GlobalFoundries (GFS) Q4 2025 Earnings Transcript

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Date

Wednesday, Feb. 11, 2026 at 8:30 a.m. ET

Call participants

• Chief Executive Officer — Timothy Breen
• President and Chief Operating Officer — Niels Anderskouv
• Chief Financial Officer — Sam Franklin

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Takeaways

• Revenue -- $1.83 billion for the quarter, reflecting an 8% sequential increase and flat performance year over year.
• Full-year revenue -- $6.791 billion, up 1% compared to the prior year.
• Automotive revenue growth -- $1.4 billion for the year, representing a 17% year-over-year increase and a record for the company.
• Gross margin -- 29% for the quarter, up 300 basis points sequentially and 360 basis points year over year.
• Full-year gross margin -- 26.1%, increasing by 80 basis points year over year.
• Operating profit -- $335 million for the quarter, representing an operating margin of 18.3%, an increase of 270 basis points from the prior year period.
• Full-year operating profit -- $1.066 billion at a 15.7% operating margin, up 210 basis points year over year.
• Diluted earnings per share -- $0.55 for the quarter and $1.72 for the full year, representing 10% year-over-year growth.
• Adjusted free cash flow -- $264 million for the quarter at an approximately 14% margin; $1.2 billion for the full year at an approximately 17% margin, setting a company record.
• Share repurchase announcement -- Board authorized up to $5.5 billion in share repurchases, with buybacks to begin in the current quarter.
• Non-wafer revenue -- Accounted for 12% of total revenue in the quarter, including reticles and nonrecurring engineering.
• Silicon photonics revenue -- Exceeded $200 million for 2025 within communications infrastructure and data center; expected to nearly double again in 2026.
• Communications infrastructure and data center revenue -- 29% annual growth to 11% of full-year total, surpassing prior "low 20s%" forecast, driven by silicon photonics and satellite communications.
• Automotive fourth-quarter growth -- 40% sequential quarterly revenue increase, with 3% year-over-year growth, some driven by shipment timing.
• Smart mobile devices revenue -- 36% of quarterly and 39% of annual revenue; quarterly revenue declined 13% sequentially and 11% year over year; full-year decreased 12%, mainly due to price adjustments with select dual-sourced customers.
• Design wins -- Over 500 design wins in 2025, more than 95% on a sole-source basis, with significant expansion in automotive, hyperscalers, mobile, and industrial end markets.
• Strategic acquisitions -- Acquired AMF, Infinilink, and MIPS; signed licensing agreement with TSMC for gallium nitride (GaN) technology; agreed to acquire Synopsys' processor IP business (ARC).
• Capacity investments -- Committed $16 billion to expanding US operations and €1.1 billion to grow Dresden facility capacity above one million wafers per year by 2028.
• 2026 outlook -- Revenue guidance of $1.625 billion plus or minus $25 million for the next quarter; gross margin expected at 27% plus or minus 100 basis points; non-wafer revenue guided at 10%-12% of total.
• 2026 net CapEx guidance -- Non-IFRS net CapEx projected at 15%-20% of full-year revenue, up due to strong demand in silicon photonics, FDX, SiGe, and advanced packaging.
• 2026 free cash flow margin -- Expected at approximately 10% of full-year revenue, reflecting ongoing strategic investment but continued disciplined capital management.

Summary

GlobalFoundries (NASDAQ:GFS) reported quarterly revenue and profitability metrics at or above the high end of prior guidance, underscored by a mix shift toward higher-margin automotive, communications infrastructure, and data center end markets. Management disclosed more than 500 sole-source design wins and emphasized an expanding presence in major secular trends, including AI data centers, physical AI, and global semiconductor supply diversification. The company advanced its silicon photonics strategy with acquisitions and partnerships, increasing revenues in that segment and setting a $1 billion annual run-rate target by 2028. A $5.5 billion share buyback program was authorized, reflecting a strengthened balance sheet and ongoing investments in differentiated capacity, with 2026 guidance pointing to continued capital deployment in growth corridors.

• Company noted robust engagement with all four hyperscalers, five top automotive OEMs, six mobile fabless and OEMs, and seven of the top eight industrial IDMs.
• Fourth-quarter wafer shipments totaled 619,300 millimeter equivalent wafers, up 3% sequentially and 4% year over year.
• Full-year utilization rate reached approximately 85%, supported by a 10% annual increase in 300-millimeter wafer shipments.
• The licensing of TSMC gallium nitride technology is expected to accelerate differentiated power solutions for high-growth data center markets from US-based fabs.
• End-market mix saw more than 60% of revenue now sourced outside smart mobile devices, up from previous years, contributing to ongoing gross margin expansion.
• Customer prepayments and government grants will influence the timing of net CapEx, with plans to align spending to demand corridors such as silicon photonics and advanced packaging.
• President and COO Niels Anderskouv confirmed his departure after three years, citing progress in strategic pillars and improved organizational alignment.

Industry glossary

• Silicon photonics: Integration of photonic and electronic signals on a single silicon chip, enabling high-bandwidth optical communications.
• FDX: GlobalFoundries’ proprietary Fully Depleted Silicon-On-Insulator platform for energy-efficient chip manufacturing.
• GaN: Gallium Nitride, a semiconductor material enabling high-efficiency power electronics and RF applications.
• BCD: Bipolar-CMOS-DMOS process combining different transistor types for efficient power management ICs.
• SiGe: Silicon Germanium, a semiconductor material used for high-speed, high-frequency applications.
• CPO (Co-Packaged Optics): Integration of optical components with switching silicon to improve bandwidth and energy efficiency in data centers.
• MCU: Microcontroller unit, an integrated circuit used in automotive, industrial, and IoT devices for embedded control.
• RISC-V: Open standard instruction set architecture used in developing processor cores, adopted in GlobalFoundries' expanding IP portfolio.
• ARC: Processor IP family from Synopsys focused on high-performance, power-efficient compute and AI cores.

Full Conference Call Transcript

Timothy Breen, CEO, Niels Anderskouv, President and Chief Operating Officer, and Sam Franklin, CFO. A short while ago, we released GLOBALFOUNDRIES Inc.'s fourth quarter and full year 2025 financial results, which are available on our website at investors.gf.com, along with today's company slide presentation. This call is being recorded, and a 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 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 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, and we do not undertake any obligation to update any forward-looking statements we may 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 the risks and uncertainties described in our SEC filings, including in the section under the caption "Risk Factors" in our annual report on Form 20-F and 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 Morgan Stanley Technology, Media, and Telecom Conference in San Francisco on March 8, and the Canaccord Genuity Global Technology and Industrial Growth Conference in New York City on March 11. In addition, we are looking forward to hosting a publicly webcast investor webinar at 4: 30 PM Eastern Time on March 10. At this event, we will provide a business, technical, and strategy update on how GLOBALFOUNDRIES Inc. is at the forefront of the silicon photonics and advanced packaging revolution. We will begin today's call with Timothy Breen providing a summary update on the current business environment, technology, and end markets, followed by Sam Franklin, who will provide details on our fourth quarter and full year results and also provide first quarter 2026 guidance. We will then open the call for questions with Timothy Breen, Niels Anderskouv, and Sam Franklin. We request that you please limit your questions to one with one follow-up. I will now turn the call over to Timothy Breen.

Timothy Breen: Thank you, Eric, and welcome everyone to our fourth quarter and full year 2025 earnings call. I am pleased to announce that GLOBALFOUNDRIES Inc. delivered strong results in the fourth quarter, with revenue, gross margin, and EPS at or above the high end of the guidance ranges. For the fifth consecutive quarter, the communication infrastructure and data center end market demonstrated double-digit percentage year-over-year growth, driven by strong momentum in areas such as Satcom and optical networking. As a result of the team's consistent execution, disciplined cost management, and relentless focus on profitability, we grew gross margin by nearly 400 basis points year-over-year in the fourth quarter.

These achievements show that with our unique differentiation portfolio aligned to key long-term secular trends, GLOBALFOUNDRIES Inc. is well-positioned to seize emerging opportunities and deliver durable, profitable growth. We made significant progress towards our strategic objectives in 2025, focusing on the three core pillars of our customer value proposition: technology differentiation, deep customer and ecosystem partnerships, and leveraging our uniquely diversified geographical footprint. Let me summarize some of our key business milestones and highlights in the year. In 2025, GLOBALFOUNDRIES Inc. made extraordinary strides in strengthening our technology differentiation across multiple vectors. In the exciting growth area of silicon photonics, we acquired AMF and Infinilink, which together bring valuable state-of-the-art IP and synergetic customer bases.

We expect both of these acquisitions to accelerate our technology roadmap and broaden our portfolio of optical networking solutions, driving greater customer value. As evidenced by our recently announced collaboration with Corning for detachable fiber attach, we are building a unique and differentiated ecosystem of partners in silicon photonics. In the burgeoning realm of physical AI, our acquisition of MIPS enables GLOBALFOUNDRIES Inc. to become a diversified and holistic technology solutions provider with an expansive portfolio of offerings and a larger than ever service addressable market. Lastly, we accelerated our gallium nitride technology roadmap with a licensing agreement signed with TSMC.

The addition of this proven GaN technology will accelerate the development of our next-generation GaN platform and enable us to deliver even more differentiated power solutions for high-growth areas such as the data center from our US footprint. The second strategic pillar where we made significant strides was to deepen customer and accelerate design win momentum. In 2025, we secured over 500 design wins, a company record and a leading indicator of future production revenue. These wins were across the broadest set of applications and the widest range of end markets in our history.

With over 95% of these design wins secured on a sole-source basis, this is a testament to the significant value offered by our differentiated technology and global footprint. 2025 saw us broaden our customer base and engage with nearly all of the leading industry players across the major end markets. As highlighted in our physical AI investor webinar in December, this includes active engagements with all four hyperscalers, all five top automotive OEMs, all six mobile fabless and OEMs, and seven of the top eight industrial IDMs. Among many significant customer announcements in 2025, I would like to highlight three specific areas.

We meaningfully expanded our long-standing partnership with Apple to build and deliver wireless connectivity and power management chips in our US-based fabs. We deepened our collaboration with Cirrus Logic to advance the development and commercialization of next-generation BCD and GaN power technologies in the US. And most recently, our collaborations with Navitas and Onsemi are set to accelerate the development and scaling of 650-volt and 100-volt GaN technology for data centers and other critical power applications. Finally, in 2025, we advanced our third key strategic pillar, leveraging our geographical footprint. In June 2025, we increased our commitment to invest $16 billion in the US, with plans to expand manufacturing and advanced packaging capabilities in our New York and Vermont facilities.

Furthermore, we announced plans to invest €1.1 billion to expand our Dresden facility, increasing the fab's wafer production capacity to over 1 million wafers per year by 2028 and making it the largest of its kind in Europe. We also made significant progress in making our technologies available on all continents, creating valuable optionality for all of our customers. In summary, we are very pleased with the progress made towards our strategic objectives in 2025, which sets the foundation for us to capture opportunities in 2026 and beyond.

For GLOBALFOUNDRIES Inc., we expect these opportunities to be driven by the most significant megatrends defining our industry today: the rapid scaling of AI data centers, the proliferation of AI into the physical world, and the need for resilient, diversified global semiconductor supply. The rapid expansion of compute for AI data centers is reshaping demands on infrastructure and creating two critical bottlenecks: networking and power. Addressing these bottlenecks will be paramount for the continued scale of AI, and these requirements are driving a rapid shift in semiconductor demand.

With years of focused R&D and capacity investments, as well as partnerships with leading customers, GLOBALFOUNDRIES Inc. is at the center of this transformation and is well-positioned to capitalize on both key opportunities. In data center power, we have already seen encouraging momentum in the fourth quarter with two first-of-their-kind design wins secured on our GaN and BCD platforms. We expect to start volume production this year, and we believe the data center power opportunity is still in its very early stages. As we continue to leverage our winning technology to develop, ramp, and scale in data center power, we look forward to securing additional customer partnerships in this exciting growth area for GLOBALFOUNDRIES Inc.

Meanwhile, optical networking has clearly emerged as a strong acceleration opportunity for our business at GLOBALFOUNDRIES Inc. We delivered on our objective to roughly double our silicon photonics revenue within our communication infrastructure and data center end market to over $200 million in 2025. Even on this higher base, we expect to nearly double the contribution from silicon photonics again in 2026, driven by strong customer demand for our differentiated technology, a robust ramp in supply capacity, and the integration of our recent acquisition of Advanced Micro Foundry. Closed in November, the addition of AMF accelerates our photonics roadmap, broadens our customer base, and drives opportunities to scale and geographic synergies in Singapore.

This acquisition is expected to deliver consistent accretive growth to our corporate gross margin targets in 2026 as we continue to ramp opportunities for silicon photonics across applicable markets and begin to scale opportunities in the field of co-packaged optics. We now believe that we are on a path to reach a $1 billion run-rate revenue level for silicon photonics by 2028, a substantial acceleration from our prior objective. Moving on to the second major megatrend, physical AI. The emerging technology requirements of physical AI map directly to GLOBALFOUNDRIES Inc.'s core strengths in building highly integrated, power-efficient, secure, and cost-effective connected devices.

The addition of MIPS last August has enabled us to build and accelerate AI capabilities, combining our world-class manufacturing capability and customer relationships with the full suite of RISC-V IP subsystems, software, and recently signed acquisition of Synopsys' processor IP solutions business. Along with its team of highly skilled engineers, we expect yet another paradigm shift forward. Integrating Synopsys' ARC technology portfolio of high-performance, ultra-low-power compute and AI cores allows us to deliver position processing solutions across a broad spectrum of physical AI applications, from software-defined vehicles to medical devices, defense applications, industrial robotics, and beyond. The processor IP portfolio is a highly complementary addition to our MIPS RISC-V IP portfolio.

Together, we expect to be at the forefront of supporting our customers in powering next-generation edge processing workloads, multimodal sensors, real-time control, and actuation, all enabling distributed intelligence and action within physical AI devices. The Synopsys ARC acquisition is expected to significantly accelerate our physical AI roadmap, given ARC's proven leadership in AI-focused IP and software, along with the infusion of its world-class engineering talent.

By adding the ARC portfolio to MIPS, we expect GLOBALFOUNDRIES Inc. to become a full-spectrum RISC-V processor IP provider, serving a global base of over 300 active customers, now equipped with an expanded range of solutions, including ARC ultra-low-power neural processor cores and its widely used ASIC designer and software toolchain as part of our offering. The final megatrend defining our industry is the critical importance of geographically diversified semiconductor supply in a fragmented, globalizing world. Geopolitical tensions, tariffs, and export controls are actively driving firms to reshore or onshore their semiconductor supply. Companies now routinely mandate non-China, non-Taiwan sourcing, while others have publicly announced the US as central to their long-term supply chain strategy.

GLOBALFOUNDRIES Inc. is ready to meet these requirements in a way no other company can. Our flexible and scaled footprint spans the US, Europe, and Asia, making us uniquely suited to satisfy customer requirements and capture meaningful share from this secular shift. Strong customer engagements are turning into meaningful new design wins, tape-outs, and preparations for high-volume ramps. Over the course of 2025, new design wins that were specifically driven by our manufacturing footprint were worth well over $3 billion of combined expected lifetime revenue. As more and more customers choose us for our three-continent footprint, we expect to build on this momentum in 2026 and beyond.

Accelerated revenue growth and profitability tailwinds to GLOBALFOUNDRIES Inc. are only starting to take shape, but we are setting the foundation with customer partnerships today. We expect to fully leverage our unique geographic advantage, placing us at the forefront of semiconductor onshoring in the years to come. Let me now discuss our recent design wins, customer engagements, and business highlights across each of our end markets. In automotive, we made significant progress in 2025 in growing our content in the car beyond our traditional leadership in automotive MCUs. For example, automotive smart sensors and networking revenue more than tripled in 2025, driven by robust ramps in radar, cameras, and other sensors critical for next-generation ADAS.

In 2025, we secured over 50% more design wins in automotive compared to the year prior, which builds on years of increasing design win momentum. Automotive design wins typically take several years to fully ramp, yet we have outperformed the automotive semis market every year in our existence as a public company. In mobile devices, we continued our focus on the most differentiated applications for high-end handsets. We secured several new design wins in the fourth quarter across camera controllers, RF front-end, and power management, including a few notable highlights. We secured a design win on our 22UX platform targeting next-gen imaging in mobile phones and action cameras worth an estimated lifetime revenue of over $500 million.

With best-in-class analog performance, low noise optimization, and compelling cost competitiveness, we expect further UX wins in areas such as IoT, automotive, and industrial. We won a camera controller program for premium-tier Android with Cambridge Mechatronics on our FinFET platform, an opportunity for meaningful share gain in a relatively new area for GLOBALFOUNDRIES Inc. Thanks to its superior RF noise performance, our newly launched CBIC platform was selected by Broadcom for a low noise amplifier, the second major customer to adopt this technology. In home and industrial IoT, we deepened our long-term collaboration with a leading MCU supplier with a fourth-quarter design win for its next-gen AI-enabled MCUs used in a variety of physical AI applications.

We are also seeing notable opportunities for connectivity solutions on our FinFET platform, including SoCs for next-generation Wi-Fi 8 and other IoT applications, such as point-of-sale retail. In aerospace and defense, we secured new design wins across secure connectivity and RF applications that will begin ramping in our Malta, New York fab. As physical AI proliferates in the coming years and manifests across many different new applications and form factors, we expect our home and industrial IoT business to be a key beneficiary. In 2026, we expect a stronger second half for this end market compared to the first half, driven by the ramp of new products in areas such as AI-enabled MCUs, Wi-Fi connectivity, and power management.

In communications infrastructure and data center, we secured an important co-packaged optics design win for scale-up networks on our CLO silicon photonics platform. These photonic IC design wins at both endpoints of the scale-up network mark an important step in the industry's rollout of CPO. As AI clusters grow, the capabilities of our silicon photonics portfolio position GLOBALFOUNDRIES Inc. at the center of the shift towards higher bandwidth, lower latency interconnects that underpin scale-up AI networking. Beyond silicon photonics, our leading portfolio of high-performance SiGe used in applications such as TIAs and driver ICs serve critical needs across optical networking. GLOBALFOUNDRIES Inc. is not just participating in these critical optical networking opportunities; our product innovations are actively driving it forward.

In satellite communications, we continue to expand our leadership, winning additional content on the satellite, enabling direct-to-cellular phone services. GLOBALFOUNDRIES Inc.'s technology enables ubiquitous global connectivity by eliminating traditional mobile dead zones through satellite-to-mobile technology. Our most recent design win in the fourth quarter further broadens our content across the full SATCOM ecosystem, from terminals on the ground to satellites in orbit. For all of these reasons, we are enthusiastic about further growth and acceleration in our communications infrastructure and data center end market, where we expect to outperform peers and achieve over 30% year-on-year revenue growth in 2026. In conclusion, GLOBALFOUNDRIES Inc. is at an exciting inflection point.

Our acquisitions are expanding GLOBALFOUNDRIES Inc.'s capabilities as a holistic technology solutions provider, and our differentiated technology and footprint are proving an excellent fit in the confluence of major AI and onshoring megatrends. In addition, I am encouraged by our record design win momentum, breadth of customer engagements, and clear path towards a richer mix of business. I have never been more optimistic about our long-term potential than I am now. I'll now pass the call over to Sam Franklin for a deeper dive on fourth quarter and full year 2025 financials.

Sam Franklin: Thank you, Timothy. For the remainder of the call, including guidance other than revenue, cash flow, and net interest income, I will reference non-IFRS metrics. As Timothy noted, our fourth quarter results were at or above the high end of the guidance ranges we provided in our last quarterly update. We delivered fourth-quarter revenue of $1.83 billion, up 8% sequentially and flat year-over-year. We shipped approximately 619,300 millimeter equivalent wafers in the quarter, up 3% sequentially and 4% from the prior year period. Wafer revenue from our end markets accounted for approximately 88% of total revenue. Non-wafer revenue includes revenue from reticles and nonrecurring engineering, accounting for 12% of total revenue in the fourth quarter.

For the full year, we delivered revenue of approximately $6.791 billion, up 1% year-over-year. We shipped approximately 2.3 million 300-millimeter equivalent wafers, a 10% increase from 2024, equating to utilization levels of approximately 85% for 2025. Let me now provide an update on our revenue by end markets. Smart mobile devices represented approximately 36% of fourth-quarter total revenue and 39% of full-year revenue. Fourth-quarter revenue declined approximately 13% sequentially and 11% from the prior year period. Full-year 2025 revenue decreased 12% year-over-year, principally driven by GLOBALFOUNDRIES Inc.-initiated one-time pricing adjustments made in 2025 with a small number of mobile customers where GLOBALFOUNDRIES Inc. was dual-sourced.

We expect to gain greater share of wallet with these customers in 2026, and we also believe that pricing has stabilized in this end market. In 2026, we expect our smart mobile devices business to largely track the overall smartphone market. Moreover, as we continue our multiyear journey to diversify our product and end market portfolios, 2025 was the first full year where more than 60% of GLOBALFOUNDRIES Inc.'s total revenue came from markets other than smart mobile devices. While revenue from smart mobile devices remains a key component of our end market mix, we do expect this trend to continue.

As growth from IoT, automotive, and communications infrastructure and data center benefit from faster-growing SAM opportunities where GLOBALFOUNDRIES Inc. is demonstrating strong design win momentum. Automotive represented approximately 23% of fourth-quarter total revenue and 21% of full-year 2025 revenue, which is up from just 2% five years ago and is a testament to the design wins, content growth, and customer partnerships that GLOBALFOUNDRIES Inc. has developed over the last decade. Fourth-quarter revenue increased approximately 40% sequentially and 3% year-over-year, partly driven by the timing of customer shipments, as indicated on our prior earnings call.

Full-year automotive revenue grew approximately 17% year-over-year to a record $1.4 billion, and with continued share gains and content expansion, we expect to sustain this momentum in 2026. Home and industrial IoT represented approximately 17% of the quarter's total revenue and 18% of full-year revenue. Fourth-quarter revenue increased in this end market approximately 17% sequentially and decreased 15% year-over-year. Full-year home and industrial IoT revenue declined 6% year-over-year, driven by the end of life of certain aerospace and defense products. With new aerospace and defense and other IoT applications forecast to ramp into production in 2026, we expect a return to full-year revenue growth for our IoT end market this year, albeit with a skew to the second half.

Finally, communications infrastructure and data center represented approximately 12% of the quarter's total revenue and 11% for full-year revenue, marking a notable return to revenue growth for this end market. Fourth-quarter revenue, which includes revenue from silicon photonics, increased approximately 29% sequentially and 32% year-over-year. For the full year 2025, communications infrastructure and data center revenue grew 29% year-over-year, well above our prior expectation of low 20s percentage year-over-year growth, driven by strong momentum in optical networking, silicon photonics, and satellite communications. We delivered on both of the key growth objectives we set out earlier in the year. Specifically, we grew satellite communications to over $100 million in revenue, and we approximately doubled silicon photonics revenue in 2025.

As evidenced by our results, we continue to focus our strategy on shifting the mix of our business towards margin-accretive, high-value secular growth markets, where our differentiated product portfolio is very well suited to support the required content expansion and evolution. In 2025, revenue from our automotive, communications infrastructure, and data center end markets together comprised a record one-third of total revenue, up from approximately 27% the year prior, and signals a consistent step forward towards our ongoing mix shift.

As we focus on growing differentiated technology solutions for our customers in areas that are accretive towards our corporate gross margin targets, we expect this mix shift between and within end markets to provide a robust platform to continue growing GLOBALFOUNDRIES Inc.'s profitability. In the fourth quarter, we delivered gross profit of $530 million, which translates into approximately 29% gross margin, up 300 basis points sequentially and 360 basis points year-over-year. For the full year, we delivered gross profit of $1.773 billion and a gross margin of 26.1%, equating to an 80 basis point increase year-over-year. R&D for the quarter was $115 million, and SG&A was $80 million.

Total operating expenses of $195 million were up 9% quarter-over-quarter and represented approximately 11% of total revenue. We delivered operating profit of $335 million for the quarter, as an operating margin of 18.3%, above the high end of our guided range and up 270 basis points from the year prior period. For the full year, GLOBALFOUNDRIES Inc. delivered operating profit of $1.066 billion at a 15.7% operating margin, an increase of 210 basis points year-over-year. Fourth-quarter net interest income, net of other expenses, was $16 million, and we incurred a tax expense of $41 million in the quarter. We delivered fourth-quarter net income of approximately $310 million, an increase of approximately $54 million from the prior year period.

As a result, we reported diluted earnings of $0.55 per share for the fourth quarter on a fully diluted share count of approximately 560 million shares. On a full-year basis, GLOBALFOUNDRIES Inc. delivered net income of approximately $965 million and diluted earnings per share of $1.72, up 10% year-over-year. Let me now provide some key cash flow and balance sheet metrics. Cash flow from operations for the fourth quarter was $374 million. For the full year, cash flow from operations was $1.731 billion. Fourth-quarter CapEx, net of proceeds from government grants, was $110 million, or roughly 6% of revenue. Full-year net CapEx for 2025 was approximately $574 million, or 8% of revenue.

Adjusted free cash flow for the quarter was $264 million, which represented an adjusted free cash flow margin of approximately 14% in the quarter. Adjusted free cash flow for the full year 2025 was $1.2 billion, at a free cash flow margin of approximately 17%, building on our objectives set out at the start of the year and demonstrating a new record for GLOBALFOUNDRIES Inc. This is thanks to the multiyear investments we have made in our diversified capacity footprint, as well as our continuous drive to improve our productivity and cost structure. At the end of the fourth quarter, our combined total of cash, cash equivalents, and marketable securities stood at approximately $4 billion.

Our total debt was $1.2 billion, and we also have a $1 billion revolving credit facility, which remains undrawn. In light of our consistent free cash flow generation and balance sheet metrics, I would like to share an update regarding our capital allocation strategy. Our top priority continues to center on disciplined reinvestment into GLOBALFOUNDRIES Inc. and focus on high ROI opportunities, as demonstrated by our recent acquisitions and the continued remixing of our business. Our strong balance sheet has been a key enabler of our strategy to pursue value-accretive investments. Taking these factors into account, we believe our robust cash position enables us to further enhance shareholder returns through the implementation of a share repurchase authorization.

Today, I am pleased to announce that our board of directors has authorized a share repurchase of up to $5.5 billion, supported by our solid balance sheet, margin expansion, and the implementation of our long-term strategic pillars that Timothy outlined. We believe share repurchases represent a compelling and accretive use of capital, as well as helping offset the impact of share-based compensation. We intend to begin repurchasing shares this quarter and look forward to keeping you updated as we execute on this important step in our capital allocation roadmap. Now let me provide you with our outlook for 2026. We expect total GLOBALFOUNDRIES Inc. revenue to be $1.625 billion, plus or minus $25 million.

Given our consistent customer momentum and recent IP-related acquisitions, we expect non-wafer revenue to be in the 10% to 12% range of total revenue, up from 8% to 12% in prior years. We expect gross margin to be approximately 27%, plus or minus 100 basis points, which reflects a continuation of year-over-year gross margin expansion. Excluding share-based compensation, we expect total operating expenses to be $225 million, plus or minus $10 million. We expect to maintain a similar quarterly operating expense run rate for 2026. We expect operating margin to be in the range of 13.2%, plus or minus 180 basis points.

At the midpoint of our guidance, we expect share-based compensation to be approximately $63 million, of which roughly $16 million is related to cost of goods sold. We expect net interest and other income for the quarter to be between $2 million and $10 million, and income tax expense to be between $17 million and $35 million. Based on the tax environments across the jurisdictions we operate in, we expect an effective tax rate in the high teens percentage range for the full year 2026. Based on a fully diluted share count of approximately 560 million shares, we expect diluted earnings per share for the first quarter to be $0.35, plus or minus $0.05.

For the full year 2026, we expect non-IFRS net CapEx to be in the range of 15% to 20% of full-year revenue. The projected year-over-year increase in net CapEx in 2026 is primarily driven by strong customer demand and capacity corridors where we are oversubscribed, such as in silicon photonics, FDX, and SiGe, as well as establishing new capabilities in areas such as advanced packaging. Not only are these important drivers of revenue growth, but they are also critical long-term accelerators of GLOBALFOUNDRIES Inc.'s gross margin expansion. Given the timing of these investments, we expect net CapEx may vary quarter to quarter, subject to the timing of expenditure and receipt of government grants.

We will continue to thoughtfully manage our capital spending plans to align with the broader demand environment. Although we expect 2026 to represent a year of strategic investment in our capacity, we remain focused on our disciplined expansion principles and free cash flow generation. For 2026, we expect a free cash flow margin of approximately 10% of full-year revenue as we receive customer prepayments and continue to invest in accretive and expanding product corridors. To wrap up, I would like to thank the dedication of our employees around the world for their unwavering commitment to our customers and strategic objectives over the course of the last year, and I look forward to building on this in 2026.

Let me now pass the call back to Timothy for some closing remarks.

Timothy Breen: As you saw in our 6-K filing this morning, today is Niels' last earnings call at GLOBALFOUNDRIES Inc., and I want to express my sincere gratitude for his service and contributions. Over the past three years, Niels brought clarity, strategic discipline, and a deep customer focus that strengthened our operations and helped advance our product and technology roadmap. I wish him the very best in his next endeavors. Here is Niels for some final remarks.

Niels Anderskouv: Thank you, Timothy. As I step down from my role as President and COO, I want to express my deep gratitude to the entire GLOBALFOUNDRIES Inc. team. The past three years have been some of the most rewarding of my career, and together, we sharpened our strategic focus, strengthened our business discipline, and advanced the three foundational strategic pillars that now define GLOBALFOUNDRIES Inc.'s differentiated position in the market. I'm incredibly proud of how we aligned our manufacturing, commercial, and product organizations to move with greater speed, customer focus, and purpose. A shift that is now reflected by the strong technical advancements across our roadmap, expanding design win momentum, and our stronger operating rhythm.

What stands out most, though, is the relentless dedication of our people. Their commitment, their drive to win, and their belief in what GLOBALFOUNDRIES Inc. can achieve have shaped the company's trajectory and laid a powerful foundation for the years ahead. GLOBALFOUNDRIES Inc. is in a stronger position today than at any point in its history, and I have full confidence that Timothy and the team will continue to accelerate the company's strategy and deliver exceptional results. It has been an honor to be part of this mission with you.

Operator: And with that, let's open the call to Q&A. Certainly. And our first question for today comes from the line of Mehedi Husseini from Susquehanna Financial Group. Your question, please.

Mehedi Husseini: Yes. Thanks for letting me ask a question. And the first one, I want to focus on silicon photonics, especially in the context of the recent fab acquisition in Singapore and Infinilink from November. Can you remind us what the strategy here is and how GLOBALFOUNDRIES Inc. intends to differentiate? And I have a follow-up.

Timothy Breen: Thanks, Mehedi. No, it's a great question. Obviously, you've seen over the last year a very strong acceleration and a lot of public announcements about the need for silicon photonics as a critical enabler of the scale-up of AI in the data center build-out that we're seeing. Something we've been working on for more than a decade as GLOBALFOUNDRIES Inc., organically building an incredible organic platform. And obviously, in 2025, we added to that with inorganic plays, including the acquisition of AMF and also of Infinilink. Look, our goal, and I think where we're making great progress, is to be the best in the industry for three key reasons.

Number one, having the strongest process technology offering, and that includes offering for 200 gig per lane technologies today and a roadmap to 400 gig per lane and beyond, which is what the industry needs to achieve the next level of performance, and we're well on track to deliver that, and those acquisitions support us in that journey. Also, having the strongest enablement, obviously, are new areas for customers to design, and they need robust PDKs, simulations, modeling, and so on to be able to bring their solutions to market. They also need ecosystem partners within that.

Some of the partnerships we've mentioned, for example, with Corning, bring to the table specialized solutions, things like detachable fiber attach, which are critical for the transition to co-packaged optics. And the last thing that, of course, GLOBALFOUNDRIES Inc. is well known for is that global manufacturing footprint. And so we're scaling silicon photonics in Singapore and the US, including on a 300-millimeter platform, which, again, we think gives us a lot of opportunity to grow the business and differentiate going forward. I think you're seeing the proof points reflected in the revenue trajectory. We obviously had a strong 2025, doubling from the prior year. We think that will continue through the course of 2026 and beyond.

And that's given us also confidence to accelerate what we said previously about reaching a $1 billion run-rate revenue, which we think we'll reach by 2028. So overall, very strong momentum, lots more opportunities ahead. We're very much at the beginning of this transition in the data center.

Mehedi Husseini: Great. Thank you. And then the second question, actually, on a different topic, but perhaps part of your longer-term strategy. And one of the things I would like for you to remind us of is what is your strategy with quantum compute. And I ask that because IONQ recently acquired Skywater. Skywater was a smaller analog fab. And I think your strategy on the RISC-V is somewhat also strategic with a longer-term opportunity that quantum brings. So remind us what the strategy is and any additional color that you can provide. This would be great. Thank you.

Timothy Breen: No, thank you. Actually, longer-term, very excited about the trajectory for quantum. And I think the reason is you see now significant investment going into building scalable, fault-tolerant quantum systems. And that's the key. It's not about proving at the lab scale now. It's about proving that we can actually build functional systems at scale. GLOBALFOUNDRIES Inc. has very specific solutions for different quantum modalities, everything from photonics, which we've talked about just now and more broadly, including partnerships that we have with companies like CyQuantum. But we actually also have partnerships in areas like spin qubit, ion trap, topological quantum.

So a lot of these modalities that are all competing in a way to prove they can be the first ones to scale. GLOBALFOUNDRIES Inc. provides for all of those. Obviously, since that announcement you referred to, people have recognized even more the importance of high-volume manufacturing. Again, it's not just about proving at the lab scale, but how do you actually industrialize and build larger-scale systems. We have good partnerships out there. We expect to announce more in the coming months. And again, just given the depth of our technical bench, it's an area I think will play a critical role going forward.

Operator: Thank you.

Timothy Breen: Thank you. And our next question for today comes from the line of Ross Seymore from Deutsche Bank.

Ross Seymore: Hi, guys. I want to talk a little bit about the supply side of the equation. You talked about CapEx was doing. But as we think about areas of tightness, pricing environment, and some of your more unique process technologies, how are you viewing the tightness, the differentiation, and what that means for kind of sustained CapEx going forward beyond this year?

Timothy Breen: Well, thank you for the question. I think we're seeing particularly in these areas of differentiated technology combined with strong end market traction, you know, a big step up if let's compare to a year ago. In corridors such as silicon photonics. Also, FTX platform, you know, a lot of use cases there from the car to the IoT and beyond. And areas like silicon germanium, we haven't spoken so much about. But again, getting pulled through in a lot of the optical connectivity in the data center. So the demand drivers are strong. Those corridors are running hot. We're able to meet our customers' demands today.

But given the ramp profiles of new designs that have been won already and are now taping out, we see good areas for us to invest there and scale. The good news for us in terms of those investments is they're highly accretive, short time to market within our existing four-wall footprint. So they come with quick ramp and a very good capital efficiency. And maybe one thing to add to that is, obviously, they're also eligible for some of the best government support we've had in, frankly, our history, in terms of putting that capacity on, given the strategic nature of the footprint.

So I think good opportunity for us to grow, to invest more strongly against that customer demand.

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