Summary of GlobalFoundries Conference Call Company Overview - **Company**: GlobalFoundries - **Industry**: Semiconductor Foundry - **Position**: Top five foundry globally with a unique geographical footprint [3][4] Core Strategies and Differentiation - **Technology Focus**: Emphasis on analog mixed signal content and process technologies ranging from 12nm to 180nm [4] - **Geographical Footprint**: Operations in Singapore, Dresden (Germany), and Upstate New York (Malta) with a recent "China for China" strategy to partner with local suppliers [5][6][27][28] - **End Market Coverage**: - 40% revenue from smart mobile devices - Strong automotive franchise with expected mid-teens growth in 2025 - Growing IoT business and robust activity in comms infrastructure and data centers [6][19][20] Market Dynamics and Geopolitical Considerations - **Geopolitical Tensions**: GlobalFoundries is well-positioned due to its localized operations in major regions, which enhances customer interest amid tariff policies [12][13] - **Supply Chain Assurance**: Focus on cross fab fungibility to optimize capacity needs and ensure supply chain diversity [10][14][15] Financial Performance and Growth Outlook - **Q2 Results**: Continued strength in automotive and smart mobile markets; high teens growth expected in comms infrastructure and data centers [19][20][21] - **Design Wins**: Achieved nearly 200 design wins in Q2, indicating strong future growth potential [22] - **Automotive Market Growth**: Revenue in automotive increased from $100 million in 2020 to $1.2 billion last year, with expectations for continued growth [24][36] Key End Markets and Innovations - **Silicon Photonics**: Expected to generate approximately $200 million in revenue, with significant growth tied to AI infrastructure [31][32] - **Automotive Content Growth**: Anticipated increase in silicon content per vehicle from $500 to $1,500 over the next few years, driving revenue diversification [36][38] Capital Expenditure and Utilization - **CapEx Outlook**: Flat CapEx expected this year, with potential increases in 2026 based on demand signals [50][51] - **Utilization Rates**: Current utilization in the low 80s, with room for improvement to enhance gross margins [47][48] Competitive Landscape - **Competitors**: TSMC is recognized as a strong competitor, but GlobalFoundries believes its unique advantages in technology and footprint will allow it to thrive [41][43] Conclusion - GlobalFoundries is strategically positioned to capitalize on growth opportunities in the semiconductor industry, particularly in automotive, IoT, and data center markets, while navigating geopolitical challenges and ensuring supply chain resilience. The company is focused on enhancing its technological capabilities and expanding its market presence through strategic partnerships and innovations.

Group 1 - GlobalFoundries Inc. (GFS) and Lattice Semiconductor (LSCC) are being compared for their value to investors, with GFS currently having a Zacks Rank of 2 (Buy) and LSCC at 4 (Sell) [3] - GFS is likely experiencing an improvement in its earnings outlook compared to LSCC, which is a significant factor for value investors [3] - Value investors analyze various traditional metrics to assess whether a company is undervalued, including P/E ratio, P/S ratio, earnings yield, and cash flow per share [4] Group 2 - GFS has a forward P/E ratio of 19.70, while LSCC has a significantly higher forward P/E of 58.38, indicating that GFS may be more attractively priced [5] - The PEG ratio for GFS is 0.85, suggesting a favorable valuation relative to its expected earnings growth, whereas LSCC has a PEG ratio of 1.69 [5] - GFS's P/B ratio is 1.56, compared to LSCC's much higher P/B of 12.15, further indicating GFS's relative undervaluation [6] - Based on these valuation metrics, GFS holds a Value grade of B, while LSCC has a Value grade of F, making GFS the more appealing option for value investors [6]

Core Viewpoint - GlobalFoundries has established a partnership with a local Chinese foundry to enhance its "China for China" strategy, aiming to provide reliable supply for its customers in mainland China [1] Group 1: Partnership and Strategy - The collaboration with the Chinese foundry will focus on automotive-grade CMOS technologies, targeting semiconductor demand from both domestic and international companies in China [1] - Customers will benefit from GlobalFoundries' automotive-grade process technology and manufacturing expertise without needing to redevelop and tape out at a new foundry [1] - The CEO noted that many customers are adopting a dual-source model, producing locally in China while leveraging GlobalFoundries' global reach for overseas markets [1] Group 2: Financial Performance - In Q2 of FY2025, GlobalFoundries reported revenue of $1.688 billion, a year-over-year increase of 3.7% and a quarter-over-quarter increase of 6%, slightly above market expectations [2] - The net profit for the same quarter was $228 million, reflecting a year-over-year growth of 47.1% and a quarter-over-quarter increase of 8.57% [2] - Adjusted earnings per share were $0.42, surpassing market expectations of $0.35 [2] Group 3: Future Outlook and Investments - The company expressed a cautious outlook for Q3, projecting revenue of $1.68 billion, which is below Wall Street's average expectation of $1.79 billion due to weak demand in consumer electronics [3] - GlobalFoundries is increasing its investment plan to $16 billion, with $1 billion allocated for capital expenditures and $3 billion for R&D in emerging chip technologies, including those for electric vehicles and AI servers [4] - The company has also announced a strategic acquisition of MIPS, which will enhance its customizable IP product offerings and differentiate its process technology through IP and software capabilities [4]

Core Insights - GlobalFoundries has entered into a deeper collaboration agreement with Apple to advance semiconductor technologies and strengthen U.S. manufacturing [1][2] - The partnership aims to accelerate investments at GlobalFoundries' semiconductor manufacturing facility in Malta, New York, focusing on power-efficient and AI-enabling technologies [2][3] - This agreement marks a significant milestone in the decade-long partnership between GlobalFoundries and Apple, emphasizing the importance of U.S. semiconductor manufacturing and supply chain resilience [3] Investment and Commitment - Apple has committed $600 billion to the U.S. over the next four years, highlighting its dedication to American innovation and job creation [3] - GlobalFoundries plans to invest $16 billion to expand semiconductor manufacturing and advanced packaging across its facilities in New York and Vermont [3] Strategic Importance - The collaboration is aligned with U.S. administration policies that prioritize American leadership in AI and domestic semiconductor manufacturing for national security [3] - GlobalFoundries is recognized as a leading manufacturer of essential semiconductors, serving various high-growth markets including automotive and smart mobile devices [4]

Core Insights - GlobalFoundries (NASDAQ: GFS) reported a positive Q2'25 earnings but provided below-consensus guidance for Q3'25, leading to a decline of over 9% in GFS shares post-earnings [1] - Despite the lackluster forecast for Q3'25, there is a belief that GlobalFoundries may be positioned for exceptional growth in the future [1] Financial Performance - The earnings report for Q2'25 was described as upbeat, indicating strong performance in that quarter [1] - The guidance for Q3'25 was below market expectations, which contributed to the negative market reaction [1] Analyst Background - The analysis was conducted by Michael Del Monte, a buy-side equity analyst with over 5 years of industry experience, who has a diverse background in various sectors including O&G, OFS, Midstream, Industrials, Information Technology, EPC Services, and consumer discretionary [1]

Group 1 - GlobalFoundries is taking bold steps in the Chinese market despite a bleak outlook for Q3 due to weak consumer demand, focusing on a "Made in China" strategy and launching automotive-grade CMOS and BCD technologies [2] - The company aims to retain full control over intellectual property and quality while leveraging strong customer relationships in China, having secured design orders in battery management, radar, microcontrollers (MCUs), and power management integrated circuits (PMICs) over the past year [2] - CEO Tim Breen noted that this initiative has sparked strong interest from Chinese customers, who are seeking not only domestic supply but also the ability to serve overseas markets through GlobalFoundries' global influence [2] Group 2 - GlobalFoundries is not the only chip manufacturer localizing its operations in China; NXP is also considering partnerships with local foundries to achieve complete chip production in China [3] - The company has a pessimistic outlook for Q3, expecting revenue of $1.68 billion, which is below Wall Street's expectation of $1.79 billion [3] - In June, GlobalFoundries raised its investment plan to $16 billion, including an additional $1 billion in capital expenditures and $3 billion for R&D in next-generation electric vehicle and AI server chips, with Q2 revenue reaching $1.69 billion and earnings per share of $0.42, exceeding expectations [3]

Core Insights - GlobalFoundries reported a revenue growth of 3.4% to $1.69 billion in Q2, with adjusted EPS of $0.42, both exceeding analyst expectations [3] - Despite the overall positive quarter, the consumer electronics segment declined by 10%, indicating mixed performance across different markets [3] - The company issued disappointing Q3 guidance, projecting revenue of $1.68 billion and adjusted EPS of $0.42, which reflects a slight decline and is below analyst consensus [4] Company Performance - GlobalFoundries experienced strong growth in the automotive and data center sectors, along with decent growth in IoT devices [3] - The consumer electronics segment, however, continues to struggle, showing no signs of improvement in the near term [4] - The stock is currently trading at all-time lows, with a valuation of around 20 times this year's earnings expectations and 14.5 times 2026 EPS expectations [7] Market Position - GlobalFoundries operates in the specialty semiconductor market, focusing on nodes that are not leading-edge but are crucial for various end markets including consumer electronics, automotive, IoT devices, and data centers [2] - The company is viewed more as a geopolitical risk play rather than a strong contender in the AI semiconductor space, serving as a hedge against potential disruptions in the East Asia supply chain [6]

Core Insights - GlobalFoundries Inc. reported $1.69 billion in revenue for Q2 2025, a 3.4% year-over-year increase, with an EPS of $0.42 compared to $0.38 a year ago, exceeding Zacks Consensus Estimates for both revenue and EPS [1] - The company experienced a revenue surprise of +0.67% and an EPS surprise of +16.67% compared to analyst expectations [1] Revenue Breakdown - Wafer shipment volume reached 581, surpassing the average estimate of 575 [4] - Net revenue from wafer fabrication was $1.52 billion, slightly above the $1.5 billion estimate, reflecting a year-over-year increase of +2.8% [4] - Revenue from smart mobile devices was $683 million, below the estimate of $653.1 million, showing a decline of -10.4% year-over-year [4] - Non-wafer revenue amounted to $166 million, slightly below the estimate of $172.86 million, but representing a +9.9% year-over-year increase [4] - Revenue from home and industrial IoT was $300 million, compared to the estimate of $325.75 million, indicating a +1.7% year-over-year change [4] - Automotive revenue reached $368 million, exceeding the estimate of $341.3 million, with a significant year-over-year increase of +36.3% [4] - Revenue from communications infrastructure and datacenter was $171 million, below the estimate of $183.91 million, but reflecting an +11% year-over-year change [4] Stock Performance - Shares of GlobalFoundries have returned -7.1% over the past month, contrasting with the Zacks S&P 500 composite's +1% change [3] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3]

GLOBALFOUNDRIES Inc. TABLE OF CONTENTS | Part 1 - Unaudited Financial Statements | Page | | --- | --- | | Interim Condensed Consolidated Statements of Financial Position | 2 | | Interim Condensed Consolidated Statements of Operations | 3 | | Interim Condensed Consolidated Statements of Comprehensive Income (Loss) | 4 | | Interim Condensed Consolidated Statements of Cash Flows | 5 | | Interim Condensed Consolidated Statements of Changes in Equity | 6 | | Notes to Interim Condensed Consolidated Financial Stat ...

Financial Data and Key Metrics Changes - GlobalFoundries reported second quarter revenue of $1,688 million, a 6% increase quarter-over-quarter and a 3% increase year-over-year [28] - Adjusted free cash flow for the quarter was $277 million, representing a margin of over 16% [33] - Gross profit was $425 million, translating to a gross margin of approximately 25.2% [31] Business Line Data and Key Metrics Changes - Automotive revenue grew over 36% year-over-year, comprising nearly 22% of total revenue [17][30] - Smart mobile devices represented approximately 40% of total revenue, with a year-over-year decline of about 10% [30] - Communications infrastructure and data center revenue increased approximately 11% year-over-year, accounting for about 10% of total revenue [30] Market Data and Key Metrics Changes - Automotive and communications infrastructure and data center markets demonstrated double-digit percentage year-over-year revenue growth for the third consecutive quarter [8] - Smart mobile devices and home and industrial IoT markets experienced slower recovery due to geopolitical uncertainties impacting consumer demand [8][20] - The company expects mid-teens percentage growth in automotive revenue for 2025 [17] Company Strategy and Development Direction - GlobalFoundries is focusing on diversifying its manufacturing capacity across the U.S., Europe, and Asia to mitigate risks associated with global trade tensions [11][12] - The company announced a definitive agreement to acquire MIPS, enhancing its capabilities in AI and processor IP, which is expected to close later this year [14][15] - The "China for China" strategy aims to localize manufacturing for automotive applications, responding to customer demand for domestic sourcing [13][48] Management's Comments on Operating Environment and Future Outlook - Management noted that inventory levels at customers have been normalizing, with some sectors experiencing tightness that could lead to demand spikes [66] - The company remains optimistic about long-term growth prospects, particularly in automotive and data center markets, despite short-term headwinds [42][84] - Management expects to generate over $1 billion in adjusted free cash flow for 2025, maintaining a strong focus on profitability [37] Other Important Information - The company is enhancing its global reach with a focus on automotive sectors, particularly in China [13] - Gross margin is expected to expand to approximately 25.5% in the third quarter, driven by product mix and improved utilization [36][58] - The company is actively managing potential supply chain cost impacts associated with tariff uncertainties, estimating limited impacts of around $20 million for 2025 [35] Q&A Session Summary Question: What types of headwinds are being seen for Q3? - Management expects solid growth in automotive and communications infrastructure markets, but smart mobile and IoT markets are expected to be down due to inventory management [42][43] Question: Can you elaborate on the "China for China" strategy? - The strategy focuses on localizing manufacturing for automotive applications, with significant interest from both international and Chinese customers [48][49] Question: What were utilizations in Q2 and expectations for the second half? - Utilization was in the low 80s in Q2, with expectations to progress further into the low to mid-80s in the second half [55] Question: How are inventory levels at customers expected to normalize? - Inventory levels have been coming down, with some customers indicating that downstream inventories could be too low, potentially leading to demand spikes [66] Question: What is the strategic importance of the MIPS acquisition? - The acquisition is expected to add $50 million to $100 million in top-line revenue, providing high-margin IP-based revenue streams [74][75]