GLOBALFOUNDRIES Inc. Q4 FY2025 earnings call

Management Statement and Operational Highlights:

• Technology Differentiation: In 2025, made strides in silicon photonics (acquired AMF and InfiniLink), physical AI (acquired MIPS and Synopsys ARC), and gallium nitride (licensing agreement with TSMC).
• Customer Partnerships: Secured over 500 design wins in 2025, broadened customer base including with Apple, Cirrus Logic, Navitas, and onsemi.
• Diversified Footprint: Invested $16B in U.S. and EUR 1.1B in Europe, making technologies available on all continents.
• Megatrends: Focus on AI data centers, physical AI, and diversified supply chain; silicon photonics revenue doubled in 2025 with plans to reach $1B run rate by 2028.

Segment Performance:

• Smart mobile devices: Represented approximately 36% of fourth quarter total revenue and 39% of full year 2025 revenue. Q4 revenue declined ~13% sequentially and ~11% from prior year; full year 2025 revenue decreased 12% year-over-year, principally due to GF-initiated one-time pricing adjustments with mobile customers.
• Automotive: Approximately 23% of fourth quarter total revenue and 21% of full year 2025 revenue. Q4 revenue increased ~40% sequentially and 3% year-over-year; full year 2025 revenue grew ~17% year-over-year to a record $1.4 billion.
• Home and Industrial IoT: Approximately 17% of quarter's total revenue and 18% of full year revenue. Q4 revenue increased ~17% sequentially and decreased 15% year-over-year; full year home and industrial IoT revenue declined 6% year-over-year, driven by end of life of certain aerospace and defense products.
• Communications infrastructure and data center: Approximately 12% of quarter's total revenue and 11% of full year revenue. Q4 revenue, including silicon photonics, increased ~29% sequentially and 32% year-over-year; full year 2025 revenue grew 29% year-over-year, driven by strong momentum in optical networking, silicon photonics and satellite communications.

Guidance:

• First quarter 2026: Expect total revenue $1.625B ±$25M, gross margin ~27% ±100bps, operating margin ~13.2% ±180bps, diluted EPS ~$0.35 ±$0.05.
• Full year 2026: Non-IFRS net CapEx 15%-20% of revenue, free cash flow margin ~10% of revenue, driven by strong customer demand in capacity corridors like silicon photonics and advanced packaging.

Risks:

• Factors causing actual results to differ from forward-looking statements, including geopolitical tensions, tariffs, export controls, and uncertainties in market demand affecting semiconductor supply chain.

Question and Answer: Q: Mehdi Hosseini asked about silicon photonics acquisitions and strategy.

A: Timothy Breen responded on leveraging acquisitions to strengthen silicon photonics technology, enablement, and global footprint, expecting continued growth with plans to reach $1B run rate by 2028.

Q: Mehdi Hosseini asked about quantum compute strategy.

A: Timothy Breen mentioned GF's partnerships and solutions for various quantum modalities, expecting more announcements and role in quantum industrialization.

Q: Ross Seymore asked about supply side and CapEx.

A: Timothy Breen and Sam Franklin discussed strong demand in differentiated technologies, accretive CapEx investments, and government support aiding capacity expansion.

Q: Mark Lipacis asked about customer visibility and value chain.

A: Timothy Breen noted increased visibility across end markets, strong data center visibility, and growth in automotive and IoT with design wins and product transitions.

Q: Christopher Muse asked about acquisitions and margin impact.

A: Sam Franklin discussed incremental revenues from acquisitions, margin accretiveness, and multiyear opportunities with MIPS and AMF.

Q: Sreekrishnan Sankarnarayanan asked about wafer volumes and ARM competition.

A: Timothy Breen spoke about improved pricing environment and customer demand driving wafer volume growth, emphasizing customer-driven optionality over competition with ARM.

Q: Timothy Arcuri asked about non-wafer revenue and gross margin.

A: Sam Franklin discussed non-wafer revenue range and its accretive margin contribution, with expectations of continued margin expansion through mix shift and productivity improvements.