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GlobalFoundries Drives Gross Margin Expansion: Can the Momentum Last?
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Key Takeaways
GlobalFoundries' Q2 2026 gross profit rose 24% to $505M as IFRS gross margin reached 28.3%.
GFS' Technology services made up about 11% of Q2 revenue and are expected to support gross margin growth.
GFS' Communications infrastructure and data center revenue jumped 62%, its seventh double-digit quarter.
GlobalFoundries Inc. (GFS - Free Report) is making steady progress in strengthening its profitability. The company delivered stronger-than-expected second-quarter 2026 results, supported by favorable business mix, manufacturing productivity gains and higher utilization. In the second quarter, gross profit increased 24% to $505 million, while IFRS gross margin expanded to 28.3% from 24.2% in the year-ago quarter. Non-IFRS gross margin was even stronger at 29.9%, representing a 470-basis-point year-over-year increase and a 90-basis-point sequential improvement.
Technology services, which includes IP, licensing, software, reticles and nonrecurring engineering activities, accounted for approximately 11% of second-quarter revenue. Solid traction in the Technology services business is expected to be a strong driver of Gross Margin in upcoming quarters.
The company is also benefiting from stronger demand in communications infrastructure and data centers. Revenues from this end market surged 62% year over year in the second quarter, marking the seventh consecutive quarter of double-digit growth. High-margin technologies such as silicon photonics and silicon germanium are also gaining momentum.
Apart from improving revenue mix, margin expansion is also driven by structural manufacturing-cost improvements and greater utilization of existing manufacturing capacity. Despite the favorable momentum, sustaining the improvements will depend on GF’s ability to balance profitability and investments in future growth. GFS needs to continue moving toward higher-value technologies while improving manufacturing productivity to sustain margin growth in the long run.
How Are Competitors Faring?
GlobalFoundries operates in a highly competitive foundry industry. It faces competition from industry giants, such as United Microelectronics (UMC - Free Report) and Taiwan Semiconductor (TSM - Free Report) . UMC's gross margin increased to 32.5% in the second quarter of 2026 from 29.2% in the first quarter and 28.7% a year earlier. UMC’s growth was driven by higher wafer shipments and better capacity utilization.
In the second quarter of 2026, TSM’s gross margin reached 67.7%, up 150 basis points sequentially and 910 basis points from the year-ago quarter. Management attributed the sequential improvement primarily to cost-improvement initiatives and higher capacity utilization.
GFS’ Price Performance, Valuation and Estimates
GFS has increased 44.1% over the past year compared with the industry’s growth of 34.6%.
Image Source: Zacks Investment Research
Going by the price/earnings ratio, the company's shares currently trade at 19.67 forward earnings, higher than the industry average of 13.53.
Image Source: Zacks Investment Research
GFS’ earnings estimate for 2026 has improved over the past 60 days.
View the Zacks #1 Rank List
Image: Bigstock
GlobalFoundries Drives Gross Margin Expansion: Can the Momentum Last?
Key Takeaways
GlobalFoundries Inc. (GFS - Free Report) is making steady progress in strengthening its profitability. The company delivered stronger-than-expected second-quarter 2026 results, supported by favorable business mix, manufacturing productivity gains and higher utilization. In the second quarter, gross profit increased 24% to $505 million, while IFRS gross margin expanded to 28.3% from 24.2% in the year-ago quarter. Non-IFRS gross margin was even stronger at 29.9%, representing a 470-basis-point year-over-year increase and a 90-basis-point sequential improvement.
Technology services, which includes IP, licensing, software, reticles and nonrecurring engineering activities, accounted for approximately 11% of second-quarter revenue. Solid traction in the Technology services business is expected to be a strong driver of Gross Margin in upcoming quarters.
The company is also benefiting from stronger demand in communications infrastructure and data centers. Revenues from this end market surged 62% year over year in the second quarter, marking the seventh consecutive quarter of double-digit growth. High-margin technologies such as silicon photonics and silicon germanium are also gaining momentum.
Apart from improving revenue mix, margin expansion is also driven by structural manufacturing-cost improvements and greater utilization of existing manufacturing capacity. Despite the favorable momentum, sustaining the improvements will depend on GF’s ability to balance profitability and investments in future growth. GFS needs to continue moving toward higher-value technologies while improving manufacturing productivity to sustain margin growth in the long run.
How Are Competitors Faring?
GlobalFoundries operates in a highly competitive foundry industry. It faces competition from industry giants, such as United Microelectronics (UMC - Free Report) and Taiwan Semiconductor (TSM - Free Report) . UMC's gross margin increased to 32.5% in the second quarter of 2026 from 29.2% in the first quarter and 28.7% a year earlier. UMC’s growth was driven by higher wafer shipments and better capacity utilization.
In the second quarter of 2026, TSM’s gross margin reached 67.7%, up 150 basis points sequentially and 910 basis points from the year-ago quarter. Management attributed the sequential improvement primarily to cost-improvement initiatives and higher capacity utilization.
GFS’ Price Performance, Valuation and Estimates
GFS has increased 44.1% over the past year compared with the industry’s growth of 34.6%.
Image Source: Zacks Investment Research
Going by the price/earnings ratio, the company's shares currently trade at 19.67 forward earnings, higher than the industry average of 13.53.
Image Source: Zacks Investment Research
GFS’ earnings estimate for 2026 has improved over the past 60 days.
Image Source: Zacks Investment Research
GlobalFoundries currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.