GLOBALFOUNDRIES Inc. Q3 FY2025 earnings call

• Business Environment and Technologies: Discussed scaling AI in the data center with optical networking, the advent of physical AI applications, and the importance of geographically diversified semiconductor supply. - Design Wins and Traction: Secured numerous design wins across applications like optical networking, automotive, smart mobile, home/industrial IoT, and satellite communications. - Financial Results: Third quarter revenue was $1.688 billion, gross margin was approximately 26%, operating margin was 15.4%, and net income was $232 million.

Automotive: Represented approximately 18% of the third quarter's total revenue. Increased 20% year-over-year and is on track to approach $1.5 billion in annual revenue in 2025. Smart mobile devices: Represented approximate 45% of the quarter's total revenue. Decreased 13% year-over-year with the first design win for the Civic platform. Home and industrial IoT: Represented approximately 15% of the quarter's total revenue. Decreased 16% year-over-year, impacted by end-of-life aerospace and defense products. Communications infrastructure and data center: Represented approximately 10% of the quarter's total revenue. Increased 32% year-over-year and is expected to grow in the low twenties percentage range for 2025.

• Total GF revenue expected to be $1.8 billion plus or minus $25 million in 2025. - Gross margin expected to be approximately 28.5% plus or minus 100 basis points. - Operating margin expected to be in the range of 16.8% plus or minus 170 basis points. - Diluted earnings per share for the fourth quarter expected to be $0.47 plus or minus $0.05. - Plan to reinvest in the business and return free cash flow to shareholders in 2026.

• Geopolitical risks such as conflicts, tariffs, and export controls affecting semiconductor supply chains. - Dependence on key customers and potential impact of market fluctuations on business performance.

Q: Ross Seymore from Deutsche Bank asked about the core differentiation of GF's silicon photonics business versus peers and the capital and CapEx needs to quintuple the business over five years.

A: Timothy Breen noted GF's early development of silicon photonics, best-in-class device performance, and ecosystem building. Sam Franklin mentioned expected pickup in CapEx in 2026 tied to customer demand and value accretion.

Q: David O'Connor from BNP Paribas asked about the onshoring pipeline and GaN strategy.

A: Timothy Breen discussed eight customer announcements regarding U.S. onshoring with significant spend potential. Sam Franklin and Niels Anderskouv talked about GF's focused GaN strategy on reliable devices and technology differentiation.

Q: Chris Caso from Wolfe Research asked about gross margins and utilization.

A: Sam Franklin explained third quarter gross margin improvement due to mix into accretive end markets and non-wafer technology services, with expectations for continued margin improvement in 2025.

Q: Harlan Sur from JPMorgan asked about TriNet for China strategy and business model.

A: Timothy Breen discussed strong customer traction in China for specific technologies, with local Chinese players also showing interest, and ongoing product development and qualification cycles.

Q: C. J. Muse from Cantor Fitzgerald asked about non-wafer revenue growth and smart mobility outlook.

A: Timothy Breen mentioned non-wafer revenue growth driven by design wins, MIPS acquisition, and pricing reset in smart mobility with potential for growth in 2026.

Q: Krish Sankar from T. B. Cowen asked about wafer shipments and ASPs.

A: Timothy Breen discussed pricing dynamics, mix tailwinds from differentiated technologies, and stable pricing in most markets. Sam Franklin and Niels Anderskouv talked about design wins translating to non-wafer revenue growth.

Q: Joseph Moore from Morgan Stanley asked about capacity utilization and non-wafer revenue expedites.

A: Timothy Breen discussed significant floor space utilization upside and disciplined CapEx based on demand. Sam Franklin and Niels Anderskouv mentioned increasing desire for expedites and growth in non-wafer revenue from design wins and tape-outs