GlobalFoundries Q1 2025: Navigating Contradictions in Gross Margin Strategy and Automotive Growth Prospects

Gross margin improvement strategy, automotive sector growth outlook, and strategic positioning amidst geopolitical tensions are the key contradictions discussed in GLOBALFOUNDRIES's latest 2025Q1 earnings call.



Revenue and Gross Margin Trends:
- GlobalFoundries reported Q1 2025 revenue of $1.585 billion, up 13% from the previous quarter but down 2% year-over-year.
- The decline year-over-year was mainly due to underutilization payments and product mix shifts.
- They achieved a gross margin of 23.9%, which was at the high end of their guided range, driven by improving utilization and cost management.

Automotive and IoT Growth:
- Automotive revenue represented 19% of the quarter's total revenue, showing a 16% increase year-over-year.
- Growth in automotive was driven by increased design wins, especially in automotive processing and battery management systems.
- IoT revenue accounted for 21% of the quarter's total revenue, growing 6% year-over-year, due to a rebound in demand and new design wins across various applications.

Communications Infrastructure and Data Center Expansion:
- The communications infrastructure and data center market grew year-over-year, representing 11% of the quarter's total revenue, with a 45% increase from the prior year.
- Growth was attributed to new opportunities ramping in the market, particularly in satellite communication and optical communication technologies.

Gross Profit and Margin Expectations:
- GlobalFoundries delivered a Q1 gross profit of $379 million, with an operating margin of 13.4%, which was at the high end of their guided range.
- Expectations for Q2 2025 revenue are in the range of $1.675 billion, and gross margin is expected to be in the range of 25%.
- The company anticipates achieving a gross margin of 30% by the end of 2025, supported by increased utilization and strategic cost improvements.