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    GFS
    Earnings call· Jun 2025(Q2 FY25)

    GLOBALFOUNDRIES Q2 FY25 earnings call GFS

    Aug 5, 2025 Source

    Executive summary

    GlobalFoundries Q2 FY25 — Strong Financial Results & Strategic Expansion

    GlobalFoundries delivered strong Q2 FY25 financial results, surpassing guidance midpoints and generating robust adjusted free cash flow. The company is strategically expanding its global footprint, including a new China-for-China partnership and the acquisition of MIPS to enhance its edge AI offerings. While navigating slower recoveries in consumer-facing markets and managing inventory dynamics, GF remains focused on long-term growth opportunities in high-growth segments like automotive and data centers, supported by record design wins and capital-efficient capacity expansions.

    Highlights

    5

    • Exceeded Q2 guidance midpoints for revenue, gross margin, and operating margin.

    • Diluted EPS of $0.42 exceeded the high end of guidance.

    • Generated $277 million of adjusted free cash flow in Q2, remaining on track for over $1 billion in FY25.

    • Automotive and Communications Infrastructure & Data Center revenue grew double-digit percentage year-over-year for the third consecutive quarter.

    • Secured nearly 200 design wins in Q2, a new quarterly record, with over 90% on a sole-sourced basis.

    Concerns

    4

    • Smart Mobile Devices and Home & Industrial IoT end markets experienced slower recovery due to geopolitical uncertainties and global trade tensions.

    • One-time ASP adjustments for specific customers in Smart Mobile Devices will result in year-over-year ASP declines in H2 2025 for this end market and to a lesser degree for GF overall.

    • Anticipate approximately $20 million in cost impacts in H2 2025 due to tariff uncertainties.

    • Q3 revenue guidance reflects a slower-than-expected market recovery and customer volume adjustments.

    Guidance & targets

    19
    CategoryTargetConfidence
    Adjusted Free Cash Flow
    over $1 billion
    high materiality
    High
    Automotive Revenue Growth
    mid-teens percentage ranges
    high materiality
    High
    Communications Infrastructure and Data Center Revenue Growth
    high teens percentage ranges
    high materiality
    High
    Home and Industrial IoT Revenue Growth
    decline mid-single-digit percent year-over-year
    medium materiality
    High
    Total Revenue
    $1.675 billion, plus or minus $25 million
    high materiality
    High
    Non-wafer Revenue as % of Total Revenue
    approximately 12%
    medium materiality
    High
    Gross Margin
    approximately 25.5%, plus or minus 100 basis points
    high materiality
    High
    Total Operating Expenses (excluding SBC)
    $190 million, plus or minus $10 million
    medium materiality
    High
    Operating Margin
    14.2%, plus or minus 180 basis points
    high materiality
    High
    Share-based Compensation
    approximately $56 million
    low materiality
    High
    Share-based Compensation (COGS related)
    roughly $18 million
    low materiality
    High
    Net Interest and Other Income
    between $4 million and $12 million
    low materiality
    High
    Income Tax Expense
    between $26 million and $40 million
    low materiality
    High
    Effective Tax Rate
    mid-teens percentage range
    medium materiality
    High
    Diluted EPS
    $0.38, plus or minus $0.05
    high materiality
    High
    CapEx (net of grants)
    approximately $700 million
    high materiality
    High
    Full Year Revenue
    growth
    high materiality
    High
    Non-wafer Revenue as % of Total Revenue
    12%, 13% of the mix
    medium materiality
    High
    Gross Margin
    significant improvement
    high materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Smart Mobile Devices
    Represented approximately 40% of total revenue. Revenue increased sequentially but declined year-over-year due to a reduction in customer underutilization payments and certain ASP adjustments.
    		$675.2 million-10%+17%—
    Home and Industrial IoT
    Represented approximately 18% of total revenue. Revenue decreased sequentially but increased year-over-year for the second consecutive quarter. Full year revenue expected to decline mid-single-digit percent YoY due to residual consumer-facing IoT inventories.
    		$304 million+2%-9%—
    Automotive
    Represented approximately 22% of total revenue. Remained a strong growth driver, with double-digit YoY growth for the third consecutive quarter. On track for mid-teens percentage revenue growth in 2025.
    		$376.6 million+36%+19%—
    Communications Infrastructure and Data Center
    Represented approximately 10% of total revenue. Revenue decreased sequentially but increased year-over-year. Expected to see high-teens percentage revenue growth in 2025.
    		$168.8 million+11%-2%—

    Operational metrics

    19
    Cash and investments balance
    $3.9 billion
    end of Q2 FY25

    Combined total of cash, cash equivalents, and marketable securities.

    Total Debt
    $1.2 billion
    end of Q2 FY25

    Balance at the end of the second quarter.

    Revolving Credit Facility
    $1 billion
    end of Q2 FY25

    Available and undrawn at the end of the second quarter.

    R&D Expense
    $125 million
    Q2 FY25

    Operating expense for the second quarter.

    SG&A Expense
    $42 million
    Q2 FY25

    Operating expense for the second quarter.

    Total Operating Expenses
    $167 millionflat QoQ
    Q2 FY25

    Approximately flat quarter-over-quarter.

    Net Interest Income
    $17 million
    Q2 FY25

    Reported for the second quarter.

    Other Expense
    $7 million
    Q2 FY25

    Reported for the second quarter.

    Income Tax Expense
    $34 million
    Q2 FY25

    Incurred in the second quarter.

    Diluted Share Count
    557 million
    Q2 FY25

    Used for diluted earnings per share calculation.

    CapEx
    $159 million
    Q2 FY25

    Capital expenditure for the second quarter.

    ASP per wafer
    down high single-digit percentageYoY
    Q2 FY25

    Due to product mix, pricing adjustments, and reduction in customer underutilization payments.

    ASP per wafer (like-for-like)
    down mid-single digits
    FY25

    Overall for the whole enterprise in 2025.

    ASP per wafer (like-for-like, excluding mobile impacts)
    less than 1% down
    FY25

    Excluding impacts from the smart mobile device segment.

    Non-wafer revenue
    10%
    Q2 FY25

    Includes revenue from reticles, nonrecurring engineering, expedite fees, and other items.

    MIPS acquisition revenue
    $50 million to $100 million
    full year run rate

    Expected addition to top line on a full year run rate basis.

    MIPS acquisition revenue (long-term)
    hundreds of millions of dollars
    coming years

    Expected incremental revenue opportunity over the coming years.

    Utilization
    low 80sup from 80% in Q1
    Q2 FY25

    Progressed into the low 80s in the second quarter.

    Tariff cost impacts
    $20 million
    H2 FY25

    Expected cost impacts associated with tariff uncertainties, limited due to global footprint and diversified sourcing.

    Industry KPIs

    8
    MetricValueDetails
    Ai data center revenueSilicon photonics: over $200 million; Satcom: approximately $100 millionUSD
    Fab capacity utilizationlow 80s%
    Bookings net order intakenearly 200 design winscount
    Design wins socket pipelinenearly 200 design winscount
    Inventory channel inventoryCustomers took on additional inventory in Q2
    Node platform ramp schedule22FDX technology
    Wafer shipments foundry ASP581,000300-millimeter equivalent wafers
    End market segment revenue mixAutomotive: 22%; Smart Mobile Devices: 40%; Home and Industrial IoT: 18%; Communications Infrastructure and Data Center: 10%% of total revenue

    Product announcements

    6
    ProductTypeDetails
    22FDX MRAM, 55 BCDLite, 12LP+ platformsmilestone
    12LP+ AutoPro platform for next-generation radar processorlaunch
    Fifth-generation microcontroller with 4-megabyte MRAM on 22FDX platformlaunch
    AI processors for smart glasseslaunch
    Wi-Fi 7, Wi-Fi 8, next-generation Bluetooth System-on-a-Chip solutionslaunch
    Audio design for ultra-low power AI-enabled hearing aids on 22FDXlaunch

    Deals & partnerships

    3
    China-based foundryDefinitive agreement for China-for-China manufacturing strategy

    Agreement to expand multi-fab customer offering on successful automotive-grade platforms while maintaining control over IP and quality standards. This is a unique opportunity for GF to offer flexibility for global sourcing.

    MIPSAcquisition of AI and processor IP supplier

    MIPS brings decades of design and IP innovation, particularly in RISC-V capabilities for efficient processor cores tailored for edge AI. This acquisition allows closer collaboration with customers earlier in the design cycle with more direct access to process IP and greater customization potential.

    ContinentalExclusive manufacturing partner for Advanced Electronics & Semiconductor Solutions organization

    Continental strategically brought on GF as its exclusive manufacturing partner, demonstrating trust in GF's auto-qualified process technologies, quality, and reliability.

    Capital programs

    2
    Fab 8 CHIPS 8.02 projectfulfilled milestone
    Funding: CHIPS Act support

    Benefit: diversifying our Fab 8 facility

    Fulfilled first CHIPS milestone in diversifying Fab 8 with 22FDX technology on track for qualification, bringing supply chain resiliency and security onshore.

    Germany wafer fabrication capacity expansionworking to get approval
    Funding: EU Chips approval

    Benefit: expand our wafer fabrication capacity

    Intend to convert former Bump Test Facility to expand wafer fabrication capacity and are working to get EU Chips approval to support the investment, aiming for more efficient scale in Germany and domestic supply for European customers.

    Risks & headwinds

    5
    Slower recovery in consumer-facing marketsH2 FY25

    Smart Mobile Devices revenue down 10% YoY; Home and Industrial IoT revenue up 2% YoY but full year expected to decline mid-single-digit percent YoY.

    Mitigation: Partnering closely with certain customers to support inventory management and preserve market share, including one-time ASP adjustments for dual-sourced foundry suppliers.

    Customer inventory build-up in consumer-facing marketsH2 FY25

    Some customers took on additional inventory in Q2, particularly in consumer-facing markets, in anticipation of increased tariff-related impacts.

    Mitigation: Partnering with customers on inventory management; expect these inventories to normalize in H2 2025, impacting demand. GF's diversified footprint provides resilience.

    ASP declines due to customer adjustmentsH2 FY25

    Year-over-year ASP declines in H2 2025 for Smart Mobile Devices end market and to a lesser degree for GF overall.

    Mitigation: Deliberate decisions made in partnership with customers to maximize share and secure longevity in sockets, especially with dual-sourced arrangements. Overall pricing environment remains stable outside these specific areas.

    Tariff uncertainties and associated cost impactsH2 FY25

    Roughly $20 million in cost impacts expected in H2 2025.

    Mitigation: Leveraging GF's global footprint and diversified sourcing strategy to limit cost impacts. Long-term, tariffs underscore the importance of geographically diversified foundry partners, which GF is uniquely positioned to provide.

    Slower-than-expected market recoveryQ3 FY25

    Q3 FY25 revenue guidance of $1.675 billion (plus or minus $25 million) reflects slower recovery and customer volume adjustments.

    Mitigation: Expect continued growth in high-margin end markets (automotive, CID) and stabilization of demand for consumer-centric goods to drive gross margin expansion in Q4.

    What to watch in Q3 FY25

    5

    Q4 Gross Margin Expansion

    Q4 FY25
    CurrentQ3 guide: 25.5% +/- 100 bps
    Targetsignificant improvement

    Why it matters

    Gross margin expansion is a key driver for profitability and was a prior target for exiting the year at 30%.

    I do anticipate a significant improvement from third quarter to fourth quarter in gross margin driven by the factors I talked about earlier with stronger product mix, we've got some of the non-wafer revenue coming through as well as some additional improvement in both depreciation and utilization.

    Q&A highlights

    5

    Why is Q3 guidance more cautious compared to some foundry peers, and what are the specific headwinds expected to persist beyond Q3?

    Management clarified that the base case for FY25 remains revenue growth, with strong growth in automotive and communications infrastructure/data center. The Q3 caution stems from specific customer inventory management in automotive (leading to a sequential decline) and continued softness in consumer-facing markets (smart mobile, IoT) due to inventory digestion, which is expected to stabilize by Q4.

    “So our base case for the year remains growth in fiscal 2025. Tim and Niels touched on it some in the prepared commentary, but just kind of breaking that down by end market, we expect solid growth in both automotive and communications infrastructure and data center end markets for the year at mid-teens and high teens, respectively, for both of those end markets.”

    asked by Joseph Moore · answered by John Hollister

    2 min read6 chapters

    Detailed Narrative

    01

    Strong Q2 Performance and FY25 Outlook

    GlobalFoundries reported Q2 FY25 revenue of $1.688 billion, a 6% sequential increase and 3% year-over-year growth, exceeding guidance midpoints. Diluted EPS reached $0.42, surpassing the high end of the guidance range. The company generated $277 million in adjusted free cash flow in the quarter and remains on track to achieve over $1 billion for the full fiscal year 2025, demonstrating strong profitability and cash generation through the cycle.

    02

    Strategic End Market Growth and Diversification

    Automotive and Communications Infrastructure & Data Center end markets continued to be strong growth drivers, both achieving double-digit percentage year-over-year revenue growth for the third consecutive quarter. Automotive revenue grew 36% YoY, comprising 22% of total revenue, while Communications Infrastructure & Data Center grew 11% YoY, representing 10% of total revenue. GF expects mid-teens and high teens percentage growth for these segments, respectively, in FY25, driven by edge and cloud AI transitions.

    03

    Market Dynamics and ASP Adjustments

    The Smart Mobile Devices and Home & Industrial IoT end markets experienced a slower recovery due to geopolitical uncertainties and global trade tensions. This led to certain one-time📎 ASP adjustments for specific dual-sourced customers in Smart Mobile Devices to support inventory management and preserve market share. These adjustments are expected to result in year-over-year ASP declines in H2 2025 for the mobile segment and to a lesser degree for GF overall, though the overall pricing environment remains constructive in other segments.

    04

    Global Footprint and CHIPS Act Progress

    GF is leveraging its geographically diversified manufacturing footprint across the U.S., Europe, and Asia to provide supply chain resiliency. The company fulfilled its first CHIPS milestone in the U.S. with the Fab 8.02 project for 22FDX technology qualification. In Europe, GF is working to secure EU CHIPS approval to expand wafer fabrication capacity in Germany, supporting European customers and enhancing efficient scale.

    05

    China-for-China Strategy and MIPS Acquisition

    GF announced a definitive agreement with a China-based foundry to enable customers to access GF production for domestic Chinese demand, initially focusing on automotive-grade CMOS and BCD technologies. This strategy aims to expand market share while maintaining IP and quality control. Additionally, GF entered a definitive agreement to acquire MIPS, an AI and processor IP supplier, expected to close later this year, to add RISC-V capabilities for edge AI applications and deepen customer engagement.

    06

    Record Design Wins and Emerging Opportunities

    The company secured nearly 200 design wins in Q2, a new quarterly record, with over 90% awarded on a sole-sourced basis. These wins span automotive processing, data center power delivery, and connected home automation. Emerging opportunities include silicon photonics, expected to nearly double revenue to over $200 million in 2025, and satellite communications, projected to contribute approximately $100 million in revenue in 2025 from a de minimis base in 2024.

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