Q2 2026 GLOBALFOUNDRIES Inc. Earnings Call Transcript
Key Points
- GLOBALFOUNDRIES Inc (GFS) delivered strong Q2 2026 results with revenue and non-IFRS gross margin exceeding the high end of guidance, achieving a record gross margin of 29.9%, up 470 basis points year-over-year.
- The communications infrastructure and data center end market grew over 60% year-over-year, driven by strong demand for Silicon Photonics and silicon germanium, with full-year 2026 growth expectations raised to 50-60%.
- GLOBALFOUNDRIES Inc (GFS) secured seven new optical networking design wins in Q2, including engagements with four of the top five optical transceiver players, and expects Silicon Photonics revenue to more than double in 2026.
- The company launched Quantum Technology Solutions, securing a $375 million grant from the US Department of Commerce and four new customer-specific quantum engagements, positioning it as a leader in quantum manufacturing.
- GLOBALFOUNDRIES Inc (GFS) completed strategic acquisitions (Synopsys ARC IP and Potion Technologies IVR team), expanding its IP, software, and custom silicon capabilities, and expects Technology Services revenue to reach the high end of the 10-12% range for 2026.
- The company implemented pricing increases across several technology corridors, expected to be reflected in revenue starting in 2027, and announced its first-ever quarterly dividend, reflecting confidence in future cash generation.
- Smart mobile devices revenue declined 6% year-over-year in Q2, and the company expects a low teens percentage decline for full-year 2026 due to reduced handset forecasts and memory pricing impacts.
- Automotive revenue decreased 13% sequentially and 10% year-over-year in Q2, driven by customer-led shipment timing, though the company maintains a low double-digit growth outlook for the full year.
- Adjusted free cash flow was negative $3 million in Q2, and the company expects a full-year adjusted free cash flow margin of approximately 10%, indicating ongoing capital intensity.
- Operating expenses increased 16% quarter-over-quarter, and the company expects R&D to rise as a percentage of revenue due to integration of recent acquisitions and accelerated investments, which could pressure near-term profitability.
- The company faces capacity constraints in key growth areas like Silicon Photonics and SiGe, with demand oversubscribed through 2027, potentially limiting near-term revenue upside.
- The smart mobile device end market remains a significant portion of revenue (36% in Q2), and its weakness could continue to weigh on overall growth and mix.
Thank you for standing by, and welcome to the GlobalFoundries, Inc. second-quarter fiscal year 2026 financial results. (Operator Instructions) As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Eric Chow, Head of Investor Relations. Please go ahead, sir.
Thank you, operator. Good morning, everyone, and welcome to GlobalFoundries second-quarter 2026 earnings call. On the call with me today are Tim Breen, CEO; and Sam Franklin, CFO. A short while ago, we released GF Second Quarter 2026 financial results, which are available on our website at investors.gf.com, along with today's accompanying slide presentation. This call is being recorded, and a replay will be made available on our Investor Relations web page. During this call, we will present both IFRS and non-IFRS financial measures. The most directly comparable IFRS measures and reconciliations for non-IFRS measures are made available in today's press release and accompanying slides. Please
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