaller component of the portfolio, the prices over a more short-term dynamic. And exactly, as you said, both the supply and demand dynamics there are more favorable from a pricing perspective. And consistent with peers, consistent with even many of our customers, we will implement price adjustments on that part of the portfolio. You can imagine those kicking in towards the back end of 2026 and obviously flowing into 2027.”

    asked by Harlan Sur · answered by Timothy Breen

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Pillars & Execution

    GLOBALFOUNDRIES continues to execute its 3-pillar strategy focusing on technology roadmap innovation, deep customer engagement, and scaling its global manufacturing footprint. This approach has driven strong Q1 results, with profitability metrics at or above the high end of guidance, demonstrating progress in enhancing revenue composition and structural cost improvement. The team's focus on delivering for customers and efficient execution contributed to these positive outcomes.

    02

    Optical Networking Leadership

    The company highlights its industry leadership in optical networking, including silicon photonics and silicon germanium (SiGe) capabilities. Strong customer demand for SiGe solutions has led to oversubscribed capacity at the Vermont fab through 2027, prompting capacity expansion. The new 'Scale' optical module solution for NPO and CPO, aligned with the OCI MSA standard, saw new tape-outs in Q1, supporting customer roadmaps for multiple generations and exceeding MSA requirements.

    03

    Customer Partnerships & Design Wins

    Q1 saw a 50% increase in design wins YoY, building on a record 2025, with strong representation across all four major end markets. Notable engagements include a multibillion-dollar strategic partnership with Renesas, expanding GF technologies for data center power, ADAS, and industrial IoT. Automotive momentum is strong with Auto Grade 1 embedded MRAM on FDX, securing traction with Tier 1 suppliers like Bosch, enabling next-gen software-defined real-time systems.

    04

    Diversified Manufacturing Footprint

    GF's 3-continent manufacturing footprint (U.S., Germany, Singapore) provides supply chain resilience and geographic flexibility, increasingly a customer requirement. A joint collaboration with Apple and Broadcom was announced to bring new process technologies to the Malta, New York fab, supporting next-gen components for Face ID systems and underscoring the value of onshoring. GF is also deepening partnerships with governments for capacity growth and technology onshoring.

    05

    Technology Services Evolution

    The company rebranded 'wafer revenue' to 'manufacturing services' and 'non-wafer revenue' to 'technology services' to better reflect its evolving business model, which includes increasing IP, licensing, and software offerings. This shift is expected to drive high-quality, high-margin growth, with technology services comprising a greater proportion of total revenue, trending towards the high end of the 10%-12% range for FY26.

    06

    MIPS & Synopsys ARC Integration

    The acquisition of MIPS (closed August 2025) and the pending acquisition of Synopsys ARC IP business are transforming GF into a holistic technology solutions provider. MIPS is contributing to technology services revenue, with strong customer feedback and bookings, trending above the midpoint of the $50M-$100M FY26 revenue contribution range. These acquisitions enable deeper customer engagement earlier in the design cycle and push process technology limits, particularly for RISC-V in real-world workloads.

    AI-generated summary of the company’s earnings call. Not investment advice.