GlobalFoundries Q3 2025: Contradictions in Smartphone Segment, Non-Wafer Revenue, Margins, and Onshoring Pipeline

Date of Call: November 12, 2025

Financials Results

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

Guidance:

• Q4 2025 revenue expected $1.8B ± $25M; non‑wafer revenue ~13% of total.
• Q4 gross margin ~28.5% ±100 bps; Q4 operating margin ~16.8% ±170 bps.
• Q4 operating expenses ex‑share based comp ~$210M ± $10M; share‑based comp ~$63M (≈$16M in COGS).
• Q4 net interest & other income $4M–$12M; income tax expense $40M–$62M (FY effective tax mid‑ to high‑teens).
• Q4 diluted EPS $0.47 ± $0.05.
• End‑market outlook: 2025 automotive mid‑teens growth; comms/data center low‑20s growth; IoT mid‑single‑digit decline; smart mobile low‑double‑digit decline.

Business Commentary:

• Revenue and Gross Margin Growth:
• GlobalFoundries reported third quarter revenue of $1.688 billion, flat over the prior quarter and a 3% decrease year-over-year, with gross profit of $439 million, representing approximately 26% gross margin.

• Growth was driven by strong double-digit percentage year-over-year revenue growth in automotive and communications, infrastructure, and data center end markets, which represented 28% of total third-quarter revenue.

• Silicon Photonics and Optical Networking Expansion:

• Silicon photonics revenue is expected to reach over $200 million in 2025, nearly doubling year-over-year, contributing to a $1 billion-plus run rate business by the end of the decade.

• The growth is driven by the expected transition to co-packaged optics, a substantial market shift due to the need for higher performing pluggable optical transceivers and co-packaged optics adoption.

• Automotive and Design Wins:

• Automotive revenue decreased approximately 17% sequentially but increased 20% from the prior year, reaching 18% of the quarter's total revenue.

• This growth is attributed to new design wins with 12 unique customers, including advanced image sensors, body and chassis MCUs, and motor controllers, reflecting GF's strong performance at auto grade standards.

• Onshoring and Capacity Investments:

• GlobalFoundries is expanding its U.S. manufacturing capabilities with investments to support a 16 billion increase in U.S. manufacturing and advanced packaging, with government support.
• This is part of a broader trend of onshoring and reshoring technologies to the U.S. as customers seek to mitigate geopolitical risks and enhance supply chain resilience.
  
  

  Sentiment Analysis:

  Overall Tone: Positive

  • "GF delivered a strong third quarter with revenue, gross margin, operating margin and earnings per share at the high end of the guidance ranges." Management noted revenue of $1.688B (flat sequential, down 3% YOY) and gross margin expansion both sequentially and YOY, highlighted multiple design wins (nearly 150 in Q3) and raised comms/data center 2025 growth outlook to low‑20s, signaling confidence in mix, margin expansion and secular demand.

Q&A:

• Question from Ross Seymore (Deutsche Bank AG, Research Division): What is GF's core differentiation in silicon photonics vs foundry peers, and what CapEx is required to quintuple the business over 5 years?
  Response: GF's differentiation is decade‑long silicon photonics device and packaging expertise plus ecosystem partners; CapEx will pick up in 2026 focused on wafer and packaging capacity, and further investment will be demand‑driven and capital‑efficient.

• Question from Ross Seymore (Deutsche Bank AG, Research Division): In Q4, what are you assuming for smart mobile sequentially, did ASP cuts buy share, and when will the segment return to YOY growth?
  Response: The prior one‑time pricing adjustments are now in the rearview and caused a low‑double‑digit FY decline in smart mobile; GF expects to regain share and volume over time but cannot promise a clear return to YOY growth in 2026.

• Question from David O'Connor (BNP Paribas, Research Division): What does the U.S. onshoring pipeline look like and can GF support additional high‑volume wins out of its multifab footprint?
  Response: GF has eight announced U.S. onshoring customers representing ~$15–$20B addressable spend, a significant pipeline with ramps largely targeted around 2027+, and a capacity roadmap (with government incentives) to support scaled U.S./EU production.

• Question from David O'Connor (BNP Paribas, Research Division): TSMC exited GaN citing profitability—how is GF's GaN strategy different and how do you address those concerns?
  Response: GF is focused on high‑reliability, differentiated GaN for data center, automotive and infrastructure produced in Burlington (U.S.), leveraging customer demand for U.S. supply and integrated device solutions to drive value.

• Question from Christopher Caso (Wolfe Research, LLC): How should we think about gross margins and utilization into next year given seasonality and need to raise utilization?
  Response: Margin expansion is being driven by mix, non‑wafer services and productivity gains; utilization has trended mid‑80s with a modest pickup expected in Q4, supporting continued margin improvement.

• Question from Christopher Caso (Wolfe Research, LLC): Thoughts on potential consolidation in the mobile RF space (e.g., Skyworks/Qorvo) and impact on GF?
  Response: Consolidation should not materially alter GF's long‑standing relationships or supply/security priorities; partnerships remain strong whether customers consolidate or not.

• Question from Harlan Sur (JPMorgan Chase & Co, Research Division): Given customers returning to normal seasonality, should we expect typical Q1 declines (~10–12%) or more given non‑wafer normalization?
  Response: Too early to provide Q1 guidance; GF's increased end‑market diversification dampens single‑cycle effects, customers expect normal seasonality, and non‑wafer services are a continuing tailwind (Q4 non‑wafer ~13%).

• Question from Harlan Sur (JPMorgan Chase & Co, Research Division): Update on China‑for‑China strategy with Zen Semiconductor—timeline to transfer/qualify/ramp and commercial model?
  Response: GF is localizing specific technologies (MCUs, imaging, power) in Guangzhou to serve China‑in‑China demand; ramps follow standard automotive qualification cycles with strong customer traction, while interim supply runs from GF's global fabs.

• Question from Christopher Muse (Cantor Fitzgerald & Co., Research Division): Non‑wafer revenue is set to grow ~20% in 2025—what's driving it and should we expect similar growth in 2026?
  Response: Growth is driven by increased tape‑outs/design wins, reticles, NRE, technology services and emerging IP/licensing (MIPS); management expects this category to continue expanding as design activity and services grow.

• Question from Christopher Muse (Cantor Fitzgerald & Co., Research Division): After mobile pricing resets and expected unit share gains, can smart mobile turn positive in calendar 2026?
  Response: Pricing resets are complete (no further step‑downs expected) and should enable volume/share gains; differentiated technologies (e.g., CBIC SiGe) support long‑term mobile growth, but 2026 remains uncertain.

• Question from Sreekrishnan Sankarnarayanan (TD Cowen, Research Division): Wafer shipments up 4% Q‑o‑Q on flat revenue—what does this imply for blended ASPs and ASP ex‑mobile?
  Response: ASP pressure was concentrated in a limited set of smart mobile customers where GF took proactive pricing to gain share; across other sole‑source, higher‑margin end markets mix and services offset ASP effects, keeping margins constructive.

• Question from Sreekrishnan Sankarnarayanan (TD Cowen, Research Division): On the Silicon Labs expanded partnership—is this share gain from other foundries or new chip designs?
  Response: It's primarily share gain and a shift toward U.S. sourcing for Silicon Labs rather than purely new designs; it's both a capacity and deep technology partnership.

• Question from Joseph Moore (Morgan Stanley, Research Division): Can you quantify capacity headroom by region and support for additional U.S./EU deals (e.g., Malta constraints)?
  Response: GF has substantial in‑fab floor‑space headroom overall (Malta has significant room; Dresden requires modest expansion), can support customer ramps with disciplined, incentive‑backed CapEx and relatively short time‑to‑market for growth.

• Question from Joseph Moore (Morgan Stanley, Research Division): Are you seeing more expedite fees from data center customers and anything new on that front?
  Response: There is a modest increase in expedites and tightening in differentiated capacity corridors; rising tape‑outs and design wins are lifting reticle/non‑wafer revenue, reflecting stronger near‑term demand in key areas.

Contradiction Point 1

Smart Mobile Device Segment Performance

It pertains to the company's performance and strategy in the smartphone segment, which is a significant revenue contributor.

How do you see the smart mobile device segment performing in Q4? How did ASP cuts impact unit share gains? - Ross Seymore (Deutsche Bank AG, Research Division)

2025Q3: The ASP cuts were a short-term adjustment, and GF expects share gains in the smartphone segment. The focus is on differentiated technologies in areas like RF and audio for growth in 2026. - Sam Franklin(CFO)

What headwinds are you facing in Q3, and do they persist beyond the quarter? - Joseph Lawrence Moore (Morgan Stanley)

2025Q2: We expect solid growth in automotive and communications infrastructure and data center end markets, but smart mobile is down for the year. - John C. Hollister(CFO)

Contradiction Point 2

Non-Wafer Revenue Growth

It involves the contribution of non-wafer revenue to the company's growth and financial performance, which is a key strategic focus.

Can you explain what is driving non-wafer revenue growth? - Christopher Muse (Cantor Fitzgerald & Co., Research Division)

2025Q3: Non-wafer revenue this quarter was $232 million, up 6% from the prior quarter. We expect continued progression, and our guidance implies non-wafer revenue will increase by 27% year-over-year in 2025. - Sam Franklin(CFO)

What was the non-wafer revenue’s contribution to Q4 sales, and are you comfortable with the 30% gross margin exit rate? - Vivek Arya (BofA Securities)

2025Q2: Non-wafer revenue should be around 12% to 13% of the mix in Q4. We aim to improve gross margin driven by better product mix, non-wafer revenue, and lower depreciation. - John C. Hollister(CFO)

Contradiction Point 3

Gross Margin Trends and Expectations

It involves differing expectations regarding gross margin trends and drivers, which are critical for financial forecasting and investor confidence.

Could you clarify gross margin trends and next-year expectations, with March quarter seasonality in mind? - Christopher Caso (Wolfe Research, LLC)

2025Q3: Gross margin has been improving due to increased non-wafer technology services and differentiated end markets. - Sam Franklin

What is the outlook for ASPs for the remainder of the year, and what measures are being taken to offset ASP declines and maintain gross margins? - Mark Lipacis (Evercore ISI)

2025Q1: Gross margins in Q1 reflect a mid-single-digit ASP decline due to underutilization payment impacts and mix changes. - John Hollister

Contradiction Point 4

U.S. Onshoring Demand and Pipeline

It highlights differing perspectives on the demand and pipeline for U.S. onshoring, which could impact strategic planning and investment decisions.

Can you discuss the potential demand and project pipeline for U.S. onshoring and the ability to handle high-volume orders with the current manufacturing capacity? - David O'Connor (BNP Paribas, Research Division)

2025Q3: There is strong demand and a significant pipeline for U.S. onshoring, focusing on capacity and technology differentiation. - Timothy Breen

Can you address the tariff issue's impact on revenue and whether GF's manufacturing footprint provides better visibility into demand or opportunities to gain market share? - Mark Lipacis (Evercore ISI)

2025Q1: Inbound interest in U.S. sourcing is strong, with customers considering further U.S. content, and this could be a long-term tailwind for GF. - Timothy Breen