GlobalFoundries Q2 2026 earnings: Revenue rose 6% as gross margin expanded

GlobalFoundries (Nasdaq: GFS) reported preliminary Q2 2026 revenue of $1.786 billion, up 6% from $1.688 billion a year earlier, while IFRS diluted EPS fell 27% to $0.30 from $0.41. IFRS gross margin expanded to 28.3%, but higher operating expenses reduced operating profit and net income; adjusted free cash flow also fell to negative $3 million as investment spending increased.

Key financial results

The quarter combined higher revenue and wafer shipments with better gross profitability. Cost of revenue was nearly unchanged at $1.281 billion even as revenue increased, lifting gross profit by 24% and expanding IFRS gross margin by 410 basis points.

Those gains did not fully reach the bottom line. IFRS operating profit fell 11%, while non-IFRS operating profit increased 16% to $298 million, reflecting the effect of excluded share-based compensation, structural optimization and acquisition-related charges.

GlobalFoundries reports under IFRS. Its non-IFRS measures exclude specified items such as share-based compensation, structural optimization costs and acquisition-related charges.

Business and operating trends

Wafer shipments increased 8% to 625,000 300mm-equivalent wafers, compared with 581,000 a year earlier. Management also reported accelerating customer demand and revenue growth across its strategic growth drivers, highlighting optical networking for AI data centers and demand for its silicon photonics and silicon germanium technologies. The company did not provide a revenue breakdown for these products, so their exact contribution cannot be quantified.

GlobalFoundries continued to expand beyond manufacturing during and shortly after the quarter. It completed the acquisition of Synopsys’ ARC Processor IP Solutions business in June, combining it with MIPS to broaden its RISC-V processor IP and software-to-silicon capabilities. In July, it completed the acquisition of Photeon Technologies’ integrated voltage regulator business, adding power-delivery technology and engineering resources for AI data center applications.

The company also signed a July letter of intent with the U.S. Department of Commerce for an expected $300 million award supporting silicon photonics, wafer technologies and advanced packaging. Separately, its Quantum Technology Solutions initiative is expected to be supported by a $375 million grant under another letter of intent.

Gross-margin expansion was absorbed by operating spending

The central earnings issue was the divergence between gross profit and IFRS operating profit. Gross profit increased by $97 million, but operating expenses rose by $119 million to $331 million. Research and development spending increased to $174 million from $134 million, while selling, general and administrative expense rose to $157 million from $78 million. As a result, operating profit declined by $22 million despite the higher gross margin.

The gap between IFRS and non-IFRS results also widened. GlobalFoundries excluded $86 million of share-based compensation, $7 million of structural optimization costs and $31 million of amortization and other acquisition-related charges when calculating Q2 non-IFRS operating profit. Comparable operating adjustments totaled $62 million in Q2 2025. This helped non-IFRS operating margin rise 140 basis points to 16.7%, even as IFRS operating margin fell to 9.7%.

IFRS net income was also affected by a $29 million income tax expense, compared with a $7 million tax benefit a year earlier. Non-IFRS net income, which adjusts for specified tax and other items, increased 9% to $256 million.

Cash flow and balance sheet

Operating cash flow remained positive at $405 million, but purchases of property, plant, equipment and intangible assets increased to $411 million from $159 million. After adding $3 million of government grant proceeds, adjusted free cash flow was negative $3 million, down from positive $277 million a year earlier.

Cash used in investing activities reached $1.119 billion, including $440 million for acquisitions and $411 million for property, equipment and intangible assets. Cash and cash equivalents declined by $762 million during the quarter to $1.087 billion. Including current and non-current marketable securities, GlobalFoundries ended June with approximately $3.3 billion in cash, cash equivalents and marketable securities.

The company paid its first quarterly cash dividend of $0.12 per share on July 14. Its board approved another $0.12 dividend, payable October 9, 2026, to shareholders of record on September 23.

Q3 2026 guidance

GlobalFoundries’ Q3 guidance points to sequential revenue and IFRS margin improvement at the midpoint. The $1.885 billion revenue midpoint is approximately 5.5% above Q2 revenue, while the IFRS gross-margin midpoint is 120 basis points above the Q2 result.

For guidance purposes, the non-IFRS measures exclude share-based compensation. GlobalFoundries expects approximately $18 million of share-based compensation in cost of revenue and $58 million in operating expenses during Q3.

Recent insider transactions

Over the reported six-month period, insiders purchased 12,884 shares across 15 transactions and sold 48,184 shares across 35 transactions. That produced net selling of 35,300 shares, equivalent to a reported 17% decrease relative to total insider holdings of approximately 170,010 shares. These transactions do not, by themselves, establish insiders’ views on the company’s outlook.

The latest 10 reported transactions consisted of four sales, five stock awards and one stock gift.

Risks investors should monitor

• Operating expenses could continue to limit IFRS earnings growth. R&D and SG&A spending increased faster than revenue in Q2, causing operating profit to decline despite substantial gross-margin expansion.
• Higher investment requirements are pressuring free cash flow. Capital and intangible-asset purchases increased sharply, reducing adjusted free cash flow from $277 million to negative $3 million.
• Q3 guidance requires continued demand conversion and margin execution. The guidance midpoint assumes sequential improvements in revenue, IFRS gross margin and IFRS operating margin.
• Funding and acquisition benefits remain dependent on execution. The proposed $300 million silicon photonics award and expected $375 million quantum grant are associated with letters of intent, while the benefits from the ARC and Photeon acquisitions have not yet been quantified.

Conclusion

GlobalFoundries generated higher revenue, wafer shipments and gross margin in Q2 2026, with management pointing to optical networking and other strategic growth drivers. However, increased operating expenses, investment spending and tax expense weighed on IFRS earnings and free cash flow. The next quarter will test whether the company can deliver its guided revenue and margin improvements while managing spending associated with capacity, acquisitions and new technology initiatives.