GLOBALFOUNDRIES (GFS) Q1 FY26 earnings call: guidance and Q&A

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

How does GF's high 30s% CID growth benchmark against peers growing 50-100%? Is GF gaining or losing market share?

GF's silicon photonics and high-performance SiGe solutions within CID are growing in line with or faster than industry trends, indicating share gains in these sub-markets. The overall CID market for GF includes multiple drivers, and the company sees strong momentum in its key optical networking components.

“Silicon photonics, we've talked about already approximately doubling year-on-year. We think that is definitely growing in line with the industry. Trends and the rollouts, and we even see further acceleration to follow as we launch new products like Gale that we announced earlier this week. Our high-performance silicon germanium equally exhibiting very, very strong year-on-year growth [indiscernible] networking we're seeing a very good story.”

asked by Vivek Arya · answered by Timothy Breen

Revenue per wafer continues to decline; what does this indicate, and how does GF's current pricing strategy compare to earlier in the year?

The decline in revenue per wafer is partly due to the absence of underutilization payments from long-term agreements that were present in Q1 2025. The company emphasizes focusing on the improving margin structure rather than just standalone pricing. The pricing environment is considered more constructive than in 2025, with favorable tailwinds in constrained technology corridors.

“The important point, and you touched on mix, which is the right way to think about it, but the way we think about pricing is really the contribution from a margin perspective. And at the start of the year, we viewed the broader pricing environment is certainly more constructive than it was in 2025. And actually, as we've gone through first quarter, particularly where we see space constraints on some of our core technology corridors, we remain [indiscernible] view that it is not only constructive in some of those, but favorable tailwinds in some of those technology corridors.”

asked by Vivek Arya · answered by Sam Franklin

With the rebranding and acquisitions like MIPS and Synopsys ARC, how should investors think about the growth trajectory of Technology Services beyond 2026?

The rebranding reflects the strategic evolution towards a holistic technology solutions provider, with increasing IP, software, and customization offerings. These services enable deeper customer engagement and are expected to drive high-quality, high-margin growth. Technology Services revenue is expected to trend towards the high end of the 10-12% range for FY26, with further growth anticipated as MIPS and Synopsys ARC are fully integrated.

“our expectation is that our trends will go to the high end of the 10% to 12% range that we indicated at the start of this year. And obviously, we're in the early innings of integrating MIPS, and we haven't yet reach close on the Synopsys ARC IP business. But again, as we ramp those over time and as we create more offerings for our customers, in the IP, the software, the custom silicon solutions, we'd expect that to drive incremental growth over time.”

asked by Christopher Muse · answered by Sam Franklin

Given the robust silicon photonics outlook, how is the product mix evolving, particularly between pluggables and near/co-packaged optics, into 2027 and 2028?

The industry is seeing extremely strong adoption of optical networking. Pluggables are in high demand and evolving, with new data rates like 1.6T and 3.2T on the roadmap. The evolution to near and co-packaged optics is accelerating, with industry standards being adopted. GF is already seeing tape-outs for products intended for co-packaged and near-packaged optic use, increasing confidence in its rollout.

“I think the evolution to near and co-packaged optics is still very much, if anything, accelerating, and we've heard at OFC this year, many companies come out with their plans, and also this adoption of industry standards indicates ways that the industry can coalesce around a number of kind of more typical approaches to make those products consistent and accelerate the adoption.”

asked by Christopher Muse · answered by Timothy Breen

How does GF's MIPS IP strategy align with RISC-V and custom silicon, and is the $100M+ revenue target for MIPS in FY26 still valid?

GF is very bullish on MIPS and the upcoming Synopsys ARC acquisition, citing strong customer feedback and the need for RISC-V in real-world workloads (automotive, edge AI, radar). These capabilities enable earlier engagement in the design cycle, offering software tools and optimizing products, which deepens partnerships and increases manufacturing opportunities. The FY26 revenue contribution for MIPS is still expected to be in the $50M-$100M range, trending above the midpoint.

“we expected about $50 million to $100 million revenue contribution associated with MIPS in 2026. That range still holds. But what I would say is that we feel like the momentum with customers, as Tim said, is progressing very well. The bookings are progressing very well. We're sort of trending towards above the midpoint of that range that we indicated at the start of this year.”

asked by Krish Sankar · answered by Sam Franklin

What specific factors drove the upside in CID revenue versus prior guidance? Are there any potential offsets to the margin benefits from favorable mix, such as additional CapEx?

The CID upside was driven by incremental strength across the board, particularly the picking up of optical networking momentum, pulling through to pluggable optical transceivers, and high-performance SiGe content. Regarding margins, the FY26 CapEx guidance (15-20% of revenue) already contemplated increasing demand. CapEx ROI is strong due to adding tools to existing fabs, quick capacity ramp, and significant government support frameworks, leading to a lower net CapEx impact.

“I think as you're seeing, our principles of where we think our CapEx are very much linked to where we see strong conviction in customer demand in those corridors that are oversubscribed today. But you should think about that CapEx, the ROI is very strong because we're adding tools to existing footprints and able to bring capacity on very quickly.”

asked by Matthew Bryson · answered by Timothy Breen