GlobalFoundries Inc. Ordinary Shares 2026 Q2 Earnings Call

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's 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 replay will be made available on our investor relations webpage. 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 note that these financial results are unaudited and subject to change. Certain statements on today's call may be deemed to be forward-looking statements.

Such statements can be identified by terms such as believe, expect, intend, anticipate, and may, or by the use of the future tense. You should not place undue reliance on forward-looking statements. Actual results may differ materially from these forward-looking statements. We do not undertake any obligation to update any forward-looking statements we make today. For more information about factors that may cause actual results to differ materially from forward-looking statements, please refer to the press release we issued today, as well as risks and uncertainties described in our SEC filings, including in sections under the caption Risk Factors in our annual report on Form 20-F, and in any current reports on Form 6-K furnished with the SEC. In terms of upcoming events, we will be participating in a fireside chat at the Goldman Sachs Communacopia + Technology Conference in San Francisco on September eighth.

We will begin today's call with Tim providing a summary update on the business environment and technologies, followed by Sam, who will provide details on our second quarter results and third quarter guidance. We will open the call for questions with Tim and Sam. We request that you please limit your questions to one with one follow-up. I'll now turn the call over to Tim.

Thank you, Eric, and welcome everyone to our second quarter 2026 earnings call. GLOBALFOUNDRIES delivered strong results in the second quarter, with revenue and non-IFRS profitability metrics at or above the high end of our guidance ranges. The team continued its rigorous execution, ramping critical technology corridors where we see accelerating customer demand and the opportunity to create and capture value. In particular, our comms infrastructure and data center end market delivered over 60% year-over-year growth in Q2, driven by continued demand for optical networking applications across our silicon photonics and silicon germanium platforms. This marked one of the fastest quarters of year-over-year revenue growth for an end market in our company history. We believe our value proposition has never been more in demand. Our differentiated technology portfolio and resilient global manufacturing footprint continue to strengthen our position with customers.

We are seeing meaningful momentum as we execute our strategy and drive towards the long-term targets we shared at this year's Investor Day. Let me now update you on three key developments in the quarter that are accelerating our strategic path. One, quantum technology solutions. Two, optical networking and power opportunities in the AI data center, and three, IP, software, and custom silicon. Starting with quantum, a paradigm shift that will define the next chapter of high-performance computing over the coming decade and beyond. In May, we launched Quantum Technology Solutions, a new dedicated team and set of capabilities within GLOBALFOUNDRIES that will enable the quantum industry to move from prototypes to high-volume production. Just as CPUs, GPUs, and AI ASICs define today's compute paradigm, we believe quantum processing units, or QPUs, will be an essential part of tomorrow's.

Advanced semiconductor manufacturing, built securely here in the U.S., will be essential for the scaling of this technology. Establishing the right production capability is now the critical enabler. The ability to manufacture and integrate complex quantum devices with consistency, yield, and scale. This is precisely where GLOBALFOUNDRIES wins. Our quantum strategy is qubit agnostic, meaning our manufacturing platforms are expected to support a broad range of leading modalities, including superconducting, trapped ion, photonic, topological, and spin. Our proven platforms like FDX provide the cryogenic CMOS foundation, and we are extending our advanced packaging capabilities into the cryogenic regime to enable the 3D heterogeneous integration that these systems require. As highlighted in our recent announcements, we are working closely with eight of the world's leading quantum computing players, including partnerships with PsiQuantum, Quantinuum, and Quantum Motion as well as new endorsements from the quantum arms of large hyperscalers.

Since launching just three months ago, we have already embarked on four new customer-specific quantum engagements with accelerating commercial momentum ahead. Advancing our quantum capabilities is anchored by an expected $375 million grant from the U.S. Department of Commerce to accelerate the research, development, and build-out of quantum manufacturing capacity in the U.S. This critical partnership with the U.S. government underscores why quantum is not only a business opportunity, but also a national priority. We are only in the early stages of the nascent quantum opportunity. Over the next one to three years, we expect to generate quantum-related revenue largely through engineering engagements with customers, reported within our technology services revenue. As customer platforms qualify and move into volume production, we expect quantum-related revenue from manufacturing services to ramp towards the end of the decade.

Ultimately, our early momentum and customer proof points in this emerging area perfectly encapsulate the outsized value GLOBALFOUNDRIES provides: a strongly differentiated technology, deep customer partnerships, and a global secure manufacturing footprint. Let me turn to AI Data Center, where we continue to build momentum through new customer design wins and increasing engagement across the ecosystem. In the second quarter alone, we secured seven new optical networking design wins with customers across both pluggable transceiver suppliers as well as major hyperscaler and networking players. Silicon photonics and silicon germanium each play critical roles in optical networking systems, and combined with data center power, represent three high-quality, long-term secular growth drivers, which underscore our conviction in the ability to grow in the data center for years to come. I will walk through an update on each of these.

For silicon photonics, let's start with pluggables, which contributes the vast majority of our silicon photonics revenue today. Thanks to our differentiated technology and advanced 300-millimeter photonics manufacturing footprint, we are actively engaged with four of the top five optical transceiver players. Given our strong capabilities and robust capacity ramp, we now expect our silicon photonics revenue, as reported within the comms infrastructure and data center end market, to more than double in 2026 compared with the year prior. Beyond just this year, we are progressing well on our multi-year roadmap to advance the enablement of modules delivering 1.6T, 3.2T, and beyond. High volume manufacturing of our 200G per lane technology is underway. We have already demonstrated 400G capability and solutions for even greater bandwidth are in development.

In addition to our robust pluggable offerings today, we see significant customer interest in our SCALE platform, the industry's first OCI MSA-compatible solution for near-packaged and co-packaged optics. We currently have seven active engagements with leading companies on our SCALE platform, and customer feedback on the merits of our technology and manufacturing capabilities has been very positive. We are already delivering tangible results for our customers today, having taped out a SCALE-related design win in Q2, and we expect to tape out another in Q3. Specifically for near-packaged optics, we see NPO as an important application and exciting opportunity ahead of the broader adoption of co-packaged solutions. Because near-packaged and co-packaged optics are built on a common photonic IC, and because many components of GLOBALFOUNDRIES SCALE solution support both near-packaged and co-packaged optics, our customers benefit from the same underlying platform.

As a result, we expect GLOBALFOUNDRIES to benefit from the silicon photonics opportunity regardless of the rate and pace of various form factor adoptions by our customers. As we increase investments into our silicon photonics capabilities, the importance of government partnerships continues to grow. Last week, GLOBALFOUNDRIES entered into a letter of intent with the U.S. Department of Commerce for a $300 million award to accelerate the development of next-generation silicon photonics technologies in the U.S. The funding will support advanced optical materials, modulated technologies, and packaging innovations that will enable next-generation near-packaged and co-packaged optics architectures, building directly on GLOBALFOUNDRIES's SCALE platform. The endorsement from our partners across the industry has reinforced our strategic conviction, including the world's top XPU providers, hyperscalers, AI connectivity leaders, and ecosystem partners.

We are pleased to take a central role in advancing optical innovation and development in the U.S., and believe this recognition validates the strategic importance of silicon photonics, the excellent relationship we enjoy with our partners, and GLOBALFOUNDRIES's leadership in these technologies. Another driver of data center momentum is high-performance silicon germanium, which powers the analog and mixed-signal electronics at the heart of optical interconnects for AI and cloud infrastructure. Our differentiated SiGe platform delivers the bandwidth, signal integrity, and power efficiency required for increasingly demanding optical networking applications, making it strongly complementary to our silicon photonics portfolio. During the quarter, we secured multiple new SiGe TIA and driver design wins across networking customers. Demand for SiGe remains strong, and we are oversubscribed throughout 2027. We are actively expanding capacity in our Vermont facility to support this demand. We believe SiGe represents another key growth opportunity for GLOBALFOUNDRIES.

Combined with our leadership in silicon photonics, GLOBALFOUNDRIES offers a uniquely differentiated set of technologies that help address the bandwidth, power efficiency, and signal integrity requirements of next-generation AI systems. The momentum we are seeing today reinforces our belief that we will be a key leader in optical networking for years to come. The third strong opportunity we see in the AI data center relates to power. In July, we closed the strategic acquihire of the custom power team from Photeon Technologies in Europe, bringing an experienced design team focused on integrated voltage regulators, or IVRs. Together with our BCD, GaN, and integrated inductor capabilities, IVR further strengthens our roadmap depth in power technologies and expands our serviceable market in one of the fastest-growing opportunities within AI data centers.