GlobalFoundries Stock

Okay. Excellent. Good afternoon, everybody. Welcome to the Goldman Sachs Communicopia and Technology Conference. My name is Jim Schneider. I'm the semiconductor analyst here at Goldman Sachs. It's my pleasure to welcome GlobalFoundries and CEO Tim Breen to the stage today. Welcome, Tim.

Thank you, Jim. Great to be here. Thank you.

Excellent. I want to start off with a couple of very high-level questions around your business. GlobalFoundries kind of stands as a foundry providing specialized CMOS processes, has manufacturing sites spanning the U.S., Asia and Europe. At the highest level, tell us a little bit about what kind of capabilities are unique to GlobalFoundries, why customers come to you and why you win?

Yes. Thanks, Jim. Great to be here. Look, we see that in 3 broad categories. I think the first thing is that there was once upon a time when in semiconductors, there was leading edge and lagging edge. And that was really defined by the technology transitions that the industry went through. I think it's obvious today that we've moved beyond that paradigm. And we've moved beyond it because where semiconductors find themselves in our daily lives, in the data centers that we're relying on, in space, a broad set of use cases.

And it means that when you think about what we do, you have to focus your strategy against that. And so we think of these 3 pillars that we focus on. Number one is our technology portfolio. So we have an incredibly rich, diverse technology portfolio built over now 17 years since we've been a company called GlobalFoundries in areas as diverse as analog, mixed signal, in power, in ultra-low power CMOS and beyond.

And so step number one, have for those diverse applications, a set of technologies at the process level and increasingly now beyond that process level with advanced packaging, with IP, with software, with custom silicon as well. So pillar number one, kind of deep focus on those differentiated technologies that accomplish specific workloads.

Number two, ultimately, you are a really high-stakes decision for your customers. They don't get to choose you this year and not choose you next year. They bet on you for the long term. And so you need a track record of trust and delivery, and that takes time to build. And we've been doing this for some time now. I'm really confident to say now we're in a place where 10 or more customers have done a decade with us and made millions of wafers and hence, billions of chips with us. And so we have that foundation of trust with our customer base and with our ecosystem.

And then the last part you mentioned, it's in the name, is that global footprint. And it's really hard to build. It takes a lot of time. It's actually quite painful to establish not just a set of fabs in different geographies, but ones that work together as one global network that have cross-qualified technology so a customer can tape out once and manufacture in 3 continents.

That's a huge advantage in a world where supply chains are more fragile than ever and more -- and need more resilience than they've ever had before. And so again, when you put those 3 together, it's clear why customers are coming to us more and more for what we do.

You hosted an Investor Day back in May, where you laid out some of the long-term growth drivers of the business. I think you call them megatrends of AI data centers, Physical AI and resilient global supply. So maybe unpack some of these and highlight the specific areas where you have -- expect to have the greatest impact on your business over the next few years.

So when we start in the data center, I think, obviously, it's the area that everyone in the industry, everyone in technology is very focused on. And if you leave aside for a second, just the sheer scale of the build-out that's happening, we talked about the $800 billion of hyperscaler CapEx this year, those numbers growing into '27 and beyond.

But leave aside the scale of it and talk about what's happening within that data center today that was different from 2 years ago or different than even a year ago. And it's that, that data center is increasingly heterogeneous in terms of the compute that's going into that.

And so while before it was a GPU-centric kind of build-out, now you're talking about GPUs, CPUs, LPUs, NPUs, basically anything with a PU after it, working together in a much more complex compute environment because the AI workloads have changed. They were originally quite narrow in scope, now heavily skewed from training now to inference and even disaggregated inference workloads as well. So that introduces a new challenge called how do you connect all of that together.

And so in that data center, we very much focus on the optical connectivity piece of it. We'll talk more about that. I'm sure there's a lot of growth in that sector as we transition from copper to optical. But beyond that in the data center, you're also seeing an increasing criticality of improving power conversion and power efficiency. So again, data center power being a very good growth driver for a business like ours that specializes in the technologies for intelligent switching, dense power conversion and so on.

So data center, very, very strong driver today, where we're seeing very, very good demand growth, where we're also investing CapEx for capacity for the short-term ramps. We think that is probably dwarfed by what the longer-term Physical AI transition will be. And it's a bit like every transition we've seen in technology. You start with the boom and everyone focuses on the boom, but we forget that there's always an echo that comes later.

And the reason we think that's the case is that when AI permeates the devices in our world around us, there are so many more use cases that can be deployed that we haven't thought of yet or we haven't taken full advantage of yet. We haven't seen that really materially hit the business yet.

But of course, we see increasing interest in robotics, but also industrial automation, medical devices, agriculture, consumer devices, a broad spectrum of devices, all of which will need a lot more semiconductor content because operating in the real world, they will need to sense their environment, think with distributed compute, control a real-time system, actuation, motor control and so on. And they will need a ton of communication, largely wireless communication. So the second driver, Physical AI, very much at the beginning and the early stage, but we think that is a material business growth driver for us.

If those 2 were all that was happening, that would already be pretty overwhelming for us and overwhelming for the industry. But they're also happening at this time where this reshoring trend is now truly accelerating. And for a long time, it was interesting to customers that we had a global footprint, but it was not a competitive differentiator. It wasn't something that said, okay, we need to do this with you because of the footprint you have.

In the last couple of years, that has dramatically changed to the point that now we see procurement processes where NCNT is the rule, not a nice-to-have, right? Made in the U.S. is a critical feature of that. And so it's almost a multiplier effect on the first 2, that all of this demand growth is happening at a time when the industry is in a very committed way driving that reshoring of capacity into the U.S. but also into other parts of the footprint as well.

Great. I want to dive into those things, but maybe first ask about operational kind of question. What are the 1 or 2 key objectives you're driving toward over the next, say, year or so? And if you think about investor expectations for the business heading into 2027, if you were to outperform, what would be the key areas of upside you see for the business?

So it's interesting how our industry moves through these periods of when you're chasing supply or chasing demand. We are clearly in a chasing supply moment today. And for us, what that mostly means is a deep focus on ramps of technologies that we are already producing today, but ramping to higher volumes.

We'll be definitely increasing our CapEx. We already are increasing our CapEx this year from last year. We'll be increasing further again next year, but it's all going to come down to how quickly we can get tools installed, qualified, ready to ramp for customers. That will gate or accelerate our growth going into next year. We don't see a demand-based reason that, that would be different. We definitely see a supply-based reason that, that will be different.

And that puts us in a very much more executional phase of our business, right? We're delivering for customers working hand-in-hand, finding ways to take risks together to go faster to meet their objectives for their markets.

So priority #1, job #1 is really just build out that capacity and ramp as quickly as we can in those technologies that we are investing in and really doing that in a very much partnership mode with our customers. By the way, not just in terms of commitment, but even in terms of like financially, right, they're also co-investing alongside us in some of those ramps as well. So that's priority #1.

Priority #2 is in that broad set of technologies that we offer, every year, we're delivering critical road map intercepts, qualifications of new products, new technology launches. We just had our Global Technology Summit (sic) [ GlobalFoundries Technology Summit ] here in Silicon Valley last week. We've never had as rich or diverse a road map as we do today in all these different end markets.

But those are things customers are counting on. They're counting on it being ready, first time right. And so job #2, very close second priority is delivering those road map intercepts for features and performance that they need to win in their end markets as well. So high execution focus.

Excellent. Now clearly, AI data center is one of the bigger drivers of the growth in the overall market. You have a differentiated position in silicon photonics specifically. Walk us through that competitive differentiation relative to some of your competitors like Tower, Vanguard, et cetera, and just some of the actions that TSMC may be taking in the market as well.

Yes. So if you back up a little bit, the transition to optical, if we had this conference discussion a year ago, 2 years ago, we would be having an if discussion, not a when discussion. We're clearly now in a when moment for optical. And it's because AI data center workloads are much, much more data-intensive than previous workloads that were ever considered in being. And so now we're firmly in that camp of transition, and the transition has kind of 2 dimensions to it.

First of all, a transition from long distance kind of coherent optics that scale across to scale out and eventually scale up and even potentially scale in, right, all the scales, right, in the data center in terms of which links are being replaced by optical that were historically copper.

But the other transition happening is form factor transition where today, you see the strong ramp of pluggable optical transceivers. But tomorrow, you're seeing even taping out in our fabs today, near-package optics and co-packaged optic designs that are going into production in '27 and '28. And that's because you need to deliver that optical link closer and closer to the XPU, the GPU, the CPU, the switch ASIC and so on.

So this is the backdrop of what's happening, and it matters because our differentiation isn't just about capacity today, it's very much about a road map that can deliver the performance that those transitions need over time. And so you have to have a core silicon photonics platform, which we've been building for more than a decade that can do high-speed modulation.

So we're now talking about 100 gig per lane becoming 200 gig per lane, 200 becoming 400, going beyond 400 gig per lane with new materials, new modulators and so on. So a core photonics platform that can accommodate the acceleration of bandwidth.

But you also need to think about how that form factor is delivered. That's where advanced packaging comes to play as these solutions are delivered closer to the chip, hybrid bonding, ability to attach a fiber to the chip. These are all difficult and new techniques that weren't in the industry before. And again, part of our road map of the innovation we've been driving as well. So you need that technology platform.

You need the capabilities to work with a diverse set of customers. We have more than 40 customers in photonics today, and that number keeps growing as players really invest in their optical road map. By the way, everyone who was touting copper 2 years ago has either launched an organic or inorganic effort to get into optical, right? And so suddenly, everyone is doing optical, but that means you have to support them in these new ramps, these new capabilities that they're in with not just your team, but your models, your PDKs and so on. So the second piece of that story.

But the third piece, maybe the most, in a way, difficult to replicate is this is a fast-growth market. And so people are not betting on you to sell a few wafers today. They're looking to how do they scale for the next multiple years. We're ramping our photonics capability in existing scaled 300-millimeter fabs. These are big fabs. These are fabs that do today hundreds of thousands of wafers of leading edge, effectively leading-edge capabilities with lithography, like EUV and so on, that are ready to scale for high-performing applications in the future without building new fab space.

And we've talked about being able to 10x our photonic capacity within our existing 4-wall infrastructure in the U.S. and in Singapore to really meet the needs of that market going through that high ramp period as well. You put those 3 things together, it's fairly clear why we're having really good engagement with customers in photonics today.

And to that point, you laid out growth targets of getting to $1 billion growth run rate in silicon photonics in '28, $2 billion by 2030. How do you see that trajectory in the very short term? And then what would we have to see in either near-package optics or co-packaged optics for you to significantly blow past those targets?

I think the industry adoption needed to reach those targets has already happened. So I think we now have very limited adoption risk baked into that. Now we're in the mode of, again, chasing supply in the near term, how quickly can I qualify tools, can I invest and ramp that capacity within my existing footprint. All indicators right now from a demand point of view are flashing kind of bright green relative to those targets. It's a question of how quickly I can build on that -- bring that supply on.

And obviously, I'm going to do that in an intelligent way understanding that when you lead with capacity, you've got to balance it from a long-term kind of profitability point of view as well. But right now, we see much more demand than we can supply out of our current installed base. So we'll definitely be accelerating that.

That's still primarily today, that path to that first milestone. Pluggables gets you pretty much all the way there. We're already seeing the NPO rollout picking up steam. And by the way, it's many of the same players who are in pluggables today rolling out their NPO solution. So I think that transition is now very much inevitable.

If you saw really broad adoption of co-packaged optics at the latter part of the period, you could blow past those targets materially because co-package is the area which is critical for that scale-up transition. Once you're moving into that, you're replacing 10x the length of scale-out with those solutions. And so you're not going to see a linear growth story. You're going to see a much faster growth story on top.

Another key theme in the data center is high-voltage power, specifically for the 800-volt transition, we're expecting to happen sort of maybe by like middle or the end of 2027. Can you maybe lay out for us your exposure in those areas, specifically for gallium nitride and BCDMOS?

Yes. So as you said, we're seeing a paradigm shift in how power is converted, what it's converted from to. As you said, next year's data centers will be having 800 volt at the data center wall that needs to get delivered to 0.8 volts, let's say, at the chip with as few conversion stages as possible in a very dense form factor, right? The rack is denser than it ever has been. The amount of current that's used by all of these processes is very, very high.

And so you need technologies like BCD for intelligent switching. You need to do dense power conversion with GaN. The same reason your GaN power brick for your laptop is much smaller than your historical power brick, is the same reason that the data center relies on GaN for that. We're shipping GaN products to the data center today. One of our partners, Navitas, talked about that last week. So that ramp is already underway today, and BCD is the same story.

And our latest BCD technology, 55-nanometer, which is not from a digital point of view, very complex, but from a power point of view is kind of really very advanced. It's already being used in new conversion stages that are going into production as of now. So that ramp is starting. We have yet to see the real pull-through for the business, but we'll see that going into '27 and even more into '28, which is when we're also putting some capacity on for that technology.

The latest innovation in the data center is also the switch from lateral power delivery to vertical power delivery. There's not enough space in the rack. And so you need to find ways to deliver power vertically to the chip. We've been making investments in this area with process technology, integrated passives, but most recently with the acquihire of a small team focused on designing those voltage regulators with customers.

Because again, when you make a rapid technology transition, it's not just about having a standard offering and use it if you want to use it, work as partners with your customers, be they a traditional power semiconductor player or a hyperscaler or anyone in between to really help them navigate that transition, and that's exactly what we're doing.

So very fair. So even as you're diversifying into these markets we just talked about, you still have a significant amount of your business today tied to the smartphone market. I think a lot of people saw memory pricing driving down potential demand destruction, but I think it's maybe played out in a little bit different way than some people expected. Some pull-ins happened in terms of builds rather than driving sort of immediate downdraft.

And I guess how do you think these dynamics now with the benefit of hindsight are going to play out in your business in the -- talk about what you saw in the first half and then how you expect that to kind of materialize in the second half?

So we've been very deliberate about our approach to mobile, and mobile has taken this industry quite far, and it's been an important driver of how many companies got to where they got to, right? TSMC, by the way, included, right? We were more than 50% mobile going back a couple of years, that's down to the mid-30s today. We've laid out a long-term model that takes it to the mid-20s. And so we think that over time, as a percentage of revenue, it decreases. In absolute terms, it remains relatively flat or, let's say, to achieve our plan, we do not rely on it growing to achieve our medium-term plan.

And that's very deliberate because, again, we want to see the growth coming from the other areas where we're driving the diversification even harder. But the humble cell phone still has a role to play. It by the way, creates also a platform for technology innovation. The BCD technology we're excited about for the data center. It was born in the mobile phone, right? And if you can deliver it in that form factor, you can deliver it in other form factors, too.

Look, I think tactically, when we started the year, there was a view that it would be a tough year for mobile. It is indeed a tough year. It's not as tough for the higher end, right? I think it's very tough on the low end. More of our exposure to the higher-end handsets. We'll see what announcements, including this week's announcement from the Cupertino company, what they yield, do they drive appetite for a refresh cycle, what does pricing really do to demand?

I'd say it's holding up better than perhaps some people thought because, again, there's still just a natural replenishment rate. I think the other dynamic that we're seeing is mobile companies were the first in the queue in COVID. They understood that by getting early, they would not be the one shorted in supply.

Now they're worried about being late when the data center is the one pushing all the demand. And so you're seeing actually more visibility where they're actually still saying, I need my supply for '27, I need my supply for '28 because we're still going to sell plus or minus a large number of units of mobile, even if it's down low double digits or so on, it's still a material amount of content that needs to be secured.

Yes. Yes. Makes sense. Finally, automotive. That's been a very significant growth driver for the company since the time of your IPO. I think you're running over $1.5 billion in that business today. Can you maybe speak to the -- any incremental customer wins you've had over the past year and the sort of potential for you to maybe outstrip the double-digit growth CAGR you talked about at Investor Day?

Auto has been a great story for us. We were, sort of 5 years ago, 2%. It's now in the 20s. That will continue to tick up as it continues to grow. Auto is a predictable business, meaning you can predict there's a cycle between the design win, the tape-out and the ramp, and it takes longer than other markets, but it lasts a lot longer as well. So from a fixed asset perspective, it's a great kind of business to have in your portfolio.

And we have one of the highest shares of auto of any sizable foundry, right? Others may have different numbers, but ultimately, ours is one of the most significant. And it's because the technology fit and the footprint fit is really good for auto, right? All the portfolio of what you need for microcontrollers, zonal controllers, battery management systems, in-cabin sensing, high-performance radar, all of these kind of applications that increasingly you wouldn't buy a car without, right? They're no longer nice to have. They're very much must-haves. They fit really well within our technology base.

And automotive has been really vocal about supply security. And so if you look for who have been most out there with NCNT policies, or U.S. for U.S. sourcing and even gone as far as securing that capacity themselves as GM did with us and others have done as well, you're seeing automotive really leaning into that story as well.

So that's contributed to that kind of double-digit growth story that we've seen that will continue this year, next year and beyond. In our kind of plan that we laid out earlier this year, we see that kind of growth rate continuing. I would say the upside from that auto is predictable, right? And all this is happening with content growth rather than growth of unit sales, and the predictability is one of its strengths.

Where we could see upside is where the automotive technologies are deployed in other applications. And so right now, we start to see microcontrollers getting a pull-through from industrial, maybe the very early sign of robotics starting to pull through, too, because all the performance characteristics operating in difficult environments, high temperature, vibration, high quality, all of that is a great credibility builder for those other applications going forward. So I think auto will be, in a way, a bit the springboard for some of those other growth drivers going forward.

Great. Tim, over the past year or so, you made some unusual acquisitions of processor IP, specifically related to MIPS and RISC-V plus some assets from Synopsys. I think that goes -- most caught people by surprise to some extent. So maybe help us understand how those deals fit together to sort of get to this $1 billion revenue run rate in 2030 you outlined across IP, software and custom silicon.

So we've done -- I mean, just to back up a second on the total acquisition strategy. We've done about 6 acquisitions in the last 2 years. And we viewed all of them through the lens of bringing something differentiated to customers. So the test for me was when I send out an e-mail to my customer CEOs, my partners and I say, we've done this. Are they going to respond with a shrug? Are they going to respond with a let's talk?

I would say in our IP investments in particular, it's been very strongly let's talk. And the reason is that they see this as an extremely important part of their portfolio. They're also dependent on one dominant provider in that space, right? It sounds familiar from our foundry experience, where they're saying, I need alternatives in my business.

They're excited about RISC-V. I think the story of RISC-V being a little bit of emerging technology and being a bit of a hobbyist technology, that was 5 years ago. Today, it's broadly adopted. By the way, you see that also in the acquisitions that people like Meta, Qualcomm, others have done all RISC-V technologies and so on. So RISC-V has also come of age at the same time as we've done these deals.

And so customer feedback is, this is great. You're filling something that I don't have in my portfolio. For me, what's great about it is it's bringing in accretive revenue, very good margins, very good growth, but it's doing it in a way that is synergetic with my customer conversations already.

And so I'm able to engage with customers when they're thinking about the next-generation architecture for the zonal controller or the next-generation radar, whatever they want to build, and we're able to bring to it tools that they otherwise wouldn't have access to, software tools for simulation, processor IP for different workloads.

We can shorten their time to market, but we also get an insight on what they're trying to achieve. And that obviously puts us in pole position to be the manufacturing partner of choice as well. So I know it's very unusual for a foundry to be also being an IP supplier. But I'd say today, we're actually probably the second largest processor IP supplier after the incumbent, if you will, because of the demand that we're seeing, and that's going to grow going forward.

The last piece of it that's really interesting for us is when you build very specialized process technology, you want to get feedback loops quickly on how you can improve. Obviously, that normally comes from your customers. You do a design, you get feedback, you improve. When you have something like that internally, you're getting that feedback loop internally. You're eating your own cooking, if you want.

And so you're getting much tighter loops on your own process technology and you're improving it much more rapidly than you otherwise would, which means it's even better served when you go to that next conversation with the next customer to say, if you use this IP and this processor technology, here's what you can do in terms of device performance from that.

So I'd say off to a very good start. We've talked about between $100 million and $120 million of revenue this year, but that's growing very fast, and we're very confident for that end of decade kind of $1 billion exit run rate on the business, just given the pull we're seeing from the industry.

And then how do you think about kind of as you bring those pieces of IP together, like how the business model matures, how your familiarity with that -- running that business actually matures? And maybe give us any kind of sense you can about like whether the ultimate objective is to bring more customers into your foundry business through those relationships or to actually like really just ramp the scale and size of the IP business stand-alone?

I think it's going to be a bit of both. When we acquired Synopsys' ARC business, it came with 300 customers. You've got to believe that in the last few months since we closed that deal, we've been engaging with those customers in a whole different way to say, what don't you have that we're not doing together today on the manufacturing side because they're all building something, right? And what also don't you have in terms of custom requirements, custom IP that you need as well.

So I think we have a really fertile ground to grow, I guess, within that existing customer base. We also have a way to be a much more strategic partner to some customers for whom before they might have seen us in a narrow vertical of a manufacturing solution. Now you've got a broader set of conversations to have with the business unit leaders who are themselves going out to work and conquer the markets.

So look, I think that synergy is really strong. And I think it's playing out probably better than expected, right? We knew it will be accretive. We just didn't understand quite the pull the industry would have at this time for it.

And can you maybe just say something about sort of like what the most natural base of customers is for you in that business? And then sort of like any design wins you've actually gotten so far?

So continue to have a pretty broad base. We've been public about a few of the more recent wins. We've seen wins in areas like defense. By the way, defense obviously also values that footprint very strategically as well, but often lacks the capabilities to build their own designs, but they would like to do more of that.

So we had an announcement with Lockheed Martin about that, which is a good example of -- and you'll see more of those where a defense player wants to differentiate in silicon, but needs some of the building blocks like the IP to make that happen. So defense has been a good area.

In automotive, we've been very public about partnerships. People like Infineon, existing strong GF customers, are going deeper with us through these things. You'll see more announcements in the months to come. But it's actually pretty broad, and it's a combination of who you'd imagine is the traditional GF fabless customers or, let's say, IDMs who are increasingly fabless in their portfolio, but then a really broad set of Tier 1s, OEMs and even some hyperscalers, by the way, both for kind of edge type solutions that they're building.

But even there are some applications in the data center where they have a data processing unit, a coprocessor that they're using that IP for as well. So it's actually been really great at expanding the kind of quality of discussions and to a certain degree, expanding the customer base that we work with.

I want to briefly touch on quantum because I think you announced another U.S. government award this morning, if I'm not mistaken. Maybe talk about sort of like, just for a second, on your quantum strategy and how sort of some of these recent awards are sort of playing into that and when that starts to become like a real business.

So we've been doing quantum in various shapes and forms for maybe 7, 8 years now. It starts with a single customer engagement and you build around it. But clearly, there has been an industry-wide, let's say, uptick of momentum in the last 12, 18 months. And the reason is that you have all these quantum modalities that are being proven at lab scale and all the companies are facing some version of the same problem called, I can't build a system with 100 qubits or 1,000 qubits. I need 100,000 qubits. I need 1 million qubits to build a scalable fault-tolerant quantum computer.

And so the bottleneck is not quantum science, it's high-volume manufacturing, and it relies on a lot of the stuff that we do very well when it comes to integrating novel materials, advanced packaging, high-speed interconnect. By the way, many of them using photonics or some kind of optical technology for high-speed interconnect.

And then one thing that cuts across nearly every modality, which is that I have to be able to read out those qubits at very low temperature, right? So we have something we call cryo-CMOS, which is basically conventional FD-SOI CMOS we use for many applications, but characterized at 4 degrees Kelvin, so it can read out those quantum signals, those qubits in a different environment that many, many quantum companies are leveraging.

And so we started to see that out of this, we had the foundation for a platform that we could take to a broader set of customers. In parallel with this, U.S. government strategically said, look, we need to be leaders in quantum. Quantum is relevant not just for economic opportunity, but for national security. How can we partner with the industry in a much more aggressive way to go faster?

And so the conversation said, look, these are the things you're planning to do over time. What would it take to do it faster? What would it take to do those in 2 years instead of over 5, 6 years. And so we struck a partnership that accelerates our investment in infrastructure, right, tooling and so on to do some of these more complex exotic processes, building some of that enablement that we talked about, the PDKs and so on for many customers to use and really allows us to go faster in the journey that we're kind of already on.

And I'll emphasize that journey is not kind of orthogonal to the rest of GF because a lot of the road map requirements are beneficial to the rest of the company, right? What the next generation of photonic modulators will require in terms of materials, we're already using at the quantum stage, thin-film lithium niobate, barium titanate, all these exotic materials with long names. They're being proven at quantum for quantum applications. They will be needed for the next generation of photonics. So there's a ton of road map synergies in the portfolio.

So today, we announced that we completed the deal that we announced earlier in the year with the government. So we're very happy to have them on board as a partner, driving this forward. And it's going to be a continuation of the strategy that says invest in the technologies where you can have a true leadership position.

I'm not the best player to do single-digit nanometer or buy the next NA EUV tool, but I am the best player at integrating novel materials, advanced packaging and a very different application that otherwise would be very hard to do.

Final question in the last minute or 2 we have left. If we put everything into the broader financial picture, you talked about diversifying the business along the lines we've just described, getting to 10%, 12% long-term growth by 2028 and beyond. What are the drivers that are driving the most confidence in that view? And are there any risks that you see?

I think it's a model we sort of laid out and we sort of said let's build a plan that is where diversification is a feature, not a bug. And it's very deliberate, right? There are plenty of companies in semi experiencing very fast growth rate. But if you look at it, it's relatively narrow, right? It's a product category. It's an infrastructure transition.

We said, look, we're going to build a plan that is based on growing in multiple areas. And in some areas, less of a growth plan and more of an upside plan should that upside come to bear. And so we're quite happy with that growth. Obviously, that meant laying out targets for things like communication infrastructure and data center of 30% or in the 30s. We're doing 60% in Q2.

So obviously in some areas, we're ahead of those numbers. In other areas, we're kind of tracking in line with auto, for example, or in IoT, we're actually tracking slightly ahead as well year-to-date, right, relative to long-term plan target.

So I would say because of the megatrends we started talking about, I don't see a demand constraint to meeting and exceeding that plan, right? So how do we navigate? We have to obviously navigate the investment cycles we go through. We have to partner closely with customers. You're only as good as your last delivery, right? You earn reputation every day by delivering.

But again, I think for the next couple of years, we will be more in a supply-constrained than a demand-constrained environment. It will be more about that rate and pace of investment that we want to take on. And I think that the advantage in this cycle versus others, 2 things that matter.

One is customers' skin in the game. Customers are deeply -- we don't have to ask. They say, I want to be with you in this. I want to support you go faster. I'm betting on you, you need to succeed, how can I help? And when that end demand is driven by people like the hyperscalers, of course, they're willing to put capital to work to drive that story.

The other thing that's happening is those government partnerships play a critical role. When you're driving a build-out, having partners who are literally working with you every day on a bunch of programs and have put in place tools to allow you to accelerate CapEx at significant recovery rates that weren't there in the past also allows you to grow a bit faster.

So I'd say, look, next couple of years, barring any changes to the environment that we don't see as of today, supply-constrained, not demand-constrained. Over the long haul, the diversification of the platforms gives me a lot of confidence in the broader growth over that plan period, may even make those numbers look a bit conservative.

Excellent. I hope that's the case. And thanks very much, Tim, for joining us today. We really appreciate it. Unfortunately, we're out of time.

Thank you.

Thank you for standing by, and welcome to the GlobalFoundries, Inc. Second Quarter Fiscal Year 2026 Financial Results. [Operator Instructions] As a reminder, today's program is being recorded.

And now I'd like to introduce your host for today's program, Eric Chow, Head of Investor Relations. Please go ahead, sir.

Thank you, operator. Good morning, everyone, and welcome to GlobalFoundries Second Quarter 2026 Earnings Call. On the call with me today are Tim Breen, CEO; and Sam Franklin, CFO. A short while ago, we released GF Second Quarter 2026 financial results, which are available on our website at investors.gf.com, along with today's accompanying slide presentation.

This call is being recorded, and a replay will be made available on our Investor Relations web page. 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 made 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 deemed to 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 tenants. 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 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 risks and uncertainties described in our SEC filings, including in sections under caption Risk Factors in our annual report on Form 20-F and in 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 Goldman Sachs Communacopia and Technology Conference in San Francisco on September 8. We will begin today's call with Tim providing a summary update on the business environment and technologies, followed by Sam, who will provide details on our second quarter results and third quarter guidance. We will then open the call for questions with Tim and Sam. We request that you please limit your questions to 1 with 1 follow-up.

I'll now turn the call over to Tim.

Thank you, Eric, and welcome, everyone, to our second quarter 2026 earnings call. GF delivered strong results in the second quarter with revenue and non-IFRS profitability metrics at or above the high end of our guidance ranges. The team continued its rigorous execution ramping critical technology corridors where we see accelerating customer demand and the opportunity to create and capture value. .

In particular, our comms infrastructure and data center end market delivered over 60% year-over-year growth in Q2, driven by continued demand for optical networking applications across our silicon photonics and silicon germanium platforms. This marked one of the fastest quarters of year-over-year revenue growth for an end market in our company history. We believe our value proposition has never been more in demand.

Our differentiated technology portfolio and resilient global manufacturing footprint continue to strengthen our position with customers. We are seeing meaningful momentum as we execute our strategy and drive towards the long-term targets we shared at this year's Investor Day.

Let me now update you on 3 key developments in the quarter that are accelerating our strategic path. One, Quantum Technology Solutions; two, optical networking and power opportunities in the AI data center; and three, IP, software and custom silicon. Starting with Quantum.

A paradigm shift that will define the next chapter of high-performance computing over the coming decade and beyond. In May, we launched Quantum Technology Solutions, a new dedicated team and set of capabilities within GF that will enable the quantum industry to move from prototypes to high-volume production.

Just the CPUs, GPUs and AI ASICs define today's compute paradigm, we believe quantum processor units or QPUs will be an essential part of tomorrow's. Advanced semiconductor manufacturing built securely here in the U.S. will be essential for the scaling of this technology. Establishing the right production capability is now the critical enabler the ability to manufacture and integrate complex quantum devices with consistency, yield and scale. This is precisely where GF wins.

Our Quantum strategy is cubit agnostic, meaning our manufacturing platforms are expected to support a broad range of leading modalities, including superconducting, trapped ion, photonic, topological and spin. Our proven platforms like FDX provides a cryogenic CMOS foundation, and we are extending our advanced packaging capabilities into the cryogenic regime to enable the 3D heterogeneous integration that these systems require.

As highlighted in our recent announcements, we are working closely with 8 of the world's leading quantum computing players, including partnerships with SI Quantum Quantinuum and Quantum Motion as well as new endorsements from the quantum arms of large hyperscalers. Since launching just 3 months ago, we have already embarked on 4 new customer-specific quantum engagements with accelerating commercial momentum ahead.

Advancing our quantum capabilities is anchored by an expected $375 million grant from the U.S. Department of Commerce to accelerate the research development and build-out of quantum manufacturing capacity in the U.S. This critical partnership with the U.S. government underscores why Quantum is not only a business opportunity, but also a national priority. We are only in the early stages of the nascent quantum opportunity.

Over the next 1 to 3 years, we expect to generate quantum related revenue largely through engineering engagements with customers reported within our technology services revenue. As customer platforms qualify and move into volume production, we expect quantum related revenue from manufacturing services to ramp towards the end of the decade. Ultimately, our early momentum and customer proof points in this emerging area perfectly encapsulate the outsized value GF provides, a strongly differentiated technology deep customer partnerships and a global secure manufacturing footprint.

Let me turn to AI data center, where we continue to build momentum through new customer design wins and increasing engagement across the ecosystem. In the second quarter alone, we secured 7 new optical networking design wins with customers across both pluggable transceiver suppliers as well as major hyperscaler and networking players. -- silicon photonics and silicon germanium each play critical roles in optical networking systems and combined with data center power represents 3 high-quality, long-term secular growth drivers which underscore our conviction in the ability to grow in the data center for years to come.

I will walk through an update on each of these. For silicon photonics, let's start with pluggables, which contributes the vast majority of our silicon photonics revenue today. Thanks to our differentiated technology and advanced 300-millimeter photonics manufacturing footprint, we are actively engaged with 4 of the top 5 optical transceiver players.

Given our strong capabilities and robust capacity ramp, we now expect our silicon photonics revenue as reported within the comms infrastructure and data center end market to more than double in 2026 compared with the year prior. Beyond just this year, we are progressing well on our multiyear road map to advance the enablement of modules delivering [ 1.6t, 3.2t ] and beyond. High-volume manufacturing of our 200 gig per lane technology is underway. We have already demonstrated 400-gig capability and solutions for even greater bandwidth are in development.

In addition to our robust pluggable offerings today, we see significant customer interest in our scale platform, the industry's first OCI MSA compatible solution for near and co-packaged optics. We currently have 7 active engagements with leading companies on our scale platform. and customer feedback on the merits of our technology and manufacturing capabilities has been very positive. We are already delivering tangible results for our customers today, having taped out a scale-related design win in Q2, and we expect to take out another in Q3.

Specifically for near package optics, we see NPL as an important application and exciting opportunity ahead of the broader adoption of co-package solutions. Because Neo and co-packaged optics are built on a common photonic IC and because many components of GF scale solution support both near and co-packaged optics. Our customers benefit from the same underlying platform.

As a result, we expect GF to benefit from the silicon photonics opportunity regardless of the rate and pace of various form factor adoptions by our customers. As we increase investments into our silicon photonics capabilities, the importance of government partnerships continues to grow.

Last week, GF entered into a letter of intent with the U.S. Department of Commerce for a $300 million award to accelerate the development of next-generation silicon photonics technologies in the U.S. The funding will support advanced optical materials, modulated technologies and packaging innovations that will enable next-generation near and co-packaged optics architectures, building directly on GF scale platform.

The endorsement from our partners across the industry has reinforced our strategic conviction, including the world's top XPU providers, hyperscalers, AI connectivity leaders and ecosystem partners. We are pleased to take a central role in advancing optical innovation and development in the U.S. and believe this recognition validates the strategic importance of silicon photonics, the excellent relationship we enjoy with our partners and GF leadership in these technologies. Another driver of data center momentum is high-performance silicon germanium, which powers the analog and mixed signal electronics at the heart of optical interconnects for AI and cloud infrastructure.

Our differentiated SiGe platform delivers the bandwidth, signal integrity and power efficiency required for increasingly demanding optical networking applications, making it strongly complementary or silicon photonics portfolio. During the quarter, we secured multiple new SGI TIA and driver design wins across networking customers. Demand for SiGe remains strong, and we are oversubscribed throughout 2027.

We are actively expanding capacity in our Vivant facility to support this demand. We believe Sig represents another key growth opportunity for GF. Combined with our leadership in silicon photonics, GF offers a uniquely differentiated set of technologies that help address the power efficiency and signal integrity requirements of next-generation AI systems. The momentum we are seeing today reinforces our belief that we will be a key leader in optical networking for years to come.

The third strong opportunity we see in the AI data center relates to power. In July, we closed the strategic acquihire of the custom power team from Potion Technologies in Europe, bringing an experienced design team focused on integrated voltage regulators or IVR. Together with our BCD GaN and integrated inductor capabilities, IVR further strengthens our road map depth in Power Technologies and expands our serviceable market in one of the fastest-growing opportunities within AI data centers.

Our goal is to help enable a new power architecture for AI infrastructure, one that brings power conversion closer to the processor and addresses the increasing efficiency, power density bandwidth high current and transient response requirements of next-generation XPUs. As AI workloads continue to scale, XPUs are consuming more power than ever before, increasing the need for solutions that can reduce power losses and deliver higher performance with an increasingly constrained thermal and physical footprint.

Closed in Q2, this transaction brings new differentiated IVR technology, specialized engineering talent and additional R&D capabilities that strongly complement of our portfolio, allowing us to capture a larger share of the growing power opportunity in AI data centers. Finally, moving to another key element of our long-term strategy, our IP, software and custom silicon capabilities.

In June, we completed our previously announced acquisition of Synopsys ARC processor IP Solutions business, an important milestone in advancing our strategy in physical AI and a notable step change in expanding GF serviceable addressable market. As a recap, the strategic rationale is multifold. As AI increasingly moves beyond the data center into the physical world around us, it is transforming automotive, industrial automation robotics and intelligent edge devices. In that context, customers are looking for partners that can help them navigate the growing complexity of software, compute architectures and semiconductor design.

Together with MIPS, this acquisition bolsters GS capabilities across risk 5 processor IP, software development tools and custom silicon design, enabling us to support customers from architecture and software through high-volume silicon production. We acquired a broad set of CPU, DSP, NPU and broader risk 5 technologies as well as a proven software development toolkit and application-specific processor design capabilities.

With over 150 patents, 300 existing customers and 400 R&D engineers around the world, this acquisition meaningfully expands our ecosystem reach and depth. Importantly, we are already seeing significant strategic benefits from our acquisition by combining MIPS and Synopsis arc under one roof we are engaging with more customers earlier in the design cycle, shaping application-specific compute architectures and creating deeper, longer-lasting customer partnerships.

To accelerate customer enablement, we are increasing investment in a number of R&D initiatives. These are focused, high-return programs that position us to capitalize on expanding opportunities while helping our customers innovate faster. Over time, we believe this creates a pathway to create custom silicon opportunities and enabling physical AI customers to run their AI inference workloads on GF and based processing platforms.

In summary, we made meaningful progress across several strategic growth areas this quarter. We delivered a record quarter for design wins across both communications infrastructure and data center and smart mobile devices. In differentiated areas such as display back planes for AI glasses, PMIC for premium smartphones and smart power stage gate drivers for data center power. Our differentiated capabilities are helping customers solve increasingly complex challenges while positioning GF as a trusted technology partner.

We are making critical investments and integrating strategic acquisitions that strengthen our competitive position, diversify our growth drivers and provide a durable foundation for long-term profitable growth. I am proud of the team's diligent execution this quarter and excited about the opportunities ahead.

I'll now pass the call over to Sam for a deeper dive on second quarter 2026 financials.

Thank you, Tim. For the remainder of the call, including guidance other than revenue, cash flow and net interest income, I will reference non-IFRS metrics. GF delivered strong results in the second quarter, with revenue and non-IFRS gross margin exceeding the high end of our guidance ranges. Thanks to the efforts from our teams around the world to improve structural costs, raise manufacturing productivity and accelerate growth in value-accretive secular end markets, we grew our gross margin by nearly 500 basis points year-over-year.

Not only did this represent a second quarter record, we delivered on our expectation to reach approximately 30% gross margin. well before the end of 2026. Driven by a richer mix of revenue, this quarter's results demonstrated a meaningful step forward towards our long-term objectives to achieve structurally higher margins and profitability.

Now on to the results. We delivered second quarter revenue of $1.786 billion, up 9% sequentially and 6% year-over-year. We shipped approximately $625,000, a 300-millimeter equivalent wafers in the quarter, up 8% sequentially and 8% from the prior year period. Revenue from manufacturing services accounted for approximately 89% of total revenue. Revenue from Technology Services, which includes revenue from IP, licensing software, reticles, nonrecurring engineering, expedite fees and other items accounted for approximately 11% of total revenue for the second quarter.

Following the acquisitions of MIPS and the Synopsys Archive P business, we expect revenue contribution of approximately $100 million to $120 million towards our full year 2026 Technology Services revenue. up from our prior expectation of $60 million to $100 million as these acquisitions continue to drive new opportunities with our customers.

In addition, driven by strong conversion of our design win pipeline, and an expanding scope of partnerships with customers, we expect sustained momentum in our revenue contribution from Technology Services. As a result, we expect Technology Services revenue towards the high end of the 10% to 12% range of total revenue in 2026, with a gross margin profile significantly higher than our corporate targets.

Let me now provide an update on our revenue and outlook by end market. Communications infrastructure and data center represented approximately 16% of second quarter total revenue. Revenue increased 20% sequentially and 62% year-over-year. This marked the seventh consecutive quarter of double-digit percentage year-over-year growth for communications infrastructure and data center, and the fastest quarterly year-on-year growth since 2022.

Within this end market, we saw strong customer demand for our silicon photonics and silicon germanium offerings. In both of these high-margin technologies we're ramping capacity and making the necessary investments to unlock increases in demand indicated by our customers. Beyond optical networking, we saw strong double-digit year-over-year growth in applications across both wireless infrastructure storage.

Given the accelerating demand outlook from our customers, we now expect to achieve full year 2026 revenue growth in the range of 50% to 60% for our communications infrastructure and data center end market, up from our prior expectations of high 30s percentage year-over-year growth, which we believe is an early indication of the long-term growth opportunities ahead for GF in this end market.

Beyond growth opportunities across silicon photonics and SiGe outlined by Tim, we also closed a first-of-a-kind design win of smart power stage gate drivers on our BCD platform. We see this as just one notable step forward in the rapidly evolving market for data center power applications. Automotive represented approximately 19% of second quarter total revenue. Automotive revenue decreased 13% sequentially and 10% year-over-year, principally driven by customer-led shipment timings.

However, for the full year, we continue to expect low double-digit percentage revenue growth for our automotive end market with a higher weighting towards the fourth quarter. As automotive semiconductor content continues to grow, we're encouraged by our design win momentum with customers and the long-term growth opportunities these present. In the second quarter, we secured a significant automotive power design win for 5-volt and 10-volt power management integrated circuits built on our BCD platform.

In addition, we also taped out an ADAS radar built on our FDX platform for Bosch, a notable milestone and the combination of years of close partnership. These highlights reflect the strong momentum we continue to see across automotive power, processing, sensing and safety applications. Smart Mobile devices represented approximately 36% of second quarter total revenue. Revenue increased 15% sequentially and decreased 6% from the prior year period.

As noted by peers and customers across the industry, 2026 smart mobile handset forecasts have reduced meaningfully over the last quarter, principally due to the continued impact from memory pricing and associated shortages. As a result, we currently expect smart mobile devices to decline by a low teens percentage year-over-year in 2026. Customer design win momentum for new generations of smart mobile devices continues to be positive.

In the second quarter, we secured a notable design win on GF BCD platform with MediaTek further validating our expanding power platform. This marked GF first-ever power management integrated circuit design win with our long-standing customer. In addition, we continue to strengthen our position with next-generation augmented reality wearables at a leading hyperscaler, winning a new design for micro LED display back plans.

Finally, Home industrial IoT represented approximately 19% of second quarter total revenue. Revenue increased 30% sequentially and 10% year-over-year. In the second quarter, IoT revenue growth marked the fastest year-over-year growth since 2022, driven by a breadth of demand for applications across AI-enabled image processing, health care wearables and next-generation MCUs for edge AI compute.

As inventory normalizes, customer demand signals improve and the next generation of production ramps commenced in the second half of the year, we expect our revenue for the home and industrial IoT end market to grow in the range of 10% to 15% in 2026, up notably from our prior expectations for mid-single-digit percentage growth. In the second quarter, we secured 3 strategic chiplet design wins with Lockheed Martin on our FinFET and FDX platforms, creating a foundational aerospace and defense chiplet ecosystem that further extends GF leadership as a trusted U.S. foundry.

We also expanded our relationship with Microchip with a meaningful design win on our FinFET platform another notable proof point for the growth of our embedded compute and edge AI offerings. Moving now to other key financial performance metrics in the quarter. In the second quarter, we delivered gross profit of $534 million, which translates into approximately 29.9% gross margin above the high end of the guidance range and up 470 basis points year-over-year.

A richer mix of manufacturing and technology services revenue, structural improvements in manufacturing costs and improved utilization all contributed to favorable year-over-year margin expansion. R&D for the quarter was $144 million and SG&A was $92 million. Total operating expenses of $236 million were up 16% quarter-over-quarter and represented approximately 13% of total revenue. We delivered operating profit of $298 million for the quarter at an operating margin of 16.7%, above the midpoint of our guided range and up 140 basis points from the prior year period.

Second quarter net interest income was $9 million. Other expense was $12 million, and we incurred tax expense of $39 million in the quarter. We delivered second quarter net income of approximately $256 million, an increase of approximately $22 million from the prior year period. Diluted earnings of $0.46 per share was at the high end of the guidance range based on a fully diluted share count of approximately 556 million shares.

Let me now provide some key cash flow and balance sheet metrics. Cash from operations in the second quarter was $405 million. Second quarter CapEx net of proceeds from government grants was $408 million or roughly 23% of revenue. Adjusted free cash flow for the quarter was negative $3 million, as indicated in our prior quarter's guidance. At the end of the second quarter, our combined total of cash, cash equivalents and marketable securities stood at approximately $3.3 billion.

Our total debt was $1.1 billion, and we also have a $1 billion revolving credit facility which remains undrawn. On July 14, we paid GF first-ever quarterly cash dividend of $0.12 per share, an important milestone that reflects both the progress we have made in strengthening the business and our confidence in its future cash-generating capacity. Supported by a strong balance sheet and disciplined capital allocation framework, we remain committed to investing in profitable growth while returning excess cash to shareholders.

As outlined at our Investor Day, our objective is to return up to 50% of trailing 12-month non-IFRS adjusted free cash flow after investments through a combination of dividends and share repurchases over time. Pursuant to this strategic objective, I'm pleased to announce that our Board of Directors approved a quarterly cash dividend of $0.12 per share payable on October 9, 2026, and to shareholders of record as of September 23, 2026.

In addition, approximately $100 million remains under the share repurchase authorization approved by our Board of Directors and we expect to be flexible with the deployment of the remaining authorized amount.

Next, let me provide you with our outlook for the third quarter of 2026. We expect total GF revenue to be $1.85 billion, plus or minus $25 million. We expect gross margin to be approximately 30.5%, plus or minus 100 basis points. which at the midpoint reflects approximately 450 basis points of year-over-year expansion. Excluding share-based compensation, we expect total operating expenses to be $260 million, plus or minus $10 million. We expect operating margin in the range of 16.7% plus or minus 170 basis points.

At the midpoint of our guidance, we expect share-based compensation to be approximately $76 million of which roughly $18 million is related to cost of goods sold. We expect net interest and other income for the quarter to be between $3 million and $11 million, and income tax expense to be between $28 million and $52 million. Based on a fully diluted share count of approximately 556 million shares, we expect diluted earnings per share for the third quarter to be $0.51 and plus or minus $0.05.

Now let me provide an update on some broader financial drivers as we evolve the mix of our business and aim to deliver the growth model set out at our recent Investor Day. With respect to pricing, we're encouraged by the improving industry dynamics as well as the evolving mix of our business towards highly accretive technologies. In addition to these positive mix shifts in the second quarter, we implemented pricing increases in partnership with our customers across several technology corridors.

Following the satisfactory conclusion of these customer conversations, we expect the pricing adjustments to be reflected in revenue commencing in 2027. The magnitude of these pricing increases varies by end market and technology and contemplates the differentiated value we provide the ongoing supply and demand dynamics and the inflationary absorption across our industry in recent years.

Conversations with our customers have been very constructive, and we'll continue to assess pricing for 2027 and through the second half of 2026. With respect to operating expenses, consistent with the strategic updates we set out at our Investor Day in May, we believe that R&D will rise as a percentage of revenue. as we integrate recent acquisitions and accelerate our R&D capabilities to support key growth opportunities.

We've strengthened our portfolio of capabilities through the acquisitions of the Synopsys archive P business in June as well as the IVR business from Potion Technologies in early July, adding critical R&D, IP and engineering resources.

Following these acquisitions, we now expect quarterly operating expenses in the second half of 2026 to be consistent with our third quarter guidance as we accelerate critical R&D investments while ramping talent and capabilities intended to support key growth opportunities across the AI data center, physical AI, quantum computing and advanced packaging. These timely and necessary investments are targeted to accelerate our technology road map deepen our customer engagements and expand future growth opportunities in the years ahead.

Moving now to tax where we expect an effective tax rate in the mid-teens percentage range for the full year of 2026. And principally due to the expected geographical mix of wafers shipped in the second half of this year. Finally, for the full year 2026, we continue to expect an adjusted free cash flow margin of approximately 10%.

In conclusion, I'd like to thank our global teams for their continued commitment and diligent execution towards our strategic goals. GF drove another quarter of meaningful year-over-year margin expansion and achieved new second quarter records across a range of growth and profitability metrics. Our strategic initiatives and investments executed over the last year are demonstrating good momentum across the end markets that we serve. And the continued mix shift in our business is driving improved diversification across our end market portfolio.

Looking ahead, we intend to continue executing towards a richer mix of business targeting continued structural cost improvements and improved manufacturing productivity, all of which we believe are forming a strong foundation for increasing shareholder value in the years ahead.

With that, let's open the call to Q&A. Operator?

[Operator Instructions] Our first question comes from the line of Chris Caso from Wolfe Research.

I guess the first question is about the common data center growth and some of the capacity expansion that's occurring in that segment. And I know while it's growing strongly, you're capacity constrained. Can you help us with to the extent you can, timing and magnitude of that capacity expansion. When does additional capacity come online?

And I did also notice that you received, I think it was a 300 million chips at grant for the silicon photonics expansion. Can you speak to how that helps to defray some of the net CapEx for that.

Yes. Thank you, Chris. So I'll kick us off on that. So in terms of capacity, as you say, demand has been strengthening across basically all data center applications. We're feeling that very strongly in the optical networking space that particularly pulls on silicon photonics and silicon germanium. But we're also seeing it in other parts of the business starting to pick up, including areas like power. So our strategy will be to add capacity in those areas.

One advantage for us is we're building that capacity out within our existing fab footprint, and we have, let's say, ample fab footprint today to ramp capacity relatively quickly. By day one of the contributors to us upping our full year view about our CID end market is actually our confidence about bringing that pacto and driving factory-level productivity improvements to be able to get basically wafers out through the back half of this year and even further into 2027.

So we feel good about the ability to meet that growth with additional capacity expansion. Maybe I'll turn to the 300 million partnership with the U.S. government. We couldn't be more excited about this. I think it's really important to bear in mind that the shift to optical networking is very much a secular shift, and we see this only at the very early innings of penetrating the data center.

We've spoken in the past about 70% of data center links being optical by 2030, I think every piece of evidence today points to that being perhaps even conservative relative to what's happening, including the penetration, not just to scale out but also scale up networking. And so look, we're very excited about the prospects of optical networking and within that silicon photonics. But a lot of what that will require is higher performance technologies in the future. And so what we announced really has 3 components continuous innovation at the PIC level, right?

So improved modulated technology so we can go to 400 gig per lane and beyond. New materials. At some point, we will introduce new materials into the system, think about barium titan a thin film, lithium niobate, think about indium phosphide, all areas of technological innovation to produce higher performing systems and more integrated systems going forward.

And then the last piece was extraordinarily important, particularly for near and co-packaged optics is packaging. And so being able to build those integrated optic engines for both those applications using our scale solution also requires continued capability and capacity. So that partnership allows us to accelerate that. And we're very grateful to have the U.S. government as a strong, let's say, partner in our corner supporting that innovation happen right here in the U.S.

Do you have a follow-up question?

I do. A follow-up. I'll ask on gross margins. And can you speak to what's the driver of the gross margin expansion as you go into the third quarter in terms of utilization mix and pricing and perhaps give us some color on the trajectory of gross margins into next year, particularly in light of some of your comments with regard to pricing?

Yes. Very happy to you, Chris. And look, I will start by saying that we're very encouraged by the continued progression and expansion in our gross margins. And I think it's a continued reflection of the progress that we've seen during the course of this year, we had almost 500 basis points of more expansion in the second quarter. We had over basis points of margin expansion in the first quarter.

And as I said in my prepared remarks, if you take the midpoint of our inferred guide, that implies about another 450 basis points of margin expansion. So this is really playing to the thesis and the levers that we discussed at our Investor Day just a couple of months ago now. And frankly, it's falling through on a relatively healthy basis when you look at the revenue take revenue a year ago and compare it to the same period this year, about $100 million of revenue growth look at that adjusted gross profit and you see about $100 million of gross falling through as well.

So we're very encouraged by that relative fall through to the underlying gross margin as it relates to our revenue growth. And you sort of touched on it a little bit in your question, Chris. Mix has been a big and continues to be a big driver of that.

And the way to think about mix is twofold. It's mix from a manufacturing services point of view, and its mix from a technology services point of view as well. Both of those have been encouraging tailwinds for us, particularly when you look at the relative strength and growth within some of those end markets, which I touched on around it comes in for in data center being highly accretive to those targets. Utica Technology Services revenue up a little under $40 million year-over-year. That's about one point of benefit that comes through there.

So the combination of the mix across manufacturing and technology services has been encouraging. We expect that to continue. As I said previously, productivity within our manufacturing sites and driving structural cost improvements has been a big driver as well. utilization, we were in the second quarter sort of high 80s from a utilization point of view. So we still feel we've got a good amount of our existing capacity to be able to grow into and see positive margin movements over time.

And frankly, all of that is against some of the benefits we had in the year ago period. We had things like liquidated damages in early 2025, which have fallen out. So again, it sort of reflects the strong growth we've seen from a margin point of view. We bumped up on that 30% target margin that we said we were looking to solve for at the exit of 2026. In our second quarter, we're above that in the third quarter guidance. So expectation now for the full year is that we should be at about 30 points of gross margin for the full year rather than just that exit target that we had at the beginning of the year. I hope that helps, Chris.

And our next question comes from the line of Krish Sankar from TD Cowen.

I just wanted to first follow up on the silicon photonic CID year-over-year growth, almost doubling from your prior outlook. I'm just kind of curious what changed in the last 3 months that the outlook has been revised almost materially higher. And any color you can give on your PIC solutions compared to your 2 competing foundries. Then I had a quick follow-up on Quantum too.

Yes. Great. Thank you very much, Krish. Look, Photonics remains a very strong driver for us. I think every customer meeting is all about what more can we do, how much faster can we go? There is clearly strong demand today. And by the way, in a market like this, we don't just validate that demand with our direct customers.

We spend time throughout the ecosystem, including with the big hyperscalers, and you've seen many of them are supporting a lot of what we're doing here in the U.S. and around the world. So we're validating the demand, and we believe it's very real today and durable going forward. That's giving us confidence to continue to invest. We'll increase our investments in Photonics capacity.

And as I mentioned earlier, there's nothing our factories love more than being challenged to get more output literally every single week. We're calling in from [indiscernible] New York right now, and the factory is hard at work producing more wafers every day for these oversold corridor.

So I think very conviction about continuing to grow silicon photonics. But yet, we're still at the very beginning of this, and that those growth targets we set for kind of end of 2018 and through 2030, I'd say today, we are very much on track and potentially ahead of those targets in terms of our silicon photonics growth.

Got it. Very helpful, Tim. And then a quick follow-up on Quantum. You recently got the $375 million grant. Can you talk a little bit about the opportunity set there and whether being the quantum commercialization curve. And have you seen more interest or share gains given Ion just recently closed acquisition of Sky water?

Yes. So thank you for that question. I mean, quantum is extremely exciting, and there's a few reasons behind that. I think one is talking to now basically all the players in the sector, everyone is facing the same kind of transition. But this is not a -- can I prove it in a lab discussion. This is can I scale to high-volume manufacturing. And so the conversations we have.

And in our announcement, we had both dedicated quantum players, but also hyperscalers and others comments and support that. initiative, the conversations are similar because it's all about transitioning to that high-volume scale and cracking different problems that they've proven at lab scale that need to prove now as they transition to high volume. Since that announcement, we've launched 4 significant new engagements with some -- a subsidy of the players that are supporting us in that announcement. And we see that ramp continuing.

Those engagements have some common features. For example, some of the stuff we're doing around cryogenic CMOS for readout, ICs for different modalities. That's very exciting because it builds on existing platforms that we have. But also there are those who have very specific requirements. And that's where also I'm quite excited about the technology benefits of us investing in quantum.

And so I'll give you an example. A couple of -- actually more than 2, 3 or 4 players are doing things linked to the photonic side in that quantum solution that has excellent read-across for us in our long-term silicon photonics road map. So think of that as a very synergetic with what we're doing in that space. And so Quantum is actually reinvigorating a number of our long-term technology road maps even further and faster than otherwise it would be happening. So that's very positive.

As Sam mentioned in the prepared remarks, we'll see the financial profile of Quantum in our technology services revenue this year and definitely into next year. Think of it more medium term as a kind of call option on the scale to high-volume module manufacturing. Too early to call exactly when those ramps will happen. But clearly, that is the objective of these players that are engaging with us is develop and crack the solutions and then scale them to high volume together.

And our next question comes from the line of Karl Ackerman from BNP Paribas.

Two, if I may. Tim, you spoke about the 3/4 of growth, including photonics, lantem, IP and custom silicon. But could you speak to the revenue and OpEx contribution of the ARC and Foton Technologies IVRT, the September outlook? And also, if you zoom out, could you double click on the rationale for these deals and maybe any early customer design engagements you've seen to date?

Yes. So let's -- I'll talk about rationale, and then I'll let Sam comment on how we're thinking about revenue for this year. So we've been very focused in our acquisition strategy on identifying capabilities that our customers value and that links to our manufacturing road map but also linked to what they tell us around gaps that the industry today is not meeting. So let me take kind of the MIPS and Synopsys story first, and I'll come back to Foton both very exciting in their own ways.

Customer feedback on MIPS and then ARC has been excellent. I spent a lot of time personally with customers, especially since we've closed the ARC deal. And by the way, with that came 300 customers. Some of those were not GF customers before. So it gives us also new customers to engage with on those road maps. And these are very strategic discussions because these are about future architectures for their processor solutions.

How can they add AI at the edge, how can they do on device inference in the automotive space, the industrial space, the robotics space. And so it's bringing some really interesting discussions to bear, and it allows us as GF to engage much earlier in that design conversation than we would if it was just a conversation about manufacturing capacity and manufacturing process technology. It has another benefit, which is that it's also giving us very, very early input into our manufacturing road map.

And so now you have this let's say, symbiosis internally that we have an internal customer for what we're doing that is actually challenging us to push performance of next-generation technologies, particularly in CMOS business to the next level. So you're thinking about how do you do lower power inference at the edge and so on. So I'd say early, of course, for both of these, but very encouraging. We've talked about some of the early wins and partnerships in spaces like defense with Lockheed Martin, automotive players like Infineon, but there are very many more in the pipeline.

So very encouraging for our IP software and custom silicon strategy. To talk briefly about IDR and Foton, we've had the chance to work with the Potion team for many years now as the IVR category has started to become more and more important. The way you should think about that is IVR is to power what CPO is to photonics, right? Think about how do you build a much more wafer-level integrated to min to deliver power closer to chip and to be able to do things that today exist in much more kind of traditional power modules, much more like the industrial and automotive power modules of today.

This is moving to a much more kind of, let's say, wafer-level solution that is higher and higher performance. that is essential for next-generation data center power, given how hungry these XPUs PPUCPUs are all for power. Portion team, very engaged with a number of our existing customers. So it's a very natural transition to bring that team on board, accelerate those engagements and again, early back from the likes of existing kind of fabless and IDMs, but also hyperscalers who are engaged there are very, very positive, bringing that capability into GF.

And Karl, maybe if I just jump on the second part of your question as it relates to some of the financial profile. And for all the reasons that Tim outlined, these investments are incremental, they're strategic. And actually, in the case of the MIPS acquisition as well as the archive P business from Synopsys, they are revenue generative from day 1. At the outside of this year, we expected that we'd be seeing about $60 million to $100 million of incremental revenue through from that MIPS acquisition during the course of 2026.

That remains the expectation. But what's changed over the course of the last quarter is that we closed the acquisition of the Synopsys or IP business. So the midpoint of that range, as you can kind of infer from my prepared remarks has moved up from the $60 to $100 million to $100 million to $120 million, $30 million of revenue growth our expectation in terms of the skew of that incremental revenue from that recent acquisition is sort of 1/3, 2/3 skewed from third quarter and fourth quarter perspective.

As it relates to the R&D and the fall-through ultimately through to EPS. Look, these are R&D intensive businesses. They're also highly accretive from a gross margin point of view. Overall, we expect that the increased pain particularly the acceleration from an R&D point of view to largely be covered by that incremental revenue we see coming through both of those acquisitions. So we feel quite good about it from that perspective.

Very clear. For my follow-up, if I may, could you discuss what portion of those 7 customers on your scale platform are working on NPL or your packoptics? And I guess how should we think about the timing of your NPL opportunity?

Yes. Maybe just to take a step back, and I think there's obviously a year ago, the industry wasn't talking a lot about NPL now it's talking a lot about it. I think the reason is that you see a comfort level for a number of players moving from, let's say, traditional pluggable infrastructure to NPL, and that's because they have synergies in terms of things like the SerDes.

So the system is, let's say, a smaller transition versus moving to the full co-packaged optics. We think both those form factors as well as pluggables will continue to exist in the data center. Obviously, as you get more into scale up networking, that's where you need to move to smaller form factors like NPO and CPO and to really address all of those linkages within a scale-up network. So we think all of those will continue to exist.

Scale supports NPO and CPO. So a lot of the dimensions that go into bringing our scale solution together and EIC bonded to a pick with a micro-optic with a fiber attached unit and necessary for both NPO and for CPO. Fundamentally, the mechanical difference is that the NPO is bonded to the Board, whereas the CPO sits within the package, right? And there are differences, therefore, to let's say, more of the things like the [indiscernible] architecture, as I mentioned, but left to the mechanics of how things are done.

So look, we see very good momentum on NPO. I'd say the scale engagements we have cut across both. And actually, I'd say even many of the customers are doing both because they have both an NPL that they're ramping sooner and a CPO that they're ramping a little bit later. We still maintain the view that 27, we'll see the beginning of NPO ramp in 28. We'll see the beginning of CPO ramp, and that's been quite consistent over the last few quarters.

And our next question comes from the line of Mehdi Hosseini from Susquehanna International Group.

I also have a couple of follow-ups on coinfrastructure. Tim, can you help us understand what is the contribution of SeGi into your overall optical revenue mix. And as we migrate to NPL and assuming the PIC itself becomes a catalyst to what extent should I expect some synergy between Sipho and SeGi? And I do have a follow-up.

Yes, it's a great question. And let me talk about SiGe just for a little bit since you picked it out. Just to wind the clock back, right? How do we have such an important position in SiGe. IBM Microelectronics, I think, is on record for inventing SiGe. IBM Microelectronics is part of GF today. And so we've had team members building SiGe Solutions for a long time now. And so that's always been an important part of our portfolio. What you're seeing in Siggi is that the acceleration is driven by, let's say, 2 trends happening at the same time.

One is the shift to optical networking means you are moving more data through a different kind of link. But as you push to higher and higher bandwidth what you could do previously in CMOS at say, 50 gig per lane 100-gig per lane at 200 gig per lane and definitely a 400 gig and you cannot do. And so what we're seeing is people are breaking out those TIAs, those transimpedance amplifiers and also incrementally also breaking out the drivers and doing them in high-performance analog solutions like SiGe.

And so in a way, what we're seeing in our SiGe business is actually growth driven by both the switch to optical, but also the increased bandwidth requirements within those optical solutions. That's driving significant growth within the space. Just to give you a dimension, our SiGe business is actually larger than our silicon photonic business today. So it's actually a meaningful part of our data center business overall.

And like silicon photonics has very strong growth trajectories because it serves the same underlying trend. And perhaps with even that multiplier effect playing out even more so as we're expanding the performance of those pluggable technologies. You'll also find high-performance analog solutions in near and co-packaged optics as well. So those will also have components of those depending on the architecture.

Our SiGe Solutions, we build them today in Burlington, Vermont. We're expanding capacity there. That's part of what is also increasing our output within 26 and definitely into '27. But we're also qualifying 300-millimeter SIG in Singapore, which will bring additional capacity. The economics of 300-millimeter, which obviously is very good. but also higher performance. And so as you move to new platforms, you improve your FT or F MAX performance. And so we think we can continue that great tradition started by IBM of leading the industry in terms of our SiGe solutions for the market.

Okay. Great. I feel like an or just focusing on optical, but I'm going to move on. Within the com infrastructure, there's also salarated prom and SpaceX had their first quarterly call last night. So Help us understand, right now, we're just focused on a transceiver and optical solution. But I see there's also a synergy.

So what kind of a substrate for satellite com and remind us from an Analyst Day how Satelite Cancosa drive double-digit growth here. Hopefully, I'm in line with morassumptions.

Yes. So Satcom look, continues to be a strong growth business for us. And the reasons for that, I think, are fairly clear. The transition to LEO deployment, really driven by SpaceX originally and a couple of other players now ramping as well. It's very clear to see. And as a consumer, once you take a flight and you still link on the flight, you kind of don't want to go back to how it used to be.

So I think it's clear why those solutions are taking effect. Remember, you're beaming a signal, 300 miles into space, a signal that normally would have gone 2 or 3 miles to a base station or a cell tower. And so you need higher performance RF, you need beamforming, you need other kind of wireless technologies. These are very core strength areas for GF. Some of these technologies are in SOI today. Some of them have SOI like characteristics that are done without SOI as well. And we're seeing more and more trajectory of new RF technologies playing into SATCOM going forward.

Even areas like RF GaN, we think will play a very important role in Satcom going forward because you're not just increasing the number of units deployed, but you're talking about faster and faster bandwidth. And by the way, this is not just for consumers. You're hearing about industrial deployment, corporate deployment and so on. And there I say, when you put data centers in space, you're going to need a lot more bandwidth to bring that capability back to us for people to use. So I think very strong secular driver of growth for us.

Obviously, we're starting from a relatively small base compared to other markets, given this is relatively new, but we definitely see it growing very well long term.

And our next question comes from the line of Timothy Arcuri from UBS.

So Sam, I had a multipart question. So the segment guidance implies like December is up sort of in the 10% range. So my question is, a, is that right? And then can you give us any sense for September of how the guidance shakes out by segment, even if you just give qualitative comments on that?

Yes. Happy to take that, Tim, and you're right in terms of your overall inference. We said that certainly for the remaining part of this year, just given some of the dynamics around mobile, we think that's sort of download teens for the full year.

Meanwhile, automotive, despite having a slight softer in 2Q, that was really a function of some of the customer shipment timing. Our expectation is that come back in second half. So sort of low double-digit growth on auto is very consistent with what we've been guiding throughout this year. IoT has actually been an interesting update from our perspective. And what we're seeing is that where there has been some softness in Smart mobile, some of those customers within mobile have actually reallocated their demand into IoT, a lot of commonality between some of those connectivity applications that you see between the 2.

So that's what's driving the pickup in IoT to sort of the 10% to 15% level that I indicated year-over-year. And then obviously, we spent quite a bit of time on coming for in data center, so I won't reiterate that, but that's really the change quarter-on-quarter, that movement to kind of 50% to 60% year-over-year growth. So you can sort of infer from that Tim, what that means for the third quarter into fourth quarter, I think your math is about right in terms of that implied pickup into the fourth quarter.

And then look, as it relates to some of the dynamics within 3Q and 4Q, it's largely consistent with, I think, what we're expecting to see from a trend perspective and what I just outlined on the end market split as well.

And maybe, Tim, if I can just add. If we zoom out for a second and think about kind of are we seeing more and more traction in those end markets? I think we haven't spoken a lot about design wins across the board, but we continue to see record design win momentum entering into 2026 versus '25. So again, that traction remains really strong.

I think the other thing that's very important, we've worked very hard to make our manufacturing footprint as flexible as possible because there are always going to be perturbations between different end markets in terms of timing. You see obviously a very strong story in the data center. You see mobile is obviously going in a different direction given the memory shortage. We've been able to reuse capacity very well this year to enable us to capture some of those upsides given the flexibility of our manufacturing footprint.

Great. And then just as a quick follow-up. So on SIPO, we do hear about some competitors are getting aggressive in going after that business as well. And the customer base is fairly concentrated. So how to think about that? Like can customers multisource across different suppliers? How feasible is that?

Yes. I think -- look, the fact that there's competition is a sign that there's strong support for this secular trend, and I think that's not a bad thing from our point of view. What I can say is customers are also coming to us and saying, I don't have enough secured and I need to secure more and how can I help? And some of that is also mitigating geopolitical risk that they see as well.

And look, our strategy in any platform is try to work as broadly as we can across the industry, so that we're not betting on the success of player A over player B, but we're mitigated if different people in different sockets. Actually, we have more than 40 customers today in Sipo, and that, of course, includes some early-stage companies, but some of the early companies are really doing great things in terms of ramping a new solutions.

So I don't think we have a customer concentration concern at this stage and you're going to see even new entrants look at all of the, let's say, I would say, smaller fabless companies that historically were saying copper will last for a long time. All of them to a tea have done a photonic strategy made a photonics acquisition, and they're entering into that space. quite aggressively.

So I don't think we have a customer concentration concern. And I just think we have durable demand. And like I mentioned earlier, our conversations with the hyperscalers are very helpful to vet what they see kind of as an end consumer of those applications. And again, that reinforces the durability of the demand.

And our next question comes from the line of C.J. Muse from Cantor Fitzgerald.

I guess first question on CID implicit in your guide roughly an exit rate of $350 million for this segment. And so curious, based on what you see today in terms of design wins, how do you see kind of the growth into calendar '27? I know you don't want to give specific guidance, but should we be thinking about very strong growth off of that kind of new level? Or is there kind of a digested period? .

Yes. Happy to take that, C.J. And you're kind of getting to the right rough numbers going out of this year. the commentary that we provided as part of our Investor Day and Analyst Day a couple of months ago still stands as we see the opportunities to come in for data center. Obviously, it's expected to come in stronger during 2026, but there was a good reason we indicated that 30-plus percentage year-over-year growth that we're targeting through our long-term model.

The plus is sort of ties into what Tim said earlier around some of the growth that we're seeing in demand, the increases that we're making to support that demand into our capacity and just the continued ramp in customer expansion as well. So look, I would still stand by our long-term model that we shared a couple of months back. in terms of that 30-plus point percentage growth going into 2027 and beyond.

C.J., if I could it's very helpful. Demand is clearly very strong. And so the question is more about the rate and pace of manufacturing productivity and capacity expansion. That's obviously a conversation we continue to have with customers. One of the advantages for us is that we can meaningfully inflect our capacity within our existing fab footprint.

We don't need to build other fabs and some of our other players in the industry are building other fabs, which obviously is a longer lead time to bring that capacity online. So we're bringing within our 4 walls. And just to give you a sense, if we think of our long-term plan, just take for Photonics, we could 10x our photonics capacity within our current 4 walls plan on a global basis. And so we have a lot of flexibility about when we do that based on the demand and the partnerships we have with customers.

Very helpful. And then a follow-up on gross margins. It sounds like the story here in calendar '26 is really all about mix. And so curious given your commentary around selective price increases and how you're going to continue to look at that into calendar '27, how are you thinking about the prioritization of drivers between kind of mix, pricing and utilization. And is there a framework for us to think about incremental gross margins from here?

Yes. Look, maybe I'll start with the mix point, C.J., because it remains the single biggest driver. And in actual fact, we're still at some of the early innings of those mix shifts that we talked about from a capacity point of view. Clearly, the demand has been pulling through well during the course of 2026.

But when you think about the CapEx that we indicated for this year, that's sort of 15% to 20% range, my expectation is that we'll be up to the higher end of that range. One of the single biggest drivers to support incremental investments into capacity to meet that growing demand. Now as you'd expect, the time lag between when you incur those CapEx dollars to when you install a tool, qualify it, ramp it there's a lag to be able to then support that demand. My point being is that mix will continue to be a significant driver as we outlook within the model over the course of the next couple of years.

And really, the 2 to 3 other factors I'd point to. One, yes, utilization, but somewhat impacted. If you think about where things are at from a cycle point of view we still got a point of utilization to be able to grow into just with our installed capacity today. So that's one dynamic. And then the other is really around continued improvements from a cost and a productivity point of view.

We have been focusing maniacally on our structural cost improvements. We've seen that come through in terms of our relative cash cost per Marcelo. It's an area of continued focus for the teams as well. So really across that range of metrics is where we see the opportunity to continue expanding margin and get towards that 40% exit run rate that we indicated in the 2028 time frame.

And beyond that, to Tim's earlier comments, is where we expect to see continued ramps in custom silicon and activities under our IP software custom silicon business as well as the increased ramp from co-packaged optics and the broader silicon photonics offerings as well. So that's how we think about it over the next couple of years around some of those margin ramp drivers.

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Eric Chow for any further remarks.

Thank you, Jonathan. Thank you, everyone, for joining today. We're very glad to see you, and we will see you at the Goldman Sachs Conference on September 8. Thank you.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

All right. Good morning, everyone. Thanks for joining. I'm Krish Sankar with TD Cowen. I'm the analyst covering GlobalFoundries. Very fortunate to have Sam Franklin, the CFO of Global. We also have Sean from the IR team over there.

Sam's, thank you very much for your time. Really appreciate it. And I do have a bunch of questions. So I'm just going to go with it. But I do want to say congratulations, ever since you took over, the stock has been on a tear. And a few weeks ago, you had like a very interesting Analyst Day where you spoke about long-term targets.

Now clearly, I want to get to the exciting silicon photonics part of it, but I just want to start from the gross margin front. You laid out some pretty compelling gross margin targets, getting to like 40% in a couple of years, 45% by 2030. What are the barriers to get there? Like is there anything we need to worry from a supply chain standpoint? Are there any levers that need to be pulled? Or is it, do you think more driven by demand and you have a clear path to a 40-plus percent gross margin?

Well, Krish, it's great to see you. Thanks for having us here today. Look, as we think about the gross margin trajectory and the profitability capability of GF over the next, call it, 5 years, we actually split our thesis into kind of 2 time horizons and really the -- the first of those time horizons is exiting 2028, where we're targeting to be a 40% gross margin business.

And then longer term, our target is to get to 45% based on the business model and the investments we have today and really a function of investments we've made over the last couple of years, strong customer design win momentum, which creates that foundation for future expectations on not just margin, but also wafer revenue as well. And then really, it's enhancing our service capability to customers.

So we said -- if I bridge the audience here, we said that we expect to exit 2026 at about a 30% gross margin. So if you think about that sort of 10-point walk to that first time horizon I outlined, there's really kind of 4 key dynamics that we think about there. The first is mix, right? We've been actively remixing our business for several years now. Mix matters in a business like ours, just in the same way that fixed cost absorption matters as well.

But we're starting to see that momentum pull through now in terms of the revenue trajectory we're having within certain end markets. Communications infrastructure and data center is a great example of that. We grew a little under 30% last year. First quarter this year, about 32%. Our expectation for the full year is high 30s percent. That pulls through at a meaningful margin contribution as we think about the overall corporate target.

So I would say that, that concept of mix really mattering, that drives probably 5 points of margin over the next few years. And I only touched on comms, infra and data center, but automotive, a critical growth engine has been for many years now. Again, we're continuing to diversify our revenue within automotive, falls through at an attractive gross margin structure as well.

And IoT, we're in the relatively early stages of new ramps for new opportunities there. So think of that as a strong driver from a margin perspective. The second piece is really a function of some of the investment decisions we've made over the last year as it relates to our offerings to customers and in particular, our technology service offerings. That has historically been referred to as non-wafer revenue.

As we've made decisions to acquire more of a RISC-V capability, we completed the acquisition of MIPS in the second half of last year. We're shortly going to be completing the acquisition of the Synopsys ARC IP business as well. We're building a strong RISC-V capability. That creates an additional revenue opportunity, both short term and long term. Short term, it's really centered around the IP licensing software revenue. It's partnering with customers earlier to design RISC-V solutions. Longer term, that drives custom silicon opportunities as well.

So historically, that has been in the neighborhood of, call it, 8% to 10% of revenue, roughly 10% at the midpoint. First quarter this year, it was upwards of 13%. We expect longer term, it's in that sort of 12% to 14%. That falls through at an attractive gross margin as well. So think of that as a couple of points of margin.

And then you get into the very core of our business, which is as a manufacturer and really kind of driving efficiencies from a manufacturing point of view. Cost and productivity really matter. We've been investing heavily in digital manufacturing, AI capabilities for manufacturing, making sure you can drive more productivity within your existing tool set really matters.

And then the fourth piece is scale. We operate at the highest end of the fixed cost scale of our business and our industry more broadly, getting that scale efficiency within your footprint matters. Again, we've been investing in technology diversification to fill our 4 walls. So long answer for you, but I wanted to give you the full puts and takes over that near-term horizon. Then when we go to the long-term horizon, it's advanced packaging, it's custom silicon, the ramp of co-packaged optics. That's how we think about incremental margin fall-through long term.

Maybe one question on capacity before you go into the technology side of things. I think your CapEx is around $1.3 billion, $1.4 billion this year. If I do the math, I come up with like $600 million to $700 million as maintenance CapEx. So your CapEx is almost double. Is that mainly because of silicon photonics you're investing in? Or are there other things that's driving this CapEx growth this year?

It's actually a few technologies and several technology corridors where we see strong demand pull, silicon photonics clearly being one of them. But maybe just taking a little bit of a step back, I provided guidance at the start of this year that I expected CapEx to be in the range of 15% to 20% net CapEx that is. That is a step-up from the last couple of years where we've been in the 7% to 10% range.

But it really plays to the core principles of why we deploy CapEx, why we invest in our capacity. And the first of those principles is demand visibility. We have been in the fortunate position of investing in some of these technologies for many, many years now. We're at this important intersection of where the investments in those technologies is also now being serving that demand we're seeing pull through.

So demand is the core principle. The second of those is how do we invest efficiently with in our existing 4 walls. We're doing that already today. We are one of the only foundries capable of really expanding within the 4 walls. We have built a model over the next 3 years, which is not reliant on a modular expansion. So we can do that very efficiently from a CapEx point of view.

And thirdly, it is how we think about the funding arrangements, the government support, the customer partnerships as well. So you put all of that together, why has CapEx increase to sort of the 15% to 20% this year. It's because we're seeing the confluence of those core principles come together.

From a technology point of view, yes, silicon photonics will be a beneficiary of a large amount of CapEx this year, but it's not the only technology corridor. We're seeing strong demand on our FDX solutions, which are applicable to all of the end markets that we serve. Silicon germanium capability as well, which goes into the TAI drivers within the data center, again, strong pull-through of demand there.

So that demand visibility while being able to grow very efficiently within our 4 walls has been the key driver of year-over-year CapEx. And look, I will say that, that's still within the target, call it, net CapEx of 20% of revenue that we set out not just 5 years ago, but also reaffirmed as part of our Investor Day a couple of weeks ago.

Got you. And on the last quarter -- last earnings call, your comm infrastructure division where silicon photonics is a part of it, I think you raised the growth rate from 30% to mid-30s year-over-year. What is really driving that? And how to think about the data center power networking business growth profile longer term?

Yes. Maybe just to unpack a little bit for the benefit of the audience, what comprises our communications infrastructure and data center revenue today. Within communications infrastructure, there's traditional wireless infrastructure, but there's a growing component of that coming from satellite communications. So strong growth in that in 2025.

And then as you rightly say, the balance of that is coming through from data center, which comprises our technology solutions from both a silicon photonics point of view as well as a silicon germanium point of view as well. So when you think about this over the next few years, call it, and the opportunities we see within data center, yes, optical networking is going to be a key component of that. But power applications for data center as well is another opportunity where we're seeing good customer traction as well.

Think about the optical connect side of the business, there's 2 layers to this. First is where we are today, which is really around the pluggable optical transceivers. We have a strong position in that and a growing customer base, particularly after we finished the acquisition of AMF last year. We think that as we drive towards that $1 billion run rate exiting 2028, pluggable optics is a key component of that revenue growth.

Longer term, we've set ourselves a target of driving $2 billion of silicon photonics revenue. And that second phase of growth is when you get through that inflection point of, call it, late 2028 into 2029, where we see the growth of co-packaged optics. We're encouraged by the progress we're already seeing there, and we've had some tape-outs even in the first quarter on CPO.

So good momentum there, but think of it as those 2 time horizons. And then again, I mentioned data center power. As you think about the importance of efficient power conversion reduction of losses associated with power, we've been developing quite a strong GaN technology solution to support data center customers as well. So that's how we think about the data center power, both on GaN and BCD capability of which we have today.

Got you. On your CPU platform, the scale CPU platform, I think you've spoken about how you can do the PIC, but you can also integrate with a third-party EIC, where they do EIC in a single-digit nanometer node. Is that a differentiator? Because I keep hearing sometimes TSMs, COOP is more, you do the PIC and the EIC in the same foundry, but you're kind of agnostic to that. So you're willing to partner with third-party ecosystem. Is that part of the differentiation? Or how to think about your scale CPO platform and its differentiation from competition like COO and Tower?

Sure. So look, we've been investing in photonics and CPO for the best part of the decade. This is not something that GF just decided it was going to do recently. We've deployed upwards of $1 billion of R&D and CapEx dollars to really grow our silicon photonics capabilities. And so we feel that even with some of the recent announcements around Scale, which is our silicon photonics co-packaged advanced light engine solution that this is capability we've been building for years.

What's really changed in the market over the last call it, 2 years is that we've moved from this notion of sort of if rather than when to when rather than if as it relates to the migration to optics and specifically co-packaged optics for scale-up infrastructure within the data center. So we've been building this capability for years.

You're right, we have an ecosystem solution. We have a very strong PIC offering today. We've been partnering with ecosystem partners like Corning, like SENKO. The fiber detach is going to be an important part of the design infrastructure. So yes, as we said previously, we have the capability to manufacture an EIC within our technology nodes today. To the extent that an EIC is being developed on a single-digit nanometer, then clearly a consignment within our CPO solution would be how that would come together amongst those ecosystem partners.

So look, I think the other dynamic, which has really changed even in the last couple of months is the establishment of the OCI MSA principles. Just look at the founding members behind those OCI MSA principles, and you see a real strength in terms of the future of CPO and some of the key, I think, potential customers for GF as it relates to that.

GF has built a solution which exceeds the rigorous demand requirements for those OCI MSA principles. So we feel that we have a very strong technical solution to support that more broadly. And as I say, we're seeing that come through with customer momentum. We're working with several of those OCI MSA founding members. We had 2 tape-outs on our CPO solution in the first quarter. So the momentum is there. You touched briefly on competition.

What I will say is that it's really only GF and TSMC that have fully fledged CPO solutions taking out in the market today. So we feel that we have quite a good position there to work with customers. And the longer-term expectations towards the end of the decade is that this becomes a $25 billion market opportunity from a module perspective.

My punchline here is that there isn't going to be one winner as it relates to CPO. We think that we've not only built a technology solution, which is very well catered towards the market demands, but we've also been reasonable in terms of how we think about our growth assumptions there, driving towards that $2 billion of revenue towards the end of the decade. So proof points are there, technical solution is there and customer momentum is there.

Are you getting requests from customers to start doing single-digit nanometer logic dies? Or are you going to still stick with like the 12-nanometer boundary condition today?

The way we've thought about this in the past is what is the market that we're servicing and what is the technical and feature requirement within that market. From a total SAM perspective, we think our SAM has the ability to sort of closely double towards the end of the decade into the 2030s, and that is on greater than 10-nanometer technologies.

Why is that the case? Because you look at the use cases and the applications and the feature requirements that are pulling through in all of the end markets we serve, and they are very well suited to GF's technology portfolio. Take physical AI as an example. You're talking about highly bespoke and customizable devices that need to have the capability of sensing, thinking, acting, communicating. Well, guess what, all of those applications sit on GF's technology portfolio.

What we've done over the course of the last couple of months, last couple of quarters is we've expanded that capability through the acquisition of MIPS. So now we've got the capability to support our customers at the design end of the ecosystem as well as supporting them through the custom silicon and the manufacturing side of the business as well.

So all said and done, we feel that with the relative CAGR of broader end market opportunities that we see across those end markets we serve, we have no strong need to go and chase a single-digit nanometer solution. And that's really a function of those broader performance requirements across automotive, IoT, comms infrastructure, data center and even smart mobile as well.

And Sam, you touched upon this earlier on, the LEO, the space opportunity. Is most of the demand today coming from government/defense? Or is it actually coming from commercial? And how -- what percentage of revenue is that today?

So I think just an important point of clarification is that we actually categorize our aerospace and defense revenue within our IoT end market. And then we have satellite communications that sits within our communications infrastructure and data center market. But it doesn't change the thrust of your question because the demand drivers have actually been very strong across both.

And if you think specifically around low earth orbit satellite launches, that plays very much into our satellite communications end market -- the submarket, I should say. That was call it, roughly a standing start of revenue in 2024 to $100 million of revenue in 2025. So we are supporting customers in that commercial satellite communications space, really with 2 areas of content opportunity. One is the RF front end, of which if you were to do a comparison to, say, a smart mobile device, you take a base station in SATCOM, you're talking about 5x the amount of RF front-end content that's going into that.

We also have our 22FDX solution going into the beam-forming applications as well. So we will -- and our expectation is that we will track pretty closely to how you see the broader growth opportunity from a low earth orbit satellite perspective. We're working with a number of customers in that respect. From an aerospace and defense point of view, as I say, within IoT. But the advantage here is that we're a trusted foundry. We have good relationship with DoD. We've been supporting aerospace and defense applications for a number of years.

Some of those applications reached end of life towards the end of 2025, but they tend to be long-dated durable applications. What was encouraging for us in the first quarter is that we did a little over $200 million of revenue in technology services. We actually saw a healthier pool of mask and reticle related revenue associated with A&D applications.

So when you think about that mask and reticle tape-out related revenue, it's a good leading indicator of the expectations for the future wafer production revenue as well. And again, this plays very sweetly into our technology portfolio. The importance of secure edge AI capability is very well serviced by our FDX technology solutions. So again, we feel that we've got a strong match between the market demands that you see and the technology solutions. And aerospace and defense clearly is coming more under the spotlight as it relates to both international and domestic agendas to build out that capability.

So we went from silicon photonics to space to aerospace, defense and talking about national agenda, I think the next question actually is on quantum. And congrats, last week I saw you got the $375 million chips R&D grant. It looks like the government is seeing a 1% equity stake. So it's very exciting. So I'm kind of curious like what is that symbolize from GLOBALFOUNDRIES' importance both in the quantum ecosystem as well as from a national asset standpoint.

Absolutely. And look, I think it's another strong endorsement, as you say, of the role that GF plays not just within the broader semiconductor ecosystem, but also the capability requirements that the growth and acceleration of quantum compute will require. Again, we have not just woken up and started investing in quantum compute. We've had strong relationships with key players within the quantum compute space for several years now.

The real way we think about our platform offering is a modality-agnostic technology platform. Why? Because we want to be the quantum foundry of choice to support all customers based on the modalities that they're developing at the moment. We think our FDX capability really services the cryogenic requirements that Quantum will need. But at the same time, we're going to look to harness our capabilities in advanced packaging, design enablement through Quantum PDKs really to offer this complete quantum hardware solution.

So you see that come through in some of those partnership announcements that we announced last week as well as the likes of PsiQuantum, Quantum Motion and Quantinuum, like we are an important foundry of choice from a quantum perspective. Now I say that because I think it was partly in recognition of that role we've been playing that led to the $375 million grant that was announced last week.

This is going to be a really important grant to accelerate the objectives that the U.S. government has laid out, not just in terms of quantum technology capability, but also quantum technology capability in the United States. And GF is very well placed to be the provider of that. So we're going to be accelerating our investments from an R&D point of view, from a CapEx point of view. And that will largely come through as a direct offset to that $375 million grant that was announced last week.

As you rightly said, the 1% equity stake that the government -- approximately 1% equity stake that the government is going to be taking from our perspective is a strong validation of the role that GF plays in this. It's, I think, a strong endorsement of the view that the government has around GF. And more importantly, it offers the government an opportunity to participate in that strategic value creation that we believe GF will not only create through Quantum, but through the other initiatives we're working on.

Are there any covenants on the equity stake, like no buybacks or any such thing? Or is it basically like it's all about technology, so it doesn't matter?

It is principally about technology. I think the thrust of your question is somewhat linked to the legacy framework of the prior chips applications. The expectation is that we don't have those types of restrictions. It's viewed very differently. It's viewed as a separate equity arrangement from the grant funding.

That's interesting. Another one I also want to touch upon, historically, Global was always viewed as like a more mobile-centric company. But it seems like when I look at your long-term forecast, mobile is going to get smaller and smaller as a percentage of revenue. A, is that by design? Or is it more a function that the other aspects of your business are going to grow faster?

And then just on a shorter-term basis, how to think about all the smartphone units getting still downtick because of memory capacity issues? And does it have any near-term implications on your business?

Sure. Maybe starting with the longer-term lens here. Look, I think one of the messages that really resonated with our investors and the sell-side community at our Investor Day is that we've built a plan over the next 5 years, which is not premised on growth within smart mobile devices.

Now that doesn't detract from the importance of smart mobile devices as a component of our overall revenue, but it's the investments we've made over the last few years and the customer momentum that we're seeing across the other end markets and frankly, the strong demand cases within those end markets which is causing, call it, a relative flat versus others growing across those end markets.

Now what I will say is that there's also form factor evolution that we expect to come through from a smart mobile perspective. Now that form factor evolution will take a few years to come through, but we're seeing design win momentum now come through in hearables and wearables and smart glass applications, short-term low volumes. But I think what's an important read across as you think about our historic smart mobile business is that you still need the RF capability, the Bluetooth connectivity, the power management capability within those devices, all of which plays very well to the same technologies you have in a handset today.

Now as I said, that plan of roughly flat with others growing from an end market point of view over the cycle, we're already seeing that relative compare come through today. As a percentage of revenue, our smart mobile devices were about 34% in the first quarter. That's the lowest it's ever been in our company history. And it's really driven by the growth that we're seeing across the other end markets.

As we touched on earlier, full year this year, expectation for content in data centers, high 30s percent. We've grown our automotive revenue over the last 5 years 14x. We're continuing to see the pull-through on IoT. So I paint that picture from a longer-term point of view because, as I say, I don't want to detract from the importance of mobile and the read across from a technology point of view, but where we've really remixed our business is towards the fast growth end markets elsewhere.

From a shorter-term point of view, because you touched on that as well. Look, the expectations for this year from a market perspective, I think, is mobile sort of down 12%, low double digits. We think we slightly outperformed that in 2026. And it's really a function of the divergence you're seeing right now between premium tier handsets and the mid- to low-tier handsets where actually the consumer has remained pretty resilient in premium, notwithstanding the increase. I think they've shown to be pretty inelastic from a demand point of view.

So call that low single-digit growth for the year. The inverse is true on mid- to lower, which I think is reasonable to assume in the sort of 20s percent range. So you take our business, which is about 2/3 skewed towards the premium end of smart mobile, that's why we sort of expect that we'll perform slightly better than the market.

And, you know, the other thing on your Investor Day a few weeks ago is obviously, you initiated a dividend. So congrats on that. So I just want to talk a little bit about what your capital return strategy is. And the reason I'm asking is because one of the pushbacks I always get from investors is that overhang -- I shouldn't say overhang, but the high concentration of Mubadala ownership. So how to think about their ownership from a longer-term perspective? And does the dividend initiation change their view on holding the stock longer term?

Maybe if I begin with those sort of capital allocation principles and the framework that we outlined at our Investor Day a couple of weeks ago. Look, we've been on a maturity path as a public company for the last 5 years since our IPO. Through some relative headwinds from a consumer cyclical point of view during that time frame, we are emerging as a more profitable, more robust company.

You take our performance in the first quarter, 3% year-over-year revenue growth, over 500 basis points of margin growth. So we are doing what we said we would do from a profitability point of view. We've also had healthy cash generation over the last few years as well. And it's really around that kind of maturity profile, resilience of our business, healthy continued free cash generation, which we're targeting in the neighborhood of 10% year-over-year through our cycle that really led us to driving a more systematic rather than reactive framework for how we think about capital allocation.

And that capital allocation set of principles is really driven around, first, making sure we're reinvesting in the business in margin-accretive corridors and technology services. Secondly, looking at opportunities from an inorganic perspective if it accelerates the strategy that we put in place. And then thirdly, looking to be thoughtful around how we deploy some of that capital back to shareholders.

We put in place a framework of looking to distribute about 50% of that free cash after investments back to shareholders. And part of that will be through the dividends that we announced as well. We've also taken some actions during the course of this year as well. We've actually had an approval from the Board at the start of the year to buy back about $500 million of shares. We bought back about $400 million of that. We feel that, that was a very good use of capital, particularly given the momentum that we've seen within the business.

So all said and done, what you're seeing is really a more structured systematic capital allocation framework, which not only aligns with the maturity that we're seeing come through from a business point of view, but also the conviction we have in the strategy over the next 5 years. Maybe switching a little bit to the Mubadala question as well, and I'm sure some of those in the room will have seen that Mubadala did offer some shares to the market last night.

Look, I'll say from a management point of view, we're very supportive of that. If you look over the last 5 years, there's really only been 3 monetization activities, 2 marketed follow-ons and 1 block share sale last night. We have, as a company, I think, really been somewhat held back by the overhang that we've seen over the last few years. It's a very consistent theme that we've had from shareholders as well.

So I am fully supportive as is the rest of the management team around seeing more of this float come into our stock. And frankly, the relative appetite that we've seen, both in the marketed follow-on back in March as well as the activity last night, again, adds weight to the belief that there's strong appetite for GLOBALFOUNDRIES' investment strategy over the years ahead. Now as it relates to Mubadala in terms of their view on GF, I actually think it's really encouraging what the Mubadala team came out and said accompanying their announcement last night.

Strong conviction in the importance of GLOBALFOUNDRIES to their investment portfolio, the importance of GLOBALFOUNDRIES within the semiconductor ecosystem as well. And so our majority shareholder has been a very thoughtful and patient partner for many, many years now. I expect them to be that in the years ahead as well.

The benefit of having an investor profile and shareholder like Mubadala is that they are very disciplined and patient from an investment and a capital perspective. You could argue that there are some very different types of investor and shareholder profiles out there. So look, I would say that this is a good thing from our perspective for the company. And I think we continue to have a very disciplined and patient majority shareholder supporting us.

Excellent. That's so great to hear. We are out of time. So Sam, thank you very much. As always, very insightful talking to you. And nice to see the stock and the company pivoting to like higher-growth markets.

Thanks, Krish. Really appreciate the support.

Thanks a lot, Sam.

All right. Good afternoon, and welcome to the second day of JPMorgan's 54th Annual Technology Media Communications Conference. My name is Harlan Sur. I'm the semiconductor capital equipment analyst for the firm. Very pleased to have Sam Franklin, Chief Financial Officer at GLOBALFOUNDRIES. For those of you that don't know, GLOBALFOUNDRIES is the fourth largest semiconductor foundry in the world. Leader in specialty and mature manufacturing technologies, targeted segments such as analog, power management, RF, wireless, wired networking, connectivity, compound semiconductors, advanced packaging, silicon photonics targeting end markets like data center, comms infrastructure, mobile, IoT, automotive and industrial markets.

And also a growing portfolio of compute related intellectual property and capabilities to support their customers' efforts in the fast-growing areas of Edge AI and physical AI. So the team reported solid results, constructive guidance last week also held an Analyst Day, which we'll be talking about. So Sam, thank you for joining us this afternoon.

Thanks, Harlan. Please to be here.

So let's start off with the Analyst Day and when you and the team built the financial long-term model that you laid out last week, what was the single most important shift in the GF narrative you wanted to crystallize and send a message to the market.

And second, from an outsider perspective, and the obvious question is whether the current business strength is structural or partly cyclical. And where do you think the team is generally structurally better today than, let's say, 12 months ago?

Sure. So Maybe just to take a little bit of a step back. It was a little over 3 years since our last Investor Day. And obviously, when you think about some of the cyclical dynamics that have been going on within pockets of our industry during that time frame, we felt that there was a prime opportunity for us to really kind of convey the way that we've been repositioning our business internally, but also more importantly, how we see that intersecting with the mega trends facing our industry and expect it to kind of drive momentum in our industry over the course of the next 5 to 10 years.

So the real confluence of messaging, I'd say that resonated most with our investors during the course of that day was sort of threefold. It was these mega trends driving our industry, the intersection with GF's portfolio and what it means for our financial model going forward, driving increased revenue diversification, increased margin expansion and really kind of delivering shareholder value as well.

So the -- I don't think there's any disputing from anyone in the room right now that the data center is a key driver of one of those mega trends. What is probably underappreciated is the role that GF has within the data center today and the expected role we have in the data center going forward today, principally service through our silicon photonics portfolio as well, by the way, through our silicon germanium applications too. So we've seen strong momentum there.

Data center going forward, we expect increased opportunities to fall through from silicon photonics, the growth of co-packaged optics but also power delivery within the data center. Again, a sweet spot opportunity as we think about the investments we've made in our portfolio as well. So that's kind of one part of it. And then the second part of it is, well, what does this mean in terms of all the data center CapEx build out as it relates to the applications, the devices that are connected to that. And that's where we think there's a real opportunity for us as it relates to physical AI.

You think about what the core features of physical AI are, what do they need to do? They need to sense, they need to think, they need to act, they need to communicate. All of those features play into the sweet spot of GF's portfolio. As we think there's a meaningful opportunity there over time. And then the third of those trends is really the surety of supply and the diversification of a globally secure semiconductor manufacturing footprint.

And again, GF is very unique in so far as we have presence on 3 continents. We have increasing technology fungibility across each of those. And so when you think about some of the challenges facing global supply chains today, we think we're very well positioned to support that going forward. So really, I'd say it was the confluence of those core drivers with our opportunities as a business. Now to the second part of your question, what's different as it relates to structural versus cyclical, I'd probably bring this a little nearer to home and tie it to our results that we reported a couple of weeks ago.

The best reference point I can give you all is first quarter revenue was up about 3% year-over-year. Our gross margins expanded 510 basis points year-over-year. A big component of that is the mix evolution that we're seeing within our business and also the end market diversification as well. That also carried through, by the way, in principle to our second quarter guidance, where at the midpoint, we guided to about 4% year-over-year revenue growth. But actually, if you look at the second quarter revenue from last year, we did about $1.688 billion.

You take that midpoint of $1.76 billion that we've guided for the second quarter. And then you take the 28.5% of margin delta that we provided as a margin guide. It actually implies that we're having a very strong pull-through from a gross profit perspective as it relates to that revenue year-over-year bridge. So look, I think that they, for me are some of the strongest indicators that we've made structural changes within our business to drive margin accretion.

On the other side of it, we'll talk about the growth rates in some of the model parameters that you laid out. But as you think about the long-term outlook for the business, the financial model that you laid out, where is the execution maybe still falling a little bit short? Where are the internal capabilities, technology portfolio, product portfolio, still falling a little bit short of expectations relative to the team's ability to confidently like hit those targets as we look forward in time.

As you can imagine, we spent a lot of time thinking about this and also presenting and putting together the most credible model for you all and for the investment community as well. And so we sort of broke it down into 2 distinct phases as we set those objectives for ourselves. The first is a set of metrics exiting 2028 where we're looking to solve for a 40% gross margin business and then longer term, looking to solve for a 45% gross margin target. Now the dynamics, I would say as it relates to where some of those challenges, where some of those capability opportunities lie for us today is really the second phase of that model. And I'd say it falls into a couple of very distinct categories.

The first, as I touched on earlier, as it relates to silicon photonics, is this growth of co-packaged optics, advanced packaging. That is an area we've been investing for the past decade. But nevertheless, when you look at what broader industry expectations are for the ramp of CPO. It's sort of in that late '28, early '29 time horizon. And so as we think about the step change in revenue pull-through and earnings leverage going beyond 2028 CPO will be an important dynamic.

The second dynamic is very much one that we've actively pursued to, again, diversify our service offering to customers and it relates to the acquisition we made for MIPS at the back end of last year, which I know we'll talk about later.

But that drives a few things, but one of them as it relates to that second time horizon window is the advent of custom silicon. We're working with customers at this point as it relates to new opportunities and some of those will have custom silicon attached to them as it relates to new designs on GF technology. Now typical life cycle from where we're at now from a design win through production ramp typically in that sort of 2- to 3-year time horizon. So as it relates to those phases of opportunities, I'd really say Phase 2 is an area of capability where we've been investing in heavily, the ramp associated with that is more in that end of '28 and beyond time frame.

Got it. And then on the financial model and the midterm targets, 10% to 12% revenue CAGR over the next few years, $4 of earnings power exiting '28, $6 long term sort of earnings power. When you and the management team and the Board were sort of stress testing this model, where did you put the most conservatism? Where is there sort of the least amount of uncertainty? And is it the gross margin trajectory, operating margin leverage, revenue CAGR or CapEx envelope, like where were the areas where there was a little bit more uncertainty, a little bit more conservatism?

I mean, look, as you can imagine, I'm sure you've lived through these as well is there's no sort of singular area of the financial model where a degree of stress testing or conservatism is applied. We stress test all elements of our model or through the top line assumptions through the P&L. And so we spend a lot of time going through those various different scenarios from a bottoms-up perspective. How do we control cost, how do we drive productivity, what's the design win momentum that we're seeing with customers? Fundamentally, we wanted to build a model that was anchored in the momentum we see today and the technologies that we're investing in today.

Then, of course, you have your top-down set of assumptions as it relates to the end markets that we service, the relative SAM growth within those end markets as well. But really for us, it's how do we drive that growth and control that from within. So maybe if I kind of take you through a couple of elements from a P&L point of view. Look, the way we positioned the end market growth opportunity that drives up to that 10% to 12% that you mentioned at the enterprise level is really through a few core vectors of growth that we're seeing meaningful acceleration of today.

Comms infrastructure and data center. We grew that almost 30% last year. We grew 32% year-over-year in the first quarter. Our expectation for that end market is high 30s percent growth in 2026. We built a model where we expect that to go through the cycle in the 30-plus percentage points, which is pretty similar to where you're seeing the broader market. But again, we've got some pointed technologies within that to capture value.

If I then take automotive, another core end market for us, we've grown our automotive end market revenue 14x in the last 5 years. It has been a really strong growth story, particularly when you look at some of the other cyclical dynamics over the last few years. Auto has been a bright spot for us. And that's really the function of the design wins that we've been building, but it's also the durability of that as an end market.

So we put a low double-digit percentage growth around that. And we think it kind of drives from 2 key areas that, again, is based in momentum we have today. Number 1 is the increase in semiconductor content within the vehicle, roughly $1,000 of semi content in the vehicle today, the expectation is that, that has a 1.5x increase through the end of the decade. It's very easy to get attached to SAR dynamics within auto, but content really matters. And that's where we've been picking up opportunities.

The second part is the gaining share dynamics within that as well. The third piece is really a function of what I mentioned around MIPS and the mega trend around physical AI, which is the opportunities we see in IoT. We've baked into our model an expected growth rate of mid-teens for IoT through the cycle. And again, the reasons behind that are not just the additional capabilities we're adding through the likes of MIPS and RISC-V, but also the momentum we see with customers. We had about 200 design wins in IoT last year. That was about a 40% uplift than the year prior. So we're seeing good traction with customers there. And then it would be remiss of me not to mention smart mobile because historically, that's been our largest end market.

But what I think resonated with our investors is that we've built a model, which is not dependent on smart mobile growth. And so we actually view that as a flat revenue end market through our model. So that's sort of how we think about it from top line and then just briefly touching on the other components. Mix really matters in our business. And when we look at the progression from where we are in the first quarter, which was 29% up to that nearer-term target of 40%. Mix will be an important component of that, call it, sort of 5 to 6 points as we see increased pull-through from those end markets that I just mentioned.

Then as you get into some of those other margin bridges, the likes of optimization of our footprint, tooling productivity, really kind of filling out the falls of our capacity, we're a high fixed cost business that matters. And then just taking it a little step further. And if I go into our operating margin targets, we've set a long-term target of 35%, nearer term, 25%. I do actually expect our OpEx to grow over the course of that period, but call it roughly half the rate of revenue.

The composition of that OpEx really matters as well. And as we add on more capabilities in RISC-V and MIPS as another example, our expectation is that the proportion of R&D is probably slightly larger than what it is today. But overall, that envelope is roughly half the rate of growth. So there's a lot to unpack there, but the punchline is we stress tested a lot in terms of how we think about this growth.

That makes a lot of sense. And if we talk about the -- you talked about the model looking beyond 2028 and the team at the Analyst Day, you definitely brought up co-packaged optics. And you're right, I mean, NPL, CPO, those are dynamics that when you think about scale out, maybe we see some in '27, but more in '28 scale up maybe '28, '29 time frame. So I totally agree with that. And we'll get back to your silicon photonics portfolio. But you also mentioned 2 other drivers, advanced packaging and custom silicon, and this created a lot of buzz after the Analyst Day.

And so the question is like what is the team doing here? Where are you going to be focused on advanced packaging and custom silicon, right? So advanced packaging, there's been a lot of questions, are you going to be pursuing things like 2.5D cost-like capabilities. And on custom silicon, the GF team used to have an ASIC team, right, doing custom silicon solutions but sold that portion of their business to another semiconductor company, but are you planning to rebuild the custom ASIC team as well to go after the custom silicon market? Is that what you mean by custom silicon?

Why don't I -- I'll start with the advanced packaging and I'll definitely get into the custom silicon. The thing that we're excited about from an advanced packaging point of view is that it's areas of capability that we've already been investing in for years as it relates to wafer to wafer, die to wafer bonding. I know we'll come on to [ SiPh ] later. When you think about some of that wafer to wafer bonding capability, we have qualified solutions in silicon photonics, it's called PIC to EIC bonding. That's going to be an important dynamic. But the capability doesn't stop there. RF is another great example of where we're in development with bonded solutions for our 9SW technologies, high-performance RF at 45% less of the die size when you think about the real estate within the phone and the RF capability that you need, that kind of size matters.

And so we're seeing good opportunities there. And then we're in early-stage development for things like SiGe on FDX as well. This is a broad area of advanced packaging and die to wafer, wafer-to-wafer bond that we see as opportunities, both within and beyond silicon photonics. And then if I switch over to your question around custom silicon. Maybe just taking a bit of a step back. We acquired MIPS for multiple reasons. One, we have a strong thesis in the belief and the applicability of RISC-V but also the relevance of that business in terms of the revenue composition. It is a business today, which is principally IP licensing software-based revenue.

Over time, that drives towards more custom silicon. We put a target out as part of our Investor Day a couple of weeks ago of looking to get to $1 billion benefit in 2030 for that business. And I will say that the reaction from customers since announcing that acquisition has been overwhelmingly positive. It changes the nature of the service offering that we can provide to our customers and it brings us into the discussions much earlier than we would have otherwise had as just a pure play foundry recipient of an RFP for a D win for example.

So we're finding we're getting that early traction, and we're having the types of design conversations, which are very relevant to the GF portfolio, which then takes me on to the last part of your question around legacy ASIC business we did sell to Marvell. I view that very different for a couple of reasons. That ASIC business that we sold to Marvell at the time was principally focused on designs for 5-nanometer embolus.

Leading edge.

Right, that's right. It was outside the wheelhouse of the technology portfolio that we were focused on as a company. So strategically, it wasn't the right fit for us going forward. What we found with MIPS and what really gives us some optimism around the opportunity there is that touching back on those features I mentioned earlier as it relates to sensing at communicate, the relevance to GF technology portfolio is very well suited there. So as you think about the opportunity for custom silicon, those design capabilities are not just to support a customer on another node, it's to support technologies that GF services today and going forward. So that's really the nuance between the 2 dynamics between that legacy ASIC and where we see ourselves today with...

Oh, that's good insights. And then maybe switching over to sort of the cyclical dynamics of the business and the resilience of the business to this cyclical downturn and now we're in the midst of the upturn. After 8 consecutive quarters of year-over-year declines, the team starts to see revenue recovery trends at the beginning of last year with year-over-year revenue trends inflecting positively. Q1 remaining positive throughout the year.

As you mentioned, you entered this year driving 3% year-over-year growth, guiding up 4% or 5% in 2Q. Street has you guys exiting the year at about 7% to 8% growth. Could you just share your thoughts on the current state of the industry and the impacts on GLOBALFOUNDRIES' recent earnings update.

Yes, absolutely. And look, you hit it right on the head there, which is I think we're in an important inflection point, not just an important inflection point for our business, but also for the industry more broadly, it was encouraging to see a return to year-over-year growth about 3% in the first quarter. And as you say, we followed that up with roughly 4% of growth at the midpoint for the second quarter as well. Now all of that is actually in the face of a couple of ongoing dynamics, which I'll come on to from an end market point of view.

But we're really, really encouraged by the diversification that we're seeing from an end market perspective. I will say that if you looked at our business 5 years ago, you would have seen revenue contribution from smart mobile devices well over 50% of total revenue. In the first quarter of 2026, revenue for smart mobile devices was 34% is the lowest that it's ever been as a percentage of our total revenue. And that's with enterprise revenue growth. So notwithstanding that reduction, actually, the growth has come, and it ties to what I said earlier around the mix and the margin dynamics, growth has come from some of those fast opportunities that we're seeing in other end markets. Communications infrastructure and data center up 32% year-over-year. I see us as upwards of high 30s for the full year.

Automotive, we delivered about 24% of growth year-over-year in the first quarter. Again, automotive proved to be a very resilient business for us. We're continuing to grow customer partnerships in that end market as well. And although pockets of IoT were a little bit soft for us in the first quarter, we are seeing good momentum pull through from a take-out perspective, which is a good leading indicator for where we see future revenue. So we still expect IoT to be about mid-single-digit growth for the year as we go through.

So that end market diversification has really helped drive some of that inflection. The other point as well is we're seeing good contribution from our technology services revenue as well. This is revenue we use to categorize as non-wafer revenue. We broaden that definition to technology services revenue to really reflect what we're doing with our business and adding that service capability. So that was about 13% of total revenue in the first quarter. Historically, that revenue has been sort of 8% to 10%. It's trended upwards for a couple of reasons.

One of those is that we saw good momentum from a mask and radical perspective in the first quarter, particularly on some of our aerospace and defense applications. But also, we're very gradually seeing that broader service offering pull-through from the likes of the MIPS acquisition. Small in the first quarter, but expected to grow as we go through the year. So I would say that, yes, on paper, it's an important inflection, but it's taken years of effort to kind of drive that diversification and get us back on to the track that we see for future growth rate.

And I think to your point, I mean, a lot of the things that you're talking about today and going forward have been sort of newer dynamics to the team's profile, right, MIPS and the focus on compute IP, the inflection that you're seeing in some of your data center photonics related, those sort of businesses. But if we go back a couple of years, I mean, your peak to trough decline in the last down cycle was only 25%. I mean it was significantly better than in your customers or your competitors, right? And so even 18, 24 months ago, I mean, the team was doing something, right? I mean your peak-to-trough decline was very minimal. How was the team better able to weather the down cycle.

And it clearly seems that on a go-forward basis, the potential for you to do even better, given the mix effects and some of the other diversification of the portfolio is going to come into play. But how was the team able to very well managed through the last down cycle?

Yes. Look, our team has done a phenomenal job for years, and we've got 1,000 very strong workforce around the world that is constantly looking to drive progress for the company. So yes, they've done an excellent job. I'd kind of really bucket into a few different categories as we think about how that relative progress we saw for the last few years. I touched already on end market diversity in, so I won't labor that too hard. But what I will say is that, that was a set of decisions and wins and opportunities that crystallized well before you started seeing the cycle turn the other way in some of the consumer-centric end markets.

And auto, I mean auto is really strong during the...

Precisely. Yes. I mean, look, if you stripped out auto, from our business over the last 3 years, you'd have a very different peak to trough ratio. And so it really kind of hits home on the importance of that diversification piece. We also had a pretty pronounced migration away within some of our data center revenue as well. So that data center momentum that we've seen over the course of the last couple of quarters is really off the back of some declines in the prior year.

So auto end market diversification more broadly, strong dynamic. The second component of it was really this focus that we have from a business and a manufacturer how do we drive improvements from a productivity point of view, constant focus on cash cost per mask place, focusing on improving cycle times as well.

There are certain things when you get into a cycle which are outside of your control, there are certain things which are inside your control. And how we perform better as a semiconductor foundry was clearly in our control. And so we look to really kind of drive some improvements there. I will say that there was probably a third component here, which we've talked about a lot in the past, less so now, which was some of those longer-term customer agreements, which provided a degree of visibility.

I say that with a degree of caution around that statement because the reality is that we wanted to preserve the long-term nature of those customer relationships. And so we were very thoughtful over the last couple of years to make sure that where possible, we negotiated, we supported our customers and helped each other through that period. But I'd say they were some of the core structural dynamics that we really focused on to try and help weather the storm and look, it's positioned us well, we think, in terms of the growth opportunity ahead.

Before I move on, any questions from the audience? If you do have a question, raise your hand and we'll get a microphone over to you. Let's talk about the design win and customer pipeline. So you exited calendar '25 with an increment to 500 new design wins. 95% sole source to GLOBALFOUNDRIES. Additionally, you expanded your customer pipeline to include Renesas. I know the CEO of Renesas, Shibata-san extremely well.

And you now -- with Renesas, you now supply manufacturing services to the top 3 microcontroller suppliers in the world, Infineon, NXP and now Renesas, right? So first, help us understand the end market breakout of your design win pipeline. And what was the major motivation for Shibata-san and Renesas to partner with GLOBALFOUNDRIES?

Sure. Look as you rightly touched on, 500 design wins in the year was a strong high water mark. So far for us as a company. And so we feel good about what that means in terms of the future opportunities for the business. And I gave you a little bit of an indication earlier around some of that composition. IoT was a big component of it. I had 200 design wins across IoT. The way to think about some of the balance of those design wins, it was actually quite evenly split across automotive, comms infra data center and smart mobile for that matter as well.

So relatively good diversification. It actually adds further credibility to what we believe is possible in terms of end market diversification over the years ahead. And look, the first quarter started quite well with the continuation of the design win momentum. So really kind of a basis for growth, which is steeped in that customer momentum. Renesas partnership, really important to us and a multiyear, multibillion-dollar partnership. Shibata-san, I think, made some really pertinent comments around why he viewed GF as an important partner to Renesas.

And it's really kind of a combination of factors. One of those is technology capability. We have got BCD, GaN, our MCU business as well, more broadly to be able to support everything from data center power to automotive to IoT. So there's a broader opportunity here as we see it across several end markets that we service and really a kind of good opportunity for Renesas as well. It plays into the sweet spot of their capabilities, too.

The second part of it, which Shibata-san included in some of his comments was the resilience of global semiconductor supply chain and the relevance of GF to meeting that objective. We have the ability through the application of our BCD, GaN, other automotive applications to be able to service that demand both here in the U.S. as well as just in Germany as well as Singapore as well. So we're looking to create that fungibility and that broader supply chain security for our customers, and I think Renesas is a great example of that.

And the next thing about doing business with the top 3 microcontroller suppliers in the world is they always love diversity of compute architecture, right? It's ARM, proprietary and a lot of them now, as you probably know, are starting to do some work on RISC-V. So having the top 3 microcontroller guys as your top customers and having a great RISC-V business, I mean I feel like it's very synergistic and very conducive to -- as these top 3 microcontroller players start to diversify their portfolio to include RISC-V, I mean you guys have the IP portfolio ready to go.

Yes, that's absolutely right. And I think that's where we've been most encouraged by some of the momentum that we've seen since closing on the MIPS acquisition and even since announcing the acquisition of Synopsys our IP business as well.

Let's go to photonics, which is clearly the centerpiece of GLOBALFOUNDRIES growth narrative and where a lot of investor energy is concentrated right now. The team is a leader in silicon photonics for 400 gig, 800 gig, 1.6T pluggable transceivers, right? That is the sweet spot for optical deployments today. And in a strong position -- and in the strong position for a lot of the components that not only -- you don't only build a silicon photonic substrate. A lot of the components you guys also make those components, too, like the silicon germanium drivers, the transimpeded amplifiers with their silicon germanium?

That's right.

And I think you guys even do the germanium photodetectors as well. So there's a ton of content that goes into these pluggable transceivers. The growth trajectory you laid out is pretty solid, right? 2025, $200 million from silicon photonics, '26 doubles, this year, doubles again to roughly $400 million, now you're not committing to a $1 billion run rate exiting '28 and ultimately $2 billion in 2030. You're clearly outgrowing data center CapEx spending trends.

Help us unpack the components of the strong growth profile and maybe you can lay out for investors, the positioning of GLOBALFOUNDRIES product offering relative to some of the other guys out there like a TSMC COUPE platform on the co-packaged optics side.

Yes. Again, maybe if I sort of start with the pluggable side and then we talk a little bit about CPO. Look, we've been more broadly investing in photonics for the best part of a decade. We've deployed the kind of $1 billion to photonics capability. This is not a new technology capability to GLOBALFOUNDRIES. And so really, what was kind of holding back this opportunity was I think if you rewound the clock a couple of years, the market expectation for photonics was still a case of if rather than when.

And that's really been a pronounced evolution. As you think about this migration and broader adoption of optics even as little as the last year where you've seen that kind of ramp up in terms of broader ecosystem partners talking to it. So pluggables near term has been a strong growth opportunity in the pluggables, transceivers. We're one of the only photonic foundries with both 200-millimeter and 300-millimeter capability in this regard. And so strong momentum there, as you say, doubled last year, we expect to double this year. It comes with a healthy margin profile as we think about our objectives from an enterprise perspective. And really, it's another area where we're focused on investing in corridor capacity to continue servicing that demand. We see strong demand in pluggables through this year, through next year as well.

So we're going to be making sure that we're putting that capacity on, investing those CapEx dollars thoughtfully to meet that demand. You skip then onto sort of CPO. And again, we think of that as sort of the late '28 time frame. We announced recently our scale solution. We've actually had this solution for a long time. It was a function of the recent OCI MSA framework that was put in place our scale solution is our silicon photonics co-packaged advanced light engine, which really drives what we believe to be a very comprehensive solution as it relates to co-packaged optics.

This market, if you look at it over the next decade and you look at the broader adoption of CPO, there's plenty of room for more than one participant in there. And so, without speaking specifically on TSMC's COUPE, which is a very strong solution in its own right. We think that particularly through the adoption of the OCI MSA principles, you look at some of those founding partners behind that framework and obviously, we're engaged with several of those names within it. We think we've got a very compelling solution to support CPO longer term.

On capital return, you announced your first ever quarterly dividend at the Analyst Day and alongside it a target to return up to 50% of your adjusted free cash flow via a combination of dividend buybacks. Kind of walk us through the sizing logic for the $0.12 dividend. Was it anchored to a target dividend yield to a payout ratio to a fraction of the free cash flow target or some combination of all of the above.

And over the long-term model, do you expect the dividend to grow at a fixed cadence with buybacks flexing opportunistically around it? Or is there other way to kind of think about dividend versus sort of repurchase?

Yes. Look, this is a really important milestone for GF, particularly when you think about our maturity profile as a public company. We've had strong free cash flow generation for the last few years. As I said earlier, I think we put together a model which we have conviction in around the opportunity growth from a profitability point of view and the opportunity growth from a free cash point of view as well. So really, this was about applying a thoughtful and systematic approach to how we think about capital allocation.

And that really kind of led us up to 3 principles. The first is that we're going to reinvest in the business in accretive margin corridors. The second is where we see opportunities to accelerate our growth model. If we find inorganic opportunities, we'll look to take advantage of those as well. And the third is then looking to distribute a portion of capital back to shareholders as well. And as you rightly touched on, that's sort of where we announced at the Investor Day, the latest update.

We think that a 50% distribution of free cash flow after investments is a reasonable basis to set ourselves on. Actually, if you look back at the first quarter already, not that we had the formal policy in place, we bought back around $400 million of shares during that period. The dividend itself, if you sort of pro rate out a $0.12 per share dividend that we've announced, called out roughly $0.48.

That's about $270 million there or thereabouts of distribution from a dividend perspective. You apply the target we set this year of roughly 10% free cash flow. It's sort of right in that sweet spot with a bit of headroom above it. As you rightly said, we want to be able to fund and grow this over time. we have what we believe is a very resilient balance sheet. We've got $4 billion of cash, $1 billion of incremental liquidity. We have less than 1x gross debt. We feel like we're in a resilient place to be able to support capital allocation on a multiyear basis.

Appreciate the time spent, Sam. Looking forward to monitoring the execution of the team as the year unfolds.

Thank you, Harlan. Really appreciate it.

Good morning, everyone. Welcome to the GlobalFoundries 2026 Investor Day. It's great to see so many of you here, and a warm welcome to those joining us virtually. We have an excellent lineup for you today of our excellent speakers. And I wanted to just go over a couple of things before we begin.

The presentations will take approximately 2 hours long. We will have a 10-minute break after the third presentation, and we'll conclude with a 45-minute Q&A. It's been almost 4 years since our last in-person event, and a lot has changed. We're very excited to show you GlobalFoundries today. You know that my slide deck and the replay will be made available after the event.

Now for some housekeeping. Note that today's discussion includes forward-looking statements. These statements are based on current expectations and involve risks and uncertainties that could cause actual results to differ materially. Shown here and included in our materials is our safe harbor disclaimer. Finally, note that we will be talking about non-IFRS metrics today.

Before I hand it over to Tim Breen, our CEO, customers are very important to GF, and I'm glad and pleased to show you a customer testimonial video. Thank you, and welcome again.

Hello, everyone. I'm Charlie Kawas, President of the Semiconductor Solutions Group at Broadcom. It's an honor to be here and to celebrate the strength of our partnership with GlobalFoundries. At Broadcom, we take pride in the fact that 99% of the world's data traffic flows through at least one of our chips. As AI increasingly disrupts our daily lives, our focus has been on open, scalable and power-efficient foundational silicon for this once-in-a-lifetime transformation. Partners like GlobalFoundries have been critical to this journey.

For decades, GlobalFoundries has been a trusted foundry partner to Broadcom, delivering innovation, reliability and scale. GlobalFoundries' footprint with fabs in Asia, Europe and the U.S. ensures solid execution and supply chain security. And as more of our joint technologies move to their U.S. fabs, our strategic alignment only grows stronger. Their leadership in RF SOI, SiGe and advanced packaging enables us to push the boundaries of wireless and wired communications.

We have partnered together with GlobalFoundries to be first to market with their most advanced technologies. Our relationship is a shared vision for the future. Together, we're advancing U.S.-based cellular connectivity, scaling AI technologies and driving innovation that benefits our mutual customers.

Thank you, and I wish you the very best. A Little over 8 years ago, I found myself in the blizzard in upstate New York. I just joined the leadership team of GlobalFoundries. And as I walked the [indiscernible] factory floors of this company built on the incredible foundation [indiscernible] microelectronics, I came to appreciate the unique assets that we had.

Over the last 8 years that follow, we clarified the company's strategy, hold our execution and quality, build a world-class team, and a sustainable business model. The last 8 years have been incredibly fulfilling.

I think for myself and for all of us that's here [indiscernible] in comparison to our excitement about what is to come. AI represents a generational shift for the semiconductor both in the cloud and in the physical world. If that was the only story we tell today about what's propelling our business, that would already be extraordinarily exciting.

But it's happening against at the back of a changing world with supply security and the need for resilient semiconductor manufacturing that matters more than ever. If I leave you with one thing today it's that sense of opportunity that meets a company well to capitalize on it.

Today, as Eric mentioned, we're going to take you through 4 presentations. I'm going to kick us off with our thesis on those 3 key megatrends driving the semiconductor industry. Greg will share a modicum of his boundless enthusiasm for our technology portfolio and our road map for the future. Mike will take us deeper into the end markets that we serve and showcase specific solutions we're delivering to our customers. And Sam will bring it home with a financial model that doesn't just demonstrate top line growth, but performance improvement at the bottom line, creating and delivering value for our shareholders.

We see 3 megatrends shaping the semiconductor industry. In the data center, the shift from generative to agentic AI to thousands and millions of agents operating autonomously at scale creates a surging demand for intelligence. And when you add to it the imperative of sovereign AI, it's clear why data center CapEx numbers are only increasing.

This year, the top 4 hyperscalers will spend more than $700 billion on data center capacity. That's more than 2x what they spent in 2025. But with that build-out comes new challenges, the challenge of connecting all of that compute together with massively parallel workloads and the challenge of providing power to all of that capacity.

But if you think the data center boom is big, we think the echo of physical AI in the real world will be even bigger as AI enables new use cases, some of which we can predict, but many of which we can only imagine today. AI will unleash huge opportunities for our industry and create new requirements. And again, all of that is happening against the backdrop where the old rules don't apply, where supply chains are being reshaped by factors such as geopolitics, supply security, tariffs and trade barriers.

Let's go deeper into the data center. We're going to talk about 2 trends that we're laser-focused on within GlobalFoundries. AI workloads generate an incredible requirement for moving data, and they do it through a more and more heterogeneous compute architecture. Just to give you a sense, an H100 GPU moves more data through its memory every single second than the equivalent of 1,000 human genomes. And if you tour apart an AI data center rack, you see as many as 7 different forms of compute, GPUs, CPUs, accelerators, switches, NPUs, DPUs, all working together to conduct complex training and inference workloads. That drives a necessity for a step change in networking, and it's accelerating that transition from copper to optical that we've talked about for a decade, but it's finally upon us today.

At the same time, power is one of the most incredible challenges for data center scale. A modern AI campus uses more power than the island of Manhattan. And a rack in a data center in 2027 will use 50x the power of the average rack powering the internet today. This power challenge is huge. It requires innovations in systems and modules to provide that power more efficiently to those enormously power-consuming workloads.

Let's go deeper into optical networking. It's clear from a number of performance metrics why optical is accelerating. Simply put, moving photons is easier than moving electrons. So it extends reach across networks. It's also easier to move more data through smaller spaces, increasing bandwidth density. And it does all of that while consuming less energy per bit moved. And those metrics are all pretty compelling.

But I think one metric on this page I want you to take away is the profound impact that optical networking has on compute efficiency. Today's CPUs and GPUs sit idle more than they should because they're waiting for data. Optical networking transforms the utilization of XPUs, enabling a step change in compute efficiency. This is why in 2026, the whole industry aligned on the transition for optical no longer being a maybe, but being a now and actually being a yesterday. How fast can we go? And there will be interesting discussions about pluggable, near and co-packaged optics.

But at the heart of all of those systems are foundational technologies such as silicon photonics, which enable those systems to perform and conduct those complex workloads. And with the industry increasingly galvanizing around standard approaches, we see this transition only accelerating. If we get into power, if you think of networking as the nervous system of the data center, then you should think of power as the blood. And today, with these racks moving from kilowatt to megawatt scale, a step change in power management is required. With the conversion to high-voltage DC requiring a very different power architecture from grid to chip, reducing conversion stages to as few as 2 stages, operating today at 400 volts tomorrow at 800 volts. This requires much more dense power conversion.

All of this works together to transform energy efficiency. And if a 10% improvement of efficiency doesn't feel like a lot, think about that as a 40% reduction in losses. And when power is the gating factor for data center scale and cost-efficient inference, 40% reduction in losses is a game changer. But again, this doesn't happen without semiconductor technology innovation. ECD for control, protection, mixed signal intelligence, low-voltage GaN for high-frequency switching and high-density power conversion, together creating a step function improvement in power management.

In GF, we think about our competitiveness on 3 dimensions. We think about our foundational technology leadership. We think about the design support and ecosystem we enable for our customers, and we think about our global footprint. In technology and optical networking, we have industry-leading portfolios in silicon photonics for that optical network transition. But we build on that differentiation with advanced packaging, 3D integration techniques, [indiscernible], broadband couplers and more. We complement that with in-house design expertise that we built organically and acquired with companies like InfiniLink. And we enable a global ecosystem of EDA, test, fiber assembly partners, allowing our customers to reduce time to market.

And I think very importantly and sometimes not well understood is we serve that from a uniquely scaled global footprint. We manufacture silicon photonics 2.5 hours from here in Upstate New York in a modern fab well equipped for scale with our campus in Singapore also ramping, providing our customers with supply chain optionality. And we complement that with in-house advanced packaging and test, truly creating a one-stop shop.

In data center power, we have industry-leading BCD and GaN processes today in the market. We've integrated drives and controllers. We've integrated passive devices, allowing us to shrink board area, allowing more efficient voltage regulation and power delivery to the chip. We enable our customers with advanced analog models and high-voltage models, all of that allowing them to tune system performance, shorten development time and reducing integration risk. And again, we serve this out of a global footprint in Germany, Singapore and the U.S.

Let's talk about physical AI. I think the way to think about physical AI from our perspective is thinking about technology waves. And there's common factors that affect every technology wave. What starts with an infrastructure build-out unleashes new applications, some of which we imagine, some of which we learn along the way. That leads ultimately to a transformation of that technology vertical.

What's also true about technology waves is each one builds on the last, and so they go faster. If you think back, some of us in the room can think back that far to the launch of the commercial internet. It took about 30 years to get to the point of the globally connected cloud that's in use today. If we think to the rollout of cellular infrastructure, and the enabling of billions of smartphones and further billions of smart devices, it took about 20 years to get to the point we're at today. Our conviction is that physical AI will happen even faster. And within a decade, the boom we see today in the data center will be met with an echo in the physical world with tens of billions of devices unleashed and empowered with AI.

But what makes a physical AI device? And why is it different to something you might find in a climate-controlled data center? A physical AI device has to act in the real world. It has to deal with unpredictable environments. It has to be able to do 4 key things well, reliably every single time. It has the sense to gather data using multimodal sensors, radar, LiDAR, time-of-flight, imaging. It has to be able to think to process those data in real time with low power and low latency, no time to go back to the cloud to consult for a workload. It has to be able to act to control motors, drives, actuators, real-world devices. And it has to be able to communicate primarily in wireless form factors with its own system and with devices around it.

As you can imagine, this drives a broad need for different semiconductors, and it lines up perfectly with GlobalFoundries portfolio. And even more so, the acquisitions we've made with MIPS and Synopsys' ARC, fit perfectly to the process of requirements that underpin these use cases.

One of the best things about my job is the broad range of companies I get to interact with, some very large and some very small. And let me just give you a couple of vignettes into conversations that I've had just in the past weeks about some of these areas.

In transportation, last week, I was talking to one of the leaders in autonomous driving. They were explaining to me their need for low light imaging. Low light imaging, one of the best ways to do that is what's called a SPAD sensor, a Single Photon Avalanche Diode sensor. That enables their autonomous systems to work in low light conditions in poor weather, enabling them to see further and make better decisions, keeping those systems safer, truly an inspiring use case. In the industrial world, we work with partners like Siemens who are dramatically reimagining how a factory should work, empowering AI in all aspects of those processes, be it robotics, be it factory workers, enabling a step change in productivity.

On the consumer side, we've all seen the pictures of robots and humanoid robots in the world around us. And I've been to some of these factories, I've been to some of these locations where they're developing and prototyping. And by the way, we're using them in our own factories too. We're tasting truly our own medicine and seeing how these devices can perform.

But lastly, I think if I had one area of physical AI that is closest to my heart, it's medical. When health care and electronics combine incredible things become possible. Right here in New York City, I was having coffee with a technologist who was telling me about the device he's working on. He's building a sensor, looks a little bit like the CGM that you might see on someone's arm that detects the precursors to a heart attack. And the second generation of this product will also connect to a delivery device that can deliver targeted medicine to reduce the likelihood of heart disease. 18 million people die every year from heart failure. This could address 30% to 40% of those deaths. Again, physical AI isn't just a business opportunity. It's also something we have a responsibility to enable to improve those outcomes.

From a market point of view, of course, we're excited about the growth. We've talked about this being an $18 billion market by 2030. But really, this is just the tip of the iceberg of scaling AI into the physical world.

Let's talk about the last megatrend, the need for resilient global semiconductor supply. This is clearly not the world that many of us grew up in. Every day, you read the news and you're surprised by another development that puts strain on global supply chains. Where the operating principle used to be economic efficiency, today, it's resiliency, geopolitics, national security. That's putting stress across the whole system. And with rising uncertainty, this is leading to changes to policies at the country level, at the company level. It's no longer sufficient for people to wait and see what happens. People need to take action.

This matters in every industry. But semiconductors, it matters even more, and it matters for 2 key reasons. Firstly, we're beginning from a fragile starting point, 50% of essential semiconductor capacity is in China and Taiwan today. And that alone is enough of a risk to motivate action. But when you think about the role semiconductor played, and we got to see this live during the pandemic when factories were idled, when cars stood on the parking lots, when jobs were affected, the trillions of dollars of downstream economic activity enabled by semiconductors, the jobs that they support and the critical applications, including defense that they enable, all mean that addressing this challenge is no longer a discussion. It's no longer on the risk register being monitored. It's being acted upon, again, at the country level and at the company level.

GlobalFoundries was born for this moment. We have the industry's most flexible global footprint, not just fabs around the world, but over the past years, we've qualified technologies in those fabs so a customer can design one time, take our product out, manufacture it on 3 continents. This creates incredible flexibility and optionality for our customers. But it also creates flexibility for us. We can respond to demand changes. We can react quickly. We can bring on capacity within our clean room space, adding in a capital-efficient manner.

And because those factories are incredibly important for the governments we work with every single day, the support levels we have from them for that build-out is the highest we've ever seen in our history. And since our fabs are not just automotive qualified, but defense certified, we're able to build the most critical chips in all the geographies that matter. It's great having a global footprint. It only matters if customers are willing to use it.

Last year, when we announced our plans here in the U.S. to accelerate our investment journey, we had incredible support from the industry, not just from the fabless companies that you might expect, but strategic OEMs like SpaceX, Apple, General Motors. For them, what we're doing here in the U.S. is a critical part of them reducing reliance on China and Taiwan and reshoring those supply chains back to the U.S. We've announced 11 partnerships for reshoring. We had $3 billion of design wins in 2025 alone driven by the reshoring trend. With more in the works, this momentum is only building.

If we take a step back and we look at the momentum across the broader business, we clearly see the leading indicators of our future growth. We had 500 design wins in 2025, more than a 50% increase over 2024. But perhaps more importantly, 95% of those wins were awarded to GF on a sole-source basis. That reflects the trust that our customers put in us and the fit to their portfolio of the technologies that we provide.

And when I think about our engagement, not just with our customers, but in many cases, our customers' customers and sometimes even our customers' customers, we've never had this level of deep engagement across the value chain before in critical areas, including industrial, automotive, mobile, hyperscalers and the aerospace and defense industry. Again, clearly, traction and momentum building for our business.

If I net all of this out, hopefully, it's clear why we're extraordinarily excited about what's to come. These 3 drivers of demand are extraordinarily powerful. As the data center build-out continues, as we hit new bottlenecks that require changes in networking and power, GlobalFoundries is ready. As AI proliferates that physical world and those use cases, some of which we can only dream of today, that true statement of science fiction becoming science fact, again, we're ready with our portfolio of technologies, and we enrich that further with our IP. And lastly, we're ready for that reshoring trend that we see accelerating.

The transformation we've undertaken over the last 8 years has made us ready for this moment. We've built an incredible technology portfolio, which Greg will share with you, but not just the portfolio for today, a road map far into the future. And we've enriched it with targeted acquisitions such as MIPS, ARC, AMF, InfiniLink, all adding specific capabilities to that road map. We've built a global footprint, and we readied it with technologies available in multiple geographies. And we're prepared for growth with expansion plans that can hit the market quickly in a capital-efficient way with deep government partnerships supporting those investments. But perhaps most of all, and where I spend most of my time, we've transformed the way we work with customers, not just building a broader set of solutions for them, complementing manufacturing with IP, software and services, but also building trust. In the end, our business thrives on trust. Our customers trust us succeed. In fact, they're counting on us to succeed. We hope you share our enthusiasm today, and we look forward to telling the rest of the story to you.

But for now, let me hand over to one of my customers in Japan.

Good morning. I'm excited to share how Renesas is advancing its strategy for intelligent connected systems and how our growing partnership with GlobalFoundries is helping us get there. The future will be shaped by smarter vehicles, more efficient infrastructure and secure edge devices. Meeting these needs requires more than innovation alone. It calls for reliable execution, supply assurance and technology platforms that scale globally. That's why we partnered with GlobalFoundries. GlobalFoundries 22FDX+ platform is enabling us to deliver more compact, energy-efficient chips that power everything from next-generation automotive microcontrollers to connected medical devices. These solutions are designed for always-on applications where power savings and performance are critical.

We are also working with GlobalFoundries on advancing power technologies, including BCD and gallium nitride. These platforms are essential for high-efficiency power conversion in battery systems and data centers, especially in demanding automotive and industrial environments where Renesas has deep expertise.

GlobalFoundries' global manufacturing footprint in New York, Vermont, Germany and Singapore provides the geographic flexibility and supply chain resilience that complement Renesas its own. Together, we are giving customers worldwide the confidence that their systems will be supported and scalable for the long term.

This partnership is not just about today's products and solutions, it's about enabling tomorrow's innovation. At Renesas, our purpose is to make our lives easier by complementing human capabilities. Together with GlobalFoundries, we are laying the foundation for the next wave of intelligent, secure and sustainable technologies that will transform how people live and work.

Thank you, and we look forward to further strengthening our partnership with the GlobalFoundries team.

Good morning. I'm going to guess that you know most of the other speakers that are presenting today as they routinely engage the investor community, earnings calls, et cetera. Me, not so much. I spend most of my time interacting with my counterparts in our customer base, with our partner ecosystem, with universities and research consortia around the world. So a bit of an introduction may be warranted.

I've been 42 years in the semiconductor industry, specifically in technology and manufacturing. But the more relevant point associated with that is the 17 years at GlobalFoundries. I joined one month after we spun out of Advanced Micro Devices in April of 2009. So what that does is it makes me a bit of a corporate historian of sorts. But maybe more importantly, it gives me a position of authority in talking about the transformation of our corporation over that 17-year period of time. And that gives me the 2 points that I want to convey to you today. First and foremost, as you heard from Tim already, we have the strongest, deepest, broadest technology portfolio in the history of our company. Second, we're the only company that has all of these capabilities under one roof.

So in my presentation today, I want to talk about the proof points underpinning that breadth and depth of that technology portfolio. And I'll start to touch on how our R&D investments are going to translate into the financial returns that Mike and Sam are both going to talk about.

So let's dive into the technology portfolio and where we've been placing our investments. I gave a keynote talk talking about an earlier version of this chart about 4 years ago. And I said, I think I have the coolest job in the industry. And I look back whimsically now at the fact that I had no idea how much transformation we were going to make in the 4 years that have passed since I made that talk. And I'm as excited as you can possibly imagine.

So the best way for us to represent technology platforms for our corporation is to map them into the 2 end markets that represent the growth vectors for our corporation. Those 2, as you've heard from Tim already, are AI data center infrastructure and physical AI. In the data center infrastructure, it's, as you see, 2 essential technologies: advanced packaging and power delivery. In silicon photonics, it's pluggables and co-packaged optics, and I'll touch briefly on quantum computing.

For physical AI, in addition to our ultra-low power CMOS platforms for FinFET and fully depleted SOI or FDX, with the integration of MIPS, it brings in the RISC-V core family, this software ecosystem that wraps around the products for those cores and importantly, the introduction of custom silicon capabilities.

Now the underpinning of this is a broad array of other technologies that address automotive, IoT, aerospace and defense, things like our gallium nitride for fast switching charging capabilities, the BCD platform, our historical strength in RF SOI and silicon germanium by CMOS and more recently, additions of RF gallium nitride for fast switching and mobile handsets as well as power amplifiers in cellular base stations. And then finally, in feature-rich, our workhorse 40-nanometer node with embedded nonvolatile that supplies most of the high-end automotive manufacturers and even the addition of a low-cost or cost-effective 22-nanometer bulk version of the technology.

So the key takeaway through this, as a consequence of the R&D investments that we have made and the acquisitions and integrations, in particular, of MIPS, we have created a technology portfolio that redefines GlobalFoundries, not as a semiconductor process technology company that offers manufacturing services, but as a holistic technology partner. So let's dive into those starting with the data center portion of it.

We'll start with Photonics. So I've been going to the Optical Fiber Communication Conference or OFC for many, many years. The news from this year's OFC conference was photonics has arrived. That's very different than the previous years where it was how much further is copper interconnect going to be pushing out the ramp for silicon photonics. That wasn't the discussion. If anything, it was a debate about co-packaged optics versus pluggables and which one is going to win and how is that market going to evolve. Of course, it's not just that it's arrived at an OFC conference, we see it in our financials as well.

Now disruptive technologies like silicon photonics take a lot of time to mature. It was a decision we made in the summer of 2015, believing that silicon photonics technology was ultimately going to be required to supplant copper in the data center. The fact that we are now on the steep S curve, and we're in that rapid adoption phase is a consequence of those investments we made more than a decade ago.

So let's look at the portfolio that we have. So today, in the pluggable space, it's 1.6 terabyte per second to 200 gigabit per lambda going to 400 because we know that's the step to get to 3.2 terabit per second. We've already demonstrated that. We're working -- even my GF Labs team is working on 800 gigabits per second.

Now it's important to know in the silicon photonics space, many of the customers are not deeply experienced in knowing how to handle photonics, and they need help, in particular, in things like optical test and packaging. So we have created an ecosystem and invested internally to support those activities as well.

Our manufacturing footprint is an asset for us. You've heard Tim talk about the geographic capabilities that we have. Through the acquisition of AMF in Singapore, we have 200-millimeter silicon photonics. AMF has historically served long-haul telecom with coherent capability. In a minute, I'll come back to why that's going to wind up being a very important acquisition for GlobalFoundries.

And as Tim said earlier, our CLO photonics platform is north of here in our advanced 300-millimeter facility. Of course, to enable customers, you have to have the infrastructure. We have invested for many years in creating the right design kit capability that has both the optical and electrical capabilities that you need to design an electro-optic device there. In addition to that, we've created an OSAT ecosystem with the right test capabilities to enable our partners to manufacture at volume as part of their supply chain solution. There's no other company that has this capability for photonics technology and manufacturing scale to address the marketplace. It's the proof point on why we are the clear leader in silicon photonics today.

So data center architecture is a very important consideration. There are 2 news items that I'll highlight that are coming out of OFC this year. First, at GTC 2025, for the first time, they started talking about scale across. You know that scale up, of course, is the investments in the rack, scale out is within the data center and scale across. So why is scale across an important consideration?

As data centers begin consuming more than 500 gigawatts of power, the need to be able to disperse your data centers regionally is important. Historically, you've used connections between data centers for backhaul. This era now is connecting GPUs to GPUs because you're accessing the power grid separated by tens of kilometers. So scale across becomes an important consideration by creating large language models, GPUs, GPU connections, tens of kilometers apart. The fact that it uses coherent communication protocol is an important capability for us, something that came in through our AMF acquisition.

You also see a list of a number of standards. There were 3 standards announced at OFC this year, which for a maturing industry is a very important consideration. I'll call out one of those, OCI, optical compute interconnect, is a very important consideration, and I'll come back to that. The point of this chart, scale up, scale out, scale across, GFS silicon photonics platforms, optical test, advanced packaging that covers all of those in addition to the manufacturing scale.

So while co-packaged optics gets a lot of the news today, we know that pluggables is a very, very important market that will continue to grow for years to come. Our road map is tied to the industry cadence. That's the 1.6 terabyte per second today that is in volume manufacturing going to 3.2 terabytes per second.

For GlobalFoundries, we distinguished ourselves in 3 ways with our pluggable solution. First and foremost is our ability to have a very low insertion loss fiber attach process. Our competitors have to do a MEMS-like technology. We have a very elegant solution that has the lowest loss insertion that can be done.

Second, because this uses CWDM or course wave division multiplexing, you have to mux and demux the signals coming in. We're capable of doing that without the use of heaters, which is a simplified design and reduces the overall power envelope for the pluggable solution.

And then in addition to it, our advanced silicon germanium capabilities that are the TIAs and drivers couple very nicely into this overall solution with best-in-class performance.

So now let's dive into co-packaged optics. Earlier this week, we hope that you have seen a press release where we announced our co-packaged optics optical module solution, which is SCALE, which stands for Silicon Photonics, Co-packaged, [ Advanced ], Light, Engine. It's what you see in the purple outline here. So this is an optical module that has an electronic IC bonded to a photonic IC. And the complex piece of this is the light-in and light-out where you have to have waveguides that are coupling to a turning device ultimately coupled to a fiber array. So complex system.

Now I'll come back to this OCI, this optical circuit -- Optical Compute Interconnect solution. It's important for 3 reasons. First one is look at the list of the founding members that have come up with this multisource agreement. You could not ask for a better list of companies that are the thought leaders in the architecture and the requirements in the data center. Number two, it's a very forward-looking standard, and I'll go into some detail as to why that is important. But number three, our scale solution is the industry's first OCI capable solution.

So let's get into a little bit of detail on why this is such a forward-looking standard. First of all, what it does is it goes to 8 wavelengths per fiber. Practically, what that means is many fewer fibers that need to be connected to your device because you can get bandwidth with 8 lambda or 8 different wavelengths on an individual fiber. That's a very important consideration on there.

The way you get that is through use of both CWDM and DWDM. So CWDM means that you've got 2 groups of wavelengths, about 20 nanometers apart, 1310, 1,330-nanometer wavelengths. Within there, you're doing DWDM separation of 4 wavelengths, each 2 nanometers apart. That uses DWDM.

The fact that our scale solution is forwardly compatible to enable that OCI solution is not a mistake. Back when DARPA was investing, so you know that this was early on, investing in creating DWDM capabilities with AMD and Air Labs, GlobalFoundriesS was their partner, and we established both 8 lambda and 16 lambda capabilities on there. So we feel like as a consequence of the demonstration of the technology we made years ago, it actually gave confidence to that list of foundry members to establish the capabilities in the standard. So we feel very, very good about our path forward.

So you have seen that the scale solution puts together a very complex engine on there. It takes an ecosystem to do that. We have invested aggressively to ensure that our customers and our internal manufacturing has all the necessary capabilities. But if I just highlight one of these categories, right, this attachable fiber here that I just got done talking about, our approach to this has been very systematic in that we worked with Teramount, Senko and Corning and designed that fiber coupler to be broadband capable, meaning that we already knew years ago when we started doing this work that DWDM doing 8, 16, 32 lambda was going to be a really important capability.

You can well imagine we're going to continue to invest. You can -- in a few years, you'll see the same chart that will show advanced materials providers for the modulators needed for 800 gigabit and beyond.

So we've made a lot of investments to establish the capabilities that I've just shown you and the proof points for it. We also know that this is in a market with a very attractive compound annual growth rate. You see the [ SAM ] growing at 40% and expectations that material volume in co-packaged optics will start in 2028. We had a photonics and advanced packaging webinar a few months ago. And there, we -- one of the announcements we made is that we pulled in the acceleration of our revenue profile at $1 billion from 2030 to 2028. Today, we believe that we can actually achieve $2 billion in revenue by 2030.

So I want to stay inside the data center and talk about the second topic that Tim mentioned, which is power, starting with the context of our leadership position before I get into the data center.

So we have had a long-standing leadership position in smart mobile devices, having shipped hundreds of millions of power amplifiers and haptic drivers. And I hadn't planned to mention the customer that we're doing that with, but they were very gracious in their earnings call last night when Cirrus Logic highlighted the strategic partnership that we have with them in being a really critical supplier to them for many, many power devices for smart mobile devices. So leadership position has been established.

Secondly, in automotive, we were fortunate enough to have worked with the leader in battery management system, power management, just as the electrification trend was taking off. And as a consequence of that, they had very large market share and our 130-nanometer high-voltage BCD technology was the technology that they've ramped with. So very important. We're now driving that investment profile for the data center. And of course, it's a very exciting one, and I'm going to go into some detail.

So why, first of all, is power delivery such an important consideration in the data center? Data center racks, and I'll take the Rubin Ultra rack, it will operate at 600 kilowatts in a single rack. The racks aren't getting any bigger, so you can imagine what that does for the power density. Let me walk through the 3 columns top and bottom here talking about why power delivery is such an essential technology.

The first thing that happens is as a consequence of that power dissipation in the rack, most of the power going in gets converted to heat. So you're operating in a very, very thermal sensitive environment. You heard Tim already talk about the fact you're going from 480-volt AC to 800-volt DC. Most of that is to reduce the total amount of copper for getting power into the rack, but it also puts a new set of requirements on the voltage conversions, the step-downs that you have to do. At the same time, you're trying to go from maybe 5 or 6 step-downs to 3 or even 2. So you get the point that there is a tremendous amount of effort you have to put in the design of your voltage regulators to do that. Of course, the key metric is how many watts you're putting in for the performance of the GPU, right? That GPU performance per watt is the key metric.

Now having said that, reliability becomes the second significant challenge. So that rack at 600 kilowatts when it's not running, it idles at 100 kilowatts. It's still an enormous amount of power when you think about it, but it idles at 100 kilowatts. When it turns on full computation, it goes to 600 kilowatts in milliseconds. And if you go do the math, 2,500 amps per microsecond. So the current transient that these voltage regulators have to go through is tremendous. That shows up, first of all, as a ruggedness parameter, the ability to go through 2,500 amps per microsecond, switching this thing on is an incredible feat of engineering. It also runs at a very high temperature on there. And I mentioned earlier the automotive work that we have done. Those battery management systems have to be capable of 150 degrees C operating temperature. This is in a very similar realm.

And then finally, highlighted already, the need for very fast switching devices. And as a consequence of going to the smaller power supplies, the form factor becomes a key consideration. So you'll have to offer the designer high switching frequencies, but also the ability to have heterogeneous integration through silicon vias. What you want to have is your GPU and the voltage regulator in as close proximity as possible. That requires engineering of the form factor as well.

So let's dive into a specific configuration and talk about where GlobalFoundries gallium nitride and BCD solutions map into that data center. So this happens to be a data center with a 3-step down, 800-volt going to 48-volt, 48-volt step down to a 6-volt intermediate bus conversion voltage level and then ultimately, the distribution into -- down into a few hundred millivolts for distribution into the GPUs. So a Vera Rubin Ultra tray will operate at 10 kilowatts. Because you're delivering at less than 1-volt, you do that math, you're putting close to 13,000 amps into each tray. That's an enormous amount of current that you have to put in there. What that drives is the need for 50 to 100 voltage regulators per tray, each of them handling hundreds of amps. So you get, first of all, the impression about the attractiveness of the market, but also the intense environment in which these devices have to do. So I've given 2 examples.

The third one, of course, is a step from 800-volt down to 48 volt, but 100-volt GaN solution, it is all about high reliability. Now we originally developed our GaN solution for fast charging in the automotive space, 650-volt GaN automotive qualified. So the applicability of that for 100-volt solution, it's a direct translation of what we already know how to do for 650-volt translated into the 100-volt there. Voltage handling capability, the hard switching ruggedness, those are all meeting the specifications. You see the key conversion efficiencies, 97 to 92 for the core VR switching frequency on there. The step then from 6 volts down to delivery can be done either with gallium nitride or BCD.

And here, I'm highlighting the key piece from our BCD portfolio. I mentioned earlier, already operating at 150 volt or 150 degrees C for automotive. These things operate around 125 to 135 degrees C. We know how to do that. Our BCD platforms are qualified for it. Being able to achieve better than 5 amps per square millimeter current density is a key feature of the design of the technology.

So of course, automotive grade 1. I highlighted the role of reliability on the previous page, right? These voltage regulators are literally mounted right below the XPUs in the tray. You can -- this is not a chip that you just pop off. So being able to have automotive grade capability at better than 1 part per million is a key enabler for the reliability that you have to have in the data center.

Both our GaN platform and our BCD platforms offer the 3D heterogeneous integration capabilities and through silicon vias that are necessary to have the implementation of them being very close coupled for power delivery directly to the GPU device in the tray.

So from a market outlook, automotive, we do believe the electrification trend will continue. Gas prices certainly put some wind in those sales today, but there's going to be a trend towards higher charging efficiency and longer range. So automotive is going to continue to be an important market. We see the data center -- every 2 years, there is a new form factor, right? If you look at the architecture for the Vera Rubin, they're actually in the same rack, but they're actually turning them on standing them up on their edge, right? So complete -- every 2 years, there are significant changes in our architecture on there that demand improvements in current handling capability and reliability and switching frequency on there. We believe that this is going to be an incredibly attractive market, and it's a market in which GF has significant momentum, and we are targeting an incremental $1 billion of revenue in our power business by 2030.

So the final part of the data center, and it might be a reach to talk about quantum in the data center today. And your first question is probably, isn't it a little bit early to be talking about quantum? The answer is yes and no. The yes portion is, today, there are no at-scale utility quantum computing capabilities out there. But we will look back at 2025 and 2026 as the inflection point where many quantum companies have established handfuls of qubits that demonstrate the viability of their quantum qubits. It moves from being a physics and research problem to an engineering and scaling challenge.

So they're not going to be coming GlobalFoundries because, hey, we need a bunch of capacity to ramp up our massive data centers for quantum computing. The way that you get from handfuls of qubits today to 1,000, 100,000 and then 1 million, which is what people believe you have to have around 1 million physical qubits to have utility scale quantum computing with fault tolerance capability in there, the only way that happens is by leveraging the advanced semiconductor manufacturing technologies that go along with it. So we're not strangers to the quantum world, of course, a long-standing nearly a decade-long relationship with PsiQuantum doing photonic quantum computing, have multiple partners in spin modality as well direct, Quantum Motion is start-ups with which we work. So we know what it takes to work with the quantum companies on there.

What has been a bit of a surprise starting last year and quite frankly, accelerated this year is the number of companies that are now looking to scale from handfuls of qubits to be able to get to a 1 million qubit physical qubits in the 2030 time frame. So here, we saw a significant opportunity for us to establish some platforms. And I won't go into all the details. There'll be a webinar at some point in your near-term future that we're going to go into on quantum computing.

So we see 2 modality-agnostic platform opportunities. First and foremost, the cryoCMOS using our fully depleted. I won't go into the details of why that is a key technology. We see the same thing for 3D interconnect. Now today, when you have an interposer, it runs at room temperature and elevated temperature in a data center. In this case, they want to operate at millikelvin temperature and use superconducting materials like aluminum or niobium. And then the quantum modalities. So no one knows which modalities are going to win. The folks that are leading today may not have scalability to 1 million qubits on there. So our approach is to not work on every modality, but the ones that we think have a high probability of success and work with the leading companies in each one of those modalities. And that work is deeply in flight.

A final comment perhaps on the business model. This is an NRE business for the foreseeable future, but don't write off the economics of this business. By the time that you are creating a 1 million qubit module, you think there's value in a co-package optics module, a scale module, wait until you're putting a 1 million qubit module into a quantum computer. We do see, after the 2030 period of time, a significant commercial opportunity for it.

Okay. So I want to now transition away from the data center to the physical AI space. It's only started getting news in the last few years on there. The fact that the physical AI trend is starting to take off is perfect timing for GlobalFoundries. It occurs at the same time we're redefining ourselves as a technology provider.

Let me break that down. So today, data centers garner all of the headlines and all of the attention on there. We believe physical AI will transform our lives and societies far beyond the large language models that we're all interacting with today. It's the tens of billions of devices that you heard Tim talk about. Think autonomous robots, think self-driving cars, AMRs, right, autonomous mobile robots. Our factories are full of them moving our materials around through our facility on there. We see massive opportunities for this. Through the MIPS integration with the integration of ARC, we redefine GF as from a semiconductor process technology company to a broad technology provider. We believe that this will create significant revenue growth opportunities for our corporation.

Of course, MIPS is the first at-scale RISC-V company with a large suite of cores with the integration of ARC, more than 300 customers and more than 40 IP and AI cores, very significant capabilities there. And the mission extends beyond the traditional MIPS business into custom silicon capabilities. So the combination in physical AI, the combination of the MIPS real-time deterministic cores combined with our ultra-low power CMOS technologies, FinFET and FDX technologies creates significant synergy opportunities for us. By combining the MIPS engineers with deep knowledge of end market applications, physical AI figures of merit with semiconductor technologists under one roof, you have the virtuous cycle of knowledge at the system level, driving the figures of merit to semiconductor technologists who can optimize the silicon technology to produce better products for our customers.

Let me give you a real-world example of that. So there's -- MIPS has an active program, and it is for a motor actuator MCU for a humanoid robotic arm. It runs at -- it's a RISC-V core operating at more than 800 megahertz and has a gigabit MAC in it. You go what on earth do you need a gigabit MAC for in the humanoid robotic arm? Well, you saw Tim earlier talk about sense, think, act, communicate, pressure sensors, temperature sensors, current sensors, high-resolution positioning and high-resolution motion control, all of these real-time deterministic going through this chip. And of course, it's a humanoid robot, so it has a very high standard of its level of performance.

As a consequence of the RISC-V core and the 22FDX platform being co-optimized for this particular situation, has to be very low power, has to have a small form factor on it. It has produced a competitive position that there's no other solution in the industry that can come close to touching it. So we see significant synergy opportunities as a consequence of having that all under one roof. So by starting with the IP licensing and royalties that has been the traditional MIPS business, accelerated by the software ecosystem that goes around that core developing products and into custom silicon, we see an opportunity to achieve a $1 billion run rate for this business by 2030.

So if you've been keeping track, I've now mentioned multibillion-dollar opportunities several times. And you can well imagine that Mike is going to come connect that to the end markets in which this plays and then Sam is going to show how it fits into the financial model.

So before I conclude my talk, I want to take one minute to go beyond the current horizon and talk about our strategic focus and how we work with start-ups. So historically, we have done a lot of research and development with the research institutes that you see on the upper left-hand side here, they're a wonderful source of technologies. And in some cases, they spin out start-up companies. But in the last few years, we have begun working with a number of venture funds and in some cases, participating in those funds as limited partners.

We get access to 4 things as a consequence of doing that. First and foremost, and you see that it covers all of the localities in Singapore, Europe and U.S., we see the deal flow, right? You look at dozens of start-ups coming through the deal flow of each of these venture funds, you get a really good insights into what start-ups are coming, which ones are funded, how they're approaching it, what system architectures they're pursuing. So tremendous insights for us. That's number one.

Number two, it's a source of customers for us. Many of these companies are chip companies that need access to technologies. We have this incredible suite of technologies that we can offer them and they become new customers for us.

Number three is now some of these companies are operating in physical sciences, and they have demonstrated something at lab scale that need an industrialization partner, and it's a source of new technology capabilities that we bring into the corporation. And then, of course, the fourth one is either an investment vehicle opportunity for us or an M&A opportunity.

So the so what associated with that is we are plugged into a global network that has sources of both technology and commercial opportunities for us that are directly related to the growth vectors. You see the areas of interest for us, not surprisingly, the things I've said already, it's in areas of advanced power, all forms of optical communications, optical circuit switching, neuromorphic computing, right? So spiking neural networks that we know are going to be critical enablers for physical AI because of the bursty nature of a lot of the edge AI capabilities. And then as you've heard, I have a little bit of passion around quantum computing these days.

So I want to close by telling a story about why I joined GlobalFoundries 17 years ago. And it actually goes back further than that, to the early 2000s, I was leading Motorola's advanced CMOS R&D line, and we had a multiyear joint development program with Advanced Micro Devices. Put you back in time, Motorola was shipping power PCs to a company in Cupertino and the early 2000s was the x86 wars, David and Goliath battle between AMD and Intel, of course.

So I came to admire the AMD team. We would innovate on things that are now old, but advanced nickel silicide capability, low-k dielectrics. And I came to admire them because they knew how to take those innovations, put them into products and go compete with Intel seemingly overnight, their ability to compete with better products because of differentiated process technologies. So fast forward a few years, 2008 and '09 started talking to AMD about joining this crazy vision of creating a foundry by spinning technology and manufacturing out of an IDM. And I said, you know what, it's a crazy mission, but I know they know how to differentiate technologies. That is as good a starting point for competing in the industry as you could possibly happen.

So I look back now 17 years later, of course, I joined the company, just [ a split ] over there. We have put dozens and dozens of competitive technologies into the differentiated process technology box but also the transformation we've done, the integration of the MIPS team, advanced packaging services and expansion into custom silicon technologies. I'm more excited about the outlook today than I was 17 years ago when I joined, and we're just getting started.

Good morning. It's a pleasure to speak with you today about Marvell's long-standing and valued partnership with GlobalFoundries. At Marvell, our strategy is focused on enabling accelerated infrastructure for the AI era. The scale required for these computing platforms is truly massive, and it starts with building the highest performance compute possible. Our approach to compute is built around custom silicon. We're developing custom compute engines for the world's largest hyperscalers. Marvell built its custom business through the acquisition of the custom ASIC group GlobalFoundries. That team spent decades working together to build custom ASICs. And today, they're working on some of the world's most advanced custom compute platforms for the world's largest data centers. That history reflects how foundational relationship between Marvell and GF has been.

At its foundation, data center scale requires high-speed networking, where more specialty technologies such as silicon germanium and silicon photonics are essential to the connectivity stack. Marvell has a leading portfolio of products based on these technologies, addressing every layer of networking, including scale up, scale out and scale across. GF is an important semiconductor manufacturing partner for Marvell, supporting key elements of our connectivity portfolio.

In today's environment, geographic diversity and operational resilience are increasingly important to our customers. GF's global manufacturing footprint provides valuable flexibility and continuity as AI infrastructure expands globally. We're proud to partner with GF, and we look forward to continuing to build on this collaboration in the years ahead. Thank you.

Okay. Good morning. Gregg said I didn't need any introduction, so I won't make one. But I will say that I have been at GF, this is my seventh year. And with all due respect to Gregg having the best job at GF. I think I actually have the best job at GF. I've done really nothing in those 7 years, but look at the end markets we serve and then lead the product teams that develop the products that try to meet those needs. So I'm very proud of those couple of thousand people that have worked on delivering the strategies around our essential chip technology.

So I'm going to do a couple of simple things with my section. I'm going to try to synthesize the megatrends that Tim went through with some of the technology that Gregg talked about to help you understand where we focus, where we -- how we win, why we win. And I'm going to try to do it at a level that is more concrete than abstract. So try to make sure you walk away with a real understanding of how that all works.

So great place to start with this presentation is where Tim left off, which is AI is the new story in our markets, right? AI is having either a direct or indirect effect on every market we serve. So whether that's the AI boom specifically in the data center or the way it sort of ripples across and has an impact across the other markets, a lot of profound change.

So I'm going to try to provide 4 things, context for the end markets, sort of a little bit of history; a wider -- a widened out view of everywhere we have opportunity; and then deep dive on a specific application so that you can understand sort of how the GF technology is matched to an application -- revenue growth expectations for each of the end markets. So think of it as 4 chapters of the same story and really building off of what Tim talked about, the sense, think, act, communicate. And what you'll see is that this is all pulling -- these markets are all pulling towards the kind of technologies that GF focuses on: Power efficiency, connected, RF and analog.

Okay. So before I do that, I'll cut to the chase. Our markets are growing very fast. Our servable opportunity is growing in a very significant way by 2030, up to $120 billion, as you'd expect. What's probably more interesting is on the right side of the chart, the 4 end markets we serve wind up to be pretty nicely distributed and ultimately large and most of them growing quite fast.

So I'll take it from top to bottom, not a real surprise. Data center AI economics, big opportunities in the number of optical electrical connections that are out there, big opportunity, as Gregg said, of not only getting power from the grid all the way down to the core or inside of these XPUs delivering thousands of amps to keep these things running, but also and probably a buried lead, if you will, in the comms infrastructure side, I think we almost look past the fact that we're actually creating an entire new class of communication infrastructure. If AI data center wasn't collecting all the ink, I think you'd be talking a lot more about satellite-based Internet. I mean that would have been the biggest story, but it's been overwhelmed a bit, but driving a ton of growth in CI&D.

In auto, it's really just a continuation of what we've been seeing. It's this ICE to ACE transition, the internal combustion engine of the past becoming sort of an autonomous connected, ever more electrified vehicle. Sometimes I don't think we appreciate. We're in the early innings of a multi-decade transition. This is not losing steam. This is going to go on for many, many years.

In IoT, probably the best of all worlds. It's a market that has gotten bigger than anybody probably would have thought, and it's not done growing. It's not growing for 2 really significant reasons. It's barely reaching some of the markets that it's serving. So yes, a lot of the consumer stuff has already happened, but it's really early days in industrial. It's super early days in medical. So you've got more expansion of IoT happening. And then you've got 2 really great technology migrations happening. The one that's been talked about for a couple of years is more AI moving to the edge. But then there's this notion of physical AI driving through the IoT market and things like ultimately robotics, whether that shows up as industrial or consumer.

So -- and finally, maybe a little bit ironically, smart mobile devices actually becomes the smallest of our markets. And it's really just the reality that the smartphone market peaked growth in 2019. And while it continues to innovate and we will continue to have opportunity because of the way AI impinges on what that device is intended to do, it's probably not going to grow a lot.

So cutting to the chase, the punchline is we'll outgrow the market in CI&D, outgrow the market in auto, outgrow the market in IoT, and we'll probably look to stay relatively flat in SMD.

So let me get at it. Let's start with automotive. So when I started in semis in the mid-'80s, there really wasn't much of a relationship between Silicon Valley and any of the epicenters of the automotive world, whether that be Detroit or Stuttgart or Tokyo. The car was really just a mechanical device. And maybe over the years, a few electronic conveniences hung off the edge. Today is completely different. Semi content is fundamental to delivering not only the automotive, the vehicle itself, but the user experience. And so body electronics, ADAS, zonal control, electrification, infotainment is a completely different world. So a great example of where the car is sensing its environment, acting autonomously, communicating continuously within and without the car. So each innovation has been moving more opportunity towards GF. So it's not just more content, it's more of what GF makes. And that's a very powerful theme that I want to hit on a few times in this discussion.

But to ground things, let's talk about what the opportunities are for GF in the car. So upper right side of the chart is a great place to start. All of the sensors that the car is being developed with are intended to enable the levels of ADAS that everybody is looking forward to. So every level of ADAS requires exponentially more sensor information to perform the job. That sensing information, that torrent of data then has to hit a very different compute infrastructure. So this compute infrastructure never existed in the car. So whether you're talking about a zonal controller, compute defined by area of the car or a domain controller compute defined by the thing that it does, it's a complete redo of the compute and communicate architecture within the vehicle. And of course, then that drives a very different word problem in terms of how you power all that compute. So this is not everything in the car running off of a 12-volt battery stuck somewhere in the hood. This is distributing power to a very complex compute and communication system. And for the first time, more often than not, off of one battery source, one battery source that has to be managed, maintained, recharged for which the propulsion of the car is competing with the essence of making the car more autonomous.

And ironically, that actually gets you to the lower right part of the chart where all of this autonomy and self-driving and all the conveniences of modern automotive life actually create the opportunity to do more things like infotainment. So you need to be entertained while you're in the car because the car is doing most of the work, but it's a complete redo. So to me, this is truly sense, think, act, communicate in motion.

But I promised I wouldn't stay at an abstract level, I want to kind of give you a concrete example. So automotive radar. So the number of radars in a car will continue to grow through the end of the decade. Our FDX technology is, hands down, full stop, the best solution for automotive radar. So just a quick, gut check, on what is radar anyway? What is that application? So in automotive radar, you transmit a millimeter wave, high-frequency signal out from the front of the car, the side of the car, the back of the car, wherever you like. That signal then runs into things. It runs into the trees and the pedestrians and the road ahead, and it is reflected back. So to win in automotive radar, you need a few things, and FDX has them all. First of all, you need the best received sensitivity. So that reflected image, the quality at which you receive that image is the single limiting factor in how your ADAS will work. If you can't capture that image on the inbound, you can never recover it. So super important, and FDX is 75% more sensitive than the same solution done with bulk CMOS.

Its partner in crime is the transmit side. On the transmit side, you need to transmit a very high fidelity signal at the highest possible output power. So you can't have a signal that integrity is diminished because you're trying to get output power and you can't lower the output power to try to make a better signal. You have to have both, and that's what FDX delivers because that's what gives you range. The higher power of the signal, the further out the signal goes, so you can get those reflections.

And then finally, to get resolution, these radars have to sit in a very specific form factor and a very specific power budget. So the number of transmit and receive channels that you can fit in that budget to find what kind of resolution you get. And by resolution, I mean, to be able to do the discernment of the object in front of you. Is it a tree? Is it a traffic cone? Is it a child on a bike because those 3 use cases really matter in terms of trying to make a decision. So the quality of the radar is the only chance the ADAS system has to make the best decision with the most time. So more range, more information, more granularity, better decision. And it's a pretty important application from a safety standpoint.

And having said that, that means that our FDX platform has to be 150 degrees capable and meet all of the most stringent safety standards like [ AzLD ]. So there's a real-world specific example. And I think our experience in automotive is worth talking about, $100 million at the beginning of the decade, $1.4 billion at the midpoint of the decade. So by growth of 14x in 5 years with literally 0 help from number of vehicles, 100% content driven. So short order, we expect to continue the growth. We're still early on in ICE to ACE. We think it's a low double-digit grower for us, and it's really based on simple math. We're going to triple the number of sensors to support all the autonomy. Even though we've been growing real fast to date, we don't see any slowdown in the momentum. We actually had 1.5x the design wins in automotive last year than we did the year before. So we think it's actually accelerating. And automotive is a tough market to break into. You have to have credibility. We've been in automotive for as long as we've been a company. And I think that's evidenced by -- we're the #1 supplier to the #1 automotive MCU company out there. So we're super bullish on our prospects in automotive.

Okay. So now moving to IoT. Some perspective on IoT. I -- amongst many other things I've done in my career, I worked at Broadcom 15 years ago, I was in the super serious strategy meeting. And if you remember in 2011, this was in the peak smartphone craze, right? Smartphone in 2011 was a lot like AI data center in 2026. It was exploding. People couldn't fathom that something could have ever been bigger than the PC or the feature phone or, god forbid, actually had a growth in content in a phone. Remember, at that time, feature phones were diving in terms of the content and the cost and the price. Smartphones went exactly the other way. And I had the temerity to say, well, that's really nice, but we better get on with investing in IoT because obviously, IoT is going to be way bigger than smartphone. It was sort of like this room crickets. It wasn't very popular at that point to talk about that. But honestly, what's the scoreboard say? I said, smartphones topped out in 2019. IoT, 10 billion installed base, 25 billion installed base, 40 billion installed base by the end of the decade. So the new markets are still driving it. The new technology transformations, you got an installed base to upgrade now with AI and eventually physical AI, it's a really good story for somebody like us who focuses on low power, analog sensing, wireless connectivity, and let me show you why that is.

So I think this slide really captures the same idea, the sense, think, act, communicate, but in an IoT context. So on the left side of the chart, I'll start with -- let me back up, 3 things that make you an IoT device because if you don't have each of these 3 things, you're really not IoT. And there's probably one fourth one coming. So the first thing is you have to sense something. The left side of this chart is the sense side. You're hearing a wake word, you're capturing an image, you're sensing a change in temperature, vibration, humidity. I don't care what it is, something in the analog world around the IoT device is doing something.

Second thing to make you an IoT device is you have to be autonomous. You have to know what to do when you get that input. If the camera captures something, you have to know whether to wake up because you have to be smart enough to know if that was a thief or just a neighbor's dog running bot, right? So the autonomy is the second -- have to have an IoT.

And the third is you have to communicate. The I still stands for Internet. So you have a plethora of wireless connectivity standards, whether you're connecting to the Internet via cellular or WiFi or connecting to other devices via ZigBee, whether you're connecting to the phone that you have via Bluetooth for provisioning, NFC for authentication. There's a ton of wireless connectivity if you are an IoT device.

And finally, the fourth dimension, and I think will come out, is physicality. I think this move to robotics will build on the first 3 of these. And you'll see that in industrial and other humanoid applications as we go forward. So all of these require massive power efficiency, massive connectivity. And what I'll talk about in the next page is embedded nonvolatile memory.

And so why did I choose embedded nonvolatile memory as the deep dive here? It's really because that's the heart of autonomy. I don't think people appreciate. We talk about ENVM, it's sort of like, well, I don't even know why that matters. It matters because this is actually at the core of autonomy. And what's important for autonomy? 3 things: security, latency, power. So ENVM, break it up, it's embedded and it's nonvolatile. Why does it matter? Well, from a security standpoint, the code never leaves the device, right? There's no external interface upon which the information, the password information, the who you are is inspectable by somebody with bad intent. It's what allows the device to be upgradable. So to do an over-the-air upgrade, if you were to have a security problem, you need to have the nonvolatile memory on the device so that you can upgrade it. And you know that when you've upgraded it, you can store the old code, download the new code, know that it's good before you reset the device. And then finally, authenticatable, right? The other aspect of security is do I know who that device is. How do I know that's the real thing? Do I know who the person is? Have I found the person's identity to the device? Think about how you activate a smartphone, right? You have your IMEI number, you have -- the carrier authenticates you in the device to bind it. That's what embedded nonvolatile memory creates on a security front.

From a latency front, you don't have time to be woken up. You don't have time to download from DRAM into the device to wake up to hear that one of you came home and said, Alexa, please play a song for me, right? So the latency is incredibly important. And finally, power in every case. Memory interfaces cost; pins, they cost power. Volatile memory requires power at all times to retain state. SRAM, just to state to know what it's doing, it has to be powered up. DRAM actually needs to be refreshed to keep it safe. None of this fits in with the duty cycle of an IoT device. IoT devices sleep most of the time. So have to wake up very fast, be consuming very low power or else you're not going to be able to run them off battery.

So very important. But at the same time, all EMVM is not created equal. There are tons of different attributes. The read and write speeds. Can I execute out of that memory or do I have to have a buffer? The endurance, how many times can I rewrite the memory? The PPM, the number of failure -- bit failures that I can tolerate, the bit size, the actual size of the technology, the error correction I have to wrap around it to make it work, the cost, whether that's the die size or the number of mask layers; or the mission profile. These go into different things. They have different temperature sensitities, they have different immunity sensitivities. So bottom line for GF is I think we have the broadest EMVM portfolio, MRAM, RRAM, flash across the widest array of technologies, FDX, FinFET, even our power technologies have this, 40-nanometer, 28-nanometer, and that is the key to autonomy in an IoT device.

And so our expectations for IoT, very bullish, whether it's because of these emerging markets, like think of the number of people with diabetes, think of the innovation now we can have continuous glucose monitors available sort of everywhere. It's going to be like a 2.5x growth from where we are today by the end of the decade. I think Tim might have mentioned we had about 500 design wins last year. More than 200 of them are in IoT. We established that the design wins lead to the revenue. And then as sort of physical AI gets going, we are engaged with. It will probably take place in the industrial world. We're engaged with 7 of the top 8 IDMs. So mid-teens growth through the end of the decade.

Smart mobile. Another really interesting one when I was thinking about how to describe this. So it was sort of shocked when I look back, it's been almost 20 years since the inception of the iPhone. The iPhone was announced in June of 2007. And at the time, there's a completely different list of players we were talking about. Nokia was the king of the feature phone. And there's literally people we don't even think about much anymore. BlackBerry, Siemens, HTC, they're all sort of taken by surprise by this big innovation. In fact, the famous CEO of Microsoft said, and I got this quoted here, "There's no chance that the iPhone is going to get any significant market share," and he doubled down and said no chance again. So if you look at the scoreboard, there's only been 3 billion shipped. It's 15% plus of all the smartphones ever shipped, more than 40% of the volume, probably more than that of the profits. But for us, the most important thing is it wasn't just a new device. It actually was a completely new ecosystem, never had such a high-volume device that's so taxing to technology. So we got a ton of our DNA out of being successful in the smartphone business. Our RF, our analog, our sensing, our display, it's been a very powerful driver of our R&D. So while the market has probably matured and slowed, it's still got interesting dynamics within it, and it still represents an important market for GF in terms of how what we do there echoes through the rest of the end markets we serve.

So again, just to set context, exactly where you'd expect us to be successful, same ideas, wireless connectivity, the complex RF front end, a lot of the sensing, the imaging, the display, the audio, the haptics, the human machine interface, very similar to what you saw in IoT. So where did that IoT technology come from? It probably came somewhere from the smartphone and all with a really complex power management scheme. And again, the significance of smartphone volume was it really tested -- it was a point where the physics of what was possible met the scale of high volume on a really aggressive cadence. So it's been very good for us.

But to diverge just briefly, so the smartphone volumes, like I said, peaked in '19, but there's still some interesting activity going on in different form factors. So whether it's glasses, wearables or hearables, important for a couple of reasons. One, these could become very large markets. You'll see in how we model it. We're not really expecting that between now and 2030, but they could become very large. The more important thing is they almost always start by taking technology out of the smartphone to put into the glasses to the wearable, to the hearable. So there's a direct pipeline between those 2 things that we benefit from. And honestly, they actually drive an even more aggressive size and power requirement for us to meet. So it's actually quite good for us.

But back to the more specific examples and a great example of where you can have an end market that is not growing so fast, but something within the end market that grows very fast. And a great example is wireless charging. So whereas smartphones aren't going to grow that much, the attach rate on wireless charging is growing quite nicely. And for GF, what do we use to get at wireless charging? Our BCD platform. So what's BCD? BCD is bipolar, very high-precision transistors, that's the B. CMOS, like CMOS logic, that's what gives it the brain, that's the C. And then LDMOS, which is the power transistor, which gives it the super high drive, right? So BCD technology is a perfect fit for something like a wireless charger. So it's a triple threat. You get all the power and analog control, the sensing to know sort of how the battery is doing and the EMVM to have it all in one device. So the attributes are clear, higher voltage, faster charging. Everybody likes faster charging, not slower charging. Lowest RSP, Gregg mentioned. That means you have the lowest resistance, which you get the most efficient charge, you get the lowest thermals.

And then finally, that all leads to the lowest system cost, battery life cycle management. People very commonly say, hey, nobody is buying new smartphones because the features aren't compelling. Well, you know the reason you buy a new smartphone because the battery stops working right, right? The way to stop the battery from going and getting fatigued is to have ever smarter charging capability, and that's what we deliver. And by the way, BCD is not new to us. We're on a third generation. We have it from 5 volts up to 150 up to 175 degrees C for automotive. So it's a technology that's very familiar.

So cut to the chase on smart mobile. We're not counting on a lot of growth, but we're excited because there's probably 10x growth in the alternative form factors that will come from the smartphone guys we're already all engaged with. And everything in here is wireless. So we are a wireless company at our heart, and we're involved with -- we're deeply engaged with practically all of the top RF suppliers.

So finally, final market, Comms Infrastructure and Data Center. It's almost you got to remember back to the time when Gregg talked about when we came out of AMD, a big chunk of our business was data center, data center and PC. But most of that was legacy digital nodes that have since moved on to different nodes at different foundries. And it was quite a headwind in our business for a while, but the turnaround has been nothing short of a renaissance. So now you think about the things that Tim and Gregg talked about, silicon photonics for optical networking, silicon germanium for wired connectivity, BCD and GaN for power delivery. It's been a real turnaround, a real reborn market for GF.

So Gregg and Tim talked about the 2 things that everybody talks about now, which is the photonics and the power delivery. I'll spend a little time on a more humble thing that people mostly underappreciate, the transimpedance amplifier. And that's not something you talk about at cocktail parties very often, I bet, but it's actually quite important. It's a -- if you think about the application of a transimpedance amplifier, both those photons we keep talking about going over the light, eventually, they have to hit a photodiode. The photodiode then creates a very high frequency, very low current that is the representation electrically of the photons. The transimpedance amplifier then takes that very low current and amplifies it to a voltage. And the technology that does that is our silicon germanium. And silicon germanium is not a new thing to GF. We actually can be the proud owners of that by virtue of our IBM acquisition. So SiGe has been in our DNA for 40 years. But all of those applications you hear about like 200 gig per lane, 400 gig per lambda, all require you to not only convert the electrical to the optical, gets a lot of attention, but the optical back to the electrical and what's the best-in-class FTF MAX and GF has that.

So it's sort of funny. This is another RF application, and everybody thinks that RF is only wireless. And it's true. All wireless applications are RF, but not all RF applications are wireless. There's a ton of RF going on in the data center, very good for GF. So that was the D part of CI&D.

Let me talk about C&I, low earth orbit satellite-based Internet. What's the problem statement? So everybody is annoyed when their cellphone doesn't seem to get any signal. And that's a tower that's like miles away. In this topology, the signal is coming from outer space. So imagine how small it is by the time it reaches earth. And the way you recover that signal is you have to have a very precision low-noise amplifier. In fact, you have to have an array of low-noise amplifiers. So great example. We took the LNA technology that we had on the phone. We optimize it for this particular application, and it helps to generate an enormous market. And so what's the simple logic? You need the best LNA. The best -- the better your LNA performs, the less LNAs you need. The less LNAs you need, the smaller the box can be. The smaller the box could be, the cheaper the box could be the faster you can grow subscribers. With 2.5 billion subscribers out there underserved, it's pretty important for the growth of that market. And just for context setting, it's about 5x the RF front-end content in every one of those ground terminals than in an average smartphone. So pretty cool.

So suffice it to say that leaves us with high expectations in the market, whether it's silicon photonics in our optical world, BCD and GaN in the power world, SiGe in the TIA and driver, this NSX technology for LNAs, 3x the satellite subscriber growth, 70% optical connections by the end of the network. We're form factor agnostic, but we're working with most of the pluggable guys now as they move from pluggable to near packaged to co-packaged at whatever rate and pace. We say that's a 30-plus percent grower for us, especially since the digital legacy or the legacy tailwinds or headwinds have abated.

And so don't believe me, believe our customers. I think the significance of the quotes on this chart, which I'm not going to read, are twofold. One, it's interesting, you have like Amazon LEO on there. Like I said, I think that would have been a bigger story if AI data center [indiscernible] all the headlines. But more importantly, it's really an acknowledgment of Jeff, the technology provider. The guy growing up from, hey, you have to have great manufacturing services to get friendly quotes from customers, but these quotes are all about the technology that we deliver. So we are moving up towards a more complete supplier of technology.

So final thought, yes, megatrends rushing through the 4 end markets we serve, exploding in a plethora of opportunity. I've been doing this for 40 years. So I'm a rookie compared to Gregg, but I've been in every operating model. I was at an IDM. I ran a couple of start-ups that were fabless. I was at a mega cap fabless guy, Broadcom, been a foundry now for 7 years, and I've seen every one of these megatrends, every one of these booms and echoes. And what I would leave you with is just think about this possibility between AI and physical AI moving to the edge into IoT.

Think about what we saw in auto. You had a 90 million unit market. This content exploded and drove 14x growth for us in the first half of the decade. Imagine what will happen if you have a multibillion unit market like IoT with 40 billion units of installed base getting upgraded in a similar content way. I mean it's just a massively different geometric progression of opportunity. So just like Gregg, I'm a little bit jealous of everybody who gets to start in semiconductors now because after 40 years of doing this, I actually think the cool part is just coming. And I just can't remember a time or a company where I've been at where the markets, the technology, the geopolitical landscape have lined up any better. So very excited about the future. Thank you.

[indiscernible] are transforming industries at unprecedented speed. Artificial intelligence accelerates this development even further. We, at Infineon, see transformation as an opportunity. Together with our customers and partners, we turn innovation into tangible progress for society. Infineon and GlobalFoundries have worked together for more than a decade. Our partnership is built on the conviction that only innovation and consistent execution ensure sustainable success in the semiconductor industry. Together, we are delivering one of the most successful automotive microcontroller platforms into the market, manufactured across global foundry sites in Singapore and Germany.

Our work with GlobalFoundries extends well beyond manufacturing capacity. We co-develop technologies. The processes we apply with GlobalFoundries are tailored to the requirements of automotive and security applications. This gives our products clear advantages in performance, ultimately benefiting our customers. As vehicles become software-defined intelligence shifts to the edge, innovation strength and speed are becoming even more important. Together, we are advancing next-generation automotive platforms, including our work on RISC-V-based architectures.

From a customer perspective, resilience matters just as much as innovation. GlobalFoundries' multisite manufacturing footprint supports supply chain resilience and our ability to scale as we expect long-term growth in our core markets.

Looking ahead, our partnership with GlobalFoundries will continue to evolve. We are constantly looking for opportunities to broaden the scope of our collaboration. With strong partners like GlobalFoundries, Infineon is well positioned to capture the growth opportunities of our time.

So our final presentation of the day is from Sam Franklin, our CFO. But before we bring him on, we have yet another customer video to show you.

[Presentation]

Good morning. It is a privilege to speak to you today about how NXP's unique hybrid manufacturing strategy enable us to navigate today's dynamic landscape and how our partnership with GlobalFoundries fits into our strategy. We are seeing sustained demand for secure and power-efficient SoCs across automotive, IoT and mobile markets. And at the same time, supply chain complexity and geopolitical uncertainty compels us to reassess the importance of manufacturing and sourcing. In this environment, foundry partnerships matter more than ever. GF is an important strategic foundry partner for NXP, and our relationship spans more than a decade. Together, we have delivered measurable business impact through consistent execution, innovation and a shared commitment to customer success. NXP is leveraging GF's 22FDX platform to drive next-generation solutions across a range of end markets, including automotive and IoT. This platform's power efficiency and performance enables our customers to build the next generation of connected and secure edge solutions. It delivers ultra-low power consumption, high performance and system-level integration, bringing RF, analog, digital, nonvolatile memory together on a single die. This platform fits well within NXP's ambition to be the leader at bringing intelligent systems to the edge. Additionally, GF's manufacturing presence in Germany and the U.S. helped support our goals of ensuring geographical supply resilience in our manufacturing base. GF's cross-qualify nodes spanning multiple sites align perfectly with NXP's hybrid manufacturing strategy, helping us mitigate risk and optimize cost.

A key reason why we chose GF is their commitment to the highest automotive quality standards, ensuring NXP's products meet the rigorous demands of global vehicle manufacturers and deliver the reliability and safety our customers require. This partnership has also delivered commercial traction. Together, we won business with major automotive and IoT customers, and we look forward to continued innovation and success. Ultimately, NXP's partnership with GF is foundational. It is about building the future. It is a key part of how NXP is delivering long-term value to our customers and shareholders. Thank you.

Good morning, and thank you for joining us today as we articulate the next phase of GF's remarkable journey and the critical role that GF plays within the semiconductor ecosystem. So we've covered a lot with you today. Tim set out the megatrends shaping our industry and the critical role GF plays within those megatrends. Mike ultimately set out how we think about the end markets and the investments we're making in those end markets to support our customers. And of course, Gregg took us through the technology road map and how our differentiated solutions are serving those end markets.

As GF CFO, my objectives of this section are to set out the financial context of our plan and lay out the framework for our projections for how GF is positioned to capture growth and maximize value profitably and sustainably.

Now as many of you might know, I've been with GF for a little over 8 years, first half of that in the capacity of the shareholder, the last 4 years as part of the management team. What gives me confidence in the plan that we shared with you today is not just the strategic tailwinds that are driving our business and our industry, but the quality of the team, the team in the room with you here today and the team that makes up our 13,000 employees around the world.

As you've heard from Tim, Gregg and Mike, this is about what's changed structurally within our business and why we believe our financial model is stronger and more resilient than at any point in our history.

Let me start with the core principles as we focus on the next 5 years of growth. Everything that we do financially ladders up to 3 core principles. Firstly, diversified revenue and durable revenue, reducing our exposure to single end market cyclicality, driving meaningful margin expansion through mix, scale, the evolution of the services that we offer our customers, and ultimately, creating substantial shareholder value through disciplined capital allocation. You'll see these principles reinforced as I take you through this section.

I'll start with our expectations for the opportunities across the end markets we serve and build upon where we're focused on driving our durable and diversified revenue growth. And you've heard a bit of this from Mike in his section as well so I'll try and bring it all together. We believe that we've put together a set of growth expectations that are anchored across end markets with strong secular tailwinds, content expansion and form factor evolution, all of which play into GF SAM today and going forward. This is a plan that's grounded in real customer momentum. You heard from the team today, we delivered over 500 design wins in 2025, 95% of those on a single-source basis. That momentum drives tape-outs, drives production revenue, gives us confidence in our plan. I'll bring together what Mike set out in his individual components of this section, but I'll start with smart mobile devices where the decisions that we've taken over the course of the last few years have created a model for us that means we're no longer reliant on the growth of smart mobile devices to drive towards the enterprise revenue CAGR that we believe is achievable. Now that's not to say that we don't see opportunities within smart mobile and our design win momentum is consistently reinforcing the principle of form factor evolution, but those design wins take time to grow and to ramp. And so we think of those as more opportunities in the second half of our target model.

Moving to automotive. As you know, this has been a real bright spot for GF, 14x revenue growth over the course of the last 5 years. And there are 2 key reasons for that Mike set out which we believe continue going forward. The first content expansion. We've seen a doubling of the content within the vehicle over the course of the last 5 years. The expectation is that grows 1.5x by the end of this decade. So content expansion matters. And notwithstanding some of the dynamics going on from a SAR perspective, I think you can see the proof in our numbers that we've outed that trend.

The second is about share gain. And one of the reasons we've shared with you today some of the customer testimonials is because it reinforces the partnerships that we have with those customers. So put all of that together gives us confidence in our target to deliver low double-digit percentage growth.

Next on to IoT. This is an exciting area for us. We've talked at length today around the opportunities that come with the evolution of IoT applications, the growth of physical AI, smart connectivity, industrial automation, defense applications as well. Again, this isn't a plan which is based solely on future expectations. This is a plan which we see momentum today. We delivered 200 design wins in IoT in 2025. That was a 40% uplift on 2024. And so as we think about the growth over the next 5 years, we believe that a target growth rate of mid-teens is reasonable with that backdrop. And finally, communications infrastructure and data center. It's a critical engine of growth and profitability, and you're seeing that come through in our numbers today. This isn't just about data center. This is about satellite communications as well and the depth of the relationships that we're building with customers in that space. We delivered 29% year-over-year revenue growth in communications infrastructure and data center in 2025. And as you heard from our call earlier on this week, we expect to deliver high 30s percent year-over-year growth in 2026. All said, we feel very comfortable with the target of 30-plus percent growth that we've identified for this end market.

We believe we put together an end market growth strategy and taken strategic decisions as a business that is underpinned by gains from a share perspective by content growth across all of the end markets that we serve and are foundational to all the design wins that we've been winning over the last couple of years.

So you've heard from Gregg and Mike where our technology platforms meet the market opportunity. This slide is really a convergence of the strategies being brought to life, multiple concurrent growth engines that serve all of the end markets.

Gregg took you through in detail the key accelerators we're driving the business towards, targeting a multibillion-dollar revenue opportunity by 2030. I'll reinforce the points on silicon photonics. We've accelerated our targets there, $1 billion run rate by the exit of 2028, we're targeting $2 billion of revenue in 2030 as we target share gains in pluggables and the ramp in near and co-packaged optics.

The demand for power is insatiable across all of the markets we serve. Gregg laid out in significant detail today how important power applications and power delivery will be within the data center. But it's not just the data center, it's all of the end markets that we serve. And we believe that with those backdrops and those tailwinds that we can target an incremental $1 billion of revenue from our power applications by 2030.

And finally, custom silicon, IP, software. It's a big part of the thesis as to why we acquired MIPS at the back end of last year. It's a big part of the thesis as to why we're seeking to acquire the ARC IP business from Synopsys. We're scaling these technology services. These create an earlier inroad with customers. We can work with customers at a much earlier point in the design life cycle than we otherwise would be able to as a pure-play foundry.

We're also targeting custom silicon solutions as well, which take years to ramp, but again, gives us confidence in this target plan of delivering $1 billion run rate business by the time we get to 2030.

All 3 of these businesses serve this broader objective, which I set out at the start of this section, revenue diversification, margin fall-through and operating leverage. We set out to build multiple engines of growth serving multiple end markets, and we believe that these decisions serve those objectives precisely.

To that end, our M&A strategy continues to be highly targeted. We're creating new capabilities to support customer demands and targeting both data center AI and physical AI applications as both Tim and Gregg set out. The proof points for us are clear. We closed 3 acquisitions in the space of the last year. We have a fourth, which we expect to close in the next couple of months. AMF and Infiniolink are targeting those data center AI applications, while MIPS and ARC are targeting the opportunity that we see within physical AI. There's a fifth acquisition, which is not on the page, one that we closed in 2024 called Tag Technology, where we acquired their power business design capabilities, principally serving GaN power. You've heard about the importance of GaN power today in terms of the opportunities in the data center.

But not only do these acquisitions strengthen our position within the physical AI and data center AI marketplace, but they are, in the case of both MIPS and AMF, driving revenue and margin contribution today, and we expect to scale that over the years ahead. The strategic intent of these acquisitions deliberately target more capabilities, more customer engagements and putting more customer road maps into GF over the next 3 to 5 years.

Again, if you look at our revenue evolution from the decisions we've taken over the last 5 years, you can see that this becomes the foundation for how we think about the next 5 years. I look at some of those diversification proof points, and we'll start with automotive. In 2020, automotive end market revenue was 3% of our end market revenue. By 2025, that was 23%, thanks to years of design innovation and design wins and momentum with customers.

Over the same period, our revenue, excluding smart mobile devices, has expanded by 10 points as a percentage of manufacturing service revenue. This is a meaningful step forward towards the balanced portfolio that we're targeting. And more recently, as we've discussed, the very strong momentum that we're seeing in communications infrastructure and data center. That is the result of very deliberate remixing decisions that we took over the course of the last few years. It does not happen overnight.

But as I say, these proof points from the last 5 years established what we believe to be the foundation for the next chapter as those design wins drive the tape-out, drive the production ramps. By 2030, we're targeting revenue from manufacturing services across automotive, IoT, communications infrastructure and data center to represent 75% of our manufacturing services revenue. That objective is to deliver a stronger, more diversified revenue mix, less exposed to singular cyclical dynamics.

To put a finer point on it, we're deliberately prioritizing robust customer demand in high gross margin products with markets and applications supported by secular tailwinds. These don't just accelerate revenue. They accelerate the mix shift that drives the margin expansion.

You heard from us this week on our earnings call that we're making some changes to our revenue categorization, namely revenue from manufacturing services and revenue from technology services. With GF shift towards becoming a holistic technology solutions partner to our customers, we believe that these categorizations better reflect the stacked value model that we're providing to our customers.

Now of course, manufacturing remains at GF's core, and that will continue to be the case both today and going forward. But we see the opportunity to support that manufacturing revenue in 2 key areas. The first is manufacturing value add. As you heard from Gregg, that's where we're growing our advanced packaging capabilities, driving opportunities in optical modules. We expect 2028 will be an important inflection point for when those opportunities start to ramp. And secondly, technology services, which, today, principally comprises of revenue from masks, reticles, NRE. But as we integrate the MIPS business, the ARC business, as we scale those businesses, we expect to see an increasing contribution from IP licensing software.

And the great thing about these technology services is that they're expected to support gross margin expansion. They don't come with the same fixed cost intensity that you otherwise associate with manufacturing services. We believe it's the evolution of these 2 categories that fundamentally changed GF's revenue mix and earnings power.

Let me now focus on our margin expansion objectives, what we've delivered and what's ahead. Since our IPO in 2021, we've delivered structural margin improvement against the backdrop of relative cyclical headwinds across certain consumer-centric end markets that we serve. We delivered over 1,000 basis points of margin expansion in 4 years. That expansion has followed 3 core principles: disciplined capacity investments; a maniacal focus on manufacturing productivity; and of course, as we've discussed today, a consistent shift in the mix and the evolution of our mix.

We've outperformed our peers on a relative margin expansion. And although we're acutely aware of the fact that we're still on the journey towards our medium- and long-term margin objectives, this progress to date serves as the foundation for our margin objectives going forward. And this isn't just a long-term expectation. The progress is visible today and as recently as our earnings that we announced earlier on this week. The performance is clear in 2 clear metrics: revenue, up 3% year-over-year; gross margin, up 510 basis points year-over-year. This margin expansion is years in the making, and we believe the opportunity is still in the years ahead to continue driving that. Q1 is just a proof point. It shows that we're on the right track to delivering what we believe is possible with our margin expansion using the levers within our control.

Over the last few years, we've reiterated our objective to be a dollar-for-dollar more profitable company through structural margin transformation. Look, we've got a long way to go, and implementing structural margin transformation doesn't happen overnight, but I'm pleased to report that we continue to make real progress towards achieving that.

I talked about Q1. What I didn't say about Q1 is it's also the highest margin that we've delivered in the first quarter as a company. And we believe that as we go through the end of this year, we can exit 2026 with a 30% gross margin. More importantly, as we ramp critical technology corridors with a higher margin mix, as we integrate the acquisitions that we've made over the course of the last year and as we expand our technology service offerings to our customers, we expect to achieve a 40% gross margin exiting 2028.

Beyond 2028, that's where we view the next inflection in the business plan that we're projecting with you today as co-packaged optics, advanced packaging, custom silicon, all targeted to ramp in that 2028 time frame and drive a line of sight to a 45% gross margin over the longer-term horizon of our model.

The key mission we're seeking to achieve is to remove that reliance on single margin drivers and drive structural margin upside across mix transformation, corridor optimization, technology services and accretive M&A. That's why we have confidence in the trajectory. But of course, expanding our capabilities across manufacturing and technology services brings a need to efficiently scale our R&D investments as well. These R&D investments will go into driving differentiation across capability tooling, IP, custom silicon, advanced packaging, optical networking.

Critically, we intend to scale this R&D where it differentiates us while maintaining SG&A discipline and AI productivity. As a result, we expect our OpEx as a percentage of revenue to be roughly in line with our historic trends. And over the duration of our model, we expect our OpEx to grow at roughly half the rate of the revenue CAGR targets that we're sharing with you today.

As we exit 2028, we believe that, that will drive approximately 15 points of margin delta to gross margin, delivering approximately 25% operating margin. However, beyond that, as the R&D investments we're making begin to scale and drive the flywheel of incremental revenue, we expect our operating leverage to compound and support an operating margin of approximately 35% longer term.

Moving to the culmination of our core financial mission, which is to raise the bar on shareholder value creation in the years ahead. Margins matter because they fuel cash and cash enables choice. Our CapEx discipline continues to be a key area of focus for GF. In the last 5 years, our CapEx intensity has been approximately 22% of revenue. That's marginally higher than the prior model we shared. However, we've generated meaningful free cash flow during that time frame.

The capital intensity that comes with being a leading foundry means that we have to plan and execute with discipline. Starting with the left side of this chart, you can see that our capital intensity in the early years was principally driven by the investments into capacity scale at our 7H facility in Singapore. That delivered approximately 400,000 wafers of incremental capacity, and we're scaling that business today across all of the technology services that we offer.

In the years that followed, the focus was on capacity within the 4 walls. It was focused on demand-led customer signals. As we discussed at the beginning of this year, and we reiterated earlier on this week, we do expect that 2026 is going to represent an investment year for GF into capacity. We're targeting about 15% to 20% as CapEx as a percentage of revenue this year, but it's going into those fast growth, high-demand corridors, SiGe, silicon photonics, FDX. So against this backdrop, we continue to believe that a long-term target of approximately 20% CapEx intensity through the cycle provides the right balance of CapEx discipline and demand-led growth.

Moving from left to right, you can see how we've evolved from a little over 2 million wafers of capacity in 2020 to approximately 2.7 million wafers exiting 2025. Now these capacity additions have followed 4 core principles. The first is that we expand our capacity intelligently, focusing on existing clean room space first and then ultimately, over time, looking to modular expansion. We've got great examples of that happening right now in our Singapore and our Dresden facilities.

The second is that we invest in technology fungibility to reduce technology concentration. Again, a great example of that, Malta, New York originally built as a FinFET fab. -- where we spent the last few years transferring technologies in to support our silicon photonics business, our 40-nanometer auto grade, our 22FDX platform. It's driving that diversification from a technology point of view as well. And with that, we target delivering manufacturing scale and efficiencies to improve utilization and optionality. We're a high fixed cost business, so scale and optionality matter.

And finally, we look to derisk those investments with customer commitments, prepayments and government support frameworks as well. So to underscore this strategy, we intend to add capacity to meet customer demand in margin-accretive corridors with meaningful stakeholder funding contributions. The partnerships and government support frameworks that we have in the U.S., Germany and Singapore are all great examples of where they're contributing meaningfully to both our CapEx and our R&D investments, where we expect to recover anywhere between 30% and 50% of eligible spending.

Even though 2025 was a relatively low CapEx intensity year, we still recovered 20% of our CapEx in the year under these frameworks. We've invested in these government relationships for many years, and we're proud to be such an integral part of the semiconductor ecosystem across all of the geographies that we operate in. In the last 12 months alone, we've successfully closed new partnerships with the Economic Development Board of Singapore, the German government and of course, the U.S. CHIPS office, all to support customer demand, which aligns with national onshoring priorities. And we expect more to come in the years ahead.

What makes GF unique across all of our manufacturing sites is that it's not just one of our sites where we benefit from these frameworks. It's all of our sites. It lowers the capital intensity of our capacity objectives and supports our margin targets. It's the combination of government support frameworks, customer funding, customer demand signals that become the backbone of investing in our capacity and drives returns without compromising flexibility.

So to bring it all together, this really captures the culmination of both the qualitative and the quantitative metrics we've outlined as part of our strategy today. The track record since our IPO is clear, notwithstanding relatively muted revenue growth over that period, we've expanded our margins, gross margins by 10 points, operating margins by 12 points. That's had a commensurate fall-through to expansion of EPS. The how we achieve that becomes the basis for the next phase of our growth. continuing to expand and remix our capacity, growing our technology services business, investing in critical growth corridors, all the while to support customer demand.

The right-hand side of this page sets out our target model in 2 distinct phases, exiting 2028 and longer term. And as you've heard today, our business is evolving and our services are expanding, and we're targeting secular growth across the end markets we deliver. We believe that leads to approximately 10% to 12% of revenue CAGR opportunity over the duration of our model. The quality of the mix within this revenue and the structural margin drivers that we're continuing to implement all drive us towards the expected exit of 2028 with a 40% gross margin and targeting a 45% gross margin over the long term.

As I've discussed, the resulting operating margin is expected to be in the neighborhood of 25% exiting 2028. And as we get the flywheel of those R&D investments driving incremental demand, creating operating leverage, we believe that we can target a 35% long-term operating margin. And all of that drives towards approximately $4 of EPS exiting 2028 and $6 of longer-term earnings power. And all the while, we intend to do that with a disciplined CapEx framework, driving to approximately 20% of revenue to target approximately 10% free cash margin. This strategy is centered on disciplined expansion, growth markets, margin-accretive corridors and consistent free cash flow generation.

To that end, free cash continues to be a key area of focus for us. We've delivered over $2.5 billion of free cash in the last 3 years. During that time frame, we've also strengthened our balance sheet with approximately $5 billion of available liquidity. We've reduced our gross leverage to less than 1x. We've returned $400 million to shareholders year-to-date 2026. We funded our capacity objectives in parallel, and we've invested in acquisitions that support our future growth and margin objectives.

This has given us the strategic freedom to invest, acquire and return capital, which I'll turn to now. Our capital allocation principles are simple and disciplined. Firstly, we reinvest in profitable growth vectors for our business, as you've heard from the team today. Secondly, we pursue differentiated and value-accretive M&A that we believe will accelerate our objectives. And finally, we intend to return excess cash to shareholders through coordinated buyback and dividend frameworks.

Today marks a milestone for GF. I'm very pleased to announce that GF's Board of Directors has approved the initiation of a quarterly cash dividend of $0.12 per share payable on July 14 to our stockholders of record as of June 24. Today has been about setting the opportunities that we believe position us well for growth while enhancing shareholder returns. And to drive this objective, we're formalizing our capital allocation framework of returning up to 50% of free cash flow after investments to shareholders through a combination of buybacks and dividends.

As you've heard today, we believe we're at an inflection point in our business. We're maniacally focused on executing our strategy and supporting our customers where they need us. Tim set out his vision and the critical role that GF supports in the megatrends shaping our world, how the AI proliferation into the physical world is only just getting started and how GF's geographical footprint matters within all of them. Greg took you through how we get there, investing in our technology road map, optical networking, advanced packaging, power delivery, Mike set out how we win with our customers, how content growth across the end markets we serve play directly into our technology portfolio.

And finally, I've set out what we believe this means for our revenue growth trajectory and earnings potential for GF over the next 5 years. We believe we're at the most important point in our company's history with the strongest differentiation in both our manufacturing and technology services portfolio, clear margin expansion drivers, a line of sight to strong profitability and a disciplined framework for delivering shareholder returns. We really like to thank you for your time today. We sincerely appreciate your support and your continued interest in GF.

Thank you.

I'll now invite Tim, Mike, Greg up on to the stage, and I'll turn it over to Eric for Q&A.

Thanks, Sam. Thank you for joining us today. We're very excited to start a Q&A session. Just a couple of general reminders and suggestions. I will ask that you limit your first them. We have 2 team members here. So kindly raise your hand, I'll call on you, and we will get to you. And then finally, I'm just excited to kick this off. So we start with Jim here in the front?

Jim Schneider, Goldman Sachs. I was wondering if you could maybe address the geographical footprint of capacity going forward. Clearly, there are a lot of specialty processes, which is your core, and some of them are really outgrowing like silicon photonics, et cetera. Can you maybe kind of talk to sort of the in-wall and modular capacity plans, where geographically you expect them to land? Is that Singapore, Dresden or Malta? And maybe just kind of talk about any color you can provide on where you'd expect geographically to add the most.

Yes. Thanks. Maybe I'll start with kind of like a recap on how do we think about this we seek to have as many of our platforms available in as many fabs as we can because we know that, that creates that optionality for customers. And we can't predict how preferences will change in the future. And so the more we can cross-qualify the better because it also allows us flexibility. As demand changes, you ought to be able to adapt to a market that picks up in one area, but maybe is weaker in another.

So first principle is do as much as you can more broadly. We're doing modular expansion already today in Germany. We're filling out the clean room space in Singapore. I'd say when you think about the bulk of the investments, the U.S. is where the demand-supply balance is probably the most, let's say, different, right? And some of those comments we made earlier about how much customer demand there is for manufacturing here means that, that will be the lion's share of our growth investments. It's also very much tailored to those technologies like photonics that we talked about.

So I'll let Sam comment about the mix in terms of financials. But I'd say, overall, more in the U.S. for the near term, but actually some really good accretion from expansion in Germany and Singapore.

I completely agree. And I would say that if you were to pinpoint where a lot of our CapEx is going this year, as you'd expect, the significant majority is going into silicon photonics. That's filling out the existing opportunities that we have within Malta today. But we also have pluggables capacity in Singapore. One of the really important reasons why we acquired AMF was because they reached the capacity of their space and there's significant opportunity to ramp and scale them into our Singapore facility as well.

So that transfer is underway. We're targeting the end of that this year to get to that scale opportunity. And then the -- I would say that there are other pockets of important CapEx being spent. FDX is one of them, but SiGe as well as we think about our Burlington, Vermont site, that's where a lot of the CapEx into SiGe is going to. So it reinforces that principle that Tim said, which is we're going to optimize the existing 4 walls that we have before we go and start putting modular expansion on.

Go to Ross here in the second row.

Ross Seymore from Deutsche Bank. Another CapEx-related question. I guess 2 parts. One for you, Sam, and then a bigger picture one. The first part is the 20% longer-term capital intensity gross or net? And then the second question is, is it enough considering all of the growth opportunities, the geographic dynamics that are going on, geopolitics, et cetera, are you trying to get ahead of that? And does the 20% do that? Or would you spend more if you could?

Yes. Maybe I'll start and then Tim dive in. But we think of that as a net target. And one of the reasons we think about that as a net target is because there are 2 really important dynamics that contribute towards that overall gross CapEx. So one is the customer prepayments that I touched on earlier. The second is the level of support that we get under government frameworks. And so we feel quite comfortable that a net target through the cycle of 20% does not inhibit us from continuing to be able to grow that CapEx provided we're getting the right level of contribution coming through from customer prepayments and government support framework. That's kind of point one.

The other point I would say is that we think about this as a through-the-cycle target. And one of the reasons I included within my presentation materials, the profile that we've had over the last 5 years is you can see, given the high CapEx intensity of our business that there's often a degree of lumpiness to the timing of those CapEx. So we may well have certain years where even on a net basis, we're above that 20% target. But my expectation is that as we see those investments scale, drive incremental operating free cash flow, we're still going to be on track towards that 20%.

Maybe just to add, Ross, I think the conversations we have with governments is can you go faster? We have more help available if you need it. So I think that part is not fully tapped, let's say, in how we think about it. On the customer side, there's a lot of interest in growing capacity. We're always going to have to strike the balance. But when we have those partnerships together, it makes it a lot easier to add capacity. And if you think about it, when you're adding capacity, you're adding tools, which means the productivity is from day 1, right? You don't have to build out huge cells before you get there. So that's how we're thinking about it.

Let's go to Krish.

It's Krish Sankar from TD Cowen. I had a 2-part question for Gregg. On the scale platform, you spoke about the integrating the EIC chip. Is that single-digit nanometer? And are you doing that in-house? Or are you actually collaborating with the external foundry? And the second part of it is, is the way to think about it, SiGe is for AEC and ACC and FIO for optical? Or can you actually use SiGe for optical?

So on the optical module, the answer to is it single-digit nanometer or not, it's an open ecosystem for us. In instances where a customer has an EIC coming from another source, we're happy to integrate that into it. Of course, we have our own internal capabilities, both as a consequence of the InfiniLink acquisition that brings the know-how to the EIC photonic IC design capabilities and of course, our own digital platforms that we have. So we're an open ecosystem. We're happy to take in silicon from wherever it comes. I didn't catch your question. Could you repeat the question on silicon germanium?

Is the silicon germanium mainly used for AEC for copper and Thor for optical? Or can you use SiGe for optical?

So silicon germanium's role in the silicon photonics space is used as the drivers and the TIA for the transmit and receive end of it. As Mike mentioned in his comments, it's the high-performance RF, right? You're trying to drive modulators on there at gigahertz. So as high FTF Max as you can possibly get from the devices. There are plenty of wired areas where silicon germanium fits in the portfolio as well. But specifically, the applications that I was highlighting in my talk were about the role of the TIAs and drivers in the photonics solution.

Let's go for this side of the room. Charles, please?

Charles Shi from Needham. I have a question on the gross margin target exiting '28, 40%, long term, 45%. Can you help us break down how much of that is, let's say, product mix driven and how much of that is efficiency driven? And for one, I do think custom silicon, that's a new area you want to get to grow that business to $1 billion. That should by itself should be 40%, 50% gross margin. IP, MIPS, ARC by itself should be 90% gross margin. And the base wafer foundry business, what's the long-term target for that part of the business, the gross margin?

And obviously, you're getting all the subsidies, 20% capital intensity. But if I do my math right, your gross capital intensity seems to be still in the 30%, but how much of the base wafer foundry gross margin is helped by the government subsidies there. Can you kind of help us break down the other pieces there. So we want to really just nail down how much of the efficiency gain you are expecting over the next few years.

Thanks, Charles. There's a few pieces to unpack within that question. So maybe I'll start with how we think about bridging the gross margin from, call it, the roughly 30% that we expect to exit 2026 with the target 40% for the exit of 2028. Look, we've really hit on this a lot today. It probably comes as no surprise to you that mix is going to be a significant driver of that. Think of that in the neighborhood of 5 to 6 points of margin opportunity over the next 3 years.

We don't break out our end markets by margin, but it probably comes as no surprise to you that the composition of silicon photonics, silicon germanium within communications infrastructure and data center falls through at a very attractive margin to our overall corporate objectives. Now that's not least the fact that we've also got healthy margin dynamics associated with the likes of IoT, with the likes of automotive as well. As I said in my prepared remarks, we're not reliant on smart mobile within this plan. So that's sort of the manufacturing services side of the mix dynamics within that 5 to 6 points.

The technology services revenue within that 5 to 6 points of mix also matters. You rightly touched on the fact that we do expect that revenue associated with MIPS to fall through at a very attractive gross margin. I would caution one point in terms of your direct compare to where some of the IP providers are, which is that a big part of this business plan with MIPS is custom silicon. And so when you're in the early phases of new engagements for custom silicon, you typically have some costs associated with that as well. So it doesn't fall through at quite the level that you can read across from IP companies, but it's comparable.

The second part of it, as we think about it is productivity and manufacturing cost productivity as well. We set ourselves internally some very ambitious targets, which we're on track to as it relates to how we think about our manufacturing costs and our cash cost per mask there. We think that over this time period, it can deliver 1 to 2 points of margin growth as well. And then you have a couple of points that we'd expect to achieve as we see opportunities come through from our scale efficiencies across all of our sites as well.

And then clearly, there's utilization within that as well, although I've embedded some of the utilization dynamics within the end market mix that I outlined. So hopefully, that gives you a little bit of color in terms of how we're thinking about the bridge to 40%. Now clearly, depreciation, which I think is what you're getting at by reference to government support frameworks, that actually, as we think about an increased CapEx cycle, that probably is a point or so of headwind as we think about it over the next couple of years.

But nevertheless, as I said, we're going to invest in our capacity in a highly efficient manner. And if we're able to recover anywhere between sort of 30% and 50% of our CapEx intensity, then clearly, that's helpful in terms of how we think about the offset to depreciation. And that offset is not a single year. It's an offset which comes through over the amortized life of the investments.

We're going to do [ Natalia ] here.

I just wanted to follow up on CapEx. So I think the slide presented the near-term expansion as more of a brownfield opportunity, right, and whereas longer term is greenfield. So as we think about the 20% net CapEx or maybe kind of in the gross CapEx we call, how should we think about that through cycle from a standpoint of how capital intensive it is to deploy brownfield versus greenfield?

Maybe I'll just again frame it because when we say greenfield, it feels like we're building a completely new fab. And we've had this experience now in Singapore. We built a new fab in 2021. This is the expansion of the existing fab campus. We have an incredible AMH system, so you can see a wafer transit between the entire campus. So it means that the first tool that you install in that new capacity is already a productive tool, right?

Wafers can go from the old fab to the new fab. And so you don't have that greenfield economic challenge where you're spending time to ramp a whole line, right? So it has very good ROI and actually has really good capital efficiency as well. That 20% is a through-the-cycle number. So there will be years where we spend a bit more because we're going to be investing, let's say, in a new shell. But for the next few years, at least, a lot of that expansion is coming within the existing 4 walls.

Mehdi Hosseini, Susquehanna. I have one follow-up and one question. Just going back to the gross margin topic. If I look at the past 12, 18 months, everywhere in the semi land has seen a price increase due to high utilization rate. And now we're beginning to see analog beginning to feel incrementally tighter. And I think that's going to get even tighter into the second half. In that context, how much of the gross margin target that you have here embeds better pricing power? And I have a follow-up.

Maybe I'll start specifically on the model and Tim, you can give a bit of color in terms of how we're thinking about pricing more broadly. But from a model perspective, we're not embedding significant price increases just associated with supply and demand dynamics. As we know within our industry, those supply and demand dynamics can change quickly. And so really, the gradual uptick that you'd see associated with pricing on an average enterprise level will be more a function of the evolution of that mix that I talked to.

So it's more a function of shipping higher ASP wafers with a higher margin structure to some of those end markets where we see the strong growth. And Tim, do you want to talk about pricing more broadly?

I think the general framework we take is, and you heard it from some of our customers, -- these are long-term partnerships. We don't want to have surprises in either direction, right? And I think in a lot of those end markets, that's what we've been able to achieve. Now where that changes is when you're introducing new features, new capacity or ramping new technologies and technologies get priced based on value, right? And so when you're unlocking data center performance with photonics, it's a relatively small cost to unlock a huge amount of system level performance. We're able, obviously, therefore, to capture more value with those new products.

So as Sam said, like-for-like pricing, very little in that long-term view, much more of that is coming from product mix growth.

And just a very quick follow-up on data center. How much of the -- what's the mix of that $1 billion incremental revenue by pluggable transceiver versus optical transceiver? And how does that mix change into 2030 when your incremental revenue doubles?

Yes. Maybe I'll start, and Gregg can obviously add some technical color as we think about the ramp timings. But really, the way we put our plan together over the period up until the exit of 2028 is that a lot of that revenue growth is principally coming from pluggables. And that's demand that we see today, that's demand that customers continue to indicate. It's actually a broadening of the customer base that has come through with the acquisition of AMF as well. So think of our plan to the exit of 2028 as principally pluggables revenue growth focused. It's the beyond 2028 inflection point where we think there's an opportunity to start ramping and scaling CPO.

And maybe, Gregg, do you want to talk about that a little?

Yes, happy to comment on it. By the way, I'll tell you, we've already seen the first few tape-outs taping out under that OCI MSA that I mentioned, right? So they've immediately snapped to that as a configuration for the future on there. And it is a matter of then those going in and ramping up. So completely aligned with SAM. We're certainly preparing now for the capacity ramp that comes when you go to millions of optical modules per month. Some of the investments we're making today are, in fact, in preparation for that. But we really see that in a significant ramp in a material way in the -- probably the second half of '28.

C.J., please.

C.J. Muse, Cantor Fitzgerald. Great day. I wanted to follow up and then ask another question, if possible. On the silicon photonics side, target model seems to apply about $250 million, $300 million of nonpluggable business exiting '28. And so curious, is your sense that is the full scale? Or is that still in kind of discrete mix? How do you kind of see the mix within that?

I think it's a great question because as you think about that module, there's different components within it. And I think as we work with different customers, they're going to take different parts of that solution. We mostly think of it as a full optical module, C.J. So that's most of it. But we're still in the early days of ramp in 2028, as we've said, right?

So one of the reasons there's an inflection point to CPO, and I think the industry sees that, too, is high level of attach rate to GPU and you're talking about an integrated module, and as you said, not just the wafer component of that story. So by 2028, relatively small contribution of CPO. But as that ramps, it will be more of that full module build that we include.

Great. And then I'd love to hear more on technology services. Is there a revenue number that -- or growth CAGR that you're targeting into the 2030 time frame? And are there specific contributors that you want to highlight? And lastly, as it relates to custom silicon, will that fall within the manufacturing services? Or will there be contributions down to the technology side?

Yes. Maybe I'll start as we think about it from revenue contribution point of view. So taking a little bit of a step back down memory lane, non-wafer revenue, right, which shall never now be consigned to the trash camp. We are thinking about this purely as technology services revenue. But nevertheless, that was principally comprised of mask radicals, NRE. Now that typically was in the range of 8% to 12%. We were sometimes at the lower end of that range, but typically around the 10% mark.

Now as we've evolved this into a broader technology services solution and as we have already started to get opportunities come through from an IP, licensing a software point of view, that's one of the reasons why you've seen that pick up as a percentage of revenue. So 2 pieces of guidance we gave at the start of this year was that we were no longer looking at the lower end of that being 8%. We narrowed that range 10% to 12%. We actually expect that for the full year '26, we're going to be closer to that 12% end of the range. We ended up actually having 13% in the first quarter.

Now as I think about this longer term, you can expect that as we continue to get more IP licensing software-related business coming through with customer partnerships, it should provide some scale opportunity to increase that from, call it, 10% to 12% now to 12% to 14%, but that's sort of in the second half of our model. You can kind of infer from that, C.J., as we think about the broader sort of 10% to 12% revenue CAGR we're putting on the enterprise, if you assume sort of roughly 12% of that being technology services in the next couple of years, you can kind of infer the contribution there that comes through under IP.

Now the other part of your question, as we think about it from a custom silicon point of view, at the end of the day, if it involves manufacturing of wafers, it will sit within the manufacturing services. It was one of the reasons why we called out the manufacturing value add because that's where we see the opportunity coming through from custom silicon, but principally in manufacturing services.

Maybe, CJ, if you think about the life cycle of a custom design, and that's something I think is quite interesting, day 1 software, Why? Because you're enabling your customer with tools so they can do simulations and think about their product architecture. Pretty quickly, NRE, right, as you work together on some optimization of that design, you then move perhaps IP royalties if they're going to use -- sorry, IP licensing, if they're going to use your IP upfront.

Then it moves into production. That moves into custom silicon within manufacturing, but you still collect IP royalties if they're using your IP through that process, right? So that revenue cycle will vary a lot by design. What's great about that is we can engage very early. And so you'll actually see an early leading indicator as software starts to grow because customers are using it to begin that design process.

Let's go to this side of the room for Chris. Chris?

Chris Caso with Wolfe Research. I wanted to ask about the change in cash return and the dividend. And it's always been a cyclical business. So that's had some peaks and valleys in cash flow. So I guess the question is, what's changed in your view going forward that gives you the confidence to both start returning some cash and to put the dividend in place?

Yes, happy to take that, Chris. And look, I think it really ties with a lot of what you've seen today from when we last presented a model to you and we took the company public to where we believe we are as a company today and where we believe we're going to be as a company over the next 5 years. And that is a link to the maturation that we believe is achievable as a company. We also have confidence that where we've already invested in our capacity footprint and the opportunities we have around our existing capacity footprint, we can be efficient from a CapEx point of view as well.

So with that increased CapEx, with the driving of incremental capacity to support the demand that we believe is certainly being signaled by our customers today, we think that creates a healthy generation of free cash flow over the next 5 years in the 10-plus percent range. And the reason it's 10-plus is because there will be some lumpiness associated with how we think about the CapEx itself.

But all said and done, you look across the peer group that we're in, as I'm sure you do regularly, they have established capital allocation framework. They have established principles between how they're doing that. And so this is an important day for GF as far as the maturation of the company, and we think that we've sized this dividend at a reasonable enough level such that we can continue with all of the objectives that we want to achieve as a business.

Go to Joe, please.

Joe Moore from Morgan Stanley. You talked about the sort of importance of your geopolitical stability of the regions that you can serve. A couple of years ago when there are automotive shortages, you had these kind of automotive OEMs starting to form direct relationships with you. And I guess the shortages aren't as intense these days, but you still have those conversations? Do you still have that connectivity? And are you getting a prioritization that extends all the way to the OEM level in the automotive space?

Thank you, Joe. I mean, actually, one of the things I like to do in my role is spend time with the whole value chain that we serve. And actually, although the shortages haven't been as acute for automotive, maybe barring Nexperia and so on, the automotive interest in partnering has only increased. And so last year, for example, we announced a partnership with Hyundai Motor Group, by the way, one of the largest players today, by the way, one of the largest importers into the U.S. today, so you can understand why they're thinking about supply security.

So I'd say that's actually intensified, if anything, in the years that have gone by. And they like very much both the combination of the technology portfolio, but also the distributed manufacturing footprint. Many of them have global markets and they want that flexibility because they don't know if they're going to see more growth in Europe or the U.S. or Asia and beyond. But I would even include that to include Chinese OEMs as well because as many of them, they want to export as much as anybody else. They want to attack those exciting markets for them.

They love the idea of manufacturing some of that outside China to be able to have resilient supply chains that their customers and the governments that are going to let them do it will also appreciate. So I think it's only intensified. And it's probably broadened to other markets. I do supply reviews with end customers 2 steps down the chain on a regular basis around what you're seeing, where are you investing, what do you think you'll need in 2, 3 years' time? It's super helpful for us from a planning point of view as well.

Vivek Arya from Bank of America. Thank you so much for hosting such an informative Analyst Day. So I have 2 questions. One is there's only a handful of people making CPO platforms and some of them are engaged with your competitors as well. So I'm curious, as part of your planning process, are you assuming a certain market share? Are you assuming that you gain share? Just what the underlying assumptions are because it's an important part of the growth from '28. But then as I zoom out, -- and I know we are talking about a very long term and shares and all these things can become a little vague over time.

But if I look at your sales in 2025, right, they were about $7 billion or so, right? The market was $75 billion, so just under 10% market share. And then you're saying you're adding another $4 billion, so that gets you to $11 billion, and the market is $125 billion according to your -- so you're kind of staying at that 10% share, right, with so much leadership technology. So are you not assuming much share gain, right? Like how do you conceptually think about share gain versus the target? Is this conservatism? Just what is the message in that trajectory?

Maybe I'll start with CPO and then we can talk more broadly about how we think about share gain. There are industry forecasts out there for the overall CPO market size. It's probably more useful to use like 2035 because you're still seeing the ramp debate that's happening. 2035, $25 billion market is what we see written about today. There will be multiple players in the CPO market. We have very strong conviction GF will be one of the top 2. If we succeed, we'll be #1. If we fail, I think we'll be #2. And that's because of the technology advantages that Gregg built.

I also think when we hear customers use, they want to have at least 2 solutions, right? They're betting very big franchises on this. And so we would expect that they will actually have a couple of solutions going, but they need that combination that we bring in CPO, the photonics technology, the advanced packaging, the scale, by the way, the footprint that also matters to them. So we're pretty confident that we'll be one of those 2. You'll decide which one, but you'll decide who the #1 is in both cases.

Overall, Sam, do you want to comment?

Yes, sure. And look, we very deliberately set out on that chart earlier how we think about the relative market CAGRs and the CAGR opportunity that we see from a business perspective. There was one number that you may well have picked up on communications infrastructure and data center, where we said 30-plus percent. And we do think that there's an increasing opportunity there for us. And some of that ties to what Tim outlined from the optical engine, the CPO perspective. And really, it's going to be the rate and pace of that ramp in the second half of the current decade and how we think about it going into the next decade that I think provides upside to that opportunity as well.

But you're not assuming share gain as part of because your...

I'd say at a macro level, yes. But at a market level and application level, no, right? Because that mix shift that Sam talked about is because we're being very intentional on where we're putting growth on the page and where we also think growth could be an upside to the plan. And so I think there'll be areas we'll deliberately focus on for sure, optical communication being a big one, but areas like automotive, net-net, probably will gain a little bit of share. Mobile, you saw us growing slightly lower than the TAM. So that's a bit of an offsetting factor.

Let's go with Matt, please.

Matt Bryson from Wedbush Securities. I have 2 follow-ups, if that's okay. Just going back to gross margins, you kind of laid out a path from 30% to 40%. I guess my question is, in 2026, you're working off 29% gross margin in the last year. A lot of the trends you talked about that are benefiting the gross margin trajectory in place. Why wouldn't we expect you to get some of that benefit this year?

Yes. Maybe a couple of points to answer that, Matt. One of those is, frankly, having the capacity there to be able to meet that demand. As we talked about on our earnings call earlier on this week, we're already seeing oversubscription in high-performance SiGe through to the end of the first half of 2027. The only reason that is due to the end of the first half of '27 is not because the demand dissipates, it's because we have more capacity coming online to be able to support that as we get into the end of this year.

So some of that is somewhat as a result of the capacity dynamics. A big part of our job is to make sure that we're as closely as possible matching the capacity and the demand dynamics. I think silicon photonics, we're doing a consistent job on that, and we feel quite good about the demand versus the capacity we have going through the course of this year. But a big part of the 15% to 20% step-up in CapEx intensity this year is to support that demand that we see growing through the course of next year and the year after and what our customers are telling us.

So there's -- you're absolutely right to say that those trends are there and they're happening now. Our job is to make sure that we have the capacity there to be able to support that growth going into 2027 and beyond.

And I just wanted to follow up on Vivek's question. When you look at your competitors out there, they've kind of -- some of them have been linked with large customers. So you look at ST, for instance, they're working with Amazon. You look at DSM Coop is being used by NVIDIA. Tower has been linked with a couple of module makers. When we look forward, should we be expecting that one of the CSPs is going to come out and say they're using GlobalFoundries? Or can you hit your targeted goals kind of being the second source if everyone is using, like you said -- or like Tim said, 2 sources for the CPO?

I think maybe the 2 comments on that. One is Gregg talked about the OCI MSA and who backed that, right? That was a pretty good list of the players in the industry. And a lot of what they base that decision on was technologies that we've proven. So you can imagine there's engagement with a pretty good portion of that group. I think it's because, again, they want to see what the technology can truly do. They do want to have multiple options. So I'm pretty confident that we'll have engagement pretty broadly across that group going forward. So I don't think we need to have an incredible inflection point of new customer engagement beyond what we already have.

You are seeing, as you rightly said, the CSPs get more engaged in the space, so far more in shaping standards, right, than in being direct purchasers of these systems. But I think they're getting much more active because they realize that they're architecting these racks with different compute stacks that they want to control more of. And for sure, they therefore will take the next step of thinking about optical networking, about power architectures and so on.

So I think those relationships and conversations are pretty good. I think they're going to move in maybe the latter part of the plan into more direct work as they start to own more of that architecture.

A follow-up from Natalia, and happy to open it up to any follow-up as well.

So the quick question I had 2 very short ones. One was, does the $1 billion in software and services revenue, including contribution from ARC? Or would that be incremental once the deal closes?

That's included.

Good. And then the second one, the AMF 200-millimeter capacity, would that be strategically helpful for you guys to continue having that? Or would there be a way that you integrate that with your current footprint?

Maybe I'll comment on AMF. So AMF was a company with incredible technology and good customer traction that grew out of a research lab basically in Singapore, and it was gated by future capacity growth. We already have some photonic processes in 200-millimeter in Singapore. In fact, we actually had a couple of processes that we were already helping them on. What we're doing right now is transferring those technologies to our world-scale campus in Singapore. So no, it's going to unlock full growth in 200-millimeter in Singapore. And we have a longer-term road map for Singapore because there's a lot of opportunity to grow further as well.

And Ross, please.

One quick follow-up on the whole market share dynamic people are asking about in various markets. The one that was the most overt was that your home IoT is supposed to grow significantly faster than the TAM. So I wondered maybe, Mike, if you wanted to go through some of the specific drivers. Is that share gains, technology specifics, partnerships? And what gives the confidence in that mid-teens versus the 9% for the SAM?

Yes. I think it's mostly share gain. And not to read too much into it, but if you even look at the customer testimonials we had, and think of the customers that were in there talking about the attributes that we just talked about, like the way 22FDX is really suitable for connectivity. They're seeing it at their secure edge. So the combination of sort of subjective comments like that and more hard data points like the number of design wins that we're seeing. it's not a perfect science, but when you start to rack them up, you say, okay, this is actually going to accumulate faster than it has in the past.

And so I think we're -- we will benefit from all of the above, some share gain, some mix to some of the older technologies that were in some of the earlier IoT weren't quite as differentiated as the ones going forward. So we'll get a better value prop out of that. So if you add it all together, combined with those megatrends of physical AI and edge AI, you get a better outcome or at least we're expecting a better outcome.

And I think just -- you touched on it there, Mike, so I'll build on it, which is when you think about the growth of IoT, the opportunity within that and you overlay physical AI, I think it's pretty well appreciated a lot of physical AI will itself within IoT. Again, one of the reasons that we have acquired MIS, one of the reasons why we have a good conviction in RISC-V architecture is that we believe that, that will be a strong supporter of not just physical AI growth, but also IoT growth for the business over time.

But I kind of have to. The mix within IoT, there's a lot of different end markets that fall within that. What you saw perhaps in the past was more on the consumer side. What you see going forward is also significant growth in industrial, aerospace and defense, a lot of these applications that are really starting now to roll out. And that's obviously going to be working in our favor given the very important requirements those industries have.

We have a follow-up from Charles.

Very quick. I think I look at the long-term CAGR of different end markets, the one I mean, at least for me, the surprise to the upside is going back to the IoT question. I understand all the comments you made, design wins and share gain prospect. I wonder how you think about how -- what's your assumption around the inflection point, let's say, for physical AI?

I believe there may be a big part of your assumption there because I think that the industry may still trying to figure out when that thing is going to take off. 2 to 7 years, there's a wide range. That's the forecast I have seen and can easily go out of your 2030 forecast range. But if things get a little bit delayed, but I wonder what's your thought on that physical AI, when the inflection point is coming, what's embedded in your assumption?

No, look, I think you -- what we laid out is quite a broad range of use cases to define physical AI. And we sort of said the definition would be those 4 key functions, right, sensing, thinking, acting and communicating. When you take that lens rather than the lens of when will we have humanoid robots, that's a good discussion to have. And by the way, if you go to China, the answer is already. And I think we're going to see some accelerated growth there as well. But you see already deployment of AI workloads in all sorts of edge devices.

And I think those ramps are more on the earlier side of that than not. And again, it's about fit for the technology portfolio because sensing, something we've done for a long time, by the way, in mobile and auto, right? Thinking distributed compute where low power like FDX really matters, right, combined with RISC-V. Precision control of motors and actuators, BCD technology, very well placed for that.

And then the whole wireless communication RF is very core in our DNA, Wi-Fi, Bluetooth, NFC, UWB, a number of protocols these devices have to do. So look, I think it's a good example where the demand is actually coming at the technologies that we have spent a lot of time developing. So look, I think we'll really very much outgrow that market.

And I think you to draw a comparison to what we've achieved in other end markets, right? Automotive, the 14x growth that we delivered there is a big part, not just of content expansion, but share gain as well. And so we very much think about the design wins being an early leading indicator of where we expect future production revenue to be. Well, we had those early design wins in automotive in the 7 to 10 years ago time frame that became the leading indicator for the growth that we saw in automotive over the last 5 years. So again, the reason we called out that de win momentum is because we think it's a good leading indicator for the opportunities ahead.

We have a question in the back.

[ Ted Kang ] from [ Craig Group ] here. I don't want to beat the dead horse here, but just going back to the gross margin again. It's impressive projection you have there. But could you break that out to different business segments? So in the long-term target, I'm thinking 2030 number, right? So by that time, what will be the gross margin for each business to achieve that 45% target? And also second question to that is, when you're getting the gross margin expansion from 30% to 45% from 26% to 2030, yet your OPM margin is going from 20% to only 35%. That's 15% as you increase both sides. So why aren't you getting more leverage on the OP margin?

Maybe I'll just -- I'll tackle the gross margin piece to begin because we don't break out the gross margin by end market. There's a very important reason as to why we don't do that. When you think about the tooling layout within a particular fab, you don't have corridors of tools that are dedicated to a particular end market. And so as a high fixed cost business and the fungibility that we have across our tooling footprint, it's not the right way to think about our business as end market margins.

Now we can point to where we see stronger margin fall-through within those end markets and communications infrastructure and data center is a great example of that, a big part of the 510 basis points of year-over-year. It's no surprise that we saw such strong growth within CI&D as well. So that's probably the -- I won't reiterate the building blocks that I shared earlier in terms of more broader piece around mix dynamics, cost productivity, how we think about scale.

But to the second point on your question in terms of how we think about the operating margin delta, you're absolutely right. There is a delta of, call it, 15 points in the early part of our model, 10 points later on. And it's very much tied to some of the business decisions we've taken around technology services. they are, albeit strong gross margin contributors, they are also R&D-intensive businesses, a lot of engineers coming across with the MIPS and the Arq acquisition as well.

So we think as we invest in that R&D capability and resource over the next couple of years, it holds us in that sort of 15-point delta to the gross margin. But then in that post '28 time frame, that's when we start getting the inflection point of custom silicon advanced packaging, optical engines, CPO, like that's how we think about the scale benefits that come through with revenue at that point that then creates operating leverage to narrow that gap to about 10 points at the end of our model.

And we have one last one from Matt.

Thanks for the chance to ask another question. Gregg, I know it's early days, but you want to take a stab at exactly how much content you might have in a 1 million qubit system or what the TAM of that market might look like? And I guess just a follow-up on that. How has IonQ's acquisition of SkyWater kind of changed the dynamics in that quantum space?

So stay tuned for the webinar that will think. But let me talk in some broad strokes. We've had dozens and dozens of customer engagements that gives us an early indication of it. First and foremost, cryo CMOS, while I highlighted the 22FDX that while designed for IoT and millimeter wave radar, it turns out it is a perfect cryogenic CMOS technology, and there's a bunch of technical details why. The area that we have been surprised about, we've been working with spinCubit and photonic quantum companies already. The number of companies that have approached us about superconducting interconnect.

And we stepped back and realized we actually are probably going to see the heaviest traction on superconducting and cryogenic interposers. Now interposers will take on a different context there because in some cases, it's wiring wafers. The superconducting guys need -- they have large qubits, so they need large amounts of interconnect. I think that's the area that's probably going to see the heaviest traction based on the customer engagements that we have. And then one of the disciplines you have to have, there are so many modalities that exist in the quantum space.

I listed 5 of them is not getting yourself overly diluted and trying to chase too many things that look like a really diverse MEMS business already. So bottom line for us, 2 of the 3 columns are platform solutions. FDX, we have discussions on our FinFET platform for cryogenic CMOS, our 130-nanometer complementary bipolar CMOS technologies. high-end trap guys need high-voltage capabilities, so things like 55 BCD. So I think we're going to find a suite of digital platforms that are cryogenic CMOS, heavy traction on the interconnect capabilities and then maybe more focused individual modalities.

I won't comment on the Ion Q1 other than to say that there are a large number of companies internationally that are interested in finding their scaling partners on there, and we've had very, very heavy engagement.

I think a lot of people were looking for great number the day that announcement came up.

Yes. Great. And thank you very much. That concludes our Q&A session. As we advance the slides twice, I'd actually like to, again, thank you so much for your interest and support in GlobalFoundries. And I'd like to kick it back over to Tim for some final remarks.

Thank you very much for being with us today. I hope you leave with even a portion of the enthusiasm we have for what's to come. We thought we'd leave you with some takeaways. For us, it's very clear we're at the middle of some incredibly interesting megatrends, and those will play out over the years to come. But that AI story and the data center, the physical AI story, really, really putting wind to our backs. -- combine it with the footprint, that's truly very special. That leads to multiple high-margin businesses that we can ramp. We are already ramping. Everything that we're growing in the future, we're already growing faster than our future forecast. We're broadening our mix in terms of technology.

I'm really proud of the acquisitions. These teams are bringing incredible skills into GF. I spent a lot of time with teams like MIPS and hope soon with ARC. They're bringing new capabilities, and they're challenging us in new ways. We're building where customers need us. I think you heard every customer talk about how important the footprint is and how important it is for their own supply story. And lastly, we're doing this all in a more holistic business model where we offer to them earlier and broader set of solutions. And obviously, at the heart of that is building trust for the long term.

Thank you very much for us. It's been great to spend time together for me. The bus was certainly worth it. We hope you enjoy the rest of the day and enjoy your lunch. Thank you.

Welcome to GlobalFoundries First Quarter 2026 Financial Results Conference Call. [Operator Instructions] As a reminder, today's program is being recorded.

And now I'd like to introduce your host for today's program, Eric Chow, Head of Investor Relations. Please go ahead, sir.

Thank you, operator. Good morning, everyone, and welcome to GlobalFoundries' First Quarter 2026 Earnings Call. On the call with me today are Tim Breen, CEO; and Sam Franklin, CFO. A short while ago, we released GF's first quarter 2026 financial results which are available on our website at investors.gf.com, along with today's accompanying slide presentation. This call is being recorded, and a replay will be made available on our Investor Relations web page.

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 made 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 deemed to be forward-looking statements. Such statements can be identified by the terms such as believe, expect, intend, anticipate and may or by the use of the future dense. 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 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 risks and uncertainties described in our SEC filings, including in sections under the caption Risk Factors in our annual report on Form 20-F and in any current reports on Form 6-K furnished with the SEC.

In terms of upcoming events, we look forward to hosting our Investor Day this Thursday, May 7, with live public webcast beginning at 9:00 a.m. Eastern Time. During the event, our leadership team will provide updates on GF's strategy, growth initiatives and long-term outlook, followed by a Q&A session. We will also be participating in fireside chats at the JPMorgan Global Technology, Media and Communications Conference in Boston on May 19 and the TD Cowen Technology, Media and Telecom Conference in New York City on May 27.

We will begin today's call with Tim providing a summary update on the business environment, technologies and end markets. Followed by Sam, who will provide details on our first quarter results and second quarter guidance. We will then open the call for questions with Tim and Sam. We request that you please limit your question to one with one follow-up.

I'll now turn the call over to Tim.

Thank you, Eric, and welcome, everyone, to our first quarter 2026 earnings call. GF delivered a strong first quarter with all of our non-IFRS profitability metrics at or above the high end of their respective guidance ranges. This was the result of excellent execution by the team with a focus on delivering for our customers. These results demonstrate a strong step forward in our multiyear journey to enhance the quality of our revenue composition, improve our structural cost position and achieve efficient scale across our world-class fabs.

We have made meaningful traction in secular growth end markets, where our differentiated technology drives share growth and [indiscernible] value creation. The first quarter continued to demonstrate proof points of this transformation. We delivered strong double-digit percentage growth in both automotive and comms infrastructure and data center. I'm proud of our team's accomplishments this quarter. We continue to execute to our proven 3-pillar strategy: to innovate and deliver a unique technology road map; to deepen our engagement throughout our customers' design cycles and to scale our diverse and fungible global footprint. Let me now update you on our progress on each.

First, our unique and innovative technology road map. There is no better proof of our technology innovation that with our industry leadership in optical networking, which includes both our silicon sonics and silicon germanium capabilities. With the advent of optical for scale across scale out and scale up networks, the market is moving to adopt our solutions for pluggable, near and co-packaged optics. With process technology leadership, in-house design, assembly, test and packaging ecosystems, all supported with high-volume manufacturing in our advanced 300-millimeter fab footprint, including here in the U.S., we believe no other company has our suite photonics offerings at scale.

Beyond silicon photonics, we also believe we have robust growth and opportunity within our silicon germanium solutions in the AI data center. SiGe by CMOS, or just SiGe, is another great example of GF's preparation and foresight meeting a strong positive inflection point in the market. Our SiGe technology is a critical enabler for data center networks where [indiscernible] amplifiers, TIAs and drivers using GF's solutions support the conversion between high-speed electrical and optical signals. GF SiGe has industry-leading FT and S-MAX performance. This means faster, cleaner signal amplification, more headroom and lower data loss across the system. TIAs and drivers are required on virtually every data center connection, and industry forecasts are anticipating significant unit growth in the coming years.

Correspondingly, we are seeing very strong customer demand for our SiGe solutions with capacity at our Vermont fab oversubscribed through well into 2027. As these city offerings are meaningfully margin accretive to our overall business, we are expanding SiGe capacity to meet accelerating customer demand. We expect GF SiGe opportunity to be a substantial driver of high-quality long-term revenue growth that complements [indiscernible] to form a comprehensive optical networking portfolio.

Another notable proof point of GF leadership was announced at the Optical Fiber Communications conference, OFC, in March. At OFC, [indiscernible] members of the Optical Compute Interconnect Multi-Source Agreement, or OCI MSA, including AMD, Broadcom, NVIDIA, Meta, Microsoft and OpenAI, established the CPO industry standard for scale-up networks that perfectly aligns with the capabilities GF has spent years developing. This was no accident. Thanks to our proven development and leadership in Dense Wavelength Division Multiplexing, or DWDM, GFNR partners provided industry proof points, laying confidence to the OCI founders to define this high standard.

As a result, just a month after the OCI standard was announced, year-to-date, GF announced its complete optical module solution for NPO and CPO, known as scale or silicon photonics co-packaged advanced light engine. This is not just the industry's first OCI MSA capable platform, the technical specs exceed the MSA requirements, supporting our customers' road maps for multiple generations. For example, scale fiber coupling is natively broadband, which enables it to excel at minimizing insertion loss, a key differentiator for CPO.

Our years of development, including partnering with our customers to design scale from the ground up, feedback so far has been excellent. In the first quarter, we saw new tape-outs in Multi New York for a pair of CPO design wins that support the new optical compute interconnect OCI standard for scaled networks. We are excited to share more details on scale and other developments at our Investor Day on May 7.

also, at OFC in March, GF made several announcements in conjunction with partners that showcased our robust silicon photonics offerings. Notable highlights included the following: Senco and GF demonstrated a wafer-level detachable fiber interface solution for CPO, a critical breakthrough that enables [indiscernible] connectivity to be attached and detached through the entire [indiscernible] development process for precise and repeatable testing.

Together with Corning and EXFO, GF showcased a complete ecosystem of CPO technology, which combined attachable fiber connectivity and automated die-level testing with high-volume silicon photonics manufacturing. Finally, we announced a strategic partnership with Siltech to mass produce 200 gig per lane receiver photonic ICs for pluggable optical transceivers using our process technology.

All of these recent developments represent a growing body of proof points for the value our innovative technology road map provides.

Let me now discuss our second key strategic pillar and provide an update on our customer partnerships and commercial engagements. Thanks to our robust product portfolio and deep partnerships with customers, we continue to accelerate our design win momentum. In the first quarter, we saw a 50% increase in design wins compared to the same period a year ago, with excellent representation across all 4 major end markets. Not only does this build on the record design win year in 2025, it is another leading indicator of our tape-out for revenue momentum in the years to come.

Notable commercial engagements in the quarter included the following highlights. GF and Renesas announced a multibillion-dollar strategic partnership that expands [indiscernible] to GF technologies, including FDX, BCD and feature is CMOS with integrated nonvolatile memory. These platforms will support SoCs, power devices and MCUs for applications such as data center power, advanced driver assistance systems and secure industrial IoT connectivity. Tape-outs under the broadened collaboration are already underway, and we believe this partnership will contribute meaningfully to continued outperformance and ramp of our data center business over time.

In automotive, we are particularly encouraged by the strong customer momentum around our new Auto Grade 1 embedded MRAM capability on FDX. This technology offers industry-leading 100 megahertz class access times for code execution directly from MRAM, combined with ultra-low power operation and proven insurance and reliability up to 150 degrees C. Our lead customers have taped-out with this feature. And as highlighted in our recent announcement, we are seeing growing engagement and traction with Tier 1, such as Bosch, as this technology moves towards production. This underscores the differentiated value of our SDX platform as automotive customers transition to a next generation of software-defined real-time systems.

In our smart mobile devices end market, we continue to secure additional design wins in the quarter that expand our reach into new applications and emerging form factors that benefit from the features we offer such as low power, rate of reliability and superior RF performance. For example, in the first quarter, we secured 2 new design wins on our SDX platform for micro LED back planes used in smart glasses, a fast-growing market is starting to gain adoption.

In the realm of robotics and typical AI, in March, GF announced a partnership with Inova Semiconductors to deliver our robotics control reference platform that combines MIPS open risk 5 compute and mixed-signal technologies with Inova's high-speed communication links. This physical AI reference platform will simplify robot design, reduce bond costs and accelerate time to market, enabling next-gen humanoid and advanced robotics.

Finally, for optical networking reported within our comms infrastructure and data center end market, we have substantial forward momentum in both customer wins and pipeline. In the first quarter, we executed additional tape-outs for silicon photonics that reinforce our confidence that we are on track to roughly double our silicon photonics revenue in '26 and to achieve greater than $1 billion silicon photonics revenue run rate exiting 2028. GF is now designed in at 3 of the top 4 pluggable optical transceiver companies.

Customers continue to provide excellent feedback on our suite of pluggable offerings that enable 1.60 solutions as well as a road map to 3.2T and beyond. With our proven record of high body manufacturing at scale, we believe we can sustain a strong growth trajectory in this area for years to come.

Now let me address our third strategic pillar, the value and importance of GF's unique diversified manufacturing footprint. Recent world events have only reinforced the reality that faces business and government leaders around the globe. Concentrated supply chains are now subject to previously unimagined risks. The [indiscernible] lies in diversification flexibility and security. All 3 areas that GF is uniquely positioned to provide our customers.

In a fragmented geopolitical environment, our 3 continent manufacturing footprint across the U.S., Germany and Singapore is a tremendously valuable asset for our customers. In particular, we have invested for years to cross-qualify fungible capacity across our fab network, meaning a customer who only design with GF once and gain the flexibility to manufacture out of 3 continents. Our one-of-a-kind footprint provides supply chain resilience, closer proximity to end demand and greater nimbleness to shift supply quickly as market demand changes.

For many of our customers, geographic flexibility is no longer a nice to have, it is a requirement. As a result, we continue to see a meaningful increase in customer engagements and design win activity specifically linked to onshoring. For example, last month, Apple announced a joint collaboration with [indiscernible] Logic and GF to bring new process technologies to our Multi New York fab. This marks the first U.S. availability of the silicon platform that supports clinical functions in upcoming Apple devices, including next-generation components used in face ID systems. GF is proud to be a founding partner in Apple's American manufacturing program. We see this as another step in a growing partnership and just one notable example of our onshoring value proposition.

We are not just partnering with customers to onshore semiconductor supply. We are also working closely with the governments of the U.S., Germany and Singapore. In the U.S. in particular, support frameworks such as chips grants and investment tax credits are an important element to our long-term strategic road map, and we continue to deepen our partnership with the U.S. government both for capacity growth as well as innovation and technology onshoring.

In summary, I'm deeply proud of our team's execution in this quarter, which advanced GF across all 3 strategic pillars.

With our deep and differentiated technology portfolio, we are reaping the benefits of years of innovation. With our customer-first approach and design enablement capabilities, we remain the partner of choice. With our unique and diversified scaled manufacturing footprint, we are empowering the global onshoring megatrend. All of these place GF at the heart of the industry transformations to come.

I'll now pass the call over to Sam for a deeper dive on first quarter 2026 financials.

Thank you, Tim. For the remainder of the call, including guidance other than revenue cash flow and net interest income, I will reference non-IFRS metrics. GF delivered strong results in the first quarter, with revenue in the high end of the guidance range and gross margin and operating margin well above the high end of the ranges. In particular, our gross margin achieved the first quarter record and grew over 500 basis points year-over-year, representing the biggest expansion in 3 years. This is testament to our team's execution and relentless focus on the structural levers driving GF sustained improvement in profitability, and we believe we're only in the early stages of this margin expansion opportunity.

Before I go deeper into the financials, I'd like to take a moment to update you on some terminology changes to our revenue categorization. The acquisition of MIPS, closed in August 2025, as well as the announced acquisition of the Synopsys ARC, our key business, which we expect to close towards the end of the first half of 2026, are both helping to transform GF into a holistic technology solutions provider. As a result, we believe that non-wafer revenue no longer captures the broader reach of our customer offerings, which we expect to include an increasing proportion of revenue from IP, licensing and software over time.

Similarly, wafer revenue is evolving to capture our expanding manufacturing capabilities in custom silicon and advanced packaging, which we look forward to covering in more detail at our Investor Day on May 7. As a result, revenue previously referred to as wafer revenue will now be categorized as revenue from manufacturing services, and non-wafer revenue will now be categorized as revenue from technology services. We believe these categories better reflect the depth and breadth of our business model today and going forward.

Now on to the results. We delivered first quarter revenue of $1.634 billion, down 11% sequentially and up 3.1% year-over-year. We shipped approximately 579 300-millimeter equivalent wafers in the quarter, down 6% sequentially and up 7% from the prior year period. Revenue from manufacturing services accounted for approximately 87% of total revenue.

Revenue from Technology Services, which includes revenue from IP, licensing, software, reticles, nonrecurring engineering, expedite fees and other items, accounted for approximately 13% of total revenue for the first quarter. Revenue upside in the quarter for Technology Services was driven by increased mask and reticles as we ramp customer tape-outs as well as consistent momentum from within IP licensing and software as we integrate the acquisition of MIPS. As the momentum and engagements with customers grow, we expect MIPS to contribute a greater proportion of our technology services revenue going forward at an accretive gross margin to our corporate objectives. All of these factors considered, we expect revenue from Technology Services to comprise a greater proportion of our total 2026 revenue, closer to the high end of our original 10% to 12% range. Our early traction here adds to our belief that the Technology Services portion of our business will be an important long-term driver of durable, high-quality, high-margin growth.

Let me now provide an update on our revenue and outlook by end markets. Communications infrastructure and data center represented approximately 14% of first quarter total revenue and increased 2% sequentially and 32% year-over-year. This marked the sixth consecutive quarter of double-digit percentage year-over-year growth for communications infrastructure and data center. Within this end market, silicon photonics drove robust growth in the first quarter and remains on track to roughly double in 2026 compared to 2025.

In line with our expectations, we saw a healthy revenue contribution from Advanced Micro Foundry, which GF acquired in November of last year. The integration is progressing well as we expand our photonics capabilities at the Jeff Science Park. Combining GF's significant scale in Singapore with AMF's complementary customer base and pluggable photonics solutions for scale across networks has expanded our customer momentum in this rapidly growing market. This acquisition is already gross margin accretive to GF, and we expect to realize even greater growth and profitability tailwinds in the coming years. For these reasons, we now expect to achieve high 30s percent year-over-year revenue growth in our communications infrastructure and data center end market in 2026, up from our expectations a quarter ago of approximately 30% year-over-year growth.

Automotive represented approximately 23% of first quarter total revenue. Automotive revenue decreased 11% sequentially off a strong fourth quarter and increased 24% year-over-year. In addition to our strong customer share in automotive microcontrollers, we are in the early stage of revenue ramps as a result of our accumulated design wins in smart sensors and networking as well as vehicle infrastructure. We are continuing to diversify our offerings to the automotive end market by ramping newly secured sockets in applications such as camera, ethernet, radar and power. It is our differentiated technology and disciplined execution that we believe is enabling GF to capture the growing automotive semiconductor content opportunity and outperform peers in this end market. As a result, we expect Automotive revenue to deliver low double-digit growth in 2026. Its sixth consecutive year of double-digit percentage growth.

Smart mobile devices represented approximately 34% of first quarter total revenue and declined 15% sequentially and 5% from the prior year period. Current industry forecasts for overall smartphone units in 2026 indicate a low double-digit percentage year-over-year decline. With approximately 2/3 of our revenue in this end market driven by premium handsets, we expect to see a more contained impact from memory pricing dynamics compared to the broader industry. As such, we expect revenue from smart mobile devices in 2026 to slightly outperform the overall smartphone market, with an expected decline in the high single-digits percentage. Beyond the near-term dynamics, we expect smart mobile devices to gradually benefit from the growth of new AI-powered form factors, such as smart glasses, hearables and wearables where we have nascent growing traction and design wins with our customers.

Finally, home and industrial IoT represented approximately 16% of first quarter total revenue and decreased 16% sequentially and 22% year-over-year. The decline in revenue from this end market in the first quarter was principally driven by the timing of certain customer shipments, a temporary impact, which we expect to reverse in the second quarter. Importantly, we continue to expect 2026 to be a growth year for IoT, driven by the normalization of core industrial customer inventory as well as the production ramp of new applications in the second half of 2026, which we believe should contribute to a healthy growth of mid-single-digit percentage year-over-year.

Beyond 2026, we expect this end market to be one of the primary beneficiaries of the burgeoning physical AI revolution and serviceable addressable market expansion, where our technology platforms and solutions are well suited to enable devices to sense, think, act and communicate.

In summary, we believe GF's strong secular growth drivers, including meaningful upside from our recent acquisitions will help offset smart mobile devices in 2026. As continued growth across the other end markets we serve, expand as a percentage of revenue. These strategic actions are also intended to accelerate our targeted mix shift towards margin accretive high-value growth markets and applications. We believe the result over time will be a more durable, more resilient, more profitable business.

In the first quarter, we delivered gross profit of $474 million, which translates into approximately 29% gross margin, above the high end of the guidance range and up 510 basis points year-over-year. First quarter saw the largest year-over-year expansion of gross margin in over 3 years. R&D for the quarter was $114 million, and SG&A was $89 million. Total operating expenses of $203 million, were up 4% quarter-over-quarter and represented approximately 12% of total revenue.

We delivered operating profit of $271 million for the quarter and an operating margin of 16.6%, above the high end of our guided range and up 320 basis points from the prior year period. First quarter net interest income, net of other expenses, was $5 million, and we incurred tax expense of $49 million in the quarter. We delivered first quarter net income of approximately $227 million, an increase of approximately $38 million from the prior year period. Diluted earnings of $0.40 per share was at the high end of the guidance range based on a free diluted share count of approximately 561 million shares.

Let me now provide some key cash flow and balance sheet metrics. Cash flow from operations for the first quarter was $542 million. First quarter CapEx net of proceeds from government grants was $309 million, or roughly 19% of revenue. Adjusted free cash flow for the quarter was $233 million, which represented an adjusted free cash flow margin of approximately 14% in the quarter. This outcome was principally driven by favorable working capital movements in the first quarter, which we expect to reverse in the second quarter. At the end of the first quarter, our combined total of cash, cash equivalents and marketable securities, stood at approximately $3.8 billion.

Our total debt was $1.1 billion, and we also have a $1 billion revolving credit facility, which remains undrawn. In the first quarter of 2026, we repurchased $400 million of shares of the $500 million share repurchase authorization approved by our Board of Directors, approximately $100 million remains, and we remain flexible with the deployment of the remaining authorized amount.

Capital allocation, planning and decisions remain tightly linked to visibility, returns and balance sheet resilience. As we move through 2026, our focus remains consistent, disciplined capacity investments structurally improving margins and cash generation aligned with returns. We will continue to drive momentum in areas that we can control and deliberate in how we allocate capital.

Next, let me provide you with our outlook for the second quarter of 2026. We expect total GF revenue to be $1.76 billion, plus or minus $25 million. We expect gross margin to be approximately 28.5%, plus or minus 100 basis points, which at the midpoint reflects over 300 basis points 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 are ramping R&D programs in the second half of 2026 to strengthen our technology differentiation and accelerate our road map in secular growth areas, such as custom silicon, silicon photonics and advanced packaging. Taking into account these investments into R&D and the expected close of the Synopsys ARC IP business acquisition towards the end of the first half of 2026, we expect to maintain a similar quarterly operating expense run rate in the second half of 2026, as indicated in our second quarter guidance.

We expect operating margin to be in the range of 15.7%, plus or minus 180 basis points. At the midpoint of our guidance, we expect share-based compensation to be approximately $71 million, of which roughly $19 million is related to cost of goods sold. We expect net interest and other for the quarter to be between negative $6 million and $2 million and income tax expense to be between $28 million and $48 million.

Based on the tax environments across the jurisdictions we operate in, we continue to expect an effective tax rate in the high teens percentage range for the full year of 2026. Based on a fully diluted share count of approximately 555 million shares, we expect diluted earnings per share for the first quarter to be $0.43, plus or minus $0.05.

Given the timing of tool delivery windows in order to meet forecast customer demand in critical growth corridors as well as the timing of government grants, we expect net CapEx to increase in the second quarter. For the full year 2026, we continue to expect non-IFRS net CapEx to be in the range of 15% to 20% of revenue. Our CapEx strategy continues to align the sizing and timing of our investments with customer demand while scaling our footprint efficiently. Over the last few years, we have seen notable increases in customer demand for incremental capacity in high-growth technology corridors such as silicon photonics, FDX and high-performance SiGe.

In order to unlock sustainable accretive revenue growth, we are expanding capacity in these areas to support the strong demand signals from our customers. Critically, these targeted CapEx investments are supported by robust partnerships with both customers and governments. As a result, we expect that the next wave of capacity investments will be accompanied by customer prepayments in addition to meaningful government grant and tax incentive frameworks in all of the geographies we serve.

Even with greater investment in enabling capacity in these key growth technology corridors, we continue to expect adjusted free cash flow margin of approximately 10% for the full year 2026 with a skew towards the second half.

In summary, I'm grateful for our team's excellent execution this quarter and the strong progress we are making towards our long-term strategic objectives, which are reflected in our financial performance. We believe GF is at a definitive inflection point where years of preparation have positioned us well to capitalize on the secular megatrends defining our industry, and we very much look forward to sharing more details with you all at our Investor Day on May 7.

With that, let's open the call to Q&A. Operator?

[Operator Instructions]

Our first question comes from the line of Harlan Sur from JPMorgan.

Congrats on the solid quarterly execution. Industry demand trends, even over the past 90 days, have accelerated, especially in areas like AI and data center where cloud and hyperscale spending continues strong. In non-AI segments, we're seeing this broad cyclical recovery profile. And then on the supply side, advanced all manufacturers are actually cutting their specialty mature capacity. And your competitors in specialty and differentiated are signaling wafer pricing increases starting in the second half of this year. I know the team had previously talked about a stable pricing environment this year. But just given the tight supply outlook, continued focus on supply chain resiliency, as you guys had outlined, how should we think about your pricing profile as you move to the second half and for the full year? .

Yes. Thank you for the question, Harlan. I think the way you can think about it is differently for different parts of the portfolio. Obviously, there's a part of our portfolio that prices on a very long-term basis. That's been stable for several years now and continues to be stable going forward. There is a component, a smaller component of the portfolio, the prices over a more short-term dynamic. And exactly, as you said, both the supply and demand dynamics there are more favorable from a pricing perspective. And consistent with peers, consistent with even many of our customers, we will implement price adjustments on that part of the portfolio. You can imagine those kicking in towards the back end of 2026 and obviously flowing into 2027.

I'll also add that for part of our portfolio where we are, capacity constrained, where demand is stronger, we're also having conversations with customers, not just about pricing but also about advanced payments to secure capacity as we accelerate our CapEx investments in those tight corridors such as FDX, silicon photonics, high-performance silicon germanium. Those customer discussions are very constructive.

Appreciate that. And gross margins came in 200 basis points better than guidance. MIPS was such a factor, right, your higher gross margin segments like CID, auto, technology services did better on a sequential basis. And for the last question, on industry supply tightness, it looks like the team potentially also benefited from sustained or increasing utilization. But maybe you could just help us understand puts and takes around gross margins Q1, during Q2? And then given the better demand mix, pricing outlook, how should we think about gross margin trajectory as you move through the second half of the year? Could we see the team, as we end the year, closer to the 33%, 35% range?

Harlan, it's Sam here. I'll provide you a little bit of color there. Obviously, we're very encouraged by where we're seeing the structural improvements within our gross margin profile, and this has been a trend which has been continuing for last couple of quarters now. Obviously, if you look at things from a year-over-year basis, roughly 3% of revenue growth but 510 basis points of gross margin. And so this is something we've been positioning for several years. These types of structural levers don't happen overnight, and they really focus across several areas in the business, namely productivity cost continuing, as Tim said, to optimize our footprint from a technology point of view. And mix obviously really matters as well.

If I touch specifically on the first quarter and bridge you a little bit from last year. The single biggest driver there was mix and mix falls into 2 categories. It's the mix as it relates to our manufacturing services, and it's the mix as it relates to our technology services. And you called it out in part of your question, which is the relative strength of the growth that we've seen within those rich mix environments from, say, for example, a communications infrastructure and data center point of view, which generally falls through at a very high margin relative to our corporate objectives. And the same is true for the likes of automotive.

So that's a contribution from manufacturing services, high rich mix has been important. And I'd say as well, from a revenue from technology services perspective, that's continued to trend actually in the first quarter, above the high end of the range, that we indicated. We expect it to be at around 12%. We ended up coming in at 13% of revenue. And part of that is related to the increased contribution we're seeing from the likes of mix and our capabilities in that arena. But I'd say that was factored into our guidance. We did see some stronger mask and [indiscernible] related revenue within technology services in the first quarter as well. And particularly in the aerospace and defense sector as well, and that falls through at a relatively attractive margin as well.

So we're quite encouraged from that perspective. I'd say the other dynamic outside of mix is really from a cost perspective. And the teams have been focusing maniacally on driving cost and productivity improvements. actually, as it relates to the 200 basis points that you referenced in the quarter, about 1 point of that came through cost synergies that we've been driving from our acquisition of Advanced Micro Foundry in Singapore. So that came in certainly more favorable from the perspective of where we were at about 90 days ago.

So you take that combination of richer mix, technology services, favorability from the acquisition when we made [indiscernible], that kind of bridges you to that 200 basis points of outperformance we had relative to the midpoint of our guidance.

I think if I fast forward a little bit to take you into where we're looking at the guidance from the second quarter perspective and how we think about things for the remainder of the year, look, I'd like to focus a little bit on the year-over-year story here because I think it really matters in terms of that structural evolution that we're seeing. At the midpoint of our guidance range, that implies about 330 basis points of year-over-year margin growth. But if you take the revenue we delivered in the second quarter of last year, $1.688 billion, we delivered gross profit of about $425 million in the second quarter of last year. And then you compare that through to midpoint of our revenue guide for the second quarter at $1.76 billion and you take that 28.5% midpoint of the range, that implies about $500 million of gross profit delta, which actually corresponds almost fully to the revenue delta. So what you're seeing is a very meaningful pull-through from that increase in revenue relative to the year-over-year margin story there as well.

Now just on a couple of the -- if you like, the pace as it relates to second quarter and how we're thinking about some of the rest of the year. Look, it would be remiss of us not to be thinking around how the conflict in the Middle East impact supply chain and how we proactively drive our supply chain planning decisions around that. And we've taken some very proactive steps in the first quarter to make sure that we're shoring up our supplies of key gas and cans like helium, hydrogen, sulfur. So making sure we have that supply chain security is key. Obviously, that comes with some incremental costs that we forecasted at the beginning of the year prior to this conflict. So expectation is that, that probably has about a 0.5 point of margin impact for each quarter as we go through the rest of 2026. But all said and done, we're quite pleased with the continued year-over-year margin trajectory that we're seeing.

And our next question comes from the line of Vivek Arya from Bank of America.

For the first one, I'm curious, how are you benchmarking your growth in comms infrastructure and data center? Because when I look at a lot of your analog peers or some of the optical customers or AI in general, they're all growing anywhere between 50% to 100%. So high 30% growth is impressive, but how do you know whether you are gaining or losing share relative to the growth rate? Like, are those growth rates representative of what the industry is growing? Or am I comparing Apples store in this year? .

Yes. Thanks for the question, Vivek. I'd say the following. Remember, our CID market considered 3 kind of big drivers. Silicon photonics, we've talked about already approximately doubling year-on-year. We think that is definitely growing in line with the industry. Trends and the rollouts, and we even see further acceleration to follow as we launch new products like Gale that we announced earlier this week. Our high-performance silicon germanium equally exhibiting very, very strong year-on-year growth [indiscernible] networking we're seeing a very good story. Also in the CID mix, and that continues to grow very sort of solidly as we see rollout of more [indiscernible] capacity and the scale of terminals. So we look at it on a kind of end market, submarket basis. And in those cases, we don't see share loss. In fact, we see a share gain in many of those cases.

Do you have a follow-up, Vivek?.

Yes. Second question is kind of another follow-up on pricing and revenue per wafer. So when the year started, what did you assume for the pricing environment? And what is it now? And then I know I'm focusing on just one metric, but revenue per wafer that continues to decline. And I imagine that's probably because of mix or other factors. But I would just appreciate your perspective on how are you thinking about industry pricing now versus before? And is your revenue per wafer, what does it -- what should it indicate to us because it has continued to decline.

Sure, Vivek, I'll take that. And obviously, Tim gave a little bit of color as part of the last question in terms of how we see the broader pricing environment, particularly in the context of some of those supply/demand constraints that we've seen. Look, I'd say one important point to remember around how we think about pricing is that within wafer pricing, we also have what used to be the underutilization payments that flowed through associated with some of those long-term agreements. That is largely in the rearview mirror. And in fact, we were still getting some of those in the first quarter of 2025. And so when you think about it from a year-over-year comparison basis, there is a little bit of fallout from that ASP perspective.

The important point, and you touched on mix, which is the right way to think about it, but the way we think about pricing is really the contribution from a margin perspective. And at the start of the year, we viewed the broader pricing environment is certainly more constructive than it was in 2025. And actually, as we've gone through first quarter, particularly where we see space constraints on some of our core technology corridors, we remain [indiscernible] view that it is not only constructive in some of those, but favorable tailwinds in some of those technology corridors.

So from a year-over-year comparison basis and going forward, I would say that the key focus is really around the margin structure that we're seeing pull through rather than just the stand-alone pricing. I hope that helps.

Our next question comes from the line of C.J. Muse from Cantor Fitzgerald.

I guess first question was to focus on technology services. Obviously, you're rebranding changes in mix. Would love to hear how we should think about the growth trajectory here beyond calendar '26. Is there a framework that we should be thinking about, particularly as Synopsys ARC closes at the end of Q in the first half of 2026 and your expectations around MIPS and other contributors?

Yes. Thank you, C.J. Maybe I'll start with just kind of winding back on why we've made this [indiscernible] change, and it really reflects the evolution of our strategy. So we renamed wafer revenue to manufacturing services, and that's because more and more of our end products we delivered in different form factors. And if you take our announcement earlier this week on the optical engine, that's much more than wafer. That's an integrated module. And we'll see more and more of that across our portfolio. So it felt more appropriate to describe that as manufacturing services.

In the technology services bucket, which you asked about, that's also growing. What that used to represent is really just a complement to the wafer revenue, the mass, the reticles, the NRE that went along with it. But with some of the acquisitions we've made, we increasingly see areas like IP, software in some of that customization and value-add services that really enable us to work more deeply with our customers.

I'll let Sam talk about how that range will trend over time. Obviously, we see increased growth based on the acquisitions that we've made.

Sure. Thanks, Tim. And C.J., we're definitely going to dive more into this as part of the day when we get together on Thursday. So I won't review too much. But to Tim's point, putting all of that together in terms of the composition of revenue from technology services, you'll recall that we used to guide that to the neighborhood of sort of 8% to 10%, we were typically around that 10% midpoint. And as we've seen this evolution and the increase in complementary services within our technology service, our expectation is that our trends will go to the high end of the 10% to 12% range that we indicated at the start of this year. And obviously, we're in the early innings of integrating MIPS, and we haven't yet reach close on the Synopsys ARC IP business. But again, as we ramp those over time and as we create more offerings for our customers, in the IP, the software, the custom silicon solutions, we'd expect that to drive incremental growth over time.

Very helpful. And I guess as a follow-up, I wanted to focus on silicon photonics. You announced a new platform. You gave a pretty robust outlook exiting calendar, expected, I think revenues to double to $400 million here in calendar '26. Would love to get a sense of how you see kind of the product mix evolving over time. My sense is the lion's share of the revenues today are pluggables, but we'd love to get an understanding of how you see that pattern of changing as we go into '27 and '28.

Yes. Thank you, C.J. No. I mean I think the broader picture is you're seeing extremely strong adoption of optical across the industry. We hear stats like by 2030, 70% of networking ports in the data center will be optical, and that reflects the complexity of compute and the sheer amount of data that AI workloads require. So I think the optical momentum is clearly building.

I think there will continue to be a good discussion about the form factors. Pluggables are in high demand today, growing fast and also evolving with new features and new data rates with 1.6T going into the market today and 3.2 and others on the road map, including for us. I think the evolution to near and co-packaged optics is still very much, if anything, accelerating, and we've heard at OFC this year, many companies come out with their plans, and also this adoption of industry standards indicates ways that the industry can coalesce around a number of kind of more typical approaches to make those products consistent and accelerate the adoption.

We've always been of a view that sort of co-package [indiscernible] story. I think that remains the case. What we have said is that we are already seeing tape-outs of products that are intended for co-package and near package optic use, and that's already happening today. So I think that confidence level on that rollout is definitely increasing.

And our next question comes from the line of Krish Sankar from TD Cowen.

Congrats on the strong results. Tim, just to stay on the topic of silicon photonics, is there a way you can compare and contrast your scale optical solution with TSMC scoop or [indiscernible] semis offerings? Any color on the nanometer nodes of the logic or optical photonics advanced packaging, et cetera, it would be helpful.

Thanks for the question, Krish. And we're going to go into a lot more detail on this week on Thursday at our Investor Day. I think it merits not just a longer discussion, but also some slides to make it a bit more visual as well.

I mean we've been working on co-packaged optics for more than 10 years. And a lot of what we announced this week is based on technologies that we've developed at the wafer level, but also around advanced packaging, things like hybrid bonding, TSVs, also some of the announcements we made about the ability to have fiber attached that is able to deliver low insertion loss light into the chip, while still maintaining maintainability of those devices so you can service them. All of these are some of the innovations we've worked on, and you'll find a lot of them written about in that OCI MSA.

So we think we have an industry-leading solution. It benchmarks very well to competition. But more broadly, this is a fast-growing market and destined to be very large. And so of course, there will be multiple solutions in the market. I think we're very confident in our ability to be amongst those leaders for the foreseeable future.

Very helpful, Tim. And then just a quick follow-up. Maybe you'll talk about this more on Thursday as well. On the MIPS IP strategy, how to think about it, given the risk [indiscernible] processor IP, custom silicon software angles. And I remember in the past, you mentioned that MIPS's technology service revenue could be a $100 million plus business this year. Is that still the [indiscernible] to think about? .

Yes. So look, we've mentioned this before a little bit, but just to comment on it. We're seeing very, very good customer feedback to MIPS and even more positive feedback when we announced Synopsys ARC transaction, which, as Sam mentioned, is set to close within the first half. I think the reason is that customers love the idea of a company with GF scale, with GF, kind of, reliability through the cycle, providing that IP. And I think with the increased adoption of risk 5, especially in those real-world workloads, right, think automotive, think AI at the edge, think about things like radar that require different kind of process technologies. There's a real market need for risk file.

I think what also customers are appreciating is the ability for us to engage earlier in that design cycle. And so we can talk about their optimization of their products. We can give them software tools to simulate those early on well before we're talking about manufacturing decisions. But obviously, it's also enabling us to have a deeper conversation and increase our chances of being that partner of choice when we get to the manufacturing. So that's highly synergetic, and it's changing the nature of the conversations with customers.

And I think the last piece that's worth calling out is having internally these capabilities also gives us a chance to, if you like, taste our own cooking, and push our process technologies further, not just today but also a longer-term road map because we're able to -- with short learning loops, basically push the limits of what we can do in our process technologies for those key applications.

So I'm very, very bullish, not just about the financial trajectory of these acquisitions but also on the strategic back.

I'll let Sam comment about where we are for the year.

Sure. Thanks, Tim. And Krish, to the second part of your question in terms of how we think about the revenue contribution from MIPS in 2026, but we provided some guidance actually at the start of this year and also at the end of last year when we did our Physical AI webinar, that we expected about $50 million to $100 million revenue contribution associated with MIPS in 2026. That range still holds. But what I would say is that we feel like the momentum with customers, as Tim said, is progressing very well. The bookings are progressing very well. We're sort of trending towards above the midpoint of that range that we indicated at the start of this year.

And obviously, that's before we factor in the timing of the close associated with the Synopsys ARC IP business. That will come later, and we'll probably be able to give a bit more color on the contribution from that perspective when we get to our next earnings call.

And our next question comes from the line of Matthew Bryson from Wedbush Securities.

For the comms and data center side of things, you've highlighted solid opportunities in silicon photonic, but can you talk a bit more specifically around whether there were any specific factors that drove the upside versus your prior guide?

Yes. Thanks, Matt. Look, I think it's incremental across the board. We're seeing, for sure, the [indiscernible] optical networking picking up. I think there's a lot of momentum behind that adoption. As we mentioned earlier, pulling through to pluggable optical transceivers. If I could show you an X-ray of pluggable optical transceiver, you'd find in it. High-performance silicon tonics, you'd also find some of that high-performance SiGe content that we talked about. So those 2, I think, are the contributors to the increased confidence in the revenue trajectory within that end market. The other parts remain solid and growing well like SATCOM, but I think the optical piece is the one that we'd call out.

Awesome. And just a follow-up on that. Higher growth in the segment, I mean, it seems to be favorable for margins, but beyond the higher costs you've outlined tied to the geopolitical events, are there any potential offsets we should maybe think about, like additional CapEx to support the quarters that are tight, or is the shift to mix largely just an unmitigated positive for gross margins?

Yes. Look, I'd probably break that down, Matt, into sort of the near-term horizon and longer term, and we'll obviously get to some of the longer term when we get together on Thursday. But the expectation from a CapEx point of view at the beginning of this year was that we'd be in the ZIP code of 15% to 20% net CapEx to revenue. That already contemplated some of the increasing demand that we've been seeing come through on the likes of high performant SiGe, photonis, FDX. And so we'd already sized our overall CapEx envelope at the start of this year to really factor some of that in.

Now I would say one other point, which I mentioned earlier from a margin point of view, we have seen strong cost synergies come through with the acquisition and continued integration of AMS, that is proving to be a good business, not just accretive from a margin point of view, but growing our offering to customers within the photonics space. And so you're right to call out some of that cost headwind, but we've generally felt that we can see some offsets from that associated with the mix dynamics. And look, our target for the full year is still to exit 2026 at or above a 30% gross margin.

Congrats on the strong results.

Thank you, Matt. Give me a second. I'll can add on the CapEx side. I think as you're seeing, our principles of where we think our CapEx are very much linked to where we see strong conviction in customer demand in those corridors that are oversubscribed today. But you should think about that CapEx, the ROI is very strong because we're adding tools to existing footprints and able to bring capacity on very quickly. And by the way, we do that in sites where we have in place strong government support frameworks and especially for these technologies, there's a lot of government support to build out capacity in the U.S. and around the world.

And so even though that CapEx comes through at a significantly lower kind of net fall through once you consider those government partnerships as well.

And our final question for today comes from the line of Ross Seymore from Deutsche Bank.

One near-term one then one longer term. On the near-term side of things, you guys were helpful for the full year on the revenues by segment. And I think you mentioned that the home IoT is likely to rebound in the second quarter. Any other kind of even directional guidance for the subsegments between the manufacturing and the technology services by end market for 2Q?

Yes. Look, I'd probably, Ross, draw your attention to start with in terms of how we're seeing this evolution from revenue composition and a diversification point of view because that kind of becomes a little bit of the layup as to how we see the opportunities, not just in the second quarter, but as we go through the year, from an end market point of view. And look, it's an important point to note that in the first quarter, the contribution of revenue from all of the end markets and technology services outside of smart mobile devices that came in at the highest level that we've had as a company, roughly 2/3 of our total revenue.

So that gradual mix shift just from a technology point of view, but from an end market point of view has been several years in the making, and we're really seeing that come through in the first quarter, and our expectation is that continues through the rest of this year.

So as it relates to the specific quarter-on-quarter dynamics, I'd say that we do continue to expect good year-over-year momentum as it relates to comms infra data center, automotive. As I said, IoT should reverse some of those dynamics we saw in Q1. And then the general offset that, which we touched on in the prepared remarks in the Q&A is really around smart mobile devices, where -- from 90 days ago, we're seeing more kind of high single-digit decline year-over-year. But putting it all together, we think that those declines are offset by the momentum we're seeing in the other end markets.

Perfect. And I guess my one longer-term question is a perfect segue from what you just said on smart mobile devices. I realize what that end market is doing, and it's nice to see you guys outperforming it relatively speaking. How do you see the performance of GlobalFoundries in that business relative to the market over time? Can you increase that delta so you outperformed by more? Or is it just is what it is, and that might be a kind of year-over-year headwind more structurally going forward as an overall segment?

Yes. And Ross, we'll share significantly more on that this firstly because obviously, the objective is that is to go a bit further out in time. I think you're seeing some tailwinds when it comes to content growth within the handset. You're also seeing new form factors that bring content.

Let me give an example, like smart glasses. I'm a personal strong believer that, that form factor we'll see the light of day and will grow and will become a common place. And that requires new technologies, things like back lane for display micro LEDs things that we've been working on with partners for some time. So I think there are some tailwinds. We'll say more about the overall end market on Thursday. But I think it's too early to count out that category as a drive for the future.

Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Eric Chow for any further remarks.

Great. Thank you, Jonathan. Thanks, everyone, for joining today. We're very excited to see you at our Investor Day on May 7. We will also be at JPMorgan Conference on May 19 and the Cowen conference on May 27. Thanks, everyone, for joining. I appreciate your interest in the company.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

Thank you for standing by, and welcome to the GF Business Webinar Series: GF at the Forefront of the Photonics & Packaging Revolution [Operator Instructions] As a reminder, today's program is being recorded.

And now I'd like to introduce your host for today's program, Eric Chow, Head of Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to GlobalFoundries Silicon Photonics and Advanced Packaging Investor Webinar, the second in our series to help you better understand the most exciting areas of our business.

Today, we will be providing a business, technical and strategy update on why we believe GF is at the forefront of the silicon photonics and advanced packaging revolution. We are excited to showcase how GlobalFoundries' differentiated platforms and high-performance interconnect technologies address the need for increasing levels of speed, efficiency and scalability for next-generation data and connectivity applications.

On the call with me today are Mike Hogan, Chief Business Officer; Gregg Bartlett, Chief Technology Officer; and Kevin Soukup, Senior Vice President of our Silicon Photonics business.

Today's slide presentation, along with a recording of the call, will be made available on our Investor Relations web page.

Certain statements on today's call may be deemed to 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 make today.

For more information about factors that may cause actual results to differ materially from forward-looking statements, please refer to risks and uncertainties described in our SEC filings, including in sections under the caption Risk Factors in our annual report on Form 20-F and in any current reports on Form 6-K furnished with the SEC.

At the conclusion of our prepared presentation, we will open the call for questions with Mike, Gregg and Kevin. We request that you please limit yourself to one question and focus the scope of your question to the topics discussed in today's webinar.

I'll now turn the call over to Mike.

Thank you, Eric. AI has fundamentally changed the performance requirements of the data center. In this new era, optical interconnect is no longer optional. It is required. Compute availability and capability is no longer the bottleneck. High-speed, low latency, power-efficient connectivity is.

Let me introduce one term that matters a lot for AI data centers, east-west traffic. At a high level, east-west traffic simply means data moving between machines inside the data center rather than in and out of the data center. Traditional applications were dominated by north-south traffic, users talking to servers. AI flips that model. Most of the data now moves laterally between compute resources and the switch fabrics that interconnect them.

In AI systems, GPUs and XPUs must constantly exchange data to train and run large models. That lateral machine-to-machine communication is what now dominates network load. This shift to what is commonly referred to as scale-out and scale-up networking exposes multiple system bottlenecks and forces a reset towards maximizing system-level efficiency on multiple levels.

At the same time, power consumption is approaching 1,000 terawatt-hours annually. When power becomes the constraint, the industry no longer optimizes individual components, it optimizes entire systems. Interconnect efficiency becomes critical. This criticality becomes more intense as workloads shift further to inference, where the cost per token becomes a key parameter for the sustainability of AI business models.

Interconnect efficiency can be summed up in 4 simple constructs: reach, the physical limits of data transmission; bandwidth density, the bits per unit area that can be delivered to a processor or switch; energy efficiency, the bits per unit of energy that can be transmitted across the link; and ultimately, compute efficiency, the overall utilization rate one can extract from a compute resource, all at the right total cost.

This is where physics takes over. Using copper becomes fundamentally challenged beyond 200G per lane. It cannot economically support the reach, bandwidth density or power efficiency required for sustained GPU-to-GPU communication at scale.

The cost and power required in terms of complex DSP techniques used to extract data from noise reaches a point of diminishing returns for both power and cost. While the physical properties of copper attenuate the signal to such an extent, no amount of retiming and retransmission can address this ever-shrinking reach.

Optical networking scales cleanly across the dimensions that matter for east-west traffic, reach across racks, bandwidth density within packages, energy efficiency and ultimately, compute utilization. That is why optical enables XPU utilization to move from as low as mid-teens to north of 80%. This is not a GF position, but one broadly embraced by the industry. Across compute vendors, network leaders and silicon suppliers, there is strong alignment. Scaling east-west traffic requires optical interconnect. These are current generation architectural decisions, not future road maps.

And while the debate will no doubt continue on the growth of specific form factors such as pluggables, onboard optics and co-packaged optics, the broader direction is clear. We are entering the optical era.

So let me now hand things over to Kevin Soukup to dive deeper.

Thank you, Mike. Now let's talk about how GF is positioned for continued growth in this exciting market. At a high level, we believe our advantage comes from combining technology leadership, deep design support and ecosystem and global manufacturing scale to enable our customers to rapidly bring their industry-leading products to market.

First, on technology leadership. With more than a decade leading the industry in silicon photonics research and development, GF offers an unmatched silicon photonics device portfolio, including modulators, broadband couplers and advanced integration features such as through-silicon vias. This suite of building blocks comes fully characterized and is engineered as part of a highly scalable platform.

Second, design support and ecosystem. We don't just manufacture wafers. We actively partner with customers. We have applied the rigor and learning of decades of best practices in microelectronics to this new field to establish a robust enablement environment, including the industry's leading silicon photonics PDK. Our in-house turnkey design capabilities, combined with strategic partners across EDA, test, fiber and assembly significantly reduced customer time to market and execution risk.

Third, global footprint and scale. We are manufacturing silicon photonics at scale on both 300-millimeter and 200-millimeter platforms, with production in New York and Singapore. This dual-region capability matters deeply to our customers, all of whom need supply chain resilience, geographic redundancy and trusted manufacturing with the ability to rapidly scale to meet the requirements of this fast-growing market.

Taken together, we believe GF enables accelerated time to market for highly integrated electro-optical solutions across every AI data center application.

This slide shows how GF's platforms translate into real products our customers are making across every major optical use case. We support long-range, scale-out and scale-up architectures, each with different requirements for bandwidth, latency and reach. For long-range and coherent applications, we are shipping into 400G and 800G ZR+ solutions as well as 1.6 terabit coherent interface modules. In scale-out data center networks, we're enabling high-bandwidth, low-loss links with DR4 and DR8 architectures, scaling to 1.6T, 3.2T and beyond. And for scale-up systems, where latency and radix are critical, we have enabled bidirectional course and dense wave division multiplexing optical engines for our customers using microring modulator technology.

As the first to market to demonstrate the manufacturability of photonic resonance structures and the viability of DWDM architectures, GF continues to lead the industry road map. We have deliberately built a broad portfolio that supports the full range of pluggable and co-packaged optics, which we believe enables GF to support today's AI data centers, but also provides a uniquely differentiated road map to support the needs of tomorrow.

The strongest validation of our strategy comes directly from our customers. Across networking, optical systems and data center infrastructure leaders, the message is consistent. GF is a trusted development partner and a critical supplier. Customers highlight the robustness of our silicon photonics platform and the breadth of device and fiber coupling options. Others emphasize GF's execution, our ability to take silicon photonics from development into high-volume manufacturing with industry-leading quality and yield. Customers see GF as a long-term partner, one that can push the limits of what silicon photonics can deliver as AI workloads continue to scale.

Late last year, GF made targeted acquisitions that accelerate both our technology road map and our revenue trajectory. On the left, you see the acquisition of AMF, which expands our manufacturing scale and geographic reach, accelerating our Singapore production capacity and immediately broadening our customer base. These new customers are not only driving demand for GF silicon photonics on a global basis, but they are also engaging on GF's leading silicon germanium and FDX technologies to support their solutions. As we integrate AMF fully into GF, we expect to unlock further revenue and cost synergies as well as enrich our road map by the establishment of a deep center of excellence in Singapore in partnership with the Institute of Microelectronics.

On the right, you see the acquisition of InfiniLink, a highly specialized team of designers based in Cairo, Egypt, which deepens our differentiated IP and design services. This brings in advanced photonics control, modulator enhancement IP and system-level expertise that enhances customer designs end-to-end. The InfiniLink team is already engaged in supporting our customers to accelerate their designs and break new performance barriers as well as pushing our road map further through new design innovations. Together, these acquisitions are not just additive, they are multipliers, accelerating time to revenue growth in both the near term and long term while strengthening GF's long-term competitive moat.

I'll close this section by stepping back and looking at the big picture. We believe GF is innovating across all 3 dimensions that matter in optical networking, bit rate per lane, lanes per fiber and overall system radix. This multidimensional approach is essential as the industry pushes beyond 1.6 terabits per second in pluggable applications and beyond 14.4 terabits per second in CPO applications. This innovation extends beyond the wafer and into advanced packaging of the optical module. We are doing this leveraging a unique combination of manufacturing experience, technical innovation, optical know-how and in-house design expertise. Driving innovation in all 3 vectors enables us to maintain our lead in optical networking, but also helps us extend into new applications like optical circuit switching, optical compute and quantum interconnects.

The key takeaway is this, GF is not chasing a single product cycle. We're building a durable, extendable platform that scales with AI, data center and advanced computing demands over the next decade. That foundation, combined with manufacturing scale, ecosystem depth and customer trust positions GlobalFoundries to lead as silicon photonics becomes core infrastructure for AI.

I'll now turn it over to Gregg to talk about our advanced packaging capabilities, which are critical enablers for innovation across these 3 vectors.

Thanks, Kevin. If we return to co-packaged optics, the heart of the CPO solution is the optical module, which integrates 3 components, an electronic IC or EIC, a photonic IC or PIC and the optical interface for the fiber coupling to the PIC. The key attributes of a CPO solution are the performance specs, specifically the high data rates closely coupled to the compute element, optimizing data bandwidth and reducing power. The integration of the EIC and PIC through vertical stacking reduces the footprint while delivering this improved performance and reduced power. Because this solution brings electronics and optics into a single module and requires a wafer-level detachable fiber coupling process, this packaging solution needs to bridge the world of electronic packaging with optics.

We believe this capability is the most important ingredient to scale CPO solutions to high-volume manufacturing, achieve high yield rates and thus, the crossover performance and cost figures of merit that will ensure CPO's broad adoption. We believe that no single company other than GF brings these together all under one roof.

To solve this challenge for our customers, GF launched plans for our silicon photonics and advanced packaging facility in 2025 in Malta, New York to establish high-volume manufacturing capability to support the CPO ramp. The result of this investment is expected to deliver a fully integrated silicon photonics production flow from silicon substrate to known-good optical modules. This capability will dramatically shorten the manufacturing cycle time and also provide rapid turnaround from wafer fabrication to full module yield, all under one roof.

The optical module business requires a complex set of components integrated at very high yield and low cost. GF has worked with partners across the entire supply chain from design and IP to fiber attach partners to test platforms and even universities with critical infrastructure to enable development of next-generation capabilities.

And as we introduce highly specialized materials for 400 gigabit per second modulators such as barium titanate, thin-film lithium niobate, indium phosphide or polymer-based solutions to our supply chain, you will see additional categories and logos as we continue to build out our ecosystem.

And while we're very excited about the road map for silicon photonics and the differentiated solutions we are building, this is just the beginning.

Before turning this back over to Mike, I want to close by providing a preview of some of the other use cases of advanced packaging that are becoming differentiation multipliers, enabling new combinations of technology in 3D structures that make new applications possible. This includes wafer-to-wafer bonding solutions that are already qualified and running for both silicon photonics and RF SOI. The silicon photonics application is a fusion bonded solution of an EIC wafer to a PIC wafer, one of the key enablers for CPO. The RF SOI solution is bonding a pair of our most advanced 9SW RF switch platform wafers, which can reduce the effective die size by as much as 45%.

In addition, we are actively developing solutions like bonding a silicon germanium heterojunction bipolar transistor or HBT, to our ultra-low power FDX platform. This delivers very high RF performance and ultra-low power without compromise for TIA and drivers in the data center.

In addition, we have demonstrated high-yield bonding of gallium nitride microLEDs to our FDX backplane as key enablers for displays and potentially as a way to an ultra-high bandwidth link between GPU and HBM to break through the memory wall in data centers.

The road map is broad. We have many new applications under development such as FinFET bonding for image sensors and gallium nitride on BCD for high-power delivery solutions.

The key takeaway here is that through 3D and heterogeneous integration innovation, we create combinations of technologies across our entire portfolio that would be impossible to achieve through monolithic integration. We believe this allows GF to enable our customers with highly differentiated solutions, and we are able to do so with the scale and maturity of a world-class manufacturing partner, including the essential enablement and application design kits that accelerate our customers' time to market.

Back to Mike to talk about the market opportunity.

Thanks, Gregg. As XPU-to-XPU traffic becomes the dominant workload in AI data centers, optical interconnect transitions from a long-haul solution to a core compute connectivity layer that scales directly with AI compute deployment.

GlobalFoundries is scaling within existing clean room space, supported by strong U.S. and Singapore government partnerships that accelerate at scale deployment of silicon photonics with excellent capital efficiency and target returns. GF's geographically diverse manufacturing footprint as well as our ability to service the market with multiple generations of solutions across 200-millimeter and 300-millimeter technologies is a clear advantage for our customers looking to ramp quickly to meet this explosive increase in demand.

By 2030, GF's serviceable addressable market in communications infrastructure and data center more than doubles to approximately $11 billion. And with our broad portfolio of solutions, we believe we are well placed to grow as fast as and likely faster than the overall market.

Within the broader CI&D landscape, the optical networking SAM more than quintuples over the same time period. Here, GF participates across silicon photonics, silicon germanium and FDX drivers and advanced packaging, capturing value from pluggable transceivers to co-packaged optics across long-haul, scale-out and scale-up AI systems.

Zooming into silicon photonics specifically, revenue doubled in 2025 is set to nearly double again in 2026, and we believe shows a clear line of sight to a $1 billion-plus run rate by the end of 2028, all while our revenue per dollar of incremental CapEx is meaningfully improved through our investments in silicon photonics, building upon our existing factory footprint and supported by our strong government investment partnerships.

In summary, GF believes XPU to XPU traffic is now the defining workload of the AI data center. Optical interconnect is the only scalable answer, and we believe GlobalFoundries is uniquely positioned to lead this transition.

With that, I'd like to hand it over to Eric.

Thanks, Mike. Before we open the call to questions, a friendly reminder to please keep the scope of your questions to the topics from today's presentation. We will be happy to address near-term questions about the business after we report Q1 earnings in May. I will also ask you to limit yourself to one question.

Finally, please note that we will be hosting an Investor Day on Thursday, May 7, in New York City. This will be our first full in-person investor event since 2022, and our lineup of C-level executives will provide an update on the company's latest technical, strategic and financial opportunities. We look forward to sharing with you our refreshed story, and I hope to see you there.

Now for Q&A. Operator?

And our first question for today comes from the line of Matthew Bryson from Wedbush Securities.

One of your competitors talks to having over 80% of the silicon photonics market today, but you have very similar revenues to them. It seems like you have at least similar trajectory into 2026, I mean, to 2027. Can you maybe try to explain the discrepancy in their view versus how GlobalFoundries sees things? And kind of more broadly, how might your platform approach to silicon photonics versus Tower's more customized solution set play into this perceived difference?

Yes. Matt, it's Mike. Thanks for the question. Let me just put like some framing and some context around how we think about where we are in silicon photonics. You can talk to the Tower about what they think, but I'll give you our perspective, and then I'll invite Kevin to maybe double-click.

I think just simply put, we think we're the largest player in silicon photonics full stop. We've built that position based on a decade of sustained investment and benefited from the deep customer and partner learning cycles that go along with that and just generally have benefited from a lot of time over target to feel like we have the largest market share of all the pure-play silicon photonic foundries.

Not to put too fine a point on it, but we think that equals greater than $1 billion of investment over this last decade. And we've done it in a way that's leveraged some advantaged 45-nanometer and 300-millimeter ability to scale in terms of how we bring that technology to market.

So results are clear. We're the leaders in this technology, both in terms of technology and share. And our reputation goes beyond a particular form factor like pluggables. It's really about the optics and the optics are inevitable. So today, we lead in pluggables because pluggables is most of the market. But we expect as the market transitions to near-packaged and co-packaged optics, we will lead as well. And it's really based on, I think, about 3 pillars. At the tech level, we support 100 and 200 gigabit per lambda today. We have 400 on the road map and a pathway to 800 and beyond. We've demonstrated leadership in both CWDM and I think we're the first to demonstrate DWDM capability. We've got expertise in nonlinear optical materials, advanced 3D packaging.

Secondarily, at the ecosystem level, when you've been involved for this long, you really just develop very deep relationships with best-in-class EDA providers like Cadence and Synopsys. So you have a full flow microelectronics-like PDK experience for the customer that includes full system optical simulation for first-time-right silicon.

And we've also built deep partnerships with folks like SENKO, Corning, Teramount on the fiber attach side and key players in the OSAT world like ASE.

So the final pillar of this is manufacturing at scale. We are the only one supporting customers at both 200-millimeter and 300-millimeter, and we're benefiting from some of the most advanced etch and lithography tooling that we bring to bear in that market. So we've got a road map and a capability that's been designed from the get-go for supporting reliable volume manufacturing, and that's why we believe we have leading market share, and we'll continue to do so. But I'll let Kevin double-click.

Yes. Thanks, Mike, and thanks for the question. Maybe I'll just add a couple more details, and I'll continue with that framing around technology ecosystem and manufacturing.

On the technology side, GF supports, as we showed, quite a wide variety of applications. So it doesn't easily synthesize into a simple set of figures. But on the wafer side, it comes down to our ability to build key active photonic devices like modulators, photodiodes, multiplexers, demultiplexers with the best performance, our ability to lead innovation and advanced architectures. For example, GF was the first to market with 8 and 16 lambda bidirectional DWDM.

And then on the packaging side, as we extend the business into CPO, on the packaging side, we offer high-density TSVs to transfer power and signal, multiple ways to attach the electrical IC and a cavity-based structure used to bond lasers, micro-optics for fiber attach or other new devices. On the ecosystem topic, Mike mentioned the PDKs. Look, we have fully characterized device libraries, and we have pre-silicon modeling capability so that our customers can be first-time-right with their designs into GF. So in short, we help our customers build their designs and close their link budgets.

On the manufacturing side, the 300-millimeter platform runs in the same fab that we run 12-nanometer FinFET. This advanced technology, it's a fully automated fab, excellent equipment and process control, and that allows us to deliver superior device performance with these photonic structures. And as a result, kind of in summary, 4 out of 5 of the top pluggable transceiver players are engaged with GF as are key switch and GPU providers for co-packaged optics.

And our next question comes from the line of Krish Sankar from TD Cowen.

I had a question for Kevin. From the prior question on Tower, I had a question on the other foundry, TSMC. How does GlobalFoundries technology for CPO compare to [ TSM's ] advanced silicon photonics and CPO platform? I believe they call it the COUPE technology. So any color comparison and contrasting would be very helpful.

Sure. And let me hand it to Gregg as well to give his perspective. But I'd say, first and foremost, we start with a PIC-first mindset. And that goes into the way we approach co-packaged optics. This is not an enabler. This is a differentiator that helps unlock the full capability in an AI data center.

Yes. Thanks, Kevin. And going back to one of the slides that Kevin covered, it's not just photonics, it's optics as a science. That's where we start.

And Kevin said the right first thought approach that we take that it is thinking about a PIC-first approach. It's not about an optical I/O. The photonic IC plays a pivotal role in successful data transmissions and manipulation of that optical path. The best example of that is we think about broadband from the start.

So as Kevin mentioned already, we have supported CWDM and DWDM from the start. That means that optical components like being able to read in 8 lambdas on an individual fiber and passively MUX and DEMUX that are important qualified devices in the library. We feel like we're the only ones that have such a rich library of those, whether it's 4, 8, 16 or even 32 wavelengths of light.

Of course, moving to DWDM is a huge beachfront density improvement. It also applies to the fiber coupling scheme. We're not doing fiber grading couplers on there. We are, in fact, using the elements that -- from our partners in our ecosystem, specifically Corning, SENKO and Teramount, all of those solutions are not single lambda only, but support full DWDM capabilities.

And maybe just as an aside, well, we talk about the road map for advanced materials going to 400 gig and beyond, where things like thin-film lithium niobate, barium titanate. We also know that DWDM is a paradigm shift in being able to have really, really good beachfront density and still have very high bandwidth there.

So because we have been over target for quite a long time, we have seen how data center architectures continue to evolve year-by-year. And we have been doing work on this PIC-first mindset from the very start, knowing that each customer, each generation of products may have different form factor configuration.

So as such, things as mundane as do you have bump, microbump or copper hybrid bonding, we support all of those form factors. So it really goes to the breadth and depth of the overall solutions that we offer in the portfolio on there. It also goes to the optical module, right? As Kevin highlighted, we do believe that this is an important extension of our manufacturing capability, not just the wafer fabrication, but the conversion of that into a known good optical module.

We are very much in support of an open ecosystem. In fact, people designing in a TSMC EIC, we welcome those wafers into our optical module and believe that our photonic ICs can also be integrated into their ecosystem as well. So we believe that for the benefit of the hyperscalers and our customers, having that open ecosystem in both directions is a critical part of our compatibility across a broad set of solutions there.

So ultimately, we do believe that there will emerge some standards, and I think we're firmly in support of that. Meanwhile, while we do maintain great flexibility for form factors there. And then maybe I'll just close with, I do think it's important to pay attention to the transition from single wavelength solutions that dominate today to the DWDM architectures.

And our next question comes from the line of Kevin Garrigan from Jefferies.

You talked about being the largest player in silicon photonics. Can you just talk more about market share and what you think your market share is today, especially compared to your competitors and where you think it can head over the next, let's say, 3 to 5 years?

Yes, Kevin, thanks. It's Mike. Look, I mean, just to put some round figures around it, we think we are the market leader in silicon photonics foundry. We certainly believe that with the addition of AMF, it's sort of beyond question that we're the #1 guy in the market. That's against what we see as a SAM of $1 billion. So that's where we are today.

Going forward, we do believe that, that optical networking SAM will grow something like 40% CAGR through the end of this decade and expect that our share will actually continue to grow through that time period. And it's really all about our ability to scale manufacturing, deliver reliable solutions and the ability to support really any form factor.

Today, the market is all about pluggables. And that's -- as Kevin mentioned, that's why we've got engagements with 4 of the top 5. But as it transitions to CPO, we feel we'll be even better positioned to take advantage of those scale-up networks as those market transitions happen. So hopefully, that will give you some indication of how we think about market share and where the market share goes.

And our next question comes from the line of Harlan Sur from JPMorgan.

At the time of the AMF acquisition in November of last year, I think you guys had anticipated driving your SiPho CPO business to $1 billion revenue level in calendar '30, right? In the most recent earnings and you guys reaffirmed that today, you pulled that forward saying that you'll be driving $1 billion annualized run rate sometime in 2028, which means $1 billion-plus in '29. So a year ahead of your prior expectations, that's a 50% growth CAGR now through '29, that's obviously faster than the SAM opportunity that you outlined in your slide deck.

What's driving the faster growth profile? You talked about share. But I'm wondering if you can also touch upon, is it more rapid adoption of CPO? Is it stronger growth in just the overall optical comps demanded by the market? Is it a combination of all of the above? Any color would be great.

Yes. Thanks, Harlan. I mean first and foremost, this is an oversubscribed corridor, right? So we are adding capacity to meet demand because that growth rate, like you mentioned, is really significant. So that $1 billion-plus run rate by the end of '28 is actually supported by real revenue customers who've got traction sort of all competing for that oversubscribed quarter. So that sets up quite favorably. But we feel good about our ability to scale, and we've made the investments to meet that demand.

With respect to where it comes from, if you -- we have to call it today, we model about maybe 1/3 of that revenue in '28 being in the CPO space versus pluggables. And clearly, CPO in the scale-up sense is going to be an accelerant to the market. But honestly, if CPO takes a little longer, we still stick by that number. We'll just ship more pluggables as CPO catches up.

And honestly, it could go the other way as well where CPO could be bigger -- sooner, bigger, faster and that scale-up networking could actually drive that percentage of that $1 billion-plus run rate up above 1/3. So that's why, to your point, we pulled in the expectation of sort of $1 billion-plus revenue in 2030. It's really a $1 billion-plus run rate before the end of 2028.

And our next question comes from the line of Mehdi Hosseini from Susquehanna International Group.

I feel like we could spend the entire day discussing and debating photonics. So in that context, I want to actually switch gears and double-click on advanced packaging. Can you help me understand your opportunities as it relates to advanced packaging and test outside of optical? And it would be great actually if you could add some TAM numbers to it.

Yes, Mehdi, hi. This is Gregg. Thanks for the question. You saw some of the development and things that we already have in production. One of those, as I mentioned in my prepared remarks, was around the RF SOI space, which brings together 2 of our flagship 9SW switch wafers for bonding.

None of these are likely to grow at the rate that the optical module for CPO does in that kind of time frame. But for us, what we have is a matrix of all of our product lines with their key platforms and innovation around how those combinations bring solutions together.

So one of the things that I highlighted in my prepared remarks was bonding an HBT to an ultra-low power FDX wafer for TIAs and drivers, but we also see those same applications, for example, in a telecommunications base station. That's not at the numbers that CPO is going to be.

So I don't think we've got a clear, here's what the TAM is going to be for each of these. Each of our individual product lines has these building blocks that bring combinations together on there. Our job is really to build the fabric, if you will, that allows each of those product lines to innovate in the end applications. And we literally -- to your point, we could go on for an hour about the -- all the end market applications that can be brought together, whether it's imaging or BCD and GaN technologies. So I think it's stay tuned as you'll see each of those product lines unfold a series of announcements in the coming years.

Mehdi, I would only add what makes us most excited about advanced packaging is we are focused completely on differentiated solutions. And the ability to take a differentiated solution and combine it with another differentiated solution through advanced packaging is sort of an exponential on differentiation.

So as Gregg said, we're not ready to put a particular TAM on that, but it actually is a force multiplier for our R&D investments to be able to deliver them combinatorially, not just sort of market by market. So it's a very exciting time for us in advanced packaging, and we expect more to come on that front.

Thank you. And this does conclude the question-and-answer session of today's program. I'd like to hand the program back to Eric Chow for any further remarks.

Thank you, Jonathan, and thank you, everyone, for joining today. We look forward to seeing you at our Investor Day on May 7 in New York City. Thank you.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

All right. Welcome back, everybody. I'm Joe Moore from the Morgan Stanley semiconductor team. Very happy to have with us today the executive team of GlobalFoundries, Tim Breen, CEO; Sam Franklin, the CFO. Thank you, guys, for being here.

I guess maybe we could just start. You described the company being at an interesting inflection point on the last earnings call. What did you mean by that? What has you excited about the direction that the business is headed?

Yes. Thank you, Joe. Thanks for being here. No, it's a super interesting moment to be GlobalFoundries. And I think it's because we see 3 trends that perhaps we've tracked for some time, but now moving to different pace of momentum. And the 3 that I see, 2 are demand and 1 is on the supply side. On the demand side, clearly, the rollout of the data center, we're seeing only acceleration in the requirements, the scale, the deployments globally, but also some of the bottlenecks those data center deployments create, whether that's power or networking areas that we've been investing in our portfolio for some time and now seeing that pull-through in the business and the pull-through for the road maps that we have for the future.

Even more excited about the longer-term trends of AI entering the physical world, right? When AI is around us in the cars we ride in, no longer driving because they'll drive themselves, the home environment, the workplace, the factory, that physical layer transition, we're starting to see that have real roots and pull-through into engagements we have with customers. But the third piece of it is how we were born is doing all of that in a globally secured footprint. And that was hard for a lot of our journey because it's not easy to run fabs in different places. But now that's not a nice to have. it's a hard requirement for a lot of these applications. And so when you put demand and supply trends like that at the same time, it really positions GF in a way that we've never been positioned in our history.

Yes, that makes a lot of sense. Some of the recent M&A that you guys have done and talked about, you've talked about being a full spectrum RISC-V process provider, things like that. How do you think about that M&A? And where is the balance between developing IP that your customers do and things like that, how do you think about those dynamics?

We've tried to ground our M&A strategy very much in our customers' requirements. And so we've said, where can we buy businesses, companies, teams that add differentiation to our technology footprint that deepen those engagements with those key customers and actually enhance our global manufacturing base, 1 or more of those 3 pillars.

The recent M&A have done exactly that. And you picked on the topic of kind of IP, custom silicon and software. As you know, we acquired MIPS in the middle of last year. We announced earlier this year the acquisition of Synopsys' ARC business. And this is all centered around providing more to our customers than manufacturing alone.

We provide processor IP, a range of cores for different applications. We give them an alternative in the ecosystem so they have choices. But we do it in a way that they can trust because we're a neutral party, right? We're not a competitor to them. We're not a supplier to their competitor only, right? We're across the broad spectrum.

It allows us to engage with them earlier on their architectures, earlier on how they think about design and it leads to enhanced foundry business as well as IP, software and customer engagements as well.

Great. And you -- before the IPO, you had a decent sized custom silicon business, which later on became Avera acquired by Marvell. Can you contrast that with what's happening? It doesn't seem like you're doing that. It seems like you're more design services element, but how do you think about that dynamic?

No. And I think that's a great question. I mean Avera goes back now '20 sort of '19 time frame. That was a business that was doing 5-nanometer designs in 2019, right? So that road map is highly oriented towards applications that GF couldn't add value to that point, and we said we are not the natural owner of that business, but the thesis that says being a differentiated IP provider, especially for process applications in that edge AI, physical AI kind of domain plus being able to build custom designs in process nodes that take advantage of those technologies like our FD-SOI platform, FDX and so on, you've got a great synergy there. And so MIPS is a better fit for that relative to where we were in the past.

And is that designed to grow the foundry business? Or are there other monetizations that you can do around that?

So you can think of it in really 3 buckets and then a sort of knock-on effect, right? So bucket one, direct IP sales, this business -- both businesses exist. They have direct IP customers today, and that will continue to grow. Both businesses, again, I'm talking about Synopsys as well, have software tools that are used today. Synopsys has over 300 customers in that business that we're buying, using tools like ASIP designer in the case of Synopsys. We have a tool called Atlas Explorer in the case of MIPS. This allows designers to build structures in silicon in virtual silicon, well before they're actually putting things into the real world. And so that software business is also there and growing. And then we have more and more interest in customer engagement.

By the way, with existing GlobalFoundries customers, but also new customers who say, look, I have a particular use case for my medical application. I don't have my in-house design team. I don't have in-house IP. Can you help me put that together? And we can do that working with them, but also bringing third parties to some of the design activity as well. So all of that leads to a different set of monetizations. Of course, a lot of it leads to additional wafer volumes as well down the road.

I mean there was a time when people use GlobalFoundries because they were cheap, right? And then really, even by the time of the IPO, you had started to establish much more of a partnership mentality and people -- the geopolitics, I'm sure helps. But it seems like this is another aspect that kind of brings you closer to the customer, it makes you more central, not like a secondary supplier of foundry services?

I think that's fair. And I think it's about do you bring differentiation? And do you help earlier in that stage of development so that when they're trying to crack their own product competitiveness, you play a role in that. But by the way, it also helps you exploit your process technology differentiation even more. What we learned in that journey is that it's one thing having a different process technology that may be actually superior, but not necessarily the biggest in the industry, while actually having the design skills means you can figure out how to use it.

So our FD-SOI platform today is dominating the field of high-performance radar. Why? Because we've been working with these customers now for many years to build that capability to how to use that technology the right way. So I think this fits with this idea of being highly differentiated.

Yes. Okay. Great. Geopolitics has obviously been front and center for what you guys have been doing for a decade now, really the desire to diversify away from Taiwan specifically, but also the desire for different regions to localize, and you guys have been a U.S. company, but with fabs everywhere. Can you talk about the importance of geopolitics, the importance of government subsidies? And how that helps you build those relationships out?

No. I mean it's obviously a trend that we read about every single day. I mean we live in an increasingly fractured world in many ways. The old order of globalization with no guardrails, I think, is an order that I think no one would say is coming back anytime soon. But it means that customers in the industry have to navigate risk and find ways to mitigate those risks in the business. And they actually want optionality, right? They don't just want to supply security, but they want choices because who knows what happens in the future.

Maybe their business grows in one region more than another, and perhaps they want to be able to localize content. And so we said it's not just enough to build fabs in different locations. You need to qualify technologies across those fabs, so you can choose, I tape out my FDX chip, but I can make it in 3 fabs or 4 fabs around the world. So you get them that optionality of that for their business security.

And of course, going alongside that is you build deep partnerships with governments. And we've had that, of course, in places like Singapore for many years. Germany is bigger supporter of us in the EU more broadly. And then, of course, the U.S. has now accelerated also its support for our industry. So that levels the CapEx playing field, meaning when we invest a dollar in the U.S., we're bringing more than $0.50 back in terms of government support. That allows us to get scale where previously it was hard to do so.

Okay. Great. Can you talk about the current economics of the business? We just had the TI CEO downstairs talking about, okay, the China foundries are starting to be full. We're seeing hotspots. We think that this could become a very tight environment for foundries, which would obviously benefit them, but obviously would also benefit GlobalFoundries. Do you see that? And I guess part of that is TI moving some of the older nodes to support substrates for CoWoS or just to support more advanced nodes, that seems like there's actually supply being taken out of your business. Is that fair?

Yes. Look, I think if you take from a year ago to today, every end market is incrementally tighter, some more than others. For sure, anything that's touching the data center is in high demand and visibility is very strong. Purchase orders are talking about '27 in many cases, not '26. And so you have different levels of visibility. But every part of the industry has basically seen a tightening. And again, some of them are on the supply side, like you mentioned, TSMC strategy changing and some of it, of course, is demand. And then, of course, there's idiosyncratic factors, where, for example, let me give a real example for GF. We have a great business in high-performance silicon germanium. It's been around for some time. But now that, that's getting pulled through on data center applications like within a pluggable optical transceiver for a TIA or a driver, suddenly, we see excessive demand in that we're able to invest with confidence to then supply that demand.

Can you talk about silicon photonics in more detail in optical? We've -- the Lumentum and Coherent were probably the 2 hardest rooms to get in this week at the conference because of the deal they struck, but very clear that this is a key bottleneck to data center, and you guys are very well positioned to help that.

Yes. It's interesting because a few years ago, it would be hard to talk about photonics with anyone to be interested. But in a way, this transition has always been underway because we'll be moving more and more data for more and more complex workloads. Obviously, AI accelerates those workloads dramatically. You add to it that in the data center, the density of the data center has changed dramatically, right? You look at the number of GPUs per rack, racks per pod, pods per data center. This is now a very dense environment, where a lot of data and power, by the way, has moved around on a daily basis.

And you start to hit physical constraints that need to be solved in different ways. How are you seeing that in the photonics demand in the market today? You're seeing a really strong business in pluggable optical transceivers. If you walk around a data center, it will be full of pluggables in every different application scale across and scale out in particular. But what you're also starting to hear about is the growth of co-packaged optics, and I think a lot of this week's announcements were about that because at some point, at that rack scale, there's not enough beachfront to put the optical transceivers in place in a pluggable format. You need to move to something called package inside that CoWoS on the substrates or on the interposer.

We've been working on that for a while. Again, sometimes I think we're early, but we're right and it's better to be probably early and right than late or later wrong. But those applications in co-packaged optics have taken time to develop. You need to integrate more components. You need to bring silicon process technology, which we have but also advanced packaging so that you can bond an electrical on the photonic IC.

You need to understand micro optics, so partnerships like the one we have with Corning about delivering a detachable fiber connected to that board. You have to solve a lot of different challenges, all of which we've been working on for some time. And so now we see the proof points in that in, okay, pluggable demand today, but also strong demand for the road map in the future of moving to co-packaged optics.

We've said consistently that '27 would probably be the inflection point of CPO. I think we still believe that's true. I think what people are maybe getting a bit more incrementally bullish on is just how fast CPO will penetrate, particularly for those scale-up applications. And for avoidance of doubt, pluggables is not going anywhere. Pluggables remain very important, but the scale of application is just becoming huge in terms of demand.

I mean you guys were talking about doubling this year, right, before we even get into that.

Exactly right. I mean you look at the revenue from 2025, that was roughly a doubling from 2024 to a little over $200 million. The expectation for this year is that we've got good line of sight to double again. And to Tim's point, a very large percentage of that, in fact, the vast majority of that is from pluggables. But the early stage ramp and the early opportunities and tape-outs that we're doing with customers is to then support the growth from a CPO perspective.

And how would you handicap your guys' capabilities versus other foundry competitors? I know you've done the acquisitions of AMF and InfiniLink [indiscernible] talked about this as well, other -- certainly, this is going to be an obvious opportunity for everyone. Where do you stand?

So I think we think about leadership here in 3 main categories, right? First of all, how strong is your technology today and your road map for the future. And because this has moved beyond just silicon innovation, you have to think about packaging, you have to think about how you put the whole system together. A lot of the innovations we've been investing in are actually allowing us to have a road map that can serve the 200 gig per lane kind of bandwidth today, which is what people talk about generally, moving to 400 gig per lane probably as fast as anybody, if not faster, from an industry sort of development point of view, that enables those 1.6T transistors, the 3.2T transceivers and so on going forward. So that enables the next generation of performance, both in pluggable and co-packaged.

The second piece is building an ecosystem and the enablement structure. So we have an extremely robust PDK, we've been developing for some time. What does it mean? It means customers can design quickly into your process with standard product, standard sales, standard IP that they can use. That's something that others haven't had time to do and others haven't put in place. Some of the partnerships on test, assembly, detachable fiber connect we talked about as well. That ecosystem is super, super important.

The last piece of it is manufacturing footprint. So back to where we -- our roots in a way. We're doing this in 300-millimeter manufacturing today in the U.S. And so when it comes to security and scalability, that's hard to beat, right? So it means we can meet the demand of the industry as it grows with CapEx efficient and short time to market.

And are you guys -- when you talk about that 100% growth this year, are you guys going to be supply limited with that? I know there -- it seems like there are other bottlenecks that impact the growth on you.

Our internal job is to try and match supply and demand as close as we can. I'd say right now, they're pretty closely matched. But we're definitely seeing incrementally stronger demand signals. And as a result, we are also increasing in some cases, our investment. What I like about the investment side, again, in the short term, this is adding tools to existing fabs. So you're able to get time-to-market advantages. It's very capital efficient. From a long-term point of view, we're also getting the support back from the government side on that.

So I'm more confident to increase the investment as the demand signals come in. What I also like about the demand is it's not 1 or 2 customers with 1 or 2 ramps, right? It's broader and broader. And in fact, the acquisition of AMF brought a whole suite of customers to GF that we didn't have before or didn't have significant scale out before, and that's giving us a much more diversified ramp as well. So I feel like we'll be able to match supply and demand quite well. Of course, that's what we think about every day of the week.

And you -- it seems like investors are starting to get the message on the importance of this. You said a lot of your questions and meetings are around this opportunity.

Yes. I think like everything, it's a question of the technology story was always quite clear, but you need to see the revenue numbers. And obviously, we've talked about that more, and that I think gives people confidence that now we can set a goal of being a $1 billion by 2030. In our last earnings call, we talked about that being run rate by the end of 2028. And so I think we have incrementally significantly more confidence on that revenue trajectory.

When you start to see these scale-up opportunities just emerge from nowhere as tens of billions of dollars, pretty impressive. Okay. Great. On the other parts of your business, consumer-centric, you have still a pretty significant mobile business. There's angst about memory issues in that part of the market. But the biggest customer seems to be okay from what we see so far. Second biggest customer has a memory business. How do you feel about mobile? Do you anticipate there being headwinds over the course of the year?

So look, bigger picture, mobile is still a significant part of our business, but we've been growing substantially in the other parts. And our strategy has been to develop a much more broad base of end demand and definitely data centers played a role in that. The auto story we can come back to if you want. The auto story has also been a really good multiyear growth story and double-digit growth rates, which has made mobile smaller than it's ever been as a percentage of our business.

I think overall, we'll track the overall mobile market. Our portfolio, if you kind of say where are we most geared, it's more geared to the high-end phone. That's kind of obvious in a way because high-end phones have more content upgraded components but think of it in RF front-end module for 5G, think of it display, haptics, audio, power management for the battery life, all of these components. And so we haven't seen tactically any significant customer changes of behaviors and actually we came off a relatively solid kind of end of year launch cycle and so on for some of those phones and those customers that you alluded to.

So I'd say overall so far, kind of tentatively good. I think, look, it's worth watching closely what happens on the lower end and do you start to see incrementally more nervousness on there. So look, we'll track the market overall. Look, longer term in mobile, what's been working well for us is really focusing on those differentiated applications that are multiyear cycles, not the tactical annual cycles where our content is particularly distinguished.

And then, of course, getting involved in new form factors. And we're hearing incremental bullishness on smart glasses and application that requires some similar ICs but also some different things like display and so on that, again, we have good technology for.

Yes. I mean the only place we've actually seen softness, there's a lot of concerns about memory and smartphone is really China Android and -- which should be pretty [indiscernible].

Relatively small.

Yes. You mentioned auto, which has been a great story really for years now. I mean you came public with low single-digit percentage and you've grown it every year a lot. You recently just extended your partnership with Renesas. Can you just give us a sense of what's happening in auto long term? And it does seem like that's one of the markets that's most focused on sourcing in the region.

Auto is, in a way, that perfect combination of the 3 things we always talk about, right? The technologies we bring to bear are particularly suited to auto, and it's not just microcontrollers, it's also battery management, in-cabin sensing, radar, LiDAR, kind of a broad spectrum of semiconductors, more than 90% is in areas that we can service. The single-digit nanometer part is very, very small. So very, very good technology fit.

We've been able to work deeply with those customers now for multiyears. By the way, those design wins take time, they ramp slowly, but then they ramp and they stay for a very long time. And actually, the supply crisis of COVID allowed us to also partner with the Tier 1s and the OEMs. So we spend time with the whole value chain. And they are instrumental in influencing the sourcing decisions by the way, partly because of trust and technology, but of course, the geopolitical factors play a big role.

And so look, auto has been for us a secular growth story. We've grown -- we've outgrown the market every year as a public company, and we've actually had our best year of automotive design wins last year. Despite everything in terms of growth, we're seeing more momentum come into the market. So it tees up the discussion about Renesas. Renesas, a great company, broad portfolio, 3 areas I think are particularly interesting in their portfolio. Of course, automotive is strong. They're ramping in data center power, which we talked a little bit briefly about.

And then they have a broader sort of edge AI microcontroller type applications for different nonautomotive use cases. All of those, again, feed very well into our technology mix and as a supplier with many customers around the world, they said, I need a partner who I can work with globally. I want U.S., I want Europe, I want Asia. I want optionality in China with our manufacturing partnership we have. And actually, even would like maybe some optionality in Japan, and we've agreed to do that with them. And so you've got a situation where it would be very hard for anyone else to deliver that kind of global sourcing in the technologies that business is focused on.

Yes. I mean, I was really struck a few years ago by the automotive OEMs striking deals with you guys where I don't think they knew who you were 2 years before that. How persistent has that been? I mean have you -- obviously, the shortages are not as much in main memory as they were. But we actually heard from [indiscernible] yesterday that the OEMs are asking the Tier 1s to build inventory, Tier 1s say, no, so the OEMs are starting to stockpile inventory so that there's a buffer. Are you seeing that OEM relationship still be important to your business?

I think on the supply chain side, it's maintained extremely high level of importance, right? We have very regular dialogue on planning. Again, they have a little bit more visibility from their side versus the Tier 1s. By the way, we spent a lot of time with the Tier 1s, too. We've been very public about AUMOVIO, formerly Continental, Bosch, Hyundai and others -- Mobis and others that have worked with us. And so I think our breadth in the Tier 1s is also quite strong.

I think, look, what they're all thinking about is what do they want to own from an architecture point of view and design over the long haul. Of course, they look to the cases of companies like Tesla who've had a much more kind of silicon native structure and many have been working on that. And by the way, that brings us back to topics like processor IP. And so for example, having access to IP for processor designs, that's again another vector of engagement with the Tier 1s and the OEMs that was perhaps harder for us to do in the past when it was all about manufacturing. And so look, I think this is going to deepen. And those end up becoming multi-company partnerships because people play a different role in bringing the systems together.

That's helpful. Moving to the financials. Your gross margins have continued to go up. You have a long-term target of 40%. Can you kind of tell us what has to happen to get to that 40%?

Sure. And look, I think the important metric that we're focused on now is the relative progression from a gross margin perspective. And if you look at the fourth quarter and do the comparison to same period the year prior, we delivered revenue that was roughly flat. We delivered margin that was almost 4 points higher. So why is that the case? A couple of fundamental drivers that Tim has alluded to already.

One of those is the mix within our business. And there's 2 layers to the mix within our business. There's the mix as we think about it from the end markets that we're servicing and the secular drivers within those end markets and there's the evolving mix as it relates to how the acquisitions we've made over the last year are starting to evolve from both wafer revenue services as well as technology revenue services as well. MIPS is a good example of that. The Synopsys IP acquisition will be another good example of that as well.

So really, it's that mix evolution that has been a strong tailwind. And by the way, we've shown that gross margin improvement, notwithstanding the fact that on a year-over-year basis, the legacy of underutilization payments had actually fallen out of that revenue stack as well. So continued mix shift is key. If you look at fourth quarter combination across comms infrastructure and data center and our automotive business, that's 35% of our revenue, okay?

You take that and you do the comparison to smart mobile in the fourth quarter, that was 36% of our revenue. If you rewound the clock to prior to when we went public as you rightly said earlier, Joe, automotive was in the low single digits. Smart mobile was greater than 50%. The mix shift doesn't happen overnight. It's been a multiyear journey, but it's a multiyear journey with very disciplined investment that's driving incremental margin fall-through as well.

The second piece of the story is really how we think about the scale opportunities across our business. And scale matters in foundry, right, particularly given that we're at the highest fixed cost end of the entire semiconductor ecosystem. And so we have, again, focused our investments over the course of the last few years to really kind of drive that scale across our Dresden footprint, across our Singapore footprint. The opportunity for us as it relates to scale is now principally in the U.S. It's scaling and remixing our Burlington, Vermont facility and it's scaling and remixing our multi-facility in Upstate New York. And again, we've been really driving towards that for the best part of 1.5 years now.

Malta was traditionally a FinFET facility. Well, now we've been transferring technologies in. We have FinFET. We have silicon photonics. We have our FDX technology. We have a 40-nanometer automotive qualified corridor as well. So we are driving scale across our footprint, which again is a tailwind as it relates to the broader margin story as well.

And then the final piece of it is really around productivity. At our core, we're a manufacturing business. And so continuing to focus on productivity is critical. Our cash cost per mask layer matters, all the components that go into our manufacturing processes and where we look to drive incremental margin growth as well. So what I will say is that all of the strategic decisions you've seen us take over the last year as well are not because we view 40% gross margin as a final destination. We view that as next stop in the journey as we continue to focus on this evolution of our business as a holistic technology services provider. We think that creates more opportunity over the long term.

Okay. That's helpful. You talked about a little bit on the earnings, a meaningful increase in capital intensity this year. How should we think about that?

Yes. Again, Tim alluded to a little bit of this earlier. We've made a really concerted effort, particularly as it relates to CapEx intensity over the last couple of years. And more importantly, how we think about it for 2026. The first core principle is debottlenecking, making sure to your earlier question, that we have the capacity that's needed to meet the demand that our customers are telling us that they need.

A couple of great examples of that are everything related to silicon photonics in the pluggable space, our high-performance silicon germanium, which is up in Burlington, Vermont, but also our FDX technologies as well. Our FDX technology is one of the most versatile that we have across the business as it relates to all of the end markets that we service. So debottlenecking that demand key. And that's really where we see a significant envelope of growth from a CapEx point of view this year, but it's because the demand is there and it's accretive demand to our long-term margin targets.

The second piece is how do we do that capacity growth and deploy that CapEx in an efficient manner? And from a GlobalFoundries point of view, we've got a footprint that allows us to grow into the existing 4 walls that we have across most of our sites. I mentioned the remixing going on with Malta, opportunity to continue growing within the 4 walls. The same is true as we remix Burlington. In fact, in Dresden, we have our legacy Bump-Test-Facility, we're going to convert that into incremental manufacturing capacity as well. And as we ramp in AMF, the silicon photonics business we acquired last year, again, using the existing 4 walls. So that efficiency really matters.

And then the final piece, Tim kind of mentioned earlier is capital efficiency and partnerships with governments across all of the geographies that we operate in as well as partnerships with customers as well. There's an increasing focus from customers that demand certainty matters in some of these critical technologies that we're putting on. So if I take the government as an example, Tim mentioned earlier, in the U.S. we can expect upwards of $0.55 on the dollar. I think you can assume a rough rule of thumb that anywhere between $0.30 and $0.55 on the dollar is what we target across all of the geographies that we operate in.

So I'd say they are really the 3 core components that we think about from a capital intensity point of view. Now the last 2 years, we've been well below our target model. Our target model is net CapEx sort of 20% of revenue. We've been operating in the roughly 8% to 10%. So actually, it's natural that you see a bit of a float up this year and I indicated on the call that I expect that to be more like 15% to 20% this year. But for all the reasons I outlined, we feel quite good about making those decisions.

I mean one of the nice things about the businesses you're in is the relatively low capital intensity compared to the guys competing gate-all-around and the cash flow that the business throws off. Can you talk about the priorities for free cash flow moving forward?

Absolutely. I mean, look, we've been on a relatively early journey in terms of becoming quite a high generative free cash flow business last year, close to $1.2 billion a year before, over $1 billion that we want to make sure that we're maintaining this flywheel of free cash generation. But we also have a very clear hierarchy about how we think about what to do with that cash generation.

We want to make sure, first and foremost, that we're investing in the business in high-growth, high-margin opportunities. That's investment from both an organic perspective and an inorganic perspective. I mentioned the technology corridors where we're really focused. Inorganically, Tim alluded to earlier, the acquisitions that we've made across the last year as it relates to MIPS and AMF. The broader opportunity that comes through with the Synopsys IP business as well.

Again, really focused on investing in the business for growth in high-margin areas. Secondly, we want to make sure that we have a very robust financial position. Balance sheet is key. We want to continue making sure that, that's strong. We ended the year with roughly $4 billion of cash on the balance sheet. We have another $1 billion of unutilized credit facility as well. We feel quite good about the strength of the balance sheet at this point.

And then finally, it's how do we look to thoughtfully look to redistribute some of that capital back to shareholders as well. Look, we're going to do that in a very orderly manner. As you heard from our last earnings call, we've had authorization from our Board to start with a $500 million buyback. That buyback is format neutral, whether it's privately or through public market buybacks as well. But I think it's a good endorsement as it relates to the long-term opportunity and the resilience and the discipline that we have within the business.

Very helpful. Let me pause there and see if we have questions from the audience. If not, maybe just we have 3 minutes left. Any final remarks. Can you close that. What do you want investors to focus on the most when it comes to GlobalFoundries?

Yes, I think the way I think about this is preparation meeting opportunity, right? And it doesn't happen overnight that you position a global manufacturing footprint with flexible technology. It doesn't happen overnight that you develop technologies that just have breakthrough performance for connectivity in the data center, for power management in the data center. It doesn't happen overnight that you build relationships in automotive to be able to grow double digits year-on-year for multiple years. And so we've been working on this for a while. I think what the inflection point is kind of where we started the discussion is you now see this driver across everything in the industry called AI.

And of course, we internalize that mostly as this virtual cloud-based interface, but you're hearing at this conference a lot more about agentic, you're hearing about physical. And so we're at the beginning of the secular shift of how technology is driven and that's going to pull through a huge amount of content in our industry. And GF has been preparing for that for some time in terms of positioning the portfolio as best we can.

Of course, things move faster in some areas and slower in others. But we're at a really incredible point where we can now deliver on that model. And as Sam said, we've got the financial firepower to do it. We've got the accretive model where every dollar of revenue comes with significant fall-through and higher margins. And so I feel like we're at the beginning of a really good sort of virtuous cycle for our company with not just one demand driver. I think the last piece of this is there are lots of ways to place semi, but betting on one thing. I think what's great about our model is it's betting across that whole kind of technology stack along the bottom, the benefits.

Great. Well, thank you very much. Appreciate it.

Thank you very much.

Thank you for standing by, and welcome to the GlobalFoundries Inc.'s Fourth Quarter of Fiscal Year 2025 Financial Results. [Operator Instructions] As a reminder, today's program is being recorded.

And now I'd like to introduce your host for today's program, Eric Chow, Investor Relations.

Thank you, operator. Good morning, everyone, and welcome to GlobalFoundries fourth quarter and full year 2025 earnings call. On the call with me today are Tim Breen, CEO; and Neils Anderskouv, President and Chief Operating Officer; and Sam Franklin, CFO.

A short while ago, we released GF's fourth quarter and full year 2025 financial results, which are available on our website at investors.gf.com, along with today's accompanying slide presentation. This call is being recorded, and a replay will be made available on our Investor Relations web page.

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 deemed to 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 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 risks and uncertainties described in our SEC filings, including in sections under the caption Risk Factors in our annual report on Form 20-F and in any current reports on Form 6-K furnished with the SEC.

In terms of upcoming events, we will be participating in fireside chats at the Morgan Stanley Technology, Media and Telecom Conference in San Francisco on March 4; and the Cantor 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 p.m. Eastern Time on March 10. At this event, we will provide a business, technical and strategy update on how GF is at the forefront of the silicon photonics and advanced packaging revolution.

We will begin today's call with Tim providing a summary update on the current business environment, technologies and end markets, followed by Sam, 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 Tim, Neils and Sam. We request that you please limit your questions to one with one follow-up.

I'll now turn the call over to Tim.

Thank you, Eric, and welcome, everyone, to our fourth quarter and full year 2025 earnings call. I am pleased to announce that GF 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 communications 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 differentiated portfolio aligned to key long-term secular trends, GF 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, namely, 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, GF made extraordinary strides strengthening our technology differentiation across multiple vectors. In the exciting growth area of silicon photonics, we acquired AMF and InfiniLink, which together brings valuable state-of-the-art IP and synergetic customer bases. We expect both of these acquisitions to accelerate our technology roadmap, broaden our portfolio of optical networking solutions and drive 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 for silicon photonics. In the burgeoning realm of physical AI, our acquisition of MIPS enables GF to become a diversified and holistic technology solutions provider with an expansive portfolio of offerings and a larger-than-ever serviceable addressable market. Lastly, we accelerated our gallium nitride technology road map 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 U.S. footprints.

The second key strategic pillar where GF made significant strides was to deepen customer partnerships 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 widest range of customers in our history. With over 95% of these design wins secured on a sole-source basis to GF, it 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 4 U.S. hyperscalers, all 5 top automotive OEMs, all 6 mobile fabless and OEM and 7 of the top 8 industrial IDMs.

Of our 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 U.S.-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 U.S. 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 AI data centers and other critical power applications.

And finally, in 2025, we advanced our third key strategic pillar, leveraging our diversified geographical footprint. In June 2025, we increased our commitment to invest $16 billion in the U.S., with plans to expand manufacturing and advanced packaging capabilities in our New York and Vermont facilities. Furthermore, we announced plans to invest EUR 1.1 billion to expand our Dresden facility, increasing the fabs wafer production capacity to over 1 million wafers per year by the end of 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 GF, we expect these opportunities to be driven by the three most significant megatrends defining our industry today. The rapid scaling of AI data centers, the proliferation of AI into the physical world and the critical 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 scaling of AI, and these requirements are driving rapid shifts in semiconductor demand. With years of focused R&D and capacity investments as well as close collaboration with leading customers, GF 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 GF. Meanwhile, optical networking has clearly emerged as a strong acceleration opportunity for our business at GF. 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 last year, the addition of AMF will accelerate our silicon photonics road map, broaden our customer base and drive opportunities for scale and geographic synergies in Singapore. This highly complementary 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 pluggable applications, and we 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 the end of 2028, a substantial acceleration from our prior objective.

Moving on to the second major megatrend, physical AI. The emerging technical requirements of physical AI mapped directly to GF's core strengths, building highly integrated, low-power, secure and cost-efficient connected ICs. The addition of MIPS last August is enabling an acceleration of our physical AI capabilities combining our world-class manufacturing capabilities and customer relationships with a full suite of risk 5 processor IP, subsystems and software. Along with the recently signed acquisition of Synopsys Processor IP solutions business, and 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 positions us to deliver 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 Risk 5 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 road map, 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 GF to become a full spectrum risk 5 processor IP provider, serving a global base of over 300 active customers, now equipped with an expanded range of solutions, including [indiscernible] ultra-low power neuroprocessor course, and it's widely used ASIP designer and MetaWare software tool chain as part of our offering.

The final megatrend defining our industry is the critical importance of geographically diversified semiconductor supply in a fragmented deglobalizing 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 U.S. as central to their long-term supply chain strategy. GS is ready to meet these requirements in a way no other company can.

GF flexible and scaled footprint spans the U.S., 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, tapeouts and preparations for high-volume ramps. Over the course of 2025, new design wins that were specifically driven by a 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 GF are only starting to take shape, but we are setting the foundation with customer partnerships today. We expected 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 compared to 2024, 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 smart mobile devices, we continue 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 22 UX platform targeting next-gen imaging in mobile phones and action cameras with 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 GF. 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 WiFi 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 Multi 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, WiFi 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 at the scale-up network marked an important step in the industry's rollout of CPO. As AI clusters grow, the capabilities of our silicon photonics portfolio position GF at the center of the shift towards high bandwidth, lower latency interconnects that underpins scale-up AI networking. Beyond silicon photonics, our leading portfolio of high-performance SiGe using applications such as TIAs and driver ICs serve critical needs across optical networking. GF is not just participating in these critical optical networking opportunities. Our products and innovation are actively driving informed.

In satellite communications, we continue to expand our leadership by winning additional content on the satellite, enabling direct to cellular phone services. GF 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, GF is at an exciting inflection point. Our acquisitions are expanding GF'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'm 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 for a deeper dive on fourth quarter and full year 2025 financials.

Thank you, Tim. For the remainder of the call, including guidance, other than revenue, cash flow and net interest income, I will reference non-IFRS metrics. As Tim 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, which includes revenue from reticles, nonrecurring engineering expedite fees and other items accounted for approximately 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, which equated 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 GF initiated onetime pricing adjustments made in 2025 with a small number of mobile customers where GF 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 products and end market portfolios, 2025 was the first full year where more than 60% of GF'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 GF 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% 5 years ago and is a testament to the design wins, content growth and customer partnerships that GF 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 increase 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 the second half of 2026, we expect a return to full year revenue growth for our IoT end market this year, albeit with a skew towards the second half.

Finally, communications infrastructure and data center represented approximately 12% of the quarter's total revenue and 11% of 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 for 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 our 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 and communications infrastructure and data center end markets, together comprised a record 1/3 of our 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 GF'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 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, GF 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 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, GF 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 GF. 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 GF and focusing 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 $500 million, supported by our solid balance sheet, margin expansion and the implementation of our long-term strategic pillars that Tim 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 road map.

Now let me provide you with our outlook for the first quarter of 2026. We expect total GF 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 the first half of 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 in capacity corridors, where we are oversubscribed such as in silicon photonics, FDX, SiGe as well as in establishing new capabilities in areas such as advanced packaging. Not only are these important drivers of revenue growth, they are critical long-term accelerators of GF'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's 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 Tim for some closing remarks.

As you saw in our 6-K filing this morning, today is Niels' last earnings call at GF, 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 road map. I wish him the very best in his next endeavors. Here is Niels for some final remarks.

Thank you, Tim. As I step down from my role as President and COO, I want to express my deep gratitude to the entire GlobalFoundries team. The past three years have been some of the most rewarding of my career. And together, we sharpened our strategic focus, strengthen our business discipline and advance the three foundational strategic pillars that now define GFC [indiscernible] 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 road map, expanding design win momentum and our stronger operating rhythm. What stand out most though is the relentless dedication of our people their commitment, their drive to win and their belief in what GF can achieve have shaped the company's trajectory and laid a powerful foundation for the years ahead. GF is in a stronger position today than at any point in its history, and I have full confidence that Tim 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 to you.

And with that, let's open the call to Q&A. Operator?

And our first question for today comes from the line of Mehdi Hosseini from Sesquhana Financial Group.

And the first one, I want to focus on silicon photonics, especially in the context of the recent SAP acquisition in Singapore and InfiniLink from November of last year. Can you remind us what the strategy here is and how GlobalFoundries is intended to differentiate? And I have a follow-up.

Thanks, Mehdi. 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. That's something we've been working on for more than a decade as GF 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 an offering for 200 gig per lane technologies today and a road map 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 in that journey. Also having the strongest enablement, obviously, these 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, brings the table specialized solutions, things like detachable fiber attach, which are critical for the transition to copackage optics, and the last thing that, of course, GF is well known for is that global manufacturing footprint. And so we're scaling silicon photonics in Singapore and the U.S. 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, and 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 $1 billion run rate revenue, which we think will reach by end of 2028. So overall, very strong momentum, lots more opportunities ahead. We're very much at the beginning of this transition in the data center.

Great. And then the second question, actually a different topic, but perhaps part of your longer-term strategy. And one -- I would like for you to remind us, what is your strategy with quantum compute? And I asked that because IonQ recently acquired SkyWater. SkyWater was a smaller analog fab. And I think your strategy on the risk side is somewhat also a strategic with a lower opportunity that Quantum brings. So can you remind us what the strategy is? And any additional color that you can provide us would be great.

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, full-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. GF 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. GF provides for all of those. Obviously, since that announcement that 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.

And our next question for today comes from the line of Ross Seymore from Deutsche Bank.

I want to talk a little bit about the supply side of the equation. You talked about what 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 of the differentiation and what that means for kind of sustained CapEx going forward beyond this year?

So thank you for the question. I think we're seeing, particularly in these areas of differentiated technology, combined with strong end market traction, a big step-up, that's compared to a year ago in corridors, such as silicon photonics. Also, our FDX platform, a lot of use cases there from the car to the IoT and beyond. In 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, will we see good areas rough 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 4-wall footprint. So they come with quick ramp and 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 a good opportunity for us to grow, to invest more strongly against that customer demand.

And Ross, maybe just to put a couple of numbers around that as well and kind of reinforcing Tim's point there around the guiding principles that we have for deploying CapEx. And as Tim said, number one, customer-led demand; number two, in accretive corridors; and number three, in a highly capital-efficient manner. Actually, 2025 as well is a good example of where we've already demonstrated that's starting to come through, not least in the increased investments we've made in Silicon Photonics to support the ramp that we've seen so far. But also some of those government grants that we've seen come through as a result of the strategic importance of our overall footprint. And so you take our gross CapEx in 2025 versus 2024. You're actually up about 15%, but on a net basis, down about 7%. The single biggest driver there is that we are now starting to see the level of increased government support across the U.S., across Germany, across Singapore, start to fall through. So relative to 2024, about $10 million of government grants came through 2025, about $150 million. We expect that to grow again in 2026. So really kind of plays to those thought of those three core principles.

I guess as my follow-up, just if we take all of these investments on one side and I think, Tim, you described it as kind of a holistic technology solution provider in your transcript. How do we think about the margin structure? What does it mean to the gross margin over time for the company and perhaps even the OpEx intensity. It seems like the business model, whether it be mix shifting or just a solution approach is really a different model than when you last updated us on some of your long-term targets. So I just wanted to see how some of those targets might be changing.

Sure, Ross. I'll take that one. And I think there's a couple of important points to unpack there, both in terms of some of the margin drivers and as you say, on the OpEx side of the equation as well. The margin, I think, is really starting to come through and what you saw us deliver in the fourth quarter as well. You take a relatively flat revenue profile year-over-year in the fourth quarter, we delivered almost 400 basis points of increased gross margin. Now some of that comes through the continuation of our focus on productivity of disciplined spending, very modest utilization pick up during the year as you heard, we were about 85% for the full year of 2025. Where we're really starting to now see the fruits of the strategic decisions that have been taken come through is around the mix. Clearly, with silicon photonics roughly doubling in 2025. That comes through at a highly accretive gross margin. That contributed to that large step-up that we saw and enjoyed in quantum in data center in 2025. And you overlay that with automotive, which has typically been a strong tailwind for us from a margin perspective, but also a secular growth perspective, you take the combination of those two, and that's about $2.2 billion of revenue in 2025, about 1/3 of our total revenue. That on a stand-alone basis, it's larger than some of the competitors that we see within this space. And so this continued diversification of the portfolio from an end market perspective and a product perspective is going to be a good driver of margin tailwind over the years to come. And then the last piece, which I'll just call out there as we think about it on a long-term basis is really about scale. And Tim talked about it in some of his prepared remarks as well, but we are being super disciplined about how we invest in our capacity. And first and foremost, we're doing it within the four walls that we have available. We have four walls opportunities available in Morten New York, in Burlington, where we are today as well as what we recently announced in Germany as well, which is converting our legacy BTF facility. So as we continue to get our sites to scale and get that scale with an improvement of the mix from a product and an end market perspective, we really expect to see good margin drivers over the years to come. And then maybe briefly, Ross, on your OpEx piece, you asked the question there. Look, I think it's fair to say there's a tactical element to OpEx and a strategic element to the OpEx as well. From a tactical perspective, if you look at 2025 and to some degree, 2024, we were getting the benefit of certain legacy tool sales coming through as a contra to OpEx. We also had good flow-through from the AM ITC during those years as well. We don't expect some of those tool sales to recur in 2026. And so there's a natural float up in some of the OpEx there. From a strategic point of view, look, it's very focused in terms of some of the inorganic plays that you've seen us make over the last few months. And really, if I take R&D as an example, the incremental investment in R&D programs across our existing product portfolio, but also in relation to the likes of MIPS and in future, the Synopsys processor IP business, that's really focusing on new IP cores, including AI cores, processor IP, again, positioning the future growth here. So a natural float up in some of the OpEx on that front as well. Hope that helps.

Congrats Niels as well.

And our next question comes from the line of Mark Lipacis from Evercore ISI.

Tim, if I look at the acquisition of the recent ones on the processor side, MIPS and ARC and then on the connectivity side, it's the Advanced Micro Foundry for SIFO and InfiniLink. So is there a synergy between these, for example, if the customers who are using the processor, are they're also using the connectivity IP? Or are these separate ideas? And then separate from that, is -- are these acquisitions, they -- are they just broadening your portfolio that you can offer? Or is this -- are they meant to also move you up the value chain, so to speak. So are you becoming more than what you've been in the past, I'd like a classic foundry. I don't know if that's the right way to say it, but are you moving up the value chain with these acquisitions? Is that part of the idea?

Yes. No, Mark, thank you for the question. It's a great one. I mean really quick recap on the photonics-oriented acquisitions because we've already spoken about that a bit. Those are absolutely about bringing new technology to that road map, accelerating capacity, by the way, bringing also new customers. AMF came with different customers that GF hadn't worked, deeply within the past and now we have new opportunities to grow with those customers. By the not just in photonics, many of them are also potential customers for the rest of the portfolio. So that's highly synergetic. And then InfiniLink, great team in Cairo, Egypt, where you've got very good design skills in our platform. That's helping customers onboard more quickly, build more innovative solutions and architectures, including some of the customers that are building more co-packaged optics type solutions, which are more complex have more packaging and so on in them. So that's highly geared towards that data center AI build-out and obviously build on our organic photonic story. The mission synopsis is different. And so I think you can think of that more as laying a foundation for that physical AI transition. We firmly believe that will outstrip the current boom on the data center over the long haul because the number of applications are much, much broader. And what's interesting is the customer reaction we had to those acquisitions first one we announced MIPS and then even more so when we announced Synopsys, I got a lot of answers sheet says very, very positive feedback to customers who said, "Listen, this is great because this allows us to engage earlier together in the road map, and we're thinking about how we solve critical problems in the car, in the IoT, in the defense space and so on." And I think it's, therefore, not just, Sam kind of alluded to accretive revenue, which it is, but it's also synergetic to our manufacturing footprint and allows us to engage much earlier, which means those engagements are much more strategic much longer and more durable as well. So I think the synergies are with our current business, but both of them really play to those megatrends that we're talking about.

Very helpful. And then a follow-up, if I may. When you listen to your customers on their earnings calls like most of them are of the view that the supply chain inventory correction has largely played out. And I'm wondering if you could give us a sense like what is the visibility for you guys look into 2026 compared to a year ago? And any color you can provide us on like how your customers are thinking about giving you like longer lead times and longer kind of visibility or higher facility into the year versus a year ago? Is that helpful?

It's a great question. And I think across all end markets, it is significantly more visibility versus a year ago. I think that's consistent. Obviously, there are some markets where the visibility is extremely high. And you hear that on other earnings calls, again, anything touching the data center. Most of the customers are talking about '27. For them, '26 is already a deal that I think is very consistent based on what you're also hearing from the big spend of data center CapEx and so on. So that's very strong. I think for us on areas like automotive, we're just sustaining momentum and not just in classical areas like microcontrollers where we have a strong business again, good visibility, but areas that are ramping very nicely like smart sensors, things imaging, think radar, some even emerging opportunities in LiDAR. And so you're seeing new growth, but this is also based on design wins that happened in some cases 2, 3, 4 years ago, and that's just the nature of that automotive business. So I think we remain with pretty good confidence and visibility into the automotive side. I think we talked about the IoT. It's a bit more of a story of product transition this year. So we do see growth. We definitely see stronger growth in the back half because we know which products are taping out and are moving into ramps in the back half of the year. But I'll call out key areas, again, like medical, they're starting to pick up, which is very interesting, I think, longer term, very, very good growth driver. Other areas of the IoT, I think, also industrial picking up as well on the same basis. And then look, smart mobile, we said we track the overall market. I think that's the one that people ask the most questions about in general from a market dynamics point of view, if you listen to some of those earnings calls. I'd say our portfolio is geared more to the premium handset and premium handset is typically more resilient to some of the disruptions you've heard about from other calls. So again, overall tracking the market. Obviously, we're watching the space very carefully.

And our next question comes from the line of C.J. Muse from Cancer Fitzgerald.

I'm just curious if you could spend a little time on the silicon photonics side. You talked about doubling revenues again here in 2016. Curious if there's a change in mix, customer base within that? And then as part of the bigger picture within CID, how are you thinking about kind of the growth trajectory for that overall business, particularly given silicon photonics doubling once again?

Yes. No, great question, C.J. So overall, what I mentioned with AMF is we brought in new customers to the mix, which is great, and those customers as to say, have more opportunities that we can grow. That's given us a pretty broad portfolio into silicon photonics. As a reminder, the majority of photonics revenue today is in the pluggable space pluggables are doing very, very well globally. If you walk around any AI data center today, you'll find a huge number of pluggable optical transceivers being used. Obviously, that pulls on silicon photonics, but also within our CID end market that pulls on things like high-performance silicon germanium actually a very strong business for us that, again, we're investing in given that the capacity is being very, very well utilized today. So I think that part is there. What you're also seeing and hearing about is the beginning of the co-package optics, transition. I think we've always been consistent that, that was a '27 scale ramp more than a '26 scale ramp, but all the progress we're seeing in terms of design wins, in terms of takeout, planning gives that a good indication that that's on track. And that's just because CPO is the only way to address certain performance workloads, especially on scale up networks. And so look, I think photonics still, like I said, very early in its rollout and those form factor changes will also drive significant increases of content.

And maybe, C.J.; just to capture 1 other aspect that look in 2025, we grew our I&D business about 30%. So really an inflection from some of the legacy migration that we saw in 2023, 2024. To Tim's point, a big piece of that is silicon photonics and optical networking, but we're also now seeing this continued growth from a communications infrastructure perspective and specifically within satellite communications as well. So you look at the LEO satellite launch projections over the course of the next couple of years, the continued commercialization industrialization of this technology as well. We believe that's a good tailwind as well heading into 2026 and consistent with the commentary that we provided on the call, we expect to have a similar growth rate in '26 as well.

Very helpful. And then -- and maybe just to get our arms around all of the acquisitions in '25. How should we think about kind of the incremental revenues and the implications to gross margins as well as OpEx. Any kind of framework around that?

Yes, happy to. And look, there's obviously a period of ramp and integration that comes through with these acquisitions as well. I sort of categorize a little bit the difference between, say, an InfiniLink acquisition, which is really focused on high capability, design team that will support revenue growth in the outer years, particularly within photonics and packaging, versus, say, AMF and MIPS, which are revenue generated from day 1, albeit more with a second half ramp. So the disclosures we provided on both MIPS and AMF in the past, where we expect MIPS to deliver about $60 million to $100 million of revenue in 2026, albeit with a second half skew. And similarly, AMF, call it, at least $75 million in '26. But look, they're not the reasons why we acquired both of those companies, the multiyear opportunity that comes with acquiring those companies is really where the focus is for GF, and we're going to provide more color on that when we get together as part of the circum photonics webinar that Eric outlined. So good opportunities on a multiyear basis, short term, call it roughly $150 million there or thereabouts, we'd expect across the two. As it relates to both of those, they are margin accretive. So think about it as roughly a point of incremental margin in 2026.

And C.J., maybe just to add on because we've talked about the photonics kind of 2028 run rate goal that we've set and increasing and confidence to deliver given how we pulled it in. We have a similar goal for what we're doing on the custom design and IP side with MIPS and now with Synopsys. Again, we believe that can be more than $1 billion business for us -- incremental $1 billion business for us over time. And so again, these are meaningful opportunities. Obviously, we start from today, but there's a lot of growth behind the plans.

Our next question comes from the line of Krish Sankar from TD Cowen.

Tim, can you give some color on how to think about wafer volumes in ASP in 2026 given the different moving parts between smart mobile and trend in auto and data center infrastructure?

Yes, it's a great question. I'll start and then Sam adds some costs. So I think you're kind of alluding to also the pricing environment. You've also heard comments from other players out there. We definitely see a stronger pricing environment in 2026. You see that evidenced not just by some of our peers and other players in the industry looking at price raises, but you're also hearing about customers of ours raising prices as well. So I think people are willing to pay for those growth areas, where they want increased volumes, they're willing to pay, and they're also passing in some cases, those on to their customers. So I think, again, versus a year ago, you're in quite a different price environment. We were very deliberate in our price decisions in '25, specifically in the smart mobile space. But again, we don't see any significant action in '26 on the same basis and overall in a better spot from a pricing point of view. We will grow wafer volumes this year. But I think, as Sam alluded to, the mix is really is really the driver for us in terms of the profitability growth because the delta between the most valuable wafer and the least valuable wafer is very significant, driven by the technology, the application and the market dynamics. And I think that mix driver will probably the stronger reason for growth from a profitability point of view in 2026.

Yes, that's right, Krish. And just one point from Tim, and we'll focus principally on the guidance for the first quarter, but you can see some of that coming through, right, on a year-over-year basis, call it revenue up about 3%. But then you look at where the midpoint of the gross margin guide is as well. That's up over 3 points. And so it really plays into some of those comments, Tim was making around the mix as well.

Got it. And then a quick follow-up. You gave a lot of color on the acquisitions, both the MIPS and Synopsys, ARC, IP, which makes a lot of sense. I'm just wondering, are you like kind of enclosing more into ARM territory? Are going to be competing with ARM in the future, or how to think about it?

It's a great question. And I think the way we are anchoring all of these acquisitions is in a strong focus on what our customers are asking us for. And so one of my priorities since I've taken the role to spend a huge amount of time on the road meeting customers and understanding the gaps and the challenges they have. And they want optionality. They want choices. And let's take the risk 5 example. Risk 5 is a strategic priority for the majority of semiconductor companies. You've seen that from everything from Mesa to Qualcomm. Obviously, all of the IDMs have been very public in their support for risk V, and there are many, many more. And so what they said is we'd love to have a provider who can invest behind that road map, who can drive a multiyear kind of support structure who can invest in building tools and software so we can simulate our designs and our architectures before we make them in silicon. And so I think the feedback for that reason has been really, really good and so on. So I think a bit less is competition, but more about filling gaps in the portfolio that the customers need today.

And our final question for today comes from the line of Timothy Arcuri from UBS.

Non-wafer revenue, obviously, you're pushing into custom silicon it's gross margin accretive, but how accretive is it? And the 10%, 12% for March quarter as a portion of revenue, is that sort of what we should think about staying in that range for the rest of the year? And then I also had a follow-up too.

Sure, I'll take that one, Tim. And as you think about what comprises our non-wafer revenue, look, the masks, the reticles IP royalties, nonrecurring engineering, all of those are key leading indicators for us in terms of where we see some of the opportunity as it relates to future production revenue and that has continued to ramp during the course of 2025, and we expect a similar range as we outlined for the call as it relates to at least the FERC quarter. But really, as we look at it over the longer term, clearly, the key addition as it relates to the last few months, is that a mix and what that kind of IP processor, software licensing royalty, revenue framework will provide as well. So it's the right range to think about for now. And clearly, that is a step-up of, call it, roughly 2 points in that range from where we were this time last year. And then from an overall margin perspective, the non-wafer revenue has traditionally and will continue to fall through at a level which is highly accretive to the corporate targets that we've set out.

Okay, Sam. And then the middle of 2025, you thought you could get to 30% exiting the year, you got closed, but you didn't quite get there. So sitting here right now, do you think we can exit this year at 30% or possibly even higher than that?

Sure, Tim. And we tried to give you a couple of the considerations on the call, and I'll just kind of reinforce some of those principles. And it really ties to some of the growth in margin that we've seen during the course of the last 12 months as well, continued expansion of margin associated with mix, continued improvement associated with productivity and really cost discipline within the business, call that a couple of points on its own. Really, the wildcard at this point is what happens from a utilization point of view as we get into the second half of this year, we see strong oversubscription in certain corridors from a technology point of view that will continue during the course of this year, and you heard that reflected in some of the comments from both eComms infrastructure and data center point of view, but also automotive as well. So I would say they're the kind of core components. Look, the long-term goal for us is still to be driving towards that 40% gross margin target. And I think what you've seen from us over the course of the last last six months, some very deliberate strategic actions to not only keep us on track to that, but ultimately go through it.

And I'd say, Tim, just to a little bit -- I'm going to give you a yes for 2026 to the question of getting to our 30% target. But as Sam said, our focus is not to get there. Our focus is to get there and keep going to that long-term target that we talked about.

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Eric Chow for any further remarks.

Thanks, Jonathan. Thanks, everyone, for joining today. We're looking forward to seeing you at our next investor webinar on March 10, where we'll discuss how we're at the forefront of silicon photonics and advanced packaging. Thank you.

Thank you, ladies and gentlemen, for your participation. This does conclude the program. You may now disconnect. Good day. Good day.

Thank you for standing by. Welcome to the GlobalFoundries Business Webinar Series, Enabling AI in the Physical World.

[Operator Instructions] As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Eric Chow, Investor Relations. Please go ahead, sir.

Thank you, operator. Good morning, everyone, and welcome to GlobalFoundries' Inaugural Business and Strategy Webinar. Today, we will be providing a market, technical and strategic update on the opportunities for GF across the rapidly evolving physical AI space. We are excited to showcase how GlobalFoundries' MIPS and ultra-low power solutions are driving the evolution of smart, autonomous and connected devices across physical AI applications.

On the call with me today are Mike Hogan, Chief Business Officer; Sameer Wasson, CEO of MIPS, a GlobalFoundries Company; and Ed Kaste, Senior Vice President of our Ultra-Low Power Product Line.

Today's slide presentation, along with the recording of the call will be made available on our Investor Relations web page.

Certain statements on today's call may be deemed 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 make today. For more information about factors that may cause actual results to differ materially from forward-looking statements, please refer to risks and uncertainties described in our SEC filings.

At the conclusion of our prepared presentation, we will open the call for questions with Mike, Sameer and Ed. We request that you please focus the scope of your questions to the topics discussed in today's webinar.

I'll now turn the call over to Mike.

Thank you, Eric. Let me start by setting the foundation for physical AI, what it is, how it is transforming the world and what it means for GF and the broader semiconductor industry.

When we look across the history of significant market inflections in our industry, we see that each investment cycle follows a familiar pattern. Infrastructure enables new applications and those new applications transform our world. Each tectonic shift is defined by the exponential growth in connected devices and the complexity of workloads they support. In addition, each tectonic shift has seen an acceleration in the time it takes to reach widespread adoption. It took about 3 decades for the dot-com build-out to blossom into the connected world we have today. It took around 2 decades for the expansion of wireless infrastructure to lead to billions of smart devices today.

We believe the current AI data center investment cycle is merely a prelude to the massive physical AI opportunity around the corner. Where the past was about connecting millions of users and devices, the future is about enabling tens of billions of devices to sense, think, act and communicate in real time. Physical AI is not just an incremental step, it's a transformative one that will drive new applications and fundamentally reshape how technology interacts with the physical world.

Here's how we see this transformation playing out. AI's impact is already moving beyond the digital realm and into the physical world. We see this today across industrial intelligence, autonomous systems, robotics, drones and smart devices. The journey from basic autonomy to multipurpose intelligence is underway, and the future will have brand-new form factors and intelligent real-world applications that users can only dream of today.

So how do we get there? Physical AI systems must aggregate data from diverse sensors, process information at different fidelities and make decisions that are executed through motors and complex real-time control plans. Smarter and ever more bespoke microcontrollers operating in complex multi-threaded real-time environments are key. They must enable efficient control loops and algorithms leveraging the power of an open versus proprietary compute environment. Communications between an array of sensor domains in the outside world elevate platforms from smart to truly intelligent autonomy, all at the lowest possible power in an untethered and connected world, where all these performance requirements for enabling the future of physical AI are at the core of GF's diverse technology portfolio today.

What does this mean for the technology industry? We expect physical AI to drive a much broader set of workloads than ever before. Devices must sense, think, act and communicate in dynamic, unpredictable environments. This means gathering data from the environment, processing it to make decisions, executing commands through actuators and sharing data internally and externally. The complexity and diversity of these workloads demand new approaches to semiconductor design and system integration. Optimization for the most -- for most of these foundational elements of physical AI will not depend on the most advanced lithography.

To enable this transition, a broad set of semiconductors is required. Customer needs are evolving rapidly and semiconductor requirements are becoming more complex with foundry at the core of this transition.

Let's dive into each one of these key areas. First, sense. AI is driving the need for sensing capabilities across virtually every application. This means a surge in semiconductor demand for sensors, more types, more volume, more precision, creating substantial opportunities for precision analog and highly integrated solutions.

Second, think. To support localized AI processing, devices require quick, efficient decision-making in ultra-low power optimized architectures. This transformation is spreading intelligence across devices, moving from centralized processing to a massively distributed intelligence model.

Next, act. Executing decisions in real time requires speed, precision and reliability. This means dense input, output, IP algorithms and architectural innovation. The rapid expansion of automation is fueling substantial growth in integrated control solutions for motor controllers to actuators.

And finally, communicate. Connectivity remains a critical enabler of physical AI, and semiconductors are central to achieving secure multistandard communication. The proliferation of connected devices is driving substantial demand for low-power RF and connectivity solutions, ensuring billions of links operate securely and efficiently.

So to sum it all up, physical AI impacts the semiconductor market by driving increased demand for analog precision, multimodal integration, ultra-low power, optimized compute, low latency, secure connectivity and advanced sensing circuitry. Integrated memory, configurable workloads and architectural innovation are essential. The market and our customers are asking for more content and complexity, more memory and optimized processing and more advanced packaging and integration.

Ultimately, with the breadth and depth of our product portfolio and the strength of our differentiated technology, we believe GlobalFoundries is uniquely well positioned to meet these critical AI needs.

In the next 15 minutes, my colleague, Sameer Wasson and Ed Kaste, will explain just how well positioned GF is to enable this significant shift.

With that, over to you, Ed.

Thank you, Mike. Now let's talk about how GlobalFoundries is an essential enabler of the physical AI transition. GlobalFoundries' portfolio is strongly matched with the needs of the ongoing AI infrastructure build-out, where we have highly differentiated solutions, including silicon photonics for AI data center connectivity, advanced packaging for 3D heterogeneous integration of different technologies for advanced compute and connectivity and BCD and power GaN for data center power delivery. With data transmission and power being 2 of the most important factors impacting the scaling of AI infrastructure, these product lines are already seeing strong design win momentum.

Our other product lines, including RF and feature-rich CMOS, are also particularly well suited for connecting and enabling applications from cloud to edge. We're incredibly excited that GF's portfolio fit is even stronger for the era of physical AI. The requirements for semiconductors that are purpose-built to sense, think, act and communicate outlined earlier by Mike, are directly in the crosshairs of GF's expertise and where the entirety of our investments are focused. This is especially true in our ultra-low power CMOS and MIPS product lines, which we will be highlighting today.

Our FDX platform is ideally suited for applications that are optimized for power and particularly leakage power above all other things. GF's differentiated FinFET platform provides an increased level of performance while still aggressively managing power. Both platforms are fully optimized for integrated solutions requiring high-performance RF connectivity, optimized memories, dedicated interface devices and more. These platforms are already the solution of choice for home and industrial IoT applications, and you'll find them inside many of the leading industrial automation systems, home security cameras, smart speakers and connected devices.

Now in the pursuit of continued enhancement of our technology platforms, we are further layering on the full suite of MIPS RISC-V processor IP, subsystems and software to target the physical AI opportunity.

I'll pass it to Sameer, who will dig deeper into these capabilities as well as where we see a ton of synergy.

Thanks, Ed. MIPS is powering the next wave of physical AI by delivering the real-time event-driven computing engines that intelligent systems need. Our processors combine a 40-year legacy in risk innovation with pioneering multi-threading capabilities, making them uniquely suited for compute that must respond instantly to the physical world. This isn't just theory. MIPS cores have been battle-tested in the field. MIPS has had a heritage of proven success, powering the Sony PlayStation 2 and Nintendo 64 game consoles.

MIPS today is a fully modern platform, driving the brains inside the MobileEye's EyeQ6 driver assistant chips. In fact, MIPS CPU IP has shipped in hundreds of millions of ADAS SoCs for cars worldwide. Even today, some of the leading cloud hyperscalers use our designs in their infrastructure. This track record means MIPS comes to GF with proven credibility and scale.

Why do industry leaders choose MIPS? Because our technology delivers deterministic real-time performance, the ability to sense an event and act on it immediately, which is exactly what physical AI applications demand. Whether it's an autonomous vehicle making a split second decision or an industrial robot reacting on a factory floor. MIPS processors provide the fast and reliable intelligence at the edge to make it happen.

We achieved this by marrying our patented multi-threaded micro-architectures with an open RISC-V instruction set. That gives customers high performance without the proprietary lock-in and a rich ecosystem of tools. In other words, we've taken a software-first co-design approach. We engage with customers early, often virtually to ensure MIPS IP is a perfect fit for their needs. By the time the chip is fabricated, our customer software is already running smoothly on our cores, a modern engagement model that speeds up time to market and builds deeper partnerships.

MIPS brings tremendous strategic value to GF. We contribute a proven world-class processor IP portfolio that enables real-time AI in the physical world, backed by decades of innovation and broad adoption. Together with GF's geographic reach and manufacturing excellence, MIPS is positioning GF to lead in high-growth areas like autonomous driving, smart devices and industrial automation. We are providing the critical computing engines that will drive these physical AI workloads, and that's why MIPS is such a powerful and timely addition to GF's customer offering.

Let's go deeper into how we conceive platforms for physical AI because this is where the real differentiation begins. At MIPS, we don't believe one size fits all architecture. Physical AI is fundamentally different from cloud AI. It's not about centralizing compute in a data center. It's about distributing intelligence across the machine. Whether it's a robot navigating a warehouse, a drone flying autonomously or a vehicle making real-time decisions on the road. Each function, sensing, thinking, acting, communicating requires its own specialized compute part. This is why we built platforms from the grounds up.

Our processor IP is workload-driven, modular and optimized for real-time responsiveness. We start with software because that's where intelligence lives. Our Atlas Explorer platform lets customers tune multimodal AI models, co-design hardware and software and validate performance before a single chip is taped out. That's the real game changer.

Now when you combine this with GF's ultra-low power process technologies, you unlock something powerful. GF's FDX and FinFET node give us the lowest power and highest integration in the industry. Their embedded memory, RF integration and advanced packaging allow us to build dense, efficient SoCs that meet the latency, power and cost constraints for edge devices. Think about a robot operating on battery in a dynamic environment. It needs to sense with precision, interpret multiple sensor modalities and act with accuracy and communicate instantly. That's not just AI, it's physical AI. And it demands distributed intelligence, low-power AI cores, high-quality mixed-signal analog and real-time communication backlinks. These are exactly the areas where MIPS and GF excel.

Together, we are not just building chips. We're building platforms for our customers that are purpose-built for the physical world, and that's how we are enabling the next wave of intelligent machines.

Thanks, Sameer. To bring these concepts home, let's start with a real application where physical AI is already having an impact, the software-defined vehicle, which is increasingly managing its own real-time interactions with the physical world. As a consequence of this trend, we're seeing the semiconductor footprint in automobile surge from a supporting role to the central pillar of innovation. Modern vehicles now integrate hundreds of chips, powering everything from ADAS to infotainment and battery management.

As autonomy connectivity and electrification accelerate, we see a corresponding increase in the semiconductor content per vehicle, which in the vast majority of cases, do not require EUV class semiconductors. In the last 5 years alone, the average semiconductor content per vehicle has risen from $700 to $1,000 and is expected to continue growing to approximately $1,400 through the end of the decade. High-performance radars, for example, are at the heart of ADAS systems as precision sensors are taking the place of a driver's vision and data is analyzed by AI. These are incredibly demanding systems requiring a sensing range of 400 meters, angular resolution below 1/10 of a degree and operating frequencies up to 120 gigahertz. They have to perform this functionality in under 3 watts of power to maximize energy available to move the vehicle and avoid overheating.

The GlobalFoundries FDX platform is already the industry-leading solution for this application, thanks to superior RF performance, leakage management and highly reliable operation up to 150 degrees Celsius. Now we have the additional benefit of MIPS IP on this platform, combining deterministic real-time processing with industry-leading efficiency and safety compliance. The multi-threaded architecture enables parallel execution of vision, sensor fusion and decision-making workloads without sacrificing latency, critical for ADAS responsiveness. This is a real winning combination.

While the transformation of things that we know and love is accelerating, these trends will also give rise to new applications that previously would not have been possible without them. The software-defined vehicle paradigm is rapidly extending into robotics with humanoids as a very exciting example. Just as software-defined vehicles decouple hardware from software to enable continuous feature upgrades, humanoid robots require an even higher degree of flexibility to support evolving AI models, sensor fusion algorithms and autonomy stacks.

The same factors driving the semiconductor content growth in vehicles are therefore magnified in the humanoid use case. Multimodal sensors emulate human sensors, enabling rich environmental perception. A distributed intelligence architecture acts as the nervous system, processing data for ultra-low latency and real-time decision-making and communicating status throughout the body. Actuators serve as the muscles, delivering precise fluid motion for real-time interaction with the physical world. All of this must be done continuously and seamlessly while always conserving energy for the next task.

This all means that the semiconductor content in a high-end industrial humanoid can reach 3 to 4x that of a modern automobile, creating a massive opportunity for GF to deliver energy-efficient safety-certified platforms that can adapt over time. Our ultra-low power platforms are perfectly tailored for running these distributed intelligent systems, delivering the multimodal sensing and edge compute capability required at the right power profile. We continue to drive disruptive memory solutions such as MRAM and RRAM with the smallest footprints and fastest access times in the market.

These technologies allow our customers to build differentiated products without developing memory IP from scratch, helping them future-proof their designs as traditional memory scaling hits physical and economic lines. And we'll continue to innovate as leaders in RF and high-speed connectivity to increase speed and bandwidth of interconnects within and outside of the application. MIPS brings an even stronger solution into this use case with standard setting control loops for real-time motor control to enable the 40-plus degrees of freedom in these robots. This application will bring to bear the very best of GF's capabilities.

At the end of the day, what's validating our strategy and giving us confidence that we are on the right path is the feedback we have received from our customers in bringing GF and MIPS together. We are experiencing a marked increase in customer engagements and the desire to accelerate partnerships is evident. The opportunity with physical AI is becoming evident for the industry and the only way to accelerate towards tapping into that opportunity is by forming stronger alliances and relationships across the value chain.

With GF and MIPS coming together, we are now able to cater to a broader set of new and existing customers who use both traditional and more custom silicon models. In addition, with our product offering scaling from process, IP, silicon and software, we are quickly becoming the design enablement partners for hardware and software engineers at our customers as they develop solutions for the physical AI space.

Okay. You've heard from Ed and Sameer about the strength of GF's technology and capabilities as well as specific examples of where we are winning in physical AI. Let me now talk about the significant market opportunity this presents and how GF is building upon our strong customer and design win momentum.

GlobalFoundries is now at an exciting inflection point, where preparation meets opportunity. Over the last decade, we have worked to expand our product portfolio, increase the differentiation of our technology and reach efficient scale in our fabs across the U.S., Germany and Singapore. That preparation has positioned us at the forefront of the next transformational shift, the proliferation of AI into the real world. We currently estimate our physical AI SAM to be $18 billion by 2030, a lower bound forecast with significantly higher upside potential as new form factors and next-gen applications ramp.

Shown through these 4 broad market lenses, transportation, industrial, consumer and medical, these examples of end applications are just the tip of the iceberg. Beyond these customer opportunities with MIPS and GF's ultra-low power platform, we have an even stronger business model than ever before. GF continues to evolve with our customers' requirements and is now a diversified holistic technology solutions provider with growing opportunities, including custom silicon, IP licensing, royalties and software. Combine the strength of our technology and the unique benefits of our geographic footprint, and there is every reason to expect GF to capture significantly more than our historical market share in this new paradigm.

Given the significant value we provide our customers as we ramp our high-margin revenue mix, we fully expect our enhanced business model to drive greater growth and profitability accretive to our long-term objectives.

We've shown you a glimpse of the future. Let me show you how we get there. As we partner closely with customers to understand their needs, we see strong design win momentum across all of our end markets. In the first 3 quarters of 2025 compared to just 2 years ago, we've nearly tripled the number of design wins with customers. Of these wins in 2025 year-to-date, approximately 95% were secured on a sole-source basis for GlobalFoundries, a strong testament to our differentiated technology. In the last couple of quarters alone, we announced customer partnerships and wins across smart glasses, satellite communications, autonomous vehicle smart sensors, AI-enabled smart medical and more.

These design wins are what we have accomplished so far, but we are even more excited about the traction we have with leading industry players moving forward. GF is engaged with a wide breadth of the key players driving innovation and growth in our industry. The level of engagement we are seeing with the key industry leaders is unprecedented in our history. The combination of GF and MIPS allows us to have more meaningful conversations with customers. Through years of partnership and collaboration, we are currently engaged with many of the top industrial IDMs, leading AI fabless companies, automotive OEMs and U.S. hyperscalers, just to name a few. Many of these relationships are just starting to bear fruit. All of this is laying the foundation for accelerated growth and increased market share in the coming years.

Today, I can confidently say that GF has never been in a better position to capture the opportunities ahead of us. We are in the very early innings of a generational transformation, and we are excited to craft this future.

With that, I'd like to hand it over to Eric.

Thanks, Mike. Before we open the call to questions, a friendly reminder to please keep the scope of your questions to the topics from today's presentation. We will be happy to address near-term questions about the business after we report Q4 earnings in February.

Operator?

[Operator Instructions] Our first question comes from the line of C.J. Muse from Cantor Fitzgerald.

I guess first question, as you think about physical AI and your positioning and the design win momentum that you highlighted, how should we think about the lifetime of revenue from these design wins? And then as you think kind of top down since kind of going public, your revenue CAGR has been about 7%. And I would be curious how do you think about this incremental demand would drive incremental uplift versus that historical 7%?

Yes, C.J., Mike Hogan here. I appreciate the question. I guess the best way to think about it is break it up into 3 time domains, the near term, the medium term and the long term. In the near term, we talked about our design win momentum in '25, and design win momentum in '25 starts to show revenue impact in '27 time frame basically. But really strong momentum, 400 design wins in the first 3 quarters of the year, 95% sole source, bodes very well for our near-term growth prospects. Medium term, as we laid out, we think physical AI is sort of a force multiplier for GF because the types of technology that physical AI requires plays more to our strengths. So we see that as improving gross margin because we have a higher value set of solutions to bring to the market with the addition of custom and MIPS IP.

Longer term, I think it really is a tens of billions of devices with very high semiconductor content. And again, very much in our wheelhouse from a technology perspective. So we talked about an $18 billion SAM in 2030 in the presentation. And we think that's conservative and a bit of a mix of existing markets that we serve, existing devices becoming more autonomous. And then the unknown, the kind of devices we probably can't even imagine coming into play. So the way we think about it is rough and tough, 10% has been our market share in the SAM that we've served. But when a market opportunity is uniquely well positioned for our technology, we've seen that 30% or higher, think of things like automotive radar.

So we feel good we've been investing in the right technologies and this physical AI world, this world of sense, think, act, communicate is actually moving towards our strengths and the technologies required to take advantage of that don't really favor the single-digit nanometer nodes that are probably more prevalent in what people are talking about in the data center today.

So I think if you add all that together, we should experience much bigger market share growth. We have a better product portfolio to bring to the market with the addition of MIPS and the ability to serve some of the custom silicon needs of our customers. So net-net, much more positive prospects.

Ed, do you want to throw anything on this?

Yes. I mean I think another way to think about it is to draw some parallel to what we've seen in the automotive market. I think that's a good analogy for what we see happening and how we see it playing out for physical AI. So as the automobile, for example, moved from largely mechanical systems to semiconductors to support the needs for autonomy, connectivity, electrification, the market -- the automotive market moved right into GlobalFoundries strength. And so as a result of that, we've organically outgrown both our peers and the broader automotive unit growth for the last several years.

As you'll know, our automotive revenue grew from under $100 million to now approaching $1.5 billion just in the last 5 years, which demonstrates Mike's point of how market transitions can accelerate our growth when they're very well aligned with our portfolio. But ultimately, we expect the physical AI to be even larger for GF than what we outlined there for automotive market because it's -- the impact of physical AI will actually impact multiple markets. So that's why we do see this as a force multiplier and a real catalyst for GlobalFoundries growth.

Yes. So C.J., to put a bow on it, we expect physical AI will get us at or above a 10% CAGR rate once we start to see the ramp of these solutions coming to market.

Very helpful. I guess maybe a follow-up question for Sameer. Curious now that part of GF would love to hear how customer engagement is going out. You and MIPS specifically is helping physical AI wins. And how should we be thinking about perhaps the evolution of GF's customer base now that you are on board.

Yes, absolutely. Thank you, C.J. Yes. So I mean, honestly, it's a pretty exciting time, right? With physical AI and what's happening in the industry, I think it's a good time to -- for MIPS to partner up and become part of GF as we go forward. Honestly, the feedback from customers has been pretty encouraging, right? I mean we are not only engaging with the traditional customers which GF had, MIPS brings in a new set of customers, mainly on the OEM and Tier 1 side as well, which is starting to expand GF's footprint and this dialogue. The dialogue is richer. We are starting to service the customer at multiple vectors.

Obviously, very strong on the foundry side, but now starting to add IP, starting to add some custom silicon discussions and eventually some software and tools as well. So just the entire service, which we are able to provide to the customer is richer, broader and healthier. And if you think about it, right, as we go execute to our plans, 2026, I expect us to add about $60 million to $100 million of revenue over whatever GF foundry business does. And then obviously, as physical AI starts ramping, that will significantly accelerate in the outer years. So no, overall, pretty exciting times. Integration is coming along well, and we are looking forward to continue kind of accelerating the path we are on.

And our next question comes from the line of Mark Lipacis from Evercore.

The question I have is on -- you talked about an $18 billion SAM, and then you showed some examples of what's going on in the car and then a humanoid robot. And I'm wondering, are there other like concrete examples that can -- that make it obvious to investors what's going on with physical AI. And I'm wondering about like the hyperscalers. I think you had mentioned some engagements with hyperscalers. And I think when people think about AI, they think about hyperscalers. And I'm wondering if you could talk about what you're doing on in that vertical market. And then I had a follow-up.

Yes. Thanks, Mark. Mike here. Let me kind of frame it this way. I think there's 4 things that maybe people don't fully appreciate about where GF is headed. And it sort of speaks to some of the questions that you have, and we can talk a little bit more about the hyperscaler question. But we're evolving from just a pure foundry to something that's much bigger than that foundry plus, if you want to think of it that way, much more holistic technology supplier, providing not only foundry solutions, but IP and custom silicon. So I think for us, evolving from pure foundry to something much bigger than that is a strength. And because the physical AI opportunity plays more to our strength, the single-digit nanometer aspects don't work against us in that thought process.

For MIPS, I think there's also a bit of a misunderstanding that MIPS isn't just an IP supplier. They're actually bringing more than an IP and design services. They're really more of a platform player, which is why folks like the hyperscalers are much more interested to have an engagement and a discussion with us about how to solve their overall system solution. So the direction of travel is really from proprietary architectures to open, which favors what we have with MIPS and from off-the-shelf solutions to things that are more customized and bespoke. So again, this is what hyperscalers are trying to solve very unique problems, very unique architectures. This is why they need to engage with somebody who brings more than just one aspect to the table.

And as Sameer alluded to and mentioned, we've seen a massive up-leveling in the customer dialogue, and that's across all different archetypes of customers. So you asked about hyperscalers, but IDMs, fabless, hyperscalers, Tier 1s, all are having a very different level of discussion with us. So combined with the rapid innovation that we see going on in physical AI, I think we're uniquely suited to serve those markets.

But Ed, do you want to throw anything else on there?

Yes. I mean, I think, Mike, you've described well the more complete solution that GlobalFoundries can now bring to the market. And of course, when it comes to executing that and delivering, it's across our geographically diverse manufacturing footprint, which is also a strategic advantage, especially as markets value secure supply chains and local for local sourcing trends accelerate. So this is another example like we talked about earlier, where the market is moving towards GlobalFoundries natural strengths.

In other words, this is the way that we're built, and we don't have to do anything new to address this need that is getting stronger from our customers, which also sets us apart from our competition. So ultimately, we're providing more and more value to our customers, whether it's through unique geographic footprint or through our increasingly differentiated technology portfolio.

And maybe, Sameer, you want to...

And then -- sorry, go ahead.

I was going to ask Sameer if he wanted to get more into the hyperscaler question that you had.

Yes, absolutely. Look, so I mean, just to add to what Mike and Ed said, right, GF is -- has -- is building more businesses beyond the foundry business. Very solid foundry business. We're starting to build an IP business with MIPS coming in, starting to build a custom silicon business, and we're starting to build a software business. This now allows us to engage with hyperscalers on multiple vectors. We have strong engagement on the GaN and power side, which is traditional foundry, but we are starting to engage with hyperscalers on the IP licensing side, on some custom silicon opportunities and also on the software side.

In fact, we are already getting deployed as an IP provider in one of the major hyperscalers as we speak, and we expect that to ramp to significant volume in the '27 time frame, which will drive a good amount of royalty fall-through for MIPS and GF.

That's very helpful. And then organizationally, how do you prosecute these opportunities? Is this a, like a physical AI business unit? Or is this like a functional capability that layers into the different vertical markets and on that same kind of topic is, would you expect to like break out and report physical AI revenues on a -- like an ongoing basis?

Yes. I think for now, you should expect we continue to report the same exact end market segments. And we think each of those end market segments will at a different rate and pace reflect the realities of physical AI becoming more and more important. So there's no real change to our structure for our reporting in terms of how we attack those markets. We just believe fundamentally, the technologies that we invest in RF and power and now in open instruction set architectures like MIPS RISC-V just position those products better to service all of those markets.

So physical AI, I don't think will ever be sort of just a stand-alone segment, but it's -- you're going to see aspects of it. You already see it in automotive, you'll see it in IoT, you'll see it in aerospace and defense and other end markets that we already serve. So I don't think there's going to be really much change there.

And our final question for today comes from the line of Tristan Gerra from Baird.

Silicon photonics is something that you've talked about on your last earnings call, obviously, central to AI along with advanced packaging being a critical element of the AI ecosystem. We've seen recently the demand for co-packaged optics drastically increasing for '27, '28 and companies in the CPO supply chain planning on raising capacity. So it's very interesting to me that to see packaging being central to your capabilities.

Could you elaborate on what differentiates you the most in terms of your advanced packaging how much of the 40% CAGR you've mentioned on your last earnings call through 2030 from silicon photonics you expect will come from advanced packaging and the synergies, obviously, between that and your differentiated wafer business that basically creates additional revenue opportunity?

Tristan, thanks for the question. This is Ed Kaste, and I'll take it.

So just to speak a little bit more broadly, GlobalFoundries has a full suite of advanced packaging capabilities in-house from silicon interposer through silicon betas, wafer bonding and now die wafer bonding as well as execution of traditional packaging through our OSAT partners. What's driving that road map is a lot of what you described there in the data center. Silicon photonics is a great example where a complex optical assembly is required to take to market our silicon photonics wafer process technology.

Also in the data center driving the road map for things like die-to-wafer bonding and power delivery applications. And while the data center market, in many cases, is driving the road map, we see these capabilities being leveraged across all markets. I'll give you a couple of additional examples for image sensing, you already have pixel wafers bonded to processor die and a road map to keep scaling that. Same in the display market, especially with the emergence of microdisplays being used in AR/VR headsets, for example, and memory stacking on logic die and many more applications like that.

And then what's even more exciting GlobalFoundries is when advanced packaging allows GlobalFoundries to integrate multiple differentiated solutions. I'll give an example of a very high-performance silicon germanium die for RF sitting with ultra-low power CMOS SoC, which serves to just amplify the differentiation that those components would individually supply when you provide them an advanced package solution. So across the board, we're very excited about this area. GlobalFoundries is well down the road on advanced packaging. And we see this as another important driver of our business, not just for physical AI, today's topic, but really for all markets.

Great. That's very useful. Then just a very quick follow-up, and that may be a little bit less relevant to this topic, but also maybe related. 6G is still a couple of years away in terms of initial technology ramp, but a lot of this is going to be AI-centric as well. Do you view this as an opportunity? Or is this just too early to talk about it?

Yes, Tristan, it's Mike. Yes, we're keeping a close eye on 6G. Right now, we think that, that next upgrade in the cellular infrastructure is probably a little too far out to start to talk about how it may or may not impact physical AI. But I think it's a great example of something -- another market that plays in GF strength. We see that the bands that are being considered for 6G start to fall in a very nice area for our RF product line.

So things like GaN on silicon for RF are definitely going to have a major play in how 6G evolves in the infrastructure side and probably even in the handset side. So I don't know that I connect the dots all the way over to physical AI. The other thing I think that is kind of consistent with the build-out of infrastructure that will enable physical AI is not only 6G, but sort of the low earth orbit satellite infrastructure that's going up there. And again, the kind of end market that really benefits and values the strength we have in our RF product line across things like silicon germanium, where we're seeing a lot of uptake as those solutions get deployed.

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Eric Chow for any further remarks.

Thanks, Jonathan. So we hope this session has been helpful. We are envisioning this as just the start of a series of deep dives so you can better understand GFs business and opportunities moving forward. Thank you very much for joining.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

Okay. We're going to get started. So I'm Tim Arcuri. I'm the semi equipment analyst here at UBS. Very pleased to have Tim Breen, who's the CEO of GlobalFoundries and Sam Franklin, who is the CFO of GlobalFoundries. So thank you to you both.

It's great to be here.

Thank you.

So let's just talk about the demand environment. Maybe you can talk a little bit about the current demand environment. How differently have the end markets played out over the past few quarters? And are you seeing anything differently than you mentioned in your earnings call? You said handsets were softer, autos and data center stronger.

Yes. I think we should separate -- thanks for having us here. I think we should separate a little bit the dynamics for us, particularly versus overall market backdrop. I think what we're seeing is, remember, after a pretty unprecedented '22, early '23, you've seen for sure, across broader markets, let's leave the data center side for a second. You've seen kind of inventory digestion, a general level of macro weakness. I think as we come through '25, it has slowly improved. Those -- what were headwinds are becoming, let's say, balanced to tailwinds. You see inventories coming down consistently quarter-on-quarter. You see general consumer sentiment better, and you start to see a little bit of green shoots around new product launches and so on, definitely on the handset side.

So I'd say, if anything, versus a year ago versus a quarter ago, better overall market demand. I think the one pocket from a market point of view that clearly everyone is talking about data center remains really strong. Lots of speculation about how long that will go on for. Our conviction is we're very much at the beginning of that build-out phase. There'll be some puts and takes and bumps along the road, but overall, that has a lot more to give. But overall, very strong now and pulling for sure on a lot of content for us.

I think there are markets for us where maybe the market isn't as strong, but our share story has been quite strong. And auto has been a good example of that where we've been gaining from a de minimis business -- went public through to now quite a large business for us, approaching $1.5 billion this year. It's been a double-digit growth even in a pretty flat market. That's just a story of good execution, good patience and progression over time.

Great. Let's just talk about the geopolitical environment. You would seem to be well positioned amid the geopolitical uncertainty. Your business hasn't really recovered that much. How much of a tailwind do you think the geopolitical situation is for you? And how do you expect tariffs to impact mature nodes for the foundry industry?

So I think this journey is actually one that has intensified, but didn't just start very recently. And so we've seen a trend of people being concerned about sourcing individual RISC-V items. That was, for sure, exacerbated and made real during the pandemic. But I think you've really only seen this year companies set really clear policies. And so now it's no longer the case that phrases like NCNT, non-China non-Taiwan. That's not a rare thing to hear in a supplier conversation. It's the default in most supplier conversations where if they haven't asked for it before, they're asking for a non-China non-Taiwan supply chain, by the way, either because they themselves are doing it or because their customers are asking for that. I think some markets led the way, automotive being a prime example, led the way to set that up earlier. But I think all markets now have some version of that embedded in their sourcing strategies. And so that's leg 1 of pulling content to the likes of us and so on.

But then leg 2 is U.S. specifically. And so now you also see U.S. sourcing as not a nice-to-have criteria, but a must-have criteria in new platform decisions and so on. And I think -- so longer term, very, very strong tailwind for us. We believe that will contribute to meaningful share gains in the next kind of, let's say, 5 to 10 years of the industry. I don't think of that as a short-term phenomenon that comes and goes, but more about secular share gain. It is not a panic buying decision, right? And it's not driven by short-term policy that's going to unwind in a short period of time.

And just to add one comment to that as well. I mean, look, independent of everything that's been happening from a geopolitical point of view over the course of the last year, we actually made very strategic decisions in the 2023 time frame to actually start diversifying our footprint to provide even more diversity for our customers as well. Our multi fab is becoming a great example for that. If you rewind to when Malta was first put in place, it was largely a FinFET fab. We've taken the decision now to migrate in technologies on our 22FDX, our 28-nanometer, our 40-nanometer. And that's going to serve all of those end markets that we have today as well as silicon photonics, which has already served out Malta. So notwithstanding those geopolitical dynamics, we've been driving towards creating this capacity, this fungibility and this optionality for our customers for quite some time.

So I guess, Tim, back to your point, so your point is really that the geopolitical tailwinds that you're going to see really are only now starting that they're still out in front of you.

I think they're very much accelerating now. And so I think you see companies very publicly stating their strategy. And we have 8 significant buyers of semiconductors we announced earlier this year when we announced our U.S. plans. We had another 4 or 5 when we announced our European plans. And I think when you see some of the largest companies in the world, some of the best supply chain managers in the world commit to a, like I say, non-China, non-Taiwan or a U.S. sourcing strategy, you can start to take it very seriously. And I think like I said, that's a good tailwind for us.

Can I ask you about your sole-source mix? I think on the earnings call, you mentioned 90% of design wins are -- over the past 4 quarters are sole sourced to you. And it's been that way now for some time actually. Yet when you report your revenue, it's 2/3 of the revenue is sole sourced. So -- and that hasn't changed much in the last 3 years. So you're winning way more than what you're reporting as revenue that's sole sourced. Is that just because of the time it takes for these designs to start to become revenue?

I think it's very relevant to the diversification we've gone through, right? And if you think about markets like auto, which we've been very focused on, auto is notorious for a very long design cycle, but also a very long production cycle, right? And so I think we've been winning more in slower to ramp markets, perhaps not winning quite as much in shorter cycle more, let's say, dual source type markets like mobile, and that really plays through in our revenue mix this year. And so I think as you start to see kind of those stabilize, but also the wins come through in things like auto, that mix of the overall revenue should increase as well.

And is there a way to think about like -- I mean, this is sort of a generic question, but is there a way to think about the margin for a sole-source piece of business versus a dual source piece of business? How much of a tailwind can that be as more of your revenue shifts over to sole source?

So I think there are lots of different drivers of mix shift impacting margins. For sure, the sourcing strategy. If you're getting awarding on a sole-source basis, it means the customer went first question, does this technology enable me to win in my market? Can I do something different that I couldn't do elsewhere? By the way, they look at the sourcing location. Now again, another factor, can I make this in one or more locations. And to Sam's point earlier, having actually optionality of saying, I can make this automotive MCU with high-performing embedded memory, I can make it in Singapore, [indiscernible] and the U.S. That's a pretty good value proposition. We've seen them willing to pay a premium for that. And so I'd say, yes, when you win on that basis, you typically are winning at higher ASPs than you might win on a dual source piece of business and so on for sure. And as that mix plays through the system, you obviously see an accretive kind of dynamic on our margins.

Great. Let's talk about some of your segments. So in handsets, you recently called out having made some pricing concessions for some longer-term share gains. Have we seen the positive impact yet from the share gain? Or have we just seen the negative impact from the pricing and that's still out in front of you?

I think when you look at ASP, you've seen that the ASPs change as a result of that, and we got some questions on that in our last earnings call. And I think like we said, it was our initiation. It wasn't something that was done to us. It's something we actually chose to do because we said, look, as a business with a certain number of capacity corridors, what's the optimum structure for the right amount of share in that market, in that socket, not just today, but also longer term. And so I feel on those ones, we've seen both impacts in one go, slight uptick of utilization, but also slightly lower ASPs, but net-net accretive from an overall profitability point of view for the business. But again, very limited to choice customers where we are in that dual source position where doing something like that could actually yield some incremental business that otherwise wouldn't be available.

Great. And let's talk about auto. So I mean you've seen very strong growth from that vertical over the past few years. How do you see the pace of activity continuing in the coming years based upon the design activity today?

So look, auto has been a long-term story for us, and the wins we're seeing today are not things that happened a year ago. They are often things that happened 3, 4, 5 years ago in terms of that momentum. And we positioned ourselves to have a great technology suite for automotive, right? You think about all the things that automotive needs. It needs high-performance microcontrollers. It needs secure imaging. It needs radar, it needs battery management, the whole slew of content. We positioned our portfolio very much against that. We positioned the fabs as automotive-grade qualified. By the way, it's hard to do it in one fab, let them to do it in 5 fabs around the world. So again, we position the portfolio to be really well tailored for automotive. And I think that's playing through now in wins that we're ramping.

But actually, the design win activity has probably been, if anything, increasing, right? And I think if any industry got once bitten twice shy memo on supply security, it was auto, right? And so auto has also been a big proponent. And you've seen that in deals we've done even with OEMs like GM who've been a constant kind of partner for how do we bring more stuff to the U.S. and more content in this part of the world. You see all the ingredients to see that secular share gain. If anything, our design win momentum in auto is picking up. It's more diversified, more applications because the content in the car is growing significantly. So even if units sold out of the dealerships are not growing, content is increasing and our portfolio fit for auto is really good.

And to foreshadow a little bit, what we'll talk about more and more in quarters to come is we think auto is the prelude to what AI will do in the physical world, right? It's a device operating out there with increasing intelligence, sensing content distributed compute, actuation, motor control, all of those applications and a ton of communication within the vehicle from vehicle to vehicle and into the cloud. And so all areas that will, I think, play out well as automotive becomes autonomous vehicles in different formats, delivery drones, all these kind of applications that need to be mission-critical, safe, all of these things.

Great. Let's talk about CID coms infrastructure and data center. There's a lot of things going on in that segment. Yes, it's only 10% of revenue, but it's growing more than 30% year-over-year. So it really is adding 3-plus points to your growth each year. And that can add up pretty quickly. So can you just break down the dynamics inside of that segment?

So I think there's 3 kind of big blocks we should talk about in that segment for us. Two relates to the data center, one relates to kind of more broader infrastructure, including SATCOM, which we also include there. So data center story, outside the GPU or the XPU in the data center, the 2 big problems are networking and power, right? I think very commonly acknowledged as bottlenecks or challenges to data center performance. We've been very, very focused on networking with silicon photonics, and we can talk more about what that has been for us as a journey to build a technology really probably before it was interesting, right, for the market, but now for sure, showing those inflection points.

But solving those critical networking points where copper just can't cut it anymore for scale-out that works now increasingly also for scale up. So we're seeing the first real growth trajectory of that photonics offering. We're augmenting that with inorganic growth, and we can talk more about that as well. But that networking piece, we see that as a very strong secular driver for us. That's a $100 million business last year, $200 million this year, more than $200 million this year, really good growth going into years to come before we add the inorganic component on top of that. And of course, that's the photonics part. But in optical networking, there's also other content like high-performance silicon germanium, some of these other technologies, which we've also invested a lot in that really enable that high-speed connectivity, which is essential for modern AI data centers. So call that Block 1.

Block 2, probably earlier in its journey, we start to see the pull-through of data center power being a big area that basically you have a lot of difficulties converting 800 volts to 0.8 volts at the chip. Any loss is a massive loss to the system overall, a massive loss to the economics of the data center. So there'll be a lot of innovation. There's a lot of companies out there doing cool things in power conversion, and we start to play in that space. Some of our recent GaN announcements also play to that space with low-voltage GaN playing a key role in the next 5 to 10 years of data center power and so on.

And the last kind of really good growth driver in CID has been SATCOM. And so the proliferation of low earth orbit satellites, this is a new -- completely new form factor from a device point of view. We never had before the option to go to target, buy a device that costs you a few hundred bucks, gives you 100 megabit connectivity, you can put it on your car, on your boat, in your remote cabin, you can put it in a rural area. And that's suddenly a new unaddressable market until recently where you have a massive component of RF content, right? Think of this device as a massive phased array antenna. There's beam forming the sorts of device to steer those RF signals because it's not going to a cell tower 2 miles away, it's going to a low earth orbit satellite 300 miles away, and it needs to do 100-megabit connection, not 1 or 2 megabits that we used to remember from old SATCOM or old flights and so on.

So look, these are big growth drivers where you suddenly see an inflection point of content, and we've been working to position the portfolio against that.

So you mentioned silicon photonics. Let's actually talk about that. It's tracking to, I think, $100 million this year, but it's expected to reach $1 billion by 2030. How should we think about that as a key driver for your business? It seems like pluggables this year, obviously, but how is your outlook on CPO and how that can help your business?

So I think we've spoken a little bit about why the transition is important. And I think if you go across the industry now, there's no more debate about kind of if versus when. There's a question of when for different architectures. Pluggables have become dominant. If you went into an AI data center today, you'll see optical transceivers everywhere, optical pluggable modules everywhere. They're getting more and more sophisticated and more and more efficient. Again, that pulls content for us. That's largely the business of photonics today for us is in the pluggables space.

What we've added with the AMF acquisition is also more strength in the pluggable space. But in many ways, the real inflection point comes when you can co-package the optics with the switch ASIC or other components in the rack. That's when you have a lot of improvement to connectivity, you really unleash bandwidth. You deal with issues like beachfront density, literally the space you can have to put connectivity into those devices. Again, copper cannot cut it. Copper generates too much heat. Copper can only take one stream of data at a time, even with advanced kind of retimers -- redrivers. With optics, you can multiplex, so you can have 2 streams, 4 streams, 8 streams, 16 streams in the same fiber. So now you're seeing the real kind of secular drivers of that.

For us, we invested in CPO well before, like I said, it was -- it's interesting. It goes back even to the IBM days for GF. So we've been doing a lot of work on device, on material, even on packaging, how do you package this device and how do you do complex things like a detachable fiber connector so that the device can have a connection to a fiber, multiple fibers for a board. But if a fiber breaks, you can replace it rather than have to replace the whole board. So we've systematically worked on cracking a lot of the high-volume manufacturing challenges. And so now we see the real pull-through of that as that CPO co-packaged optics adoption comes through. We've said about 2027 is the big inflection point for that. Our $1 billion is kind of a bottom-up number based on current engagements. I would say, if anything, maybe we're being a little bit conservative as that adoption takes place. But let's get to 500, then we can talk about where the numbers will go.

So just on that point, so it would suggest that you're gaining a lot of share. I mean, obviously, it's Tower and you are the 2 big players. Their stock has done very well because of their focused exposure on that market, but you have a good amount of exposure relative to the size of that market. How can you better highlight that business? I mean there's some hot startups, a few of which are here, and these are your customers. Are there capabilities you're missing in that end market that you could go out and acquire? Or is it just riding the wave of the market growing and it becomes a bigger piece of your business and people start to focus on it more?

I think, look, everything, the market focuses on the next problem, the next inflection point. I think we are seeing that interest now, as you say, when you have these startups with multibillion-dollar valuations and so on, the market is clearly saying and investors are saying that these are real businesses now that we need to take very seriously. And by the way, it's not just because of optical networking and things, it's also things like quantum computing, which also has attracted a lot of investor interest. So I think the market piece is coming. I'm not worried about that. I think what our focus is on organic execution, right, really delivering these ramps. These are high-volume ramps, high-velocity ramps for critical applications. We need to deliver. That's a big part of it. Our customers work closely with us to make that happen.

What we have been doing on the inorganic side is saying where can we accelerate through either adding capacity, technology, customer mix. AMF, which we acquired recently, very good fit for our business, different customer mix, right, different and complementary technology. But in Singapore, where we have a great manufacturing operations, so we can integrate very synergetically with our current footprint and adding run rate of $75 million of revenue on a base that -- that's quite meaningful on the base that we have for photonics but with significant growth potential. And a modest acquisition price, around $400 million we've paid for that business. And so relatively accretive for a small acquisition like that.

And so we'll do that to build acceleration. But we're also investing, and we announced this also recently in design capabilities to help our customers design faster, get to market quicker, build reference design, something we have a lot of familiarity with other parts of our business so that they can go from concept and architecture to functioning optical engine a lot quicker. And the acquisition we recently made in Egypt is a good example of a team that can do that and has been doing that as well.

Great. Can we talk about your non-wafer revenue? You saw strong momentum in non-wafer revenue in the third quarter. What's driving that increase in mix and how to think about its contribution to gross margin?

Yes. I think the strategic aspect, and I'll let Sam comment a bit on the kind of the dynamics, the puts and takes. But I think the strategic aspect is we want to add more value to our customers. And so we don't have to define in the industry as we make what people need to make we can provide IP. We can provide know-how, we can do NRE on top of that. We've been doing that for some time, but we can scale it more. And so a good factor that will contribute to that in the future has affected less so so far is things like MIPS. And so we acquired arguably one of the best platforms in RISC-V processor IP, as a means to add value to our customers with an IP type service, but also NRE and potentially also custom silicon in the future.

And so you start to see additional sort of service lines that obviously come with a different set of economics. They don't require CapEx to invest to grow revenue, and they also have a different margin structure compared to kind of traditional wafer business. So I think that will over time drive more non-wafer revenue. But I think some of the other aspect of non-wafer, non-wafer by the way, includes things like mask and reticles for new tape-outs. As your business grows and you have more momentum, you have more tape-outs, right? We've had more design wins, we've had more tape-outs. As a result, you have more masks and so on. So I think these are all good leading indicators of future revenue growth as well. Sam, do you want to add?

Yes, sure. So you asked a question around margin more broadly. And I think what's encouraging is that these strategic initiatives and MIPS is a great example of that, that we've taken over the course of the last year and that we'll continue to look at going forward is really creating those mix benefits, not just from a wafer revenue point of view, but also from a non-wafer revenue perspective as well. So we've, since IPO, been roughly in the ZIP code of, call it, 8% to 12% of revenue being comprised of non-wafer revenue. As you rightly say, Tim, the last quarter, we were at about 12%. Our expectation for the fourth quarter is that we'll be a little closer to 13%. So really starting to get beyond the upper boundaries of where we've trended to be.

Now that is really a function of where we're seeing that greater offering to our customers as we're broadening our services, it's mask, it's reticles, it's recurring engineering, nonrecurring engineering activities. It's a great leading indicator for where we think about the growth from our wafer revenue perspective as well. And so we talked briefly on this kind of momentum of design wins and third quarter design wins were up almost 2x from a year ago. That translates into tape-outs, which translates into production revenue as well.

So as Tim says, we're broadening that ecosystem offering to our customers. And when you think about non-wafer revenue more broadly, it comes through at quite an accretive margin relative to our overall corporate enterprise targets.

And is there like a rule of thumb where non-wafer revenue usually translates to wafer revenue within 2 years? Like what's the sort of general rule of thumb?

I think it's market dependent. I think is the unfortunate answer to not make it easier is take automotive, right? The automotive, the sequence between a design win and the tape-out and high-volume ramp because you've got test cycles, you've got reliability cycles can take a couple of years, even sometimes 3 or 4 years. Whereas the mobile product, some of the data center products can go a lot quicker. So I think it really depends. So there's a mix in there as well. I think the bigger point is the overall increase tells you more revenue is coming because one way or another leads to the next step of high-volume manufacturing.

And just on the non-wafer revenue point, you did mention MIPS. MIPS is immaterial, it sounds like in the back half of this year, but it sounds like it could be upwards of $100 million next year in non-wafer revenue. Can you just talk about -- I know you're going to host a webinar, so you're going to probably give us more on that, but -- that event. But can you just talk more about the strategy around MIPS? And obviously, you're trying to recapture more of the design ecosystem with the customers. But like where can this go?

Yes. So I think it's really interesting. You've seen RISC-V have been talked about for many years now, but did it really receive massive adoption in the market, not so far. And the reason has been a few fold. First of all, it took time for the ecosystem to mature and to deepen for a lot of code and so on to be written and tested and validated. But what you also didn't have is you didn't really have too many scaled companies who people can rely on as a partner to build processor IP and deliver that.

And so MIPS had actually a lot of good offerings from a technology point of view but they needed a kind of industry, I'd say, broad almost platform agnostic, a company like GF to back them to vouch for them for the longer term as an owner to really see the momentum that customers could use this as a tool because customers mean well we're struggling with the idea of saying, I like RISC-V, I'm not so sure about relying on other providers of IP, but I can't do a full RISC-V design on my own with my internal team to the economics just don't work.

So they actually want something like this. And we were really heartened when we did MIPS that actually a lot of engagement from both existing GF customers and new kinds of customers who said, this provides us the sweet spot we need. Now let's do a particular core, a custom project together because you're complementing the skills that we otherwise have. And meanwhile, that ecosystem is deepening even further. And obviously, we can contribute even more to that now with a bigger scale. And so I think you're going to see RISC-V play an increasingly important role. And what preview of what the team will talk about tomorrow is -- we think that's really, really important for that physical AI transition, right?

Again, we don't want to build processes that are going to work to be a complementary or competitive to an NVIDIA GPU. We'd love to build distributed compute processor in IP and cores for a robotic arm or for a software-defined vehicle [indiscernible] controller, things like that, that do real-time processing out there in the field in harsh conditions, by the way, aerospace and defense same driver. We see a lot of engagement from customers on this front. And so you've seen -- so since the deal was announced, you've seen customers come to you and say, hey, we were thinking about using MIPS, but we didn't really know about the ecosystem. And so now it's like game on.

And great technical engagement, but they really need to build a long-term plan. And not just do they want to use MIPS now, but now it gives us an angle to say -- but listen, GF's process technology can also play a role in the solution. And of course, I think that the symbiotic relationship between the IP and the architecture and the process technology, you can tailor 1 to support the other. And that means the geoprocess technology, particularly FD-SOI, or FDX platform is really doing very well. It can be increasingly tailored for those kind of applications. And so for customers not only do they get good RISC-V IP, but they also get a process technology that's really tailored to exploit all of the benefits of the IP.

Great. Let me -- I want to ask about gross margin. So earlier this year, you thought you could get to 30% by the end of the calendar year. It isn't happening, but mostly because of a slower recovery in the market. So can you just talk about the levers on gross margin as we enter next year?

Yes. So I think bigger picture, and I'll let Sam add it to it as well. I mean we're pretty close, by the way, in Q4 based on what we've guided. I think all the factors are contributing in the right direction, perhaps not quite at the pace we expected. As you said, the recovery may be a little bit slower than we thought at the beginning of the year. But all of the tailwinds to gross margin, I think that we've been focusing on are there, right? Accretive product mix, improvement of utilization where we have a footprint today that could probably accommodate a $9 billion top line versus the $7 billion, which is where we are today. And the fall-through of that additional wafer you sell is not at the standard gross margin. It's much, much more accretive because you're adding a lot of fixed cost to do that. So utilization plays a very important role in that.

And then, of course, year-on-year, we work on CapEx -- efficient CapEx investments, efficient cost control and cost management. And so I think all those ingredients are in place. If anything, I'd say that we now have other means to even improve further, things like MIPS that come with a different margin structure longer term can also contribute. We're standing by our kind of 40% company goal. That's what we're driving to. Obviously, our goal is to make progress towards that in 2026. We're not going to guide '26 now, but the goal is to make meaningful progress towards that. Do you want to add, Sam?

Look, we've spent quite some time talking around the fact that as we continue to remix the business, as we continue to see more diversification come through from revenue and the end markets that we'd expect to come back as a more profitable dollar-for-dollar company. And what's encouraging is that we're starting to see that come through now. So if you look at our third quarter results, $1.688 billion, that was flat on a quarter-over-quarter basis. Margin was up 80 basis points quarter-over-quarter, but actually more pronounced is, although, call it, roughly 3% down year-over-year from a revenue point of view, margin was up about 1.3 points. So we're really starting to see this momentum come through in terms of the quality of the mix shift.

If I fast forward to the guidance provided for the fourth quarter, you're right, Tim, midpoint of that range is 28.5%, but the upper end of that was 29.5%. So we're somewhat playing around the edges here in terms of where we expect it to be at the start of the year. But general momentum is what's encouraging for us at this stage. So call that roughly 2.5 points of quarter-on-quarter margin growth on what would be a comparatively to slightly below revenue in the fourth quarter implied guidance. And that's really where, as we think about this over the long term, it's kind of marching towards that continued profit fall-through.

And all the reasons that Tim mentioned, the scale dynamics, the mix dynamics, the continued growth within the various end markets, coms infrastructure and data center is a great example, right? In the third quarter a year ago, about 7% of revenue. We're now seeing that in 10% of revenue for the third quarter and continue to expect that to grow. So we're quite encouraged with the momentum we're seeing from the margin fall-through perspective, and we'd expect to continue to see that grow as we go into '26 and beyond for all those reasons we just talked about.

Great. Last thing that I wanted to ask was you recently brought up the opportunity for more capital returns next year as the free cash flow has gotten a lot better, which is new for GF. So the question is what would this look like should we -- and how should we think about the split between repo and dividend when you just consider that the public float is pretty low?

Absolutely. And as you can imagine, this is an area that is a nice situation for us to be in as we think about the continued flywheel of free cash generation that we've seen over the course of the last couple of years. We were back in 2023, a little over $300 million. We grew that to over $1 billion in 2024, and we expect to be on target to that roughly $1 billion in 2025 as well.

Now capital allocation obviously takes many different forms. We've taken real concerted efforts over the last 12 months to optimize the balance sheet. We've taken out a lot of our long-term debt. And so really, the way we're thinking about it going forward is how do we look at this framework of shareholder capital allocation. I don't want to preview anything too soon. But clearly, format is a consideration there, whether that is repo buybacks or standard dividend program establishment as well. So stay tuned for more on that as we mature as a public company. This is a good situation for us to be in.

Yes, it's a good problem to have. So anyway, we're out of time, but thank you for the time.

Thank you.

Thank you.

Thank you for standing by, and welcome to the Global Foundries, Inc. Third Quarter of Fiscal 2025 Financial Results Conference Call. [Operator Instructions] As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Eric Chao, Investor Relations. Please go ahead, sir.

Thank you, operator. Good morning, everyone, and welcome to Global Foundries Third Quarter 2025 Earnings Call. On the call with me today are Tim Breen, CEO, Neil Anderskouv, President and Chief Operating Officer; and Sam Franklin, Interim CFO.

A short while ago, we released GF's third quarter financial results, which are available on our website at investors.gf.com along with today's accompanying slide presentation. This call is being recorded, and a replay will be made available on our Investor Relations web page. 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 deemed to be forward-looking statements.

Such statements can be identified by terms such as believe, expect, intend, anticipate and may or by the use of future temps. 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 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 risks and uncertainties described in our SEC filings, including in sections under the caption Risk Factors in our annual report on Form 20-F and in 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 UBS Global Technology and AI Conference in Scottsdale on December 2. In addition, we are looking forward to hosting a public webcast investor webinar at 10:00 a.m. Eastern Time on December 3, at this event, we will provide a business, technical and strategy update on the opportunities for GF across the rapidly evolving physical AI market.

We will begin today's call with Tim providing a summary update on the current business environment and technologies. Neil will then discuss our recent design wins, highlights and traction across the end markets, after which Sam will provide details on our third quarter results and fourth quarter 2025 guidance.

We will then open the call for questions with Tim, Neils and Sam. We request that you please limit your questions to one with one follow-up. I will now turn the call over to Tim.

Thank you, Eric, and welcome, everyone, to our third quarter 2025 earnings call. Before I begin, I wanted to express my sincere gratitude to John for his service and contributions to GF. We wish him the best. GF delivered a strong third quarter with revenue, gross margin, operating margin and earnings per share at the high end of the guidance ranges.

For the fourth consecutive quarter, we saw a strong double-digit percentage year-over-year revenue growth, both in our automotive and communications, infrastructure and data center end markets which together represented 28% of our total third quarter revenue. We expanded third quarter gross margin, both sequentially and year-over-year, which is representative of our relentless drive to growing profitability.

With the strength of our differentiated product portfolio, which is highly suited to secular growth markets, the richer mix of high-growth businesses and the clear value proposition of our global footprint GF is laying a strong foundation for a future of robust profitable growth. GF is truly a global company.

I recently had the privilege of visiting customers and employees across the U.S., Asia and Europe, including at our Marquee Global Technology Summit in all 3 continents. Having met with over 100 current and prospective customers from across the end markets we serve, the feedback has been consistent and unequivocal.

GF brings a unique combination of differentiated technologies that meet the needs of today's secular trends, including the scaling of AI in the data center and the proliferation of AI into the physical world as well as the need to deliver those technologies from a resilient global footprint.

Let me address each of these exciting areas. Firstly, scaling AI in the data center with optical networking. After years of R&D, capacity investments and deep innovation with customers, GF is carving out a strong position in the optical market at exactly the right time. Recent commentary by hyperscalers, GPU makers and other players in the data center ecosystem have emphasized the need for silicon photonics in scale up, scale out and scale across networking.

The OCP Global Summit last month highlighted a growing shift towards pluggable silicon photonics and co-package optics, as alternatives to traditional copper interconnects over the next several years where legacy technology is simply unable to meet the increasing demands in data transmission speed, bandwidth density and power efficiency.

Propelled by this expected transition, we estimate our serviceable addressable market for optical networking will grow by a CAGR of approximately 40% through 2030. We expect GF to be a key participant in this substantial growth and are highly encouraged by our early track record of success in many applications that support optical networking, including our silicon photonics platform, as well as a high-performance silicon germanium and FDX technologies.

In Q3 alone, we won 3 optical networking designs with new customers worth over $150 million of projected lifetime revenue with the first tape-out for one of these designs already completed in the quarter. Silicon photonics alone is on track to reach over $200 million of revenue in 2025, close to doubling year-over-year.

As the market continues to require higher and higher performing pluggable optical transceivers and is co-packaged optics adoption meaningfully ramps from 2027 we envision silicon photonics to become a $1 billion plus run rate business for GF before the end of the decade. To support this growth, we will continue to partner with our customers and make the necessary investments to grow our scale as well as adding organically or inorganically new complementary capabilities.

With gross margins significantly above our target model, we expect long-term growth in silicon photonics to provide a tailwind to GF for years to come. The second significant and rapidly evolving secular trend is the advent of AI capabilities being deployed across a broad range of applications in the physical world. Based on discussions with our customers, we believe the ongoing data center AI build-out is merely a prelude to the next step of the AI revolution, real-world applications in the physical space.

From autonomous vehicles and drones to next-generation medical devices and ultimately, humanoid robots, we expect the marriage of artificial intelligence with real-time sensing, control and compute capabilities to unlock new previously unthinkable applications and accelerate demand for GF's essential technologies.

The technical demands of this next phase of AI align with GF's deep technical strength in developing feature-rich technologies that play a critical role across multiple applications, which is further complemented with our recent investment in MIPS, which will accelerate the development of real-time processor IP. In the world of physical AI, the market will need vast amounts of feature-rich, low-power connected chips that are secure and cost effective.

We believe everything that moves will become autonomous everything that senses will be intelligent and many devices that think will also actuate in the real world. GF's product portfolio enables us to play a critical role in this coming revolution. For efficient power management, our FDX and FinFET platforms are specifically designed to support always-on ultra-low leakage so edge devices can run longer and more reliably.

For robotics and real-world object manipulation, our BCD and BTD HV platforms offer a power-efficient architecture that is ideal for motor and joint control as well as battery management. Lastly, for intelligence, sensing and detection, our recently launched UX platform, as well as our established FDX and FinFET capabilities enable accurate multi-mode sensors with capabilities across radar, ultra wideband imaging and audio.

By coupling all of these technologies with a range of embedded nonvolatile memory solutions, including ESF, MRAM and RAM, we can go further to enable smart, secure processing in a range of physical applications. Across all of these GF served applications, we believe the emerging physical AI opportunity will become more than an $18 billion SAM for GF by 2030.

Our momentum with customers is accelerating in edge and physical AI applications. The proof points are already in motion. And in the third quarter, we secured several additional design wins across applications such as AI-enabled glasses, AI-enabled hearables, AI-enabled home appliances and AI-enabled software-defined vehicles.

The last team that remains top of mind for our customers is the critical importance of geographically diversified semiconductor supply. Recent geopolitical conflicts, tariffs and export controls are a consequence of an increasingly fractured and deglobalizing world. As a remedy, governments have sought to encourage industry players to reshore or onshore their sourcing of essential chips.

It is now common for customers to require, not request non-China, non-Taiwan supply chains and is now also becoming increasingly common to specifically require U.S.-based manufacturing. As many of our customers have now publicly stated, partnering with GF in reshoring technologies to the U.S. has become core to their supply strategy.

By aligning our investments to our customers' requirements, we are positioning GF to gain share from this secular trend, given our unique and advantaged global footprint across the U.S., Europe and Asia. In June, we support from half a dozen leading customers, including Apple, AMD, SpaceX, Qualcomm, NXP and several other leading technology companies, we announced that we broadened the envelope of our investments to $16 billion in order to expand U.S. manufacturing and advanced packaging capabilities in our facilities in New York and Vermont.

With support from federal, state and local governments, we have established a world-class semiconductor ecosystem in the U.S., rich with employee talent as well as diverse suppliers, customers and OEMs. Notwithstanding the ongoing Section 232 assessment in the U.S. the structural reshaping of global supply chains is well underway, and we believe that GF is at the forefront of supporting this transformation as our customers increasingly seek to mitigate geopolitical risks and enhance their supply chain resilience GF is helping them navigate trade complexities and optimize their sourcing decisions.

An excellent recent example of the progress we are making is our announcement with Silicon Labs to manufacture its wireless SoCs and on GF's new ultra-low power platform out of our Malta, New York fab. Beyond the U.S., we have also announced plans to invest an additional EUR 1.1 billion in our Dresden fab supported by incentives from the German federal government and the state of Saxony under the framework of the European chips Act, the investment will allow us to increase production capacity to more than 1 million wafers a year in Dresden by the end of 2028.

Making it the largest side of its kind in Europe, approaching Giga fab scale, driven by the needs of key European customers, such as NXP, Infineon, Ormovio and Bosch, we are well placed to meet our customers' requirements of EU-based manufacturing from our world-class site. We believe we are only in the early stages of this opportunity and see strong validation of our decade-long strategy to build and scale flexible manufacturing capabilities across our fabs, an area where GF has always been a leader for the industry and intends to continue to do so well into the future.

In conclusion, at GF, we are committed to being a trusted partner to our customers, utilizing our differentiated chip technologies and global manufacturing capacity. We believe we are well positioned to benefit from the long-term trends driving our industry. Years of work in preparation have established a solid foundation for us to capture these inflection point opportunities, all made possible by the dedication of our global team.

With that, over to you, Neils.

Thank you, Tim, and welcome to everyone on the call. GF's portfolio of diverse and differentiated solutions are enabling us to win more with our customers and serve the defined secular trends of our time. In the third quarter, we secured nearly 150 new design wins across our end markets. more than 50% growth from the same quarter a year ago. Over the last 4 quarters, over 90% of our design wins were awarded on a sole source basis to a consistent proof point of the depth of our customer partnerships and the value of our essential chip technologies.

One example of our strong and expanded portfolio of solutions includes our recent technology agreement with TSMC or 650-volt and 80-volt [indiscernible] technology. This strategic move will accelerate GA's next generation of GaN products, allowing us to serve an expanded set of customers across a broader range of power applications in markets such as data center, industrial and automotive.

GF is well suited to capitalize on this opportunity and serve the U.S. market, given our existing 200-millimeter game capabilities in Berlin on Bermont. We plan to qualify the license can technology at our fab with full production set to begin in the second half of 2026. We have made significant strides in our strategy to diversify the business and accelerate the growth of our highest margin product platforms.

I'm encouraged about the expansion in the number of end applications we serve, including in exciting areas such as optical networking, satellite communications, quantum computing, software-defined vehicles and smart glasses.

Given the importance of differentiated technology, enhanced features and the performance requirements from our customers, these fast-growing markets support accelerating growth and improvements to our product mix, supporting margin expansion. While we have more room to grow and diversify, our progress is already evident in our business results.

We have organically grown our automotive end market more than 10 fold in the last 5 years. It now comprises around 1/4 of our wafer revenue and we expect automotive to approach $1.5 billion of annual revenue in 2025. We have line of sight for automotive to become a multibillion dollar business for us through the end of the decade. We're very encouraged by the strength of our leading silicon photonics products and see strong double-digit growth as it nearly doubled in revenue in 2025 compared to 2024.

The application of our silicon photonics portfolio within our communications infrastructure and data center end market is not only margin accretive today but accretive to our long-term gross margin objectives. As we expand our capacity to meet demand and as the demand for silicon photonics grows, we expect to benefit from additional mixed tailwinds.

Lastly, we've seen strong momentum for fast-growing satellite communications applications which we expect to contribute approximately $100 million of revenue in 2025 to our communications infrastructure and data center end market, up from de minimis revenue in 2024. The portion of SatCom served on our NX platform is a margin-accretive product thanks to its differentiated features, cost profile and efficient scale despite having an ASP per way but lower than our corporate average.

The semi launch is expected to grow 150% and Satcom subscribers set to double in the next 5 years, we expect the semiconductor SAM for this opportunity to be over $1 billion through the end of the decade. The GF as an anchor supplier. Within the end markets we serve, GF is well positioned to capitalize on several key second-line inflections and we are making continued progress towards transforming the mix of our business towards the fastest-growing and most profitable platforms.

With that, let me walk you through the key highlights for the quarter by end market. Automotive represented approximately 18% of the quarter's total revenue. In the third quarter, we continued our strong momentum in automotive, winning new design wins with 12 unique customers. Highlighting the breadth and depth of our diverse product portfolio, third quarter design wins and new tape-outs included advanced image sensors, body and [indiscernible] and use high-performance audio amplifiers, advanced tire monitoring sensors, Ethernet switches and motor controllers on our FinFET FDX 40 years free and BCD high-voltage platforms.

Customers across the value chain continue to choose GF for performance at the highest auto grade standards and strong long-term partnerships. In Q3, we signed an MOU with Hyundai Motor Group that leverages GF deep semiconductor expertise to equip next-generation vehicles with SmartSystems, increased connectivity and enhanced power efficiency. Smart mobile devices represent approximately 45% of the quarter's total revenue.

In Q3, we secured our first design win for the newly launched CIBC platform. with strong engagement with multiple leading fabless eye companies. Developed manufactured in our Burlington Vermonter, Civic is our highest-performing silicon Domanian platform to date and is capable of addressing several key markets, including smartphones, wireless infrastructure, optical networking, satellite communications and industrial IoT.

For smartphones, the platform enables low-noise amplifiers that reduce power consumption while maintaining ultra-low noise and reducing battery drain. Also in the third quarter, we secured our first NOR flash memory design win for mobile a leading Chinese face company to enable next-generation mobile and barbs, a decision driven specifically by GE's global footprint and the flexibility it provides to our customers.

Lastly, we built upon our menu with a recent design win for micro LED display back pain Sapien or project with a leading provider of next-generation smart glasses. Home & Industrial IoT represented approximately 15% of the quarter's total revenue. announced that our global technology summit in Asia, GF part and is a leading player in smart sensors to produce the latest generation of smart sensors and GF BCD platform in Singapore.

This will enable next-generation application-optimized intelligent sensors with best-in-class size weight, power and cost advantages. These direct timer flight sensors are used to gauge step, a critical feature for next-generation home automation, robotics and other fiscal AI applications. We also achieved a milestone with our long-time customer and partner Silicon Labs, shipping more than 10 million Viper units built on our 40 LT platform.

This platform features low leakage in standby mode to support power efficient, always on intelligent devices and is an integral part of TFs portfolio of advanced technology for sensing applications, even exceptional seen to noise ratio performance to ensure accurate data capture. Communication infrastructure and data center represent approximately 10% of the quarter's total revenue.

I would like to highlight 3 new optical network and Designments in the third quarter. These include a significant design win with Coherent, a new engagement with a top 3 U.S. TIA driver supplier and a win with a leading China-based vendor to serve that fast-growing market. Collectively, these programs deepen our position in next-generation optical interconnects that are critical to AI data center growth.

In Satcom, we continue to build on our success with new wins with global players. During the quarter, we added a diesel beam for [indiscernible] for a Japan-based satellite program as well as an additional ground terminal low-noise amplifier in Overall, the progress we are making across optical network in satellite communication and quantum computing reflects the strength of our product portfolio and the trust our customers place in us.

With these partnerships and our expanding pipeline, I'm confident we are well positioned to capture the long-term growth opportunities ahead. I'll now pass the call over to Sam for a deeper dive on our financial results and guidance.

Thank you, Neils. For the remainder of the call, including guidance, other than revenue, cash flow, net interest income and third quarter CapEx, I will reference non-IFRS metrics, which are included in today's press release and accompanying slides.

As Tim noted, our third quarter results came in at the high end of the guidance ranges we provided in our last quarterly update. We delivered third quarter revenue of $1.688 billion flat over the prior quarter and a 3% decrease year-over-year. We shipped approximately 602,000 300-millimeter equivalent wafers in the quarter, up 4% sequentially and up 10% from the prior year period.

Wafer revenue from our end markets accounted for approximately 88% of total revenue. non-wafer revenue, which includes revenue from reticles, nonrecurring engineering, expedite fees and other items accounted for approximately 12% of the total revenue for the sequentially and decreased approximately 13% from the prior year period.

The year-over-year change was principally driven by onetime pricing adjustments made in the prior quarter, with a limited number of dual source customers. Going forward, we expect to gain a larger share of wallet with these customers. Automotive revenue decreased approximately 17% sequentially and increased 20% from the prior year period.

The sequential change was the result of customer shipment timings, consistent with the prior year period. Year-over-year revenue gains in our automotive end market were driven by share and content into pension, and we remain on track to grow automotive revenue in the mid-teens percentage range for 2025.

Home and Industrial IoT revenue decreased approximately 14% sequentially and 16% from the prior year period. This was principally driven by a year-over-year reduction in wafer revenue associated with aerospace and defense applications as certain products reach end of life with new applications now taping out and expected to move into production in 2026.

Finally, communications infrastructure and data center revenue increased approximately 2% sequentially and 32% over the prior year period. With improved visibility into our fast ramping optical networking and SATCOM businesses. We now expect full year 2025 revenue in this end market to grow in the low 20s percentage range, up from the high-teens outlook indicated on prior earnings calls.

For the third quarter, we delivered gross profit of $439 million, which was at the high end of our guided range and translates into approximately 26% gross margin. Notwithstanding flat sequential revenue. Gross margin expanded sequentially and year-over-year, approximately 80 and 130 basis points, respectively. Gross margin expansion remains a key focal area for GF and we believe we're beginning to see the benefits associated with a shift towards a more accretive product mix and increased revenue from non-wafer technology services.

R&D for the quarter was $111 million, and SG&A was $68 million. Total operating expenses of $179 million were up marginally quarter-over-quarter and represented approximately 11% of total revenue. We delivered operating profit of $260 million for the quarter and an operating margin of 15.4%, which is at the high end of our guided range and 180 basis points above the prior year period.

Third quarter net interest income was $18 million, and we incurred income tax expense of $46 million in the quarter. We reported third quarter net income of $232 million an increase of approximately 1% from the prior year period. As a result, based on a fully diluted share count of approximately 559 million shares, we reported diluted earnings of $0.41 per share for the third quarter. which was at the high end of our guided range.

Let me now provide some key balance sheet and cash flow metrics. Cash flow from operations for the third quarter was $595 million. CapEx for the quarter was $189 million or roughly 11% of revenue. Adjusted free cash flow for the quarter was $451 million, which represented an adjusted free cash flow margin of approximately 27% in the quarter. At the end of the third quarter, our balance sheet remains strong with our combined total cash, cash equivalents and marketable securities at approximately $4.2 billion.

Our total debt was $1.2 billion, and we also have a $1 billion revolving credit facility, which remains undrawn. Next, let me provide you with our outlook for the fourth quarter of 2025. We expect total GF revenue to be $1.8 billion, plus or minus $25 million. Of this, we expect non-wafer revenue to be approximately 13% of total revenue.

We expect gross margin to be approximately 28.5%, plus or minus 100 basis points which reflects a sequential and year-over-year growth in gross margin. Excluding share-based compensation, we expect total operating expenses to be $210 million, plus or minus $10 million. We expect operating margin to be in the range of 16.8% plus or minus 170 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 $4 million and $12 million, and income tax expense to be between $40 million and $62 million, which translates to an effective tax rate of approximately mid- to high teens percentage for the full year 2025.

Based on a fully diluted share count of approximately 559 million shares, we expect diluted earnings per share for the fourth quarter to be $0.47, plus or minus $0.05. Finally, a brief update on our capital allocation activities. GF continues to generate strong, consistent adjusted free cash flow while retaining healthy balance sheet fundamentals.

In 2025 alone, we have significantly reduced our outstanding debt, continued to optimize our capacity footprint by technology transfers and completed critical acquisitions to enable future growth, such as the recently closed MIPS transaction. Looking ahead to 2026, we expect to continue with our objectives to reinvest in the business as well as planning for a systematic approach to returning an appropriate portion of free cash flow to shareholders.

In closing, I want to express my appreciation to our employees worldwide for their dedication and execution that helped deliver this quarter's strong financial performance. Over the last few years, I've had the privilege of leading our business finance and operations functions. Working with exceptional team members from around the world, and I remain focused on executing a smooth transition for our finance and operations functions and partnering with Tim and Neils to advance our long-term strategic objectives.

With that, let's open the call for Q&A. Operator?

Certainly. And our first question for today comes from the line of Ross Seymore from Deutsche Bank.

I want to ask one long-term one and then a shorter-term one. On the long-term one, you went into great details about your silicon photonics business. But I just wanted to ask 2 follow-ups on that. First, what do you believe to be the core differentiation of what GF offers versus any other foundry peers?

And second, what sort of capital and CapEx needs to be applied if you're going to quintuple that business over the next 5 years?

Very good. Thank you, Ross. So maybe I'll start with the first one. I mean just to recap, right? This is GF's core play in the data center. We've talked about 2 sets of data center priorities, one, of course, being powered that we've spoken a bit about in organ announcements, but then networking, optical networking specifically being the secular trend that we see the industry now fully adopting both the pluggable optical transceivers and the transition to copackage optics, in many ways, GF was early in developing silicon photonics.

We've been doing this for now more than a decade. As a result, we believe we have best-in-class device performance, really focusing around the electrical to optical -- the optical to electrical, excuse me, signal conversion. We do that through innovation around device structure, around material and increasingly around packaging and especially as we make the transition to co-package optics, some of the innovation we've been driving around how those packages get put together will play, I think, a critical role in that rollout and that adoption.

I think the other aspect of differentiation is the ecosystem we have been building around it to enable design support for our customers and also to enable critical components, for example, our announcement with Corning around the detachable fiber connector, a very important part of how can you make these devices both high performing, but also serviceable, maintainable in those data center context.

So I think we're very bullish about the adoption story. We're very bullish also about GS differentiation. I'm going to let Sam comment about the CapEx for [indiscernible]

Ross, just a quick follow on there as far as the CapEx is concerned. Look, we've been on a bit of a journey, as you know, from a capacity and a CapEx point of view for really the last 5 years. We began that journey at roughly 2 million wafers of capacity a year, and we set ourselves a term target to get to 3 million wafers of capacity -- now as we've gone through that, obviously, the demand environment has changed slightly.

And so over the course of the last couple of years, you've seen us moderate some of that CapEx in and around the 10% of revenue versus that sort of broader model target of roughly 20%. So looking out to 2026, obviously, it's a little bit too soon to guide CapEx specifically, but you can infer from what in saying around the opportunity that we see within silicon photonics that we'd expect to see a pickup in CapEx going into next year, call it, the midpoint of that range that we've trended in over the course of the last few years as well.

So hopefully, that helps. As we think about it beyond 2026, obviously, the foundational principle of why we invest in our capacity is tied to customer demand. And so if it's to be seen around the ramp in demand for silicon photonics and the continuation of the customer partnerships that we've certainly seen during the course of this year it would justify incremental CapEx with a highly value-accretive end market for us.

And maybe, Russ, if I can just add a little bit more color on the nature of that CapEx for photonics wafer production these are highly valuable wafers. So from a wafer volume point of view, it's relatively small from a wafer value point of view, relatively high. And so very CapEx efficient when it comes to adding wafer capacity.

Some of the CapEx that Sam alluded to will also be around packaging capacity because that goes alongside especially the co-packaged optics transition. So that will be -- both of those will be featured in 2026.

Great. I guess as my follow-up in the shorter-term question is just the fourth quarter, I just wanted to talk about the end markets, what you're assuming sequentially in your revenue guide. You gave the full year guidance for automotive and comp data centers. So those ones seem to be quite obvious. But I guess what I'm getting at is the smart mobile device side of things, how are you seeing that in the fourth quarter? How did the ASP cuts lead to any unit share gains? And when do you think that segment could return to year-over-year growth?

Sure, Ross. I'll kick off there and then I'll let Tim and Neils add any other commentary in terms of the long-term opportunities that we're seeing in smart mobile more specifically. But you hit the nail on the head as it relates to some of those dynamics that we saw in the third quarter. And the way we think about our business for us is really on a year-over-year basis.

And look, we've continued to see very strong year-over-year growth from an automotive point of view in the third quarter, comms infrastructure and data center was up 32%, and we've also had a high contribution associated with wafer from non wafer revenue services. So all said and done, we're seeing the right momentum in growth as it relates to the end markets where we see most of that accelerated opportunity.

Now look, the balance on that, and again, I'll talk more specifically around the fourth quarter, but in the context of the full year is that you can infer that from a mid-teens expected full year growth in automotive, but sequentially, we'd expect quite a strong ramp going into 2024. Excuse me, going into Q4, which is quite consistent with the sequential ramp that we saw last year as well. Similarly, as it relates to comms infrastructure and data center, we provided that updated guidance now in the low 20s range.

So you can refer what sequentially that looks like the, if you like, the offset as it relates to smart mobile devices and IoT more specifically, for the full year, IoT, we expect to be down about mid-single digits. That's really a function of some of that aerospace and defense revenue that we saw falling out and we commented in the prepared remarks.

And then as it relates to smart mobile devices, clearly, a function of some of those onetime pricing adjustments, which are in the rearview mirror now, but that will contribute to quite a low double-digit [indiscernible] on a year-over-year basis. So that's how we think about it full year and you can infer from what that means the quarter-to-quarter dynamics, and then I'll let Tim and Neil's comment on the longer term where we see those opportunities.

Yes. Thank you, Sam. I think on the longer term, Ross, for Smart Mobile, we're very focused on where we can be the most differentiated. And so I'd say we see great traction in areas like audio, haptics advanced display, advanced imaging, areas where GF technologies play a key role, both by the way, in the handsets of today, but also engagements like we mentioned in areas like smart glasses, that form factor becoming increasingly viable I think, from a high-volume perspective.

And so we see longer-term good traction in smart mobile in those differentiated areas. And I think that's true also in the IoT space. Obviously, you've got a broad set of end markets contained with IoT, but you see good traction in medical. You see good traction in industrial and even in consumer, some of the announcements we've made, including companies like Silicon Labs, again, indicating good long-term growth in those markets as well.

And our next question comes from the line of David O'Connor from BMP Part of us.

Great. Maybe a question on the onshoring side of things. So firstly, congrats on the expanded partnership there with Silicon Labs. After the Apple deal last quarter seems to be increasing demand and traction for the U.S. onshore manufacturing that's starting to come to no.

Maybe could you just talk about what that pipeline actually looks like? And then related to that, just your ability to support additional really high-volume women out of the Moto fab?

No, thank you for that question. Obviously, it's a trend that we have been quite public about the engagement from customers over the last couple of quarters now. Just for those score, we've had 8 specific customer announcements regarding U.S. onshoring. If you just do a rough cut of how much that customer set spends in terms of silicon in our addressable market, you're talking about between $15 billion and $20 billion of total spend.

And so these are large representative customers that have significant opportunity to reshore capacity to the U.S. And from that point of view, we see a very strong share gain opportunity for GF. And they're coming for the footprint, but they're also coming for the differentiated technology. So we see that as very very strong.

There's a significant pipeline on top of that to your question. A lot of other customers saying, look, what can we do? When can we do it? And that again, that match of capacity and footprint being very important. I think from a timing point of view, we're talking about ramps in 2027, largely and beyond. And this is a secular shift that's durable.

And so obviously, we're going through those product design wins, product qualification cycles that are necessary. U.S. is a large part of this and obviously very visible. But actually, the story is also replicating in areas outside the U.S. I think our announcements in Dresden a couple of weeks ago for our relatively smaller expansion investments we're making there are still backed by significant Europe for Europe, let's say, customer demand, key players like Infineon, like NXP, like movie like Bosch, all kind of publicly supporting the investments we're making there to build that fab to even further scale, and obviously, when that comes very accretive economics for that fab.

And we're even seeing examples outside that in Singapore. And I think one that we mentioned in the prepared remarks, even Chinese fabless companies looking to have their own version of a diversified supply chain. The NOR Flash win that we had, we mentioned for Q3 is a good example of that moving to Singapore.

So I think the story of supply diversification is just extraordinarily clear globally and only picking up in pace.

Did you have a follow-up, David?

Yes, I do. Maybe one on the technology side on the gallium nitride on the GaN side of things. So TSMC recently exited that GaN business and at the time sizing kind of low profitability and just the competition there was quite intense. Can you maybe talk about your GaN strategy, how that is kind of different and how are you addressing these concerns?

No, thank you for the question. Maybe I'll start and then Neil can add a little bit of color as well. Look, we're very excited about again. From a simple technology point of view, this is a way of achieving significant improvement in power density, significantly reduced losses in switching and power conversion.

If you think about where that matters, of course, one of the areas it matters most is in the data center, right? When you're talking about enormous amounts of power consumption based on the build-out, GaN plays a critical role in that market. Of course, it also plays a broader role in critical infrastructure.

It plays a role in automotive. And so it actually has plenty of uses and even longer term plays a role in radio frequency and high-performance communication. So from a secular trend point of view, it's a great technology fit -- from a customer traction point of view, we also see customers very much focused on sourcing that technology in the U.S., again, key differentiation from GF.

We're building that in Burlington, Vermont, a fab that is well tack-on track record in various complex technologies and 1 that customers trust to deliver in the future. So I think our strategy is quite different than TSMC, and it's a case of us focusing on where we're a natural athlete, and they're focusing on where they are. And I think this is a good win-win for both of us. Neil?

Yes, maybe just to add to that, and you may recall from one of the previous earnings calls, our strategy on GaN is very focused around highly reliable, safe, high-quality devices and obviously, in data centers, that is crucial to ensure there's no downtime.

In addition to that, we are actually focused on the technology in a very similar fashion to the BCD technologies, meaning we are not just going for the discrete device implementation, but we're adding technologies around the discrete devices that enable us to get more differentiated, higher performing and more reliable solutions to the market.

So a very, very, very focused strategy from our side, lots of cost of interest like Tim said, and the U.S. footprint is really just the cherry on the top.

And our next question comes from the line of Chris Caso from Wolfe Search.

The first question would be on gross margins. and utilization. And obviously, you haven't step up here in the fourth quarter, but how should we think about that as we go into the new year that typically, you see some seasonality as you go into the March quarter. And ultimately, I think what drives the gross margin is going to be getting utilization rate up.

Could you give some commentary on where you see that going as you go into next year?

Yes. Chris, it's Tim here. happy to give that. I'll probably start with the third quarter dynamics and then I think that's a good layup into how we're thinking about the fourth quarter as well. So look, taking a step back, third quarter gross margin up 80 basis points quarter-over-quarter, up about 130 basis points year-over-year. Now that's on a declining revenue profile on a year-over-year basis, flat revenue on a quarter-on-quarter basis.

So we set out with a very clear mission at the start of this year, which was notwithstanding some of the consumer-driven demand environment, focusing on improving profitability, consistent free cash flow generation. And that's really what you're seeing come through in the third quarter. Actually, all the more notable as well, Chris, given the fact in the third quarter of in 2024, we still had about $40 million to $50 million of underutilization payments flowing through at that point.

So I called out roughly 2 to 3 points of margin benefit in the third quarter of last year that we didn't get in the third quarter of this year. So it's very much a case of where we've been focusing on opportunities to improve the profitability structure within the business and also continuing to mix into accretive end markets.

And what you're seeing is really a reflection of that starting to come through. Obviously, we've increased and had some incremental benefit come through from our non-wafer technology services. That's also a strong leading indicator in terms of where we see future production ramp as well as we kind of develop those projects from a mask a reticle, nonrecurring engineering perspective as well and really kind of embarking on those new projects with customers.

Little bit of benefit came through, obviously, from D&A, which we talked about at the start of this year. And utilization has been probably the lowest of the contributors towards that margin dynamic. We started out this year in roughly the low 80s. We've been trending around the kind of mid-80s for the last couple of quarters, possibly a minor pickup in the fourth quarter.

But again, just switching to the fourth quarter, what you're seeing is roughly 3 points of incremental benefit on a year-over-year basis at the midpoint of that guide. And actually, from a guide-to-guide perspective, about 3 points as well. And again, that's really a confluence of those initiatives that we focused on from continuing to improve the mix dynamics, focusing on productivity, improving the cost structure of the business and obviously taking a modest benefit from a utilization and D&A perspective.

Did you have a follow-up, Chris?

I did. And there's a question with regard to the mobile business. And obviously, we've seen at least the potential for some consolidation in that business on the RF side, some of that consolidation would affect some of your customers. What's your thoughts on that going forward of the potential effect of consolidation on -- among your customers in the mobile business?

Yes. Thank you, Chris. And I presume you're largely referring to the announcements by Skyworks and Qorvo, Obviously, we're not to comment on that merger itself, but Look, I'd say for both companies, we have a very long track record of serving both of them. And those partnerships go back even before GF was GF in some parts of our business.

And it's partly because of technology leadership -- they're obviously leaders in the RF field and have been key partners for us in building and deploying our road maps. And so that's been a very tight collaboration in the case of both those companies. I think both of them also increasingly focused on supply security U.S. manufacturing and so on.

So I think all the ingredients for strong relationships, strong future business out there with both companies. I don't think that will change whether they're 1 company or 2 companies going forward.

And our next question comes from the line of Harlan Sur from JPMorgan.

Many of your customers are coming off the bottom of the nearly 2-year long down cycle, right? But not seeing that sort of early cycle kind of strong recovery trajectory profile. But instead, seen a return to a more normal kind of seasonal profile in their businesses. You guys are already starting wafers for the March quarter given your manufacturing lead times.

I think normal seasonality is for the team is for revenues to be down about 10%, 12% sequentially. Is that how you are seeing the shipment profile early next year? Or maybe could it be down slightly more sequentially, just given non-wafer revenue is potentially kind of normalizing back to that sort of 10%, 11% of the mix?

Yes. Harlan, it's Sam here. Just happy to take the first part of that question. And look, I think one of the dynamics that you need to keep in mind, particularly when you look at our businesses, the diversification that we have across the portfolio today and actually increasing diversification, you take automotive comes in for a data center that continues to contribute a larger piece of the overall revenue stack.

And so the point there being that there's no single cyclical trend that actually is the determining factor in terms of where we see the revenue profile in the business. Now it's a little bit too soon to go into guiding the first quarter of 2026 at this point. I think you've heard from our customers that they're expecting, as you say, that kind of typical seasonal range, which you outlined on the call.

And maybe just to cover off a little piece of your second part of your question, which is around the non-wafer revenues. Look, this has been a healthy tailwind as we've gone through this year. We signaled it on prior calls. Some of that really is a function of where we see customer dialogue and the timing of new products for our customers, the timing of new engagements on engineering services as well.

And so that's what you're seeing starting to come through really in the third quarter, and obviously, we guided 13% expectation of revenue in the fourth quarter as well. So really a function of those activities. But more broadly, this plays very much to the increased suite of services that as GF, we're able to offer our customers.

And clearly, as we think about 2016 and beyond and continuing to integrate MIPS into the business and the offering that they have in terms of expanding suite of services for customers those non wafer technology services become an increasingly important component of the business.

Did you have a follow-up?

Yes, I did. So thanks for giving us an update on the diversification efforts, obviously, geographical diversification and supply chain diversification is extremely important for your customers. With that in mind, can you guys just give us an update on your trend for China strategy? I think you guys announced your partnership with Zen Semiconductor in China last quarter.

The GS team, I think, has had very strong success within the domestic China automotive markets, for example, with your differentiated technology. And for your non-China customers, obviously, they want local supply to ship to their China customers, right? So what's the time line for transferring, qualifying, ramping production of the manufacturing processes at the semi and is the business model royalty based? Or are you splitting process?

Any insights here would be very helpful.

Yes. Thank you, Harlan. So look, we've spoken on a few different calls about China for China and how we've been addressing that. Again, as a recap, our strategy has been for specific technologies where there is strong local manufacturing design from our customers. to make those available locally in Guangzhou as you mentioned.

That technology is typically in the microcontroller space, automotive imaging, increasing the also technologies in the power space all relevant for that local automotive buildout and beyond. I'd say customer traction has been very, very strong. We spoke briefly in the prepared remarks about our Global Technology Summit. We do the third of which was in Shanghai with very, very strong customer traction.

Interestingly, not just from those multinational companies serving the China market, which perhaps was where we started this engagement, but more and more from also local Chinese players who are looking for both manufacturing in China, but also that diversification for their global exports outside China.

So if anything, incrementally more bullish on the China story for us in terms of demand, and just as a level set, remember, our direct China business today is probably in the nearly lowest amongst peers. For larger semiconductor companies. And so net-net, we see China is actually quite a good upside for us. over time.

Obviously, led by saying these are automotive technologies so they go through a product development cycle, a qualification cycle, but customers are excited about that. And obviously, we're supplying them already out of our global footprint in the meantime, while that ramp is still taking place.

You. And our next question comes from the line of CJ Muse from Cantor Fitzgerald.

I guess first question on non-wafer revenues based on your guidance, that business is going to grow 20% in 2025. Curious if you can give a little more color on what's driving that incremental growth and if you could kind of help us understand whether we should assume similar type of growth into calendar '26?

Yes. Thank you, C.J. No, it's a great question, and Sam sort of touched briefly on this. And let's took what is in non-wafer revenue. So we're clear on what goes in there. That consists of reticles for masks for tapeout and nonrecurring engineering, increasing the other technology services, licensing it's starting to also be where you're seeing the IP revenue starting to layer in.

Sam mentioned MIPS is a driver of that. So look, I think there are some good tailwinds leading to that generally growing. Part of that is higher number of design wins. We spoke about that leads to high number of tape-outs, which tends to positively improve our non-wafer revenue. And then, of course, the acquisition of MIPS now starting -- I would say starting to impact that as well.

So I think that is a good trend, and we'll broaden that category going forward in years to come.

Great. And then I guess maybe to follow up on Ross' question around smartphones or smart mobility, sorry. As you think about calendar '26 and you reflect kind of the reset to pricing, but the hopeful gains in unit volumes, is that a business that can turn and grow now in calendar 2016? Or are there still kind of headwinds that we should be thinking about?

Yes. No, no, it's a great question. I think let's break it down into those 2 pieces. As we said on the pricing side, this is dual source business that we took proactive steps to reset pricing with customers in order to gain more share.

And the calculus there is that's more profitability for GF, and it's a win-win for us and our customers. So that reset is done, and that retail is now in place for the duration of some of those contracts and those contracts now still extend out several years. So we don't expect another kind of step down on the pricing side.

And as you said, we do expect increased volumes relative to baseline after that. So I think on that dual source component, which is a limited part of that business. That dynamic is there. But then I think what you're seeing on the rest of mobile is 2 factors, right? One is the ramp of more differentiated solutions.

What we're doing in the RF front end, Neil talked about CIBIC, right? This is an incredibly interesting and exciting silicon germanium technology, strong customer traction, right? How do you improve performance of low-noise amplifiers, power amplifies in the future. These are the technologies that are difficult to do, but where GF has a strong track record, and that's just one of the several technologies we're bringing to the mobile market going forward.

And of course, a lot of things have cellular connectivity and so the technologies have broader applications as well. So we're very much focused on the differentiation. That will be a mix tailwind over time in mobile and those new form factors that I spoke about as well, things like smart glass is increasingly good traction. Too early to call 2026. But definitely, we think this market -- we have plenty of room to grow and plenty of areas to play within differentiated technologies we have.

Maybe the last comment, some of the customers we've talked about in the onshoring story are also significant players in the handset. And although those ramps are largely kind of 27 and beyond as we've talked about. They're obviously based on diversifying their supply and building a more global sourcing strategy for them. So that will also be a longer term, I think, tailwind for our mobile business.

And our next question comes from the line of Krish Sankar from Cowen.

Congrats on the silicon photonics win. 2 questions. First one, wafer shipments were up 4% Q-over-Q despite flat revenues. And [indiscernible] the full year, you're still tracking around shipment on flattish revenues. I'm just trying to figure out what is the impact for ASPs, both blended ASPs and ASP x mobile? And then I have a follow-up.

Yes. So that's maybe, Chris, a good build on what I just talked about in terms of the pricing dynamics. And so it is very much that story of very specific customers where we proactively chose to make price changes from a share of wallet perspective and increase overall profit dollars to GF and obviously in the way our customers are supportive.

That is the vast majority of the dynamic on pricing affecting both the quarter and the full year trajectory. Even within mobile outside those customers, actually, we see mix being a tailwind as we ramp additional high margin or higher-margin differentiated technologies. And across all of the other end markets, that's where we are very much sole-source business, and so pricing has been largely stable.

And maybe also worth adding that this is the in-year pricing, but even the pricing that we're winning new designs on and as Neil has mentioned, year-on-year, we're winning significantly more designs, pricing is very stable. Customers are happy to pay for the value of what they're really looking for. They're looking for differentiated technology. They're looking for time to market. They're looking for supply security.

They're looking for capacity and they're willing to put the right price on that. And so we feel the overall price environment remains actually very constructive.

And Krish, maybe just to add one point to that. I think a critical dynamic you need to continue to focus on is the margin structure within the business. Actually, the correlation, I think, between where some of the pricing movements versus where the margin is, we sort of dispelled some of that focus around pure ASP. And so from our point of view, the fact that we've incurred some of those ASP trends associated with a limited number of customers in Smart Mobile and still grown margin year-over-year, quarter-over-quarter, I think, is a good proof point there to focus on.

Got it. Very helpful. And then a quick follow-up on the Silicon Labs expanded partnership, is this a share gain thing where lab is moving more wafers to Global Foundries from another foundry? Or is it more new chip designs, how to think about that?

Yes. It's absolutely a share gain. Silicon Labs, you should ask them about their sourcing strategy, but what they've been clear about with us is that they are very keen to have a strong U.S. sourcing footprint for that business. Today, they do source from other foundries. I think over time, you'd expect that to diminish and given what we're offering them. And again, it's not just the U.S. sourcing. It's also a very strong focus on their technology platforms.

Literally, everything they make our technologies that we support and invest in, and I think it's not just a capacity partnership, it's also a technology partnership.

And our next question comes from the line of Joseph Moore from Morgan Stanley.

Great. You've addressed a lot of the opportunities geopolitically and I know you have a lot of capacity headroom overall. Can you give us a sense for that by region and to the extent that you get silicon lab type deals in the U.S. or in Europe, do you have capacity to continue to grow those businesses?

Do you have space if you need to spend more money to grow. I think multi was based concerned at one point. Can you just give us an update on how that utilization is by region.

Yes. Maybe I'll talk about how we think about capacity and then maybe Sam can talk a little bit more tactically about utilization. Joe, our footprint utilization, meaning our floor space utilization, we still have significant upside or room to grow within our current 4 walls. In some of our sites, obviously, we're running up against the headroom there.

I can dress them when we start to make small investments to expand the footprint converting in that case, our former test facility using that space and so on Malta has significant floor space to grow. And so I think we have a very, I'd say, short time to market for that growth because again, we're not building new fabs to get all of that growth started and what you also have to bear in mind is that we have significant.

Probably the highest we've ever had in terms of level of government incentive programs to support that new CapEx for sure in the U.S. but also that's what we expect in Germany, and we will continue to have similar positive support levels in Singapore as we have had in the past there as well.

So I think it's very, very capital efficient, very short time to market and with that government support alongside. That said, we're tough on ourselves. We scrutinize every dollar of incremental CapEx heavily. Is it based on real demand that we have line of sight of and is in those areas that are highly kind of differentiated from a technology point of view.

So silicon photonics will definitely prioritize those kind of areas when it comes to the investments, but overall, we've ripped in how we think about adding capacity. Do you have a follow-up?

Yes, I do. I think you mentioned the sort of categories have gone wafer revenue. You talked about expedite fees. I'm curious, are you seeing a lot of that at this point? Are there any of the data center markets giving you expedites or just anything new that you see on that front?

Yes. So expert is a portion of non-wafer revenue. I'd say, if anything, we do see a little bit more desire for expedites across different markets. I think we also see specific capacity corridors closer to full utilization, which is a great sign of demand for those differentiated areas. Are we in an extraordinary kind of scarcity situation across every part of the business?

Not yet. But I think you are seeing increasing piping across those very differentiated corridors.

If I add just on the design win side, we talked about in this quarter and the previous quarter, up 100% in the previous quarter, up 50% of the number of design wins. That directly translates into tape-outs. So you continue to see the number of tape-outs coming up, meaning the radical revenue going into non-wafer revenue as well.

We expect to continue to grow. This is obviously a good sign for future growth of revenue. Thank you.

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Eric Chao for any further remarks.

Thank you, Jonathan. Thank you for joining. We look forward to seeing you at the UBS conference on December 2, and please do tune in to our investor webinar on December 3, focusing on physical AI. Thank you.