GLOBALFOUNDRIES Inc. (GFS) | The Buildout — AI Infrastructure
The Verdict
GlobalFoundries is a specialty semiconductor foundry — it does not sell GPUs or accelerators. Its role in the AI buildout is as a supplier into data-center infrastructure, mainly through optical interconnect: silicon photonics engines for pluggable transceivers, near-packaged optics and co-packaged optics, and high-performance SiGe for the analog parts of those links. It is also building toward data-center power, where it supplies BCD and GaN and added integrated voltage regulator technology through the Photon Technologies acquihire. The disclosed AI-exposed segment is Communications Infrastructure & Data Center, which also includes satellite and other communications work, so the pure-AI share of revenue is not known.
| Market Cap | — |
| Revenue (TTM) | $6.9B |
| Revenue Growth | +1.4% |
| EBITDA Margin (TTM) | 29.9% |
| Net Cash | $679M |
| Earnings Beats | 7 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- CID revenue grew 62% year over year in Q2 FY2026 — the seventh consecutive quarter of double-digit growth and the fastest since 2022 — and full-year CID guidance was raised twice in two quarters, from ~30% to 50-60%.
- Silicon photonics revenue is expected to more than double in 2026, upgraded from "roughly double" a quarter earlier, and SiGe capacity is oversubscribed throughout 2027.
- Backlog: the 20-F discloses about $11B of remaining performance obligations at Dec 31, 2025, with 51.8% expected to be recognized within 24 months.
- Gross margin reached ~30% ahead of plan — 29.9% non-IFRS in Q2, a second-quarter record — and management now guides ~30% for the full year and a 40% exit run rate in 2028.
- Capital return began: a first-ever $0.12/share dividend was paid July 14, 2026, a second was declared, and the target is up to 50% of trailing 12-month non-IFRS adjusted free cash flow after investments.
What We’re Watching
- Smart mobile is ~36% of Q2 FY2026 revenue and was cut to a low-teens decline for FY2026, from a high-single-digit decline a quarter earlier, on memory pricing and associated shortages.
- SOI wafers: 71.4% of 2025 purchases came from a single supplier, up from 60.9% in 2024; the 20-F flags that any failure by that supplier could materially and adversely affect the Company's results.
- Capacity, not demand, is the stated constraint: SiGe is oversubscribed throughout 2027 and growth depends on the pace of manufacturing productivity and expansion.
- Customer concentration: Customer A was 16.4% and Customer C 13.9% of FY2025 wafer revenue in the 20-F; both identities are unresolved.
The AI-linked part of the business is strengthening: data-center growth accelerated to 62% year over year, guidance was raised twice, and the gross-margin milestone arrived early. Against that, the largest end market is shrinking and the pure-AI revenue share is not disclosed. The open question is whether CID can hold 30%-plus growth into 2027 off a much higher 2026 base while mobile declines.
Earnings Beat
GFS reported Q2 FY2026 revenue of $1.786B, up 9% sequentially and 6% year over year, on wafer shipments of about 625,000 300mm-equivalent wafers, up 8% sequentially and 8% year over year. Reported gross margin was 28.3%; on the company's non-IFRS basis management put it at roughly 29.9%, above the high end of guidance and a second-quarter record. The standout was the Communications Infrastructure & Data Center segment, up 62% year over year.
| Metric | Q2 FY2026 | Q1 FY2026 | Q2 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $1.8B | $1.6B | $1.7B | +5.8% |
| Gross margin | 28.3% | 27.6% | 24.2% | +410bps |
| EBITDA | $481M | $491M | $519M | −7.3% |
| EPS | $0.30 | $0.18 | $0.41 | −27.1% |
| Communications Infrastructure & Data Center YoY growth | +62% | +32% | n/a | Fastest since 2022 |
I think you're kind of getting to the right rough numbers going out of this year.— Sam Franklin, Chief Financial Officer, 2026-08-05
Management tone: Tone on the Q2 FY2026 call was confident and forward-leaning versus the prior quarter: management raised CID and IoT, cut smart mobile, and pulled the ~30% gross-margin target forward from an exit-rate goal to a full-year expectation. They were direct on margin drivers, on quantum timing and on the new SiGe disclosure, but deflected on silicon-photonics competition and customer concentration. The earlier commitment to gain greater share of wallet with mobile customers in 2026 was not reaffirmed.
Management Guidance
For Q3 FY2026 management guided revenue of $1.885B ±$25M, gross margin of ~30.5% ±100 bps, operating expenses of $260M ±$10M (ex-SBC), operating margin of 16.7% ±170 bps, diluted EPS of $0.51 ±$0.05 and SBC of ~$76M. For the full year 2026 it guides ~30% gross margin, net CapEx at 15-20% of revenue toward the higher end, adjusted free cash flow margin of ~10%, a mid-teens tax rate, and technology services toward the high end of 10-12% of revenue. The end-market assumptions are 50-60% growth in CID, 10-15% in home and industrial IoT, a low-teens decline in smart mobile, and low-double-digit automotive growth weighted to Q4.
Trajectory
Revenue has been flat to modestly higher: the trailing four quarters average about +0.9% growth, and Q2 FY2026 revenue of $1.786B was up 6% year over year. The mix underneath is moving — CID up 62% year over year and IoT up 10%, against a 6% year-over-year decline in smart mobile — and that mix is the stated driver of the gross-margin expansion of roughly 470 bps year over year to 29.9% non-IFRS. Reported Q2 gross margin was 28.3% and EBITDA margin was 26.9%. Adjusted free cash flow was about negative $3M as guided, with CapEx net of grants of $408M, roughly 23% of revenue.
The Model
The model projects FY+1 revenue of $7,380M and EBITDA of $2,144M, a margin of about 29%. For FY+2 it projects revenue of $8,300M and EBITDA of $2,594M, a margin of about 31%. The near term rests on the disclosed data-center ramp and the $100-120M technology-services contribution from acquisitions; the second year leans on the mix shift toward optical and custom silicon and on the pricing increases management says will reach revenue in 2027.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $6.8B | $7.4B | $8.3B |
| YoY Growth | — | +8.7% | +12.5% |
| EBITDA | $2.1B | $2.1B | $2.6B |
| EBITDA Margin | 31.1% | 29.0% | 31.2% |
Projections are the median of 4 independent model runs. The model’s revenue sits 0.5% above analyst consensus.
For Q3 FY2026 management guided revenue of $1.885B ±$25M, gross margin of ~30.5% ±100 bps, operating expenses of $260M ±$10M (ex-SBC), operating margin of 16.7% ±170 bps, diluted EPS of $0.51 ±$0.05 and SBC of ~$76M. For the full year 2026 it guides ~30% gross margin, net CapEx at 15-20% of revenue toward the higher end, adjusted free cash flow margin of ~10%, a mid-teens tax rate, and technology services toward the high end of 10-12% of revenue. The end-market assumptions are 50-60% growth in CID, 10-15% in home and industrial IoT, a low-teens decline in smart mobile, and low-double-digit automotive growth weighted to Q4.
What Could Go Right — and Wrong
- CID sustains 30%-plus growth into 2027 — the long-term model management reaffirmed — without a digestion period off the elevated 2026 base.
- Silicon photonics reaches its $1B-plus revenue run rate ahead of the 2028 exit target, helped by SCALE engagements converting into named production programs.
- The 40% gross-margin exit run rate targeted for 2028 arrives earlier as pricing lands in 2027 and the technology-services mix rises.
- Data-center power becomes a third leg, with the IVR technology, the Monolithic Power Systems partnership and the BCD and GaN design wins scaling into revenue.
- Quantum moves from engineering services into manufacturing revenue earlier than the end of the decade, backed by the finalized $375M Commerce award and eight partner relationships.
- Smart mobile declines steeper than the low-teens guide if memory pricing and shortages persist, pulling down the largest segment.
- Silicon-photonics competition and customer multi-sourcing erode share; management deflected when asked and did not detail share or customer-level exposure.
- A failure at the single SOI wafer supplier — 71.4% of 2025 purchases — disrupts RF-SOI and FDX production.
- Capacity expansion lags demand and caps the data-center ramp; SiGe is already oversubscribed throughout 2027.
- The pricing increases implemented in Q2 do not reach revenue in 2027 as expected, or rising R&D and operating expenses outpace the incremental revenue management says will cover them.
Looking Ahead
Over the next twelve months the questions are the 2027 flow-through of the pricing increases, whether NPO ramps on schedule in 2027, and whether the $300M silicon-photonics letter of intent with the Department of Commerce becomes a definitive award. Automotive revenue is weighted to Q4 2026, and quantum revenue stays in engineering services over one to three years, with manufacturing expected late in the decade.
- Q3 2026Second SCALE tape-out — Follow-on optical engine tape-out on the SCALE platform.
- Oct 9, 2026Dividend payable — Second $0.12/share dividend; record date Sept 23, 2026.
- Back end 2026Pricing enters revenue — Implemented price increases begin flowing through; full in 2027.
- 2027NPO ramp begins — Near-packaged optics ramp; SiGe oversubscribed throughout 2027.
- 2028CPO ramp begins — Co-packaged optics ramp; $1B+ SiPho run rate exiting 2028.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $6.8B | $6.8B | $6.9B | +0.6% |
| Gross Margin | 24.5% | 25.1% | 27.4% | +60bps |
| EBITDA | $1.3B | $2.1B | $2.1B | +63.1% |
| EBITDA Margin | 19.2% | 31.1% | 29.9% | +1,191bps |
| Net Income | −$265M | $885M | $716M | +434.0% |
| Free Cash Flow | $1.1B | $1.0B | $796M | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)27.4%
- EBITDA Margin (TTM)29.9%
- Net Margin (TTM)10.3%
- ROIC5.7%
- FCF Conversion38.4%
- SBC / Revenue3.4%
The Company
GlobalFoundries is a global semiconductor manufacturer — a differentiated specialty foundry. It does not sell AI compute; it makes chips on differentiated platforms including FinFET, FD-SOI (FDX), RF-SOI, SiGe, RF GaN, BCD and high-voltage BCD, power GaN and silicon photonics. Those chips serve four end markets: automotive, smart mobile devices, home and industrial IoT, and communications infrastructure and data center. Its link to the AI buildout runs through optical interconnect — silicon photonics and high-performance SiGe — and increasingly through data-center power.
The company operates four manufacturing sites: Dresden, Germany; Singapore; Malta, New York; and Burlington, Vermont. It reported total installed capacity of about 2.8 million wafers per annum at the end of 2025 and shipped 2.3 million 300mm-equivalent wafers that year, a 10.4% increase. Capacity for silicon photonics and SiGe is being added inside the existing fab footprint. Revenue splits into manufacturing services, which was ~89% of Q2 FY2026 revenue, and technology services — IP, licensing, software, reticles, NRE and custom silicon — at ~11%.
Business Segments
Competitive Landscape
The 20-F names TSMC, UMC and SMIC as key competitors, adds Texas Instruments, Samsung and, more recently, Intel as IDM foundry arms, and lists smaller dedicated foundries including HuaHong Group, X-FAB, Tower Semiconductor, Vanguard and Powerchip. On silicon photonics, management was asked about competitors getting aggressive and reframed competition as validation of the secular trend rather than detailing share.
- Named in the 20-F as a key competitor.
- Named in the 20-F as a key competitor.
- Semiconductor Manufacturing International Corporation (SMIC)Named in the 20-F as a key competitor.
- IntelListed among the IDM foundry arms competing with GFS: "Texas Instruments, Samsung and, more recently, Intel."
- Tower SemiconductorNamed in the 20-F among the smaller dedicated foundries, alongside HuaHong Group, X-FAB, Vanguard and Powerchip.
Supply Chain
GFS buys engineered SOI wafers, process equipment and materials, and sells wafers and technology services to chip designers and system companies. Its 20-F flags a single-supplier dependency for SOI wafers, a key input into RF-SOI and FDX.
More on GFS: Earnings recap