GlobalFoundries warns of tariff risks in 2H25

GlobalFoundries reported first-quarter revenue growth of 2.3% to US$1.59 billion, supported by demand in data center and IoT markets. While tariff impacts remained minimal in early 2025, management warned of potential pressures in the second half of the year amid macroeconomic uncertainty. The company forecasts a second-quarter revenue of approximately US$1.68 billion.

According to the latest financial results released on May 6, 2025, GlobalFoundries posted net revenue of US$1.59 billion for the first quarter, marking a year-over-year increase of 2.3%. The company reported earnings before interest, taxes, depreciation, and amortization (EBITDA) of US$558 million and a gross margin of 23.9% for the quarter.

Tim Breen, CEO of GF, stated that the team delivered strong financial results at the high end of the Non-IFRS guidance ranges for revenue, gross margin, and earnings per share. He noted that the Automotive, Communications Infrastructure and Datacenter, and Home and Industrial IoT end markets grew year over year in the first quarter. Highlighting areas such as autonomous vehicles, satellite communications, and optical networking, Breen emphasized that GF continues to build momentum in critical applications with promising growth prospects.

Guidance and analyst view

For the second quarter of fiscal year 2025, GlobalFoundries projected net revenue of approximately US$1.68 billion. The company expects earnings per share of approximately US$0.36 for the quarter.

Bloomberg Intelligence analyst Jake Silverman noted that GlobalFoundries' first-quarter earnings surpassed estimates due to improved gross margins, lower expenses, and favorable non-operating items. Revenue was roughly in line, as gains in non-wafer, data center, and Internet of Things (IoT) segments offset weaker smartphone and auto sales.

The outlook for the second quarter indicates the smartphone slowdown may be temporary, with IoT demand recovering. However, uncertainty in the second half of the year could pose challenges despite a progressing gross margin recovery.

Trade and tariff concerns

During the first quarter 2025 earnings call, Breen addressed concerns about the potential impact of tariffs on GlobalFoundries' revenue and market position. He noted that tariffs have not significantly disrupted orders or demand in the first half of the year, which has aligned with expectations.

However, Breen cautioned that trade policy uncertainties could affect consumer and industrial demand in the second half of 2025 and into 2026. CFO John Hollister added that tariff concerns could particularly impact consumer-oriented segments like smart mobile devices and parts of IoT. He reported factory utilization rates at approximately 80% in the first quarter, emphasizing that increasing utilization will be critical for absorbing fixed costs and improving gross profit margins throughout the year.

GlobalFoundries estimated an annualized cost impact of approximately US$20 million from tariffs, with minimal effects expected in the second quarter. Hollister confirmed that this impact has already been incorporated into the company's financial guidance and is under continuous review. The company is actively exploring options to offset these costs by adjusting average selling prices (ASPs) and commercial negotiations with customers.

Furthermore, Breen underscored the strength of GlobalFoundries' globally diversified supply chain, which mitigates tariff-related cost increases by sourcing materials from a wide range of suppliers. Hollister highlighted that only one of the company's three 300-millimeter fabrication facilities is located in the US, reinforcing the strategic advantage of its global footprint in managing cost pressures compared to other semiconductor firms.

Segment performance insights

Breen reported strong growth in the communications infrastructure and data center segment, with notable year-over-year gains in the first quarter. He projected high-teens percentage growth for the full year of 2025, driven by increasing data consumption, storage demands, and power requirements in modern data centers. Breen attributed this performance to GlobalFoundries' strategic investments in data center technologies, positioning the company to capitalize on the expanding need for advanced semiconductor solutions in this sector.

COO Niels Anderskouv highlighted robust design momentum in the IoT segment and sustained confidence in the automotive sector, where GlobalFoundries has achieved consistent market share gains since its IPO, including 15% year-over-year revenue growth last year. CFO John Hollister noted that the flat revenue forecast for smart mobile devices reflects a US$100 million reduction in underutilization payments compared to the prior year. For the second quarter, the company anticipates broad-based growth across its end markets, with the first quarter marking a low point for smart mobile devices. CEO Tim Breen expressed confidence in the company's balanced momentum, suggesting steady progress across all segments as GlobalFoundries navigates short-term challenges.

ASP trends and margin strategies

CFO John Hollister addressed the observed decline in wafer average selling prices (ASPs) in the first quarter, primarily due to a year-over-year reduction in underutilization payments included in wafer revenue. He projected a mid-single-digit ASP decline for the full year, driven largely by changes in product mix, as different wafer products require varying numbers of mask layers.

Hollister noted that while some price reductions were accepted to gain market share in dual-sourced segments, this was a minor factor. To maintain gross margins despite ASP pressures, the company is focusing on improving factory utilization, reducing structural costs, and benefiting from depreciation roll-offs.

Niels Anderskouv added that certain differentiated process nodes, which use fewer mask layers (around 25 compared to 50–60 for others), can yield higher margins despite lower ASPs, as they involve lower production costs. This dynamic ensures that lower prices do not necessarily erode profitability, supporting the company's financial resilience.

Source: GlobalFoundries, May 2025

Source: GlobalFoundries, May 2025

Article edited by Jerry Chen