GlobalFoundries (NASDAQ:GFS) Chief Financial Officer Sam Franklin said the company is positioning itself around data center demand, physical AI, silicon photonics, supply-chain diversification and custom silicon as it looks to expand revenue and margins over the next several years.
Speaking with JPMorgan semiconductor analyst Harlan Sur at the firm’s 54th Annual Technology, Media and Communications Conference, Franklin outlined the key messages from GlobalFoundries’ recent analyst day, including a long-term financial model targeting higher gross margins, diversified growth and shareholder returns.
GlobalFoundries Points to Structural Margin Improvement
Franklin said the company used its investor day, its first in a little more than three years, to show how it has been repositioning its business to align with semiconductor “mega trends” expected to shape demand over the next five to 10 years.
Those themes include data center growth, physical AI and secure semiconductor manufacturing across multiple geographies. Franklin said GlobalFoundries has an “underappreciated” role in data centers today through silicon photonics and silicon germanium applications, with further opportunities in co-packaged optics and power delivery.
He also said physical AI plays into the company’s portfolio because such systems need to “sense, think, act” and communicate. In addition, Franklin emphasized GlobalFoundries’ manufacturing presence on three continents and increasing technology fungibility across sites as a differentiator amid supply-chain concerns.
On the question of whether recent strength is structural or cyclical, Franklin pointed to first-quarter revenue growth of about 3% year over year and gross margin expansion of 510 basis points. He said the improvement reflected mix evolution and end-market diversification. GlobalFoundries guided second-quarter revenue to about $1.76 billion at the midpoint, up roughly 4% year over year, with gross margin guidance of 28.5%.
Financial Model Targets Higher Margins and Growth
Franklin said GlobalFoundries has set targets to reach a 40% gross margin exiting 2028 and a longer-term 45% gross margin. He described the company’s longer-term model as having two phases, with the second phase depending more heavily on areas such as co-packaged optics, advanced packaging and custom silicon.
Sur noted that the company’s model includes a 10% to 12% revenue compound annual growth rate, $4 of earnings power exiting 2028 and $6 of longer-term earnings power. Franklin said the company stress-tested its assumptions across the full model, including top-line growth, costs, productivity and design-win momentum.
Franklin cited several end-market assumptions supporting the model:
- Communications infrastructure and data center revenue grew nearly 30% last year and 32% year over year in the first quarter, with expectations for high-30% growth in 2026.
- Automotive revenue has grown 14 times over the past five years, with GlobalFoundries modeling low-double-digit growth.
- IoT is expected to grow in the mid-teens through the cycle, supported by capabilities from MIPS and RISC-V.
- Smart mobile, historically the company’s largest end market, is modeled as flat rather than a growth driver.
Franklin said mix could contribute 5 to 6 points of gross margin improvement as higher-growth end markets increase their contribution. He also said operating expenses are expected to grow, but at roughly half the rate of revenue, with research and development becoming a larger share as GlobalFoundries adds capabilities such as RISC-V and MIPS.
Silicon Photonics, Advanced Packaging and MIPS in Focus
Silicon photonics was a major topic of the discussion. Franklin said GlobalFoundries has invested close to $1 billion in photonics capability over roughly a decade and is one of the few photonics foundries with both 200mm and 300mm capability. He said the company saw silicon photonics double last year and expects it to double again this year, driven by pluggable optical transceivers.
Sur said GlobalFoundries has laid out a path from $200 million of silicon photonics revenue to a $1 billion run rate exiting 2028 and ultimately $2 billion in 2030. Franklin said co-packaged optics is expected to become a more meaningful contributor in the late-2028 to early-2029 timeframe.
On advanced packaging, Franklin said GlobalFoundries has been investing in wafer-to-wafer and die-to-wafer bonding, including qualified silicon photonics solutions for PIC-to-EIC bonding. He also pointed to RF applications, including bonded solutions for 9SW technologies, and early-stage development of silicon germanium on FDX.
Franklin also discussed the acquisition of MIPS, saying it broadens GlobalFoundries’ service offering and brings the company into customer discussions earlier than a traditional foundry role would. He said MIPS is currently principally an IP licensing and software revenue business but is expected to move toward more custom silicon over time. GlobalFoundries has set a target of reaching $1 billion by 2030 for that business.
Design Wins and End-Market Diversification
GlobalFoundries exited calendar 2025 with 500 new design wins, 95% of which were sole-sourced to the company, according to Sur. Franklin said IoT accounted for about 200 of those wins, while the remainder was relatively evenly split across automotive, communications infrastructure and data center, and smart mobile.
Franklin also highlighted the company’s multi-year, multi-billion-dollar partnership with Renesas. He said the partnership reflects GlobalFoundries’ technology capabilities, including BCD, GaN and microcontroller-related offerings, as well as its ability to support resilient semiconductor supply chains through manufacturing in the U.S., Dresden, Germany, and Singapore.
Franklin said smart mobile devices accounted for well over 50% of revenue five years ago, but only 34% in the first quarter of 2026, the lowest share in the company’s history, even as enterprise revenue grew. He said communications infrastructure and data center revenue rose 32% year over year in the first quarter, while automotive grew about 24%. IoT was softer in pockets during the quarter, but Franklin said tape-out momentum remains encouraging.
Dividend and Capital Returns
GlobalFoundries also announced its first quarterly dividend at its analyst day. Franklin said the $0.12-per-share dividend, or about $0.48 annually, represents roughly $270 million of annual distribution. The company also set a target to return up to 50% of adjusted free cash flow after investments through a combination of dividends and buybacks.
Franklin said GlobalFoundries bought back about $400 million of shares in the first quarter, before the formal capital return policy was in place. He said the company has $4 billion of cash, $1 billion of incremental liquidity and less than 1x gross debt, which he said gives it the balance-sheet flexibility to support capital allocation over multiple years.
About GlobalFoundries (NASDAQ:GFS)
GlobalFoundries, Inc (NASDAQ: GFS) is a leading contract semiconductor manufacturer that provides wafer fabrication and related services to semiconductor companies and systems manufacturers. The company operates as a pure-play foundry, producing integrated circuits across a range of process technologies for customers in markets such as automotive, communications, consumer electronics, industrial, and aerospace. Its service offering spans process development, manufacturing, test and packaging support, and design enablement including process design kits (PDKs) and intellectual property (IP) libraries to help customers bring designs to production.
GlobalFoundries focuses on a portfolio of differentiated and specialty process nodes, offering technologies for radio-frequency (RF) and wireless, analog and mixed-signal, power management, embedded non-volatile memory, and silicon-on-insulator (SOI) process families.
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