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GlobalFoundries Inc. (NASDAQ: GFS) shares took a dip Wednesday, even though the contract chipmaker delivered a fiscal second-quarter 2026 earnings beat. The problem? Its third-quarter outlook landed right in line with Wall Street's expectations, and investors apparently wanted more.
The company reported revenue of $1.79 billion, up 6% from a year earlier and above the analyst consensus estimate of $1.77 billion. Adjusted earnings came in at 46 cents per share, beating the expected 44 cents.
Breaking down the numbers, smart mobile device revenue slipped 6% year over year to $644 million. But the real star was communications infrastructure and data center, which jumped 62% to $277 million. Home and industrial IoT revenue grew 10% to $331 million, while automotive revenue fell 10% to $333 million. Technology services revenue rose 21% to $201 million.
During the quarter, GlobalFoundries shipped 625,000 300mm wafers, an 8% increase from the same period last year.
The company's profitability picture also brightened. Adjusted gross margin expanded to 29.9% from 25.2% a year earlier, and adjusted operating margin increased to 16.7% from 15.3%. Adjusted EBITDA margin, however, dipped to 32.9% from 34.7%.
As of June 30, 2026, GlobalFoundries had generated $405 million in operating cash flow and held $3.3 billion in cash, equivalents, and marketable securities.
CEO Tim Breen said the company delivered second-quarter revenue and adjusted gross margin above the high end of its guidance ranges. He highlighted strong customer demand across strategic markets, particularly optical networking for AI data centers, where its silicon photonics and silicon-germanium technologies are gaining traction.
GlobalFoundries has been busy on the strategic front. In July, it signed a letter of intent with the U.S. Department of Commerce for a proposed $300 million award to support U.S. leadership in silicon photonics for AI infrastructure. It also completed the acquisition of Photeon Technologies' integrated voltage regulator business to beef up power delivery for AI data centers.
In June, the company acquired Synopsys' ARC Processor IP Solutions business to expand its RISC-V intellectual property and software-to-silicon offerings. And in May, it launched Quantum Technology Solutions, backed by an expected $375 million Commerce Department grant to accelerate future quantum computing hardware.
For the third quarter, GlobalFoundries expects revenue of $1.86 billion to $1.91 billion, compared with the analyst consensus estimate of $1.879 billion. It forecasts adjusted earnings of 46 cents to 56 cents per share, versus the expected 50 cents.
Management struck an optimistic tone on the durability of AI infrastructure demand, arguing that the opportunity remains in its early stages despite rapid growth. Breen said the shift to optical networking in AI data centers is still in the "very early innings," while CFO Sam Franklin raised the company's 2026 communications infrastructure and data center growth outlook to 50%-60% from the high-30% range.
Executives also pointed to strong customer demand for silicon photonics, expanding capacity, and long-term growth opportunities in optical networking, power, and quantum computing as key drivers of future expansion.
GFS Price Action: GlobalFoundries shares were down 3.96% at $49.96 at the time of publication on Wednesday, according to market data.
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