GLOBALFOUNDRIES Inc. Q1 FY2025 earnings call

Business Environment

• Navigating geopolitical tension and trade uncertainties, GF delivered solid financial results in Q1 at the high end of guidance ranges for revenue, gross margin, and EPS.

Design Wins and End Markets

• Nearly 90% of design wins over the last four quarters were sole-sourced. In Automotive, grew year-on-year with new design wins on 130BCD and 40ESF 3 Autopro platforms. In Smart mobile devices, saw good commercial traction and new design wins in front end, display, imaging, etc. In IoT, Q1 revenue returned to year-on-year growth with design wins in WiFi 7, cellular IoT, medical consumer devices, etc. In Communications infrastructure and data center, grew year-on-year with design wins in optical networking, Satcom, etc.

Technology Innovation

• In Optical Networking, leading in co-packaged optics and serving pluggables market with 45 SPCLO solution. In Satcom, enabling rapid deployment of commercial satellites on various platforms. In generative AI, 14-nanometer technology plays role in inference workloads. In Automotive, ramping opportunities and closing new design wins on relevant platforms.

First quarter revenue was $1.585 billion, a 13% decrease sequentially but a 2% year-over-year increase. Wafer revenue from end markets accounted for approximately 88% of total revenue, with non-wafer revenue making up about 12%. Smart mobile devices represented approximately 37% of the quarter's total revenue, with first quarter revenue decreasing ~21% sequentially and ~14% from the prior year period. Home and industrial IoT markets represented approximately 21% of total revenue, with first quarter revenue decreasing ~8% sequentially and increasing ~6% from the prior year period. Automotive represented approximately 19% of total revenue, with first quarter revenue decreasing ~25% sequentially and increasing ~16% from the prior year period. Communications infrastructure and data center end market represented approximately 11% of total revenue, with first quarter revenue increasing ~2% sequentially and ~45% over the prior year period.

Second Quarter 2025

• Expect total GF revenue to be $1.675 billion ± $25 million. Non-wafer revenue expected to be approximately 10% of total revenue. Gross margin expected in the range of 25% ± 100 basis points. Excluding share-based compensation, total operating expenses expected to be $185 million ± $10 million. Operating margin expected in the range of 14% ± 180 basis points. Diluted earnings per share expected to be $0.36 ± $0.05.

Full Year 2025

• Expect OpEx to be roughly in line with that of 2024. CapEx expectations unchanged from last earnings call. Non-IFRS effective tax rate expected in the high-teens percentage range.

• Uncertainties associated with global supply chain and end market demand dynamics continuing into the second half of 2025 due to trade and tariff disputes. - Tariff-related activities may cause certain costs across the semiconductor supply chain to rise, with unknown impacts on demand and supply chain dynamics.

Q: Mark Lipacis asked about framework for thinking about tariffs on the revenue side, percentage of revenues manufacturable in multiple geographies, and taking share from competitors.

A: Timothy Breen said short-term impacts from tariffs not seen in Q1 and Q2, inbound interest in specific sourcing choices in U.S. seen across sectors, and manufacturing footprint has majority of technologies qualified in at least two fabs.

Q: Mark Lipacis followed up on ASPs.

A: John Hollister said underutilization payments contributed to ASP decline, expect ASPs to decline mid-single digits for the year due to mix, and levers like better utilization, roll-off of depreciation costs, structural cost improvements, and positive mix on gross margin.

Q: Christopher Muse asked about growth in comms infra and data center business.

A: Timothy Breen and Niels Anderskouv discussed growth in silicon photonics, co-packaged optics momentum, and strong design wins in Satcom.

Q: Christopher Muse followed up on Auto recovery and other end markets.

A: Timothy Breen discussed smart mobile devices expected to be flattish, IoT expecting growth from core players, and bullish on Automotive with share gains and new design wins.

Q: Vivek Arya asked about 30% gross margin target.

A: Timothy Breen and John Hollister discussed factors like ramp of differentiated technologies, customer depth, and manufacturing footprint allowing margin expansion, expecting to exit 2025 at 30% gross margin.

Q: Ross Seymore asked about second quarter guide by end markets and inorganic strategy.

A: John Hollister said fairly consistent pattern, and Timothy Breen discussed M&A strategy focused on differentiated essential chip portfolio and meeting customer needs.

Q: Christopher Caso asked about underutilization charge payments and tariff impact.

A: John Hollister said underutilization charges largely behind us, and John Hollister and Timothy Breen discussed tariff impact analysis and minimal annualized impact.

Q: Quinn Bolton asked about second quarter gross margin and CPO volume ramp.

A: John Hollister said mix driving second quarter gross margin, and Timothy Breen and Niels Anderskouv discussed CPO volume ramp expected to occur with industry evolution and customer announcements.

Q: Krish Sankar asked about IoT growth and smart mobile revenue decline.

A: Niels Anderskouv discussed IoT design wins and positive momentum, and John Hollister discussed smart mobile revenue decline due to underutilization payments and seasonality.