GlobalFoundries Q3 2025: Contradictions Emerge on Smart Mobile Market Outlook, China Strategy, Margins, and Product Timelines

Date of Call: November 12, 2025

Financials Results

• Revenue: $1.688B, flat sequentially, down 3% YOY
• EPS: $0.41 diluted per share, at high end of guidance (up ~1% YOY)
• Gross Margin: 26%, expanded ~80 bps sequentially and ~130 bps YOY
• Operating Margin: 15.4%, at high end of guidance and ~180 bps above prior year

Guidance:

• Q4 revenue expected $1.8B ± $25M and non-wafer revenue ~13% of total.
• Q4 gross margin ~28.5% ± 100 bps; operating margin ~16.8% ± 170 bps.
• Excluding SBC, total operating expenses ~$210M ± $10M; share-based comp ~$63M (≈$16M in COGS).
• Net interest/other income $4M–$12M; income tax $40M–$62M (FY effective tax rate mid–high teens).
• Q4 diluted EPS $0.47 ± $0.05.

Business Commentary:

• Strong Revenue Growth Across Diverse End Markets:
• GlobalFoundries (GF) reported strong double-digit % year-over-year revenue growth for the fourth consecutive quarter, with automotive and communications, infrastructure, and data center end markets contributing 28% of total third-quarter revenue.

• This growth was driven by GF's differentiated product portfolio, which aligns with secular growth markets and a richer mix of high-growth businesses.

• Optical Networking and Silicon Photonics Expansion:

• GF's silicon photonics revenue was on track to reach over $200 million in 2025, close to doubling year-over-year, with expectations for it to become a billion-dollar-plus run-rate business by the end of the decade.
• The growth is attributed to the expected transition to pluggable optical transceivers and copackaged optics, as well as strategic partnerships such as the agreement with TSMC for gallium nitride technology.

• Gross Margin Improvement:
• GF reported a gross margin of 26% for the third quarter, expanding 80 basis points quarter-over-quarter and 130 basis points year-over-year.
• The improvement was due to a more accretive product mix and increased revenue from non-wafer technology services, reflecting the company's focus on shifting towards more profitable segments.

• Onshoring and Regional Market Diversification:
• GF's strategy to expand manufacturing in the U.S. and Europe has been supported by investments totaling $16 billion, with key anchor customers like Apple, AMD, and Intel.
• This expansion is driven by the need for customers to mitigate geopolitical risks and enhance supply chain resilience, positioning GF at the forefront of supporting global supply chain reshaping.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management: “GF delivered a strong third quarter with revenue, gross margin, operating margin, and earnings per share at the high end of the guidance ranges.” Q3: revenue $1.688B, gross margin 26% (up 80 bps Q/Q), operating margin 15.4% (180 bps above prior year). Multiple design wins (nearly 150) and silicon photonics wins >$150M lifetime pipeline; raised comms/data center 2025 growth outlook to low-20s%.

Q&A:

• Question from Ross Seymore (Deutsche Bank): What is GF's core differentiation in silicon photonics versus peers, and what CapEx is needed to quintuple the business over five years?
  Response: GF says differentiation is decade-long R&D, best-in-class device/electrical‑to‑optical performance, packaging and ecosystem (e.g., detachable fiber connector); CapEx to support photonics will increase into 2026 focusing on high‑value wafer capacity and packaging, and is capital‑efficient versus broad wafer expansion.

• Question from Ross Seymore (Deutsche Bank): On smart mobile, how should we view Q4 given prior ASP cuts and potential unit/share gains — when might the segment return to YOY growth?
  Response: Management: prior ASP resets were one‑time to gain share and are now in the rearview; smart mobile is down low‑double digits for 2025 but should see wallet share gains and longer‑term recovery in differentiated mobile areas rather than further price cuts.

• Question from David O'Connor (BNP Paribas): What does the US onshoring pipeline look like and can GF support additional high‑volume wins across its fabs?
  Response: GF reports eight public US onshoring customers representing ~$15–$20B addressable spend, sees a larger pipeline, expects ramps largely from 2027 onward, and believes its global footprint and available floor space can support high‑volume onshoring demand.

• Question from David O'Connor (BNP Paribas): How is GF's GaN strategy different from TSMC's and how do you address concerns about profitability/competition?
  Response: GF is focused on highly reliable, US‑based GaN (Burlington) targeting data center/power/automotive use cases with differentiated device and system solutions (not just discrete GaN), and sees strong customer interest aligned with US sourcing needs.

• Question from Christopher Caso (Wolfe Research): How should we think about gross margins and utilization into next year, given seasonality?
  Response: Management: Q3 margin expansion driven by mix, non‑wafer services and productivity initiatives; utilization mid‑80s with modest pickup expected in Q4, contributing roughly three points of incremental margin at guide midpoint.

• Question from Christopher Caso (Wolfe Research): How might consolidation among RF suppliers (e.g., Skyworks/Qorvo) affect GF's mobile business?
  Response: Management: GF has long, deep partnerships with both companies; consolidation is not expected to change GF's role or supply relationships materially given technology and supply‑security factors.

• Question from Harlan L. Sur (JP Morgan): Given customers' return to normal seasonality, should we expect March‑quarter shipments down ~10–12% sequentially?
  Response: Management: too early to guide Q1 2026 but business is more diversified (automotive, comms, non‑wafer services), so seasonality will be influenced by mix; customers expect typical seasonal ranges but non‑wafer services and end‑market diversification soften single‑cycle swings.

• Question from Harlan L. Sur (JP Morgan): Update on China‑for‑China (Zen Semiconductor) timeline, business model (royalty vs profit split) and ramp/qualification timing?
  Response: Management: China‑for‑China localizations target microcontrollers, automotive imaging and power technologies in Guangzhou with strong local demand; ramps follow product qualification cycles (multi‑year), and arrangements are partnership/licensing driven—specific commercial splits were not disclosed.

• Question from Christopher James Muse (Cantor Fitzgerald): What's driving non‑wafer revenue growth (could be ~20% in 2025) and is it sustainable into 2026?
  Response: Management: non‑wafer comprises reticles, NRE, tech services and IP (including MIPS), growth is driven by more design wins/tape‑outs and MIPS integration, and management expects this higher‑value services stream to continue expanding.

• Question from Christopher James Muse (Cantor Fitzgerald): Can smartphone/mobile return to growth in 2026 after the pricing reset and expected unit gains?
  Response: Management: pricing resets are complete and durable; volumes should increase versus baseline and differentiated mobile technologies (e.g., CIPIC, advanced RF) offer growth opportunities, but timing for full year 2026 recovery remains uncertain.

• Question from Krish Sankar (TD Cowen): Wafer shipments were up 4% Q/Q while revenue was flat—what does that imply for blended ASPs and mobile ASP impact?
  Response: Management: the ASP decline was concentrated in a limited number of dual‑source mobile customers due to deliberate pricing resets to gain share; overall pricing environment is constructive and margins improved due to mix and higher‑margin businesses despite those specific ASP moves.

• Question from Krish Sankar (TD Cowen): The Silicon Labs partnership — is this share gain (moving wafers to GF) or new chip designs?
  Response: Management: it's primarily share gain with Silicon Labs moving more production to GF for US sourcing and technology alignment, not only new designs but increased manufactured volumes on GF platforms.

• Question from Joseph Moore (Morgan Stanley): Capacity by region and ability to expand (e.g., Malta, Dresden) if more US/Europe wins arrive?
  Response: Management: most sites have significant floor‑space headroom (Malta included); Dresden requires modest footprint conversion to expand; GF prioritizes disciplined, customer‑demand‑driven CapEx with government incentives enabling relatively short time‑to‑market expansions.

• Question from Joseph Moore (Morgan Stanley): Are you seeing more expedite fees or urgencies from data center customers?
  Response: Management: there is some increase in expedites and tighter corridors in differentiated areas (e.g., photonics), but no broad, across‑the‑board scarcity; expedited work is a contributing part of non‑wafer revenue.

Contradiction Point 1

Smart Mobile Device Market Outlook

It involves differing perspectives on the performance and outlook of the smart mobile device market, impacting expectations for revenue and market position.

Can you discuss the smart mobile device market in Q4 and how ASP reductions impacted unit share gains? - Ross Seymore (Deutsche Bank)

2025Q3: We expect the smart mobile device end market to return to year-over-year growth. The pricing reset of the third quarter is now complete, and we anticipate the return to unit volume growth in this end market. - Sam Franklin(CFO)

Can you clarify the headwinds for the third quarter and year-end outlook? - Joseph Lawrence Moore (Morgan Stanley)

2025Q2: We expect solid growth in automotive and communications infrastructure and data center end markets. Smart mobile is expected to be down for the year, and IoT modestly down. - John C. Hollister(CFO)

Contradiction Point 2

China-for-China Strategy and Semiconductor Manufacturing

It involves the company's strategic positioning and partnerships in the China market, which could impact future revenue streams and geopolitical dynamics.

What's the status of the China for China strategy and the timeline for transferring manufacturing to Zen Semiconductor? - Harlan L. Sur (JP Morgan)

2025Q3: GF's strategy involves transferring technologies like microcontrollers and automotive imaging to Zen Semiconductor in China. There is strong customer demand, and GF is optimistic about the opportunities in the China market. - Sam Franklin(CFO)

What were Q2 utilization rates and expected second-half trends? - Harlan L. Sur (JPMorgan Chase & Co)

2025Q2: Our strategy for China, for China, was really focused on microcontrollers and BCD for power management. - Timothy Graham Breen(CEO)

Contradiction Point 3

Gross Margin Improvement

It involves differing expectations for gross margin improvement, which is a critical financial metric for investors and stakeholders.

What are your expectations for gross margins and utilization in the new year? - Christopher Caso (Wolfe Research)

2025Q3: Gross margins are expected to expand to 26% in Q4, up more than 100 basis points sequentially and more than 200 basis points year-over-year. - Sam Franklin(CFO)

What is the expected gross margin for the end of the year? - Harlan L. Sur (JPMorgan Chase & Co)

2025Q2: We expect gross margins to expand to 25.5% in Q3, up sequentially and year-on-year. - John C. Hollister(CFO)

Contradiction Point 4

Product Launch and Production Timelines

It involves differing expectations for the launch and production timelines of key products, impacting strategic planning and market expectations.

Can you discuss the smart mobile device market and how ASP cuts led to unit share gains in Q4? - Ross Seymore (Deutsche Bank)

2025Q3: We expect the smart mobile device end market is expected to see a sequential decline due to one-time pricing adjustments in the third quarter. However, GF anticipates a return to year-over-year growth as automotive and communications infrastructure end markets continue to perform well. - Sam Franklin(CFO)

What drove Q1 smart mobile device revenue? How do RF front-end margins compare to other mobile products? - Krish Sankar (TD Cowen)

2025Q1: Smart mobile device revenue was impacted by underutilization payment roll-off. There is strong design win momentum in RF front-end, audio, imaging, and haptics, with accretive margins. - Niels Anderskouv(CBO)