GlobalFoundries: Silicon Photonics and Quantum Grants Signal a Structural Re-Rating Story
TD Cowen 54th Annual Technology Conference, May 27, 2026 — CFO Sam Franklin lays out the margin and technology roadmap
GlobalFoundries is no longer the company that lived or died by smartphone volumes. CFO Sam Franklin made that case with considerable clarity at TD Cowen's annual technology conference on Wednesday, walking through a margin expansion blueprint anchored in silicon photonics, co-packaged optics, quantum computing, and a fast-growing non-wafer revenue stream — while simultaneously addressing the elephant in the room: Mubadala's overhang and what last night's block trade means for the stock's long-term investability.
The Gross Margin Walk: Four Levers to Get from 30% to 45%
Franklin was unusually specific about the mechanics of margin expansion. GlobalFoundries expects to exit 2026 at roughly 30% gross margin, reach 38% exiting 2028, and ultimately hit 45% on a longer-term horizon — a 15-point journey that Franklin broke into four discrete drivers. First is revenue mix: the company has been deliberately tilting toward communications infrastructure and data center, which grew just under 30% last year, 32% in the first quarter, and is now tracking toward high-30s percent growth for the full year 2026. Automotive has grown 14x over five years and continues to contribute at attractive margins. IoT ramps are still early, adding further upside to mix. Franklin characterized mix alone as worth roughly five margin points over the coming years.
Second is technology services, the non-wafer revenue line that has historically hovered at 8% to 10% of sales. Following the acquisition of MIPS in the second half of last year and the pending close of the Synopsys DesignWare RISC-V archive business, non-wafer revenue hit 13% in the first quarter and is expected to stabilize in the 12% to 14% range long term. This revenue — IP licensing, software, early-stage design partnerships — carries superior margins and is structurally stickier than wafer revenue. Franklin flagged this as worth a couple of additional margin points. Third is manufacturing productivity, where the company is deploying digital manufacturing and AI-based tools to extract more from its existing installed base. Fourth is scale leverage within its existing fab footprint, which Franklin described as operating "at the highest end of the fixed cost scale" in the industry.
The longer-duration margin drivers — advanced packaging, custom silicon, and the ramp of co-packaged optics — are the incremental layer on top of that foundation as the decade progresses.
Silicon Photonics: Two Revenue Horizons, One Clear Ambition
The silicon photonics narrative is evolving from speculative to tangible, and the numbers Franklin cited are worth paying attention to. GlobalFoundries is targeting $1 billion in silicon photonics revenue at a run rate exiting 2028, driven primarily by pluggable optical transceivers where the company already has a strong and growing customer base. The second phase — co-packaged optics — is expected to inflect in late 2028 into 2029, with a longer-term target of $2 billion in silicon photonics revenue toward the end of the decade. Franklin noted the company recorded two CPO tape-outs in the first quarter, including customers tied to the OCI MSA founding member ecosystem, which includes some of the hyperscalers most aggressively deploying next-generation optical networking architectures.
On competitive positioning, Franklin was direct: "It's really only GF and TSMC that have fully fledged CPO solutions taping out in the market today." He also addressed a key differentiator — GlobalFoundries has adopted an ecosystem-agnostic approach to its SCALE CPO platform, partnering with the likes of Corning and Cenko for fiber detach, and accommodating third-party EICs manufactured on sub-10 nanometer nodes as consignment components. This is a deliberately different posture from TSMC's more vertically integrated approach and may give GlobalFoundries an edge with customers who want supply chain flexibility. Franklin also pointed to GaN-based data center power management as an adjacent opportunity gaining customer traction, adding another revenue vector to the data center thesis beyond optics.
The company has invested over $1 billion in R&D and capital in photonics over the better part of a decade. Franklin's framing of the market transition was precise: "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."
Quantum: A $375 Million Federal Grant and a 1% Government Equity Stake
Perhaps the single most notable new development discussed at the conference is the $375 million CHIPS Act R&D grant announced last week — accompanied by the U.S. government taking an approximately 1% equity stake in GlobalFoundries. Franklin confirmed there are no buyback restrictions or legacy covenant-style limitations attached to the grant, characterizing the equity arrangement as structurally separate from the grant funding itself and more akin to a strategic co-investment. He described the government stake as "a strong validation of the role that GF plays" and noted it gives the government direct exposure to value creation across GlobalFoundries' broader portfolio, not just quantum.
The quantum strategy itself is modality-agnostic by design, a deliberate choice given the unsettled state of the quantum computing landscape. GlobalFoundries is positioning its FDX platform — valued for its cryogenic performance characteristics — as the manufacturing backbone for quantum hardware, while building out quantum PDKs and advanced packaging capabilities to offer what Franklin called "a complete quantum hardware solution." Announced partnerships with Si Quantum, Quantum Motion, and Quantinuum underscore that the company is already embedded with multiple credible players. Franklin indicated the grant proceeds will largely be deployed as a direct offset in R&D and capital investment, meaning it is additive to technology capability without diluting the balance sheet.
LEO Satellite: From Zero to $100 Million in One Year
One of the more underappreciated growth vectors in the GlobalFoundries story is satellite communications. Franklin disclosed that low earth orbit satellite revenue went from essentially zero in 2024 to approximately $100 million in 2025. The content opportunity per unit is compelling: a base station in a SATCOM application carries roughly five times the RF front-end content of a smartphone. The company's 22FDX platform also goes into beamforming applications. Franklin's expectation is that GlobalFoundries' satellite revenue will broadly track the growth trajectory of the LEO satellite market itself. Separately, the company is seeing aerospace and defense design-win activity accelerate, with mask and reticle-related revenue in the first quarter — a leading indicator of future wafer revenue — reflecting stronger A&D pull. Franklin noted that some legacy A&D applications reached end-of-life at the end of 2025 but characterized the pipeline of new long-dated programs as encouraging.
Mobile Is Shrinking by Design, Not by Accident
Smart mobile devices fell to approximately 34% of first-quarter revenue, the lowest share in company history. Franklin was unapologetic: GlobalFoundries has built a five-year plan that does not require growth in smartphone volumes. The company expects to slightly outperform the broader mobile market, which is tracking down roughly 12% for the year, by virtue of its two-thirds skew toward premium handsets — a segment Franklin described as surprisingly inelastic in the face of price increases. Emerging form factors including hearables, wearables, and smart glasses are generating early design-win momentum, and Franklin pointed out that these devices require the same RF, Bluetooth connectivity, and power management technologies already in GlobalFoundries' portfolio.
CapEx Discipline and the Mubadala Overhang
GlobalFoundries is guiding net CapEx to 15% to 20% of revenue this year, roughly double the 7% to 10% range of the prior two years. Franklin was explicit that this is demand-pull driven, not speculative capacity build, and that the company can expand meaningfully within its existing four walls without triggering a modular expansion cycle — a significant efficiency advantage over peers. Silicon photonics is the largest single recipient of incremental capital, but FDX and silicon germanium capacity are also being added. The ceiling remains at 20% net CapEx as a percentage of revenue, a discipline the company reaffirmed at its Analyst Day.
On capital return, GlobalFoundries has bought back approximately $400 million of a $500 million board-authorized repurchase program this year and initiated a dividend, with a stated framework of distributing roughly 50% of free cash flow after investments to shareholders. The company is targeting approximately 10% year-over-year free cash flow growth through the cycle.
The Mubadala overhang came up directly. Franklin acknowledged it has "somewhat held back" the stock and was explicitly supportive of Mubadala's block sale activity — including a transaction that priced the prior evening. He characterized Mubadala's accompanying statement as conveying "strong conviction in the importance of GlobalFoundries to their investment portfolio" and described the majority shareholder as "a very disciplined and patient" capital partner. The subtext was clear: management welcomes float expansion and views increased institutional participation as structurally positive for the stock's re-rating potential, even if the pace of Mubadala's exit remains entirely at the shareholder's discretion.