GlobalFoundries Inc. (GFS) stock fell more than 8% Wednesday despite the contract chipmaker reporting better-than-expected third-quarter 2026 results, as its plans for sharply higher capital spending in 2027 drew investor attention.

The company expects about $4 billion in net capital spending next year, with roughly one-third supported by customer prepayments. The spending plans could raise questions about future funding requirements.

Revenue rose 13% year over year to $1.899 billion, beating Wall Street's estimate of $1.889 billion.

Adjusted earnings of 53 cents per share topped analysts' estimate of 50 cents.

GlobalFoundries reported an IFRS net loss of $270 million, or 49 cents per share, largely driven by a $441 million noncash charge tied to shares issued to the U.S. government.

GlobalFoundries' Data Center Revenue Surges 81%

Communications infrastructure and data center revenue jumped 81% to $316 million, while home and industrial IoT revenue rose 49% to $384 million.

Automotive revenue grew 20% to $368 million, and technology services revenue increased 12% to $220 million.

However, smart mobile device revenue fell 19% to $611 million.

The company shipped 647,000 300mm wafers, up 7% from a year earlier.

GlobalFoundries' Margins Improve

Adjusted gross margin expanded to 31.4% from 26% a year earlier. Adjusted operating margin rose to 17.9% from 15.4%.

Adjusted EBITDA margin also improved, rising to 34.1% from 33.9%.

GlobalFoundries generated $341 million in operating cash flow during the quarter. It ended September with $3.2 billion in cash, equivalents and marketable securities.

AI Boom Fuels $1 Billion Silicon Photonics Ambition

CEO Tim Breen highlighted growing demand for silicon photonics and silicon germanium as AI data centers shift toward faster optical connectivity.

During the earnings call, Breen said demand for optical networking technology is "truly skyrocketing" as AI data centers replace copper connections with faster optical links.

He said GlobalFoundries' capacity is fully booked through 2027 and increasingly committed through 2028, with some customers seeking supply commitments through 2029 and beyond.

GlobalFoundries expects about $500 million in silicon photonics revenue in 2026.

The company now aims to reach a $1 billion annualized revenue run rate by the end of 2027, a year ahead of its previous timeline.

It also plans to roughly triple silicon photonics capacity next year, with customer demand effectively filling its 2027 capacity.

Meanwhile, GlobalFoundries expanded partnerships with Marvell, Monolithic Power Systems and TSMC.

Its five-year, $2 billion manufacturing agreement with TSMC will support U.S.-based silicon-interposer production beginning in the first half of 2028.

The company also secured nearly $1 billion in lifetime custom-silicon design wins during the quarter.

GlobalFoundries Issues Fourth-Quarter Outlook

GlobalFoundries forecast fourth-quarter revenue of $1.975 billion to $2.025 billion, compared with Wall Street's estimate of $2.002 billion.

The company expects adjusted earnings of 54 cents to 64 cents per share, compared with analysts' estimate of 56 cents.

GlobalFoundries also plans about $4 billion in net capital spending in 2027, with roughly one-third backed by customer prepayments.

For 2026, management expects communications infrastructure and data center revenue to grow 60% to 70%. However, smart mobile device revenue is expected to decline by a low-teens percentage.

GFS Price Action: GlobalFoundries shares were down 8.06% at $39.43 at the time of publication on Wednesday, according to market data.