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GlobalFoundries Inc (NASDAQ:GFS) delivered steady September-quarter results and issued upbeat guidance for the December quarter, underscoring continued progress in its diversification and margin expansion strategy.
The company is seeing strong momentum in automotive and data center demand, with silicon photonics and satellite communications driving growth even as broader market recovery remains gradual.
JP Morgan analyst Harlan Sur maintained a Neutral rating on GlobalFoundries and cut the price forecast from $40 to $35.
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Sur said GlobalFoundries delivered a solid September-quarter performance and guided modestly better than expected for the December quarter, supported by improving cyclical trends and strong momentum in key growth areas.
However, the analyst noted that Street expectations for 2026 may have been overly optimistic given the slow pace of recovery across several end markets.
He pointed out that the Communications Infrastructure and Datacenter (CID) segment is leading year-over-year growth in 2025, driven by strong demand for optical interconnects in AI infrastructure, which should roughly double the company's silicon photonics (SiPho) revenue this year. The satellite communications (satcom) business is also gaining traction as GlobalFoundries becomes a key supplier in an expanding market.
The Automotive segment continues to perform well, with mid-teens growth expected in 2025 and further strength projected into 2026, while the IoT business remains under pressure due to slow industrial recovery and weak consumer spending. Sur expects IoT growth to improve in the back half of 2026.
Within Smart Mobile Devices — the company's largest revenue contributor at roughly 45% of the September quarter total — pricing adjustments with major customers have weighed on near-term growth. Still, these moves are expected to lead to higher wafer volumes and later market share gains.
The analyst said GlobalFoundries' margin improvement story remains intact, with December-quarter guidance implying a year-over-year gain of about 300 basis points to 28.5%, despite flat revenues. This improvement is being driven by a favorable product mix, higher-margin manufacturing services, reduced depreciation, and better fab utilization.
Looking ahead, he expects the March quarter to show typical seasonal declines of 10–12% sequentially, reflecting sluggish recovery across end markets, followed by stronger growth later in the year.
Sur projected fourth-quarter revenue of $1.80 billion and adjusted EPS of $0.47.
Price Action: GFS stock traded 2.55% lower to $33.29 at last check on Thursday.
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Posted In: GFS
