GlobalFoundries Comms Infra/DC Momentum and Margin Progress is Encouraging, but Smart Mobile Devices Weakness and Higher 2H Opex Keep NT Risk/Reward Balanced; Reit Neutral

Research evidence excerpt

J P M O R G A N

North America Equity Research

05 August 2026

GlobalFoundries

Comms Infra/DC Momentum and Margin Progress is

Encouraging, but Smart Mobile Devices Weakness

and Higher 2H Opex Keep NT Risk/Reward

Balanced; Reit Neutral

Neutral

GFS, GFS US

Price (04 Aug 26):$52.02

▼Price Target (Dec-27):$57.00

Prior (Dec-26):$70.00

GlobalFoundries (GFS) delivered a largely in-line 2Q and 3Q guide, with the

company’s growth story becoming increasingly centered around the mix shift

toward Data Center (DC), Home/Industrial & IoT, Technology Services, and other

markets, partially offset by memory-related unit volume pressure in Smart Mobile.

Revenues increased to $1.786B (+9% Q/Q, +6% Y/Y) in Q2, a touch above Street

expectations. However, the real strength came from margins, with GMs expanding

+90bps Q/Q to 29.9% (+140bps above Street at ~28.5%), marking a meaningful

step toward the company’s longer-term margin framework and reaching the ~30%

GM level well ahead of prior expectations. From an end-market perspective, the

biggest positive was the sharp acceleration in Comms Infra & DC (+20% Q/Q,

+62% Y/Y), with management raising its CY26 growth outlook to +50-60% Y/Y,

up from the prior framework of high-30% Y/Y growth, driven by strong demand

for silicon photonics (SiPho) and silicon germanium (SiGe). On this front,

management noted that both SiPho and SiGe were increasingly important, yet

underappreciated parts of the optical networking story, with the company now

expecting its SiPho revenues to more than double in CY26 (supported by

engagements with 4 of the top 5 optical transceiver players, growing traction

around its SCALE optical module solution for NPO/CPO applications, etc.), and

demand for SiGe (TIA/drivers) now being oversubscribed throughout CY27.

Home & Industrial IoT was also revised higher, with management now expecting

+10-15% Y/Y growth in CY26, up from its prior outlook of ~MSD% growth due

to improving demand signals and normalized inventory levels. Auto, on the other

hand, came in softer than expected during the quarter ( -13% Q/Q, -10% Y/Y) due

to customer shipment timing, but management reiterated its low-double-digit

…