Thank you for standing by, and welcome to the GlobalFoundries conference call to review Second Quarter of Fiscal 2025 Financial Results. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Sam Franklin, Vice President, Business Finance and Investor Relations. Please go ahead, sir.

Thank you, operator. Good morning, everyone, and welcome to GlobalFoundries' Second Quarter 2025 Earnings Call. On the call with me today are Tim Breen, CEO; Niels Anderskouv, President and Chief Operating Officer; and John Hollister, CFO. A short while ago, we released GF's second 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 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 filed with the SEC. In terms of upcoming events, please note that we will be participating in fireside chats at the KeyBanc Capital Markets Technology Leadership Forum in Deer Valley on August 11; The Deutsche Bank Technology Conference in Dana Point on August 27; and 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 current business environment and technologies, Niels will then discuss our recent design wins, highlights and traction across the end markets, following which, John will provide details on our second quarter results and third quarter 2025 guidance. We will then open the call for questions with Tim, Niels and John. I'll now turn the call over to Tim.

Thank you, Sam, and welcome, everyone, to our second quarter 2025 earnings call. I'm pleased to announce that GF delivered strong financial results in the second quarter that exceeded the guidance midpoints for revenue, gross margin and operating margin. Earnings per share exceeded the high end of our guidance range, and these results reflect our continued focus on driving profitability through the cycle. We also made notable progress on other key financial metrics in the quarter, generating $277 million of adjusted free cash flow. Having recently implemented several capacity expansions in capital-efficient manners, GF is poised to capture growth opportunities across our footprint as demand accelerates in critical end markets, while continuing to deliver robust adjusted free cash flow. Thanks to the team's excellent execution, we remain on track to generate over $1 billion of adjusted free cash flow in 2025. In the second quarter, we continued to demonstrate excellent progress in high-growth markets where both the edge and cloud AI transitions are driving the need for secure, high-performance GF technologies. Both our automotive and communications infrastructure and data center end markets demonstrated double-digit percentage year-over-year revenue growth for the third consecutive quarter. As the demand for our differentiated product portfolio aligns with the increasing requirements for high-performance chip solutions in these growth markets, GF is delivering strong design win momentum with existing and new customers. For our automotive and communications infrastructure and data center end markets in 2025, we expect year-over-year growth in the mid-teens and high teens percentage ranges, respectively. Meanwhile, the smart mobile devices and home and industrial IoT end markets have continued to experience a slower recovery as uncertainties brought about by the broader geopolitical environment and global trade tensions have impacted consumer demand and inventory dynamics in these two end markets. To that end, we have been partnering closely with certain customers to support their inventory management and preserve GF's market share predominantly where we are a dual-sourced foundry supplier. In our smart mobile devices end market, achieving these objectives has involved some one-time adjustments to the average selling price per wafer or ASP. For one particular customer, we partnered to replace the fixed wafer volume component of their long-term agreement with a shift to a long-term 50% share of wallet, which is expected to result in meaningfully higher wafer revenues over the remaining life of the contract. These types of adjustments for specific customers are leading to improved utilization levels across our footprint in the second half of 2025 but will result in year-over-year ASP declines in the second half of the year for this end market and to a lesser degree, for GF overall. We continue to observe a constructive pricing environment across automotive and communications infrastructure and data center as the demand for silicon content continues to grow in these end markets, and GF's solutions and footprint bring unique differentiation. Notwithstanding these market dynamics, GF remains the diversified and differentiated foundry of choice for a growing number of our customers. With our broad product portfolio and our focus on critical performance, connectivity, and power capabilities, GF is gaining share and winning key designs across a range of applications and end markets. I would like to provide some important business highlights from the second quarter. We secured design wins for applications across automotive processing, data center power delivery and connected home automation on GF's 22FDX MRAM, 55 BCDLite, and 12LP+ platforms, respectively. Niels will cover these in more detail. Moving briefly to the macroeconomic landscape. Like others in our industry, we believe that some customers took on additional inventory in the second quarter, particularly in consumer-facing markets, in anticipation of increased tariff-related impacts, which will impact demand in the second half of the year as these inventories normalize. More strategically, it is increasingly clear that the changes and uncertainties brought about by global trade negotiations and tariffs underscore the importance of being a geographically diversified foundry partner to our customers, which GF is uniquely positioned to provide with our footprint across the U.S., Europe, and Asia. Diverse, dependable supply of semiconductors is not a luxury but a necessity for national and economic security. For over a decade, GF has made investments to build and scale flexible manufacturing capacity across our sites. Our diversification strategy is gaining traction with more and more customers who have recognized the value of partnership with GF's resilience, flexibility, and dependability. In the U.S., we fulfilled our first Chips milestone in diversifying our Fab 8 facility with our Chips 8.02 project. Our 22FDX technology is on track with qualification, bringing supply chain resiliency and security onshore. This is intended to provide our customers with critical supply as anticipated tariffs on semiconductor imports take effect. In Europe, we intend to convert our former Bump Test Facility to expand our wafer fabrication capacity and are working to get EU Chips approval to support the investment, which will deliver even more efficient scale in Germany, and support our European customers like Continental and Bosch with domestic supply. We are enhancing our global reach with our China-for-China strategy, particularly targeted at the growing automotive sector. I am pleased to announce that we have entered into a definitive agreement with a China-based foundry that will enable our customers to access GF production, performance and quality to serve their domestic Chinese demand. Initially, this agreement will apply to our automotive-grade feature-rich CMOS technologies. And based on early dialogues with our customers, we expect this will extend to our automotive-grade BCD technologies. This is a unique opportunity for GF to expand our multi-fab customer offering on our successful automotive-grade platforms while maintaining control over both the IP and quality standards that our customers require. We believe an increasingly decentralized world is a net opportunity for GF, and the strength of our opportunity funnel and design win momentum is a compelling validation of our long-term growth strategy. Furthering our efforts to support our customers where and how they need us and to align our business with the secular growth trends accelerated by the deployment of AI, last month, we announced a definitive agreement to acquire MIPS, a leading supplier of AI and processor IP. Expected to close later this year, MIPS will be an exciting addition to the GF suite of offerings that will add more value to our customers in completely new ways. MIPS brings a highly complementary IP portfolio and decades of design and IP innovation that will be accelerated when combined with GF's world-class manufacturing and global ecosystem. As a leader in RISC-V capabilities, MIPS enables efficient processor cores that are tailored for edge AI applications and ideal for the high-performance edge solutions that GF is well positioned to serve. This acquisition is a win for GF and a win for our customers, who will be able to collaborate with GF earlier in the design cycle with more direct access to process IP and with greater potential for customization. Early customer feedback on the acquisition has been very favorable as our customers look to an increasingly differentiated GF as their partner in edge AI applications. In conclusion, I want to thank our 13,000 strong employees around the world for their focus on technology differentiation, manufacturing excellence and driving the momentum with our customers, as we continue to execute our long-term strategy and lay the foundations for a strong future. With that, over to you, Niels.

Thank you, Tim, and welcome to everyone on the call. As Tim mentioned, we are continuously advancing our commercial partnerships and securing design wins with our customers, of which over 90% were awarded on a sole-sourced basis during the last four quarters. Our unique and varied technology portfolio continues to fuel strong design win momentum across each of the end markets we serve. In the second quarter, we secured nearly 200 design wins across our end markets, a new quarterly record and almost double the number from a year ago. With that, let me walk you through the key highlights for the quarter by end market. In automotive, we continue to outgrow the market and capture share as we expand our breadth of offerings in content per vehicle and enable our customers to win with GF's differentiated features and performance. A testament to this strength in the second quarter, our automotive end market grew over 36% year-over-year and comprised nearly a quarter of total wafer revenue. We're on track for mid-teens percentage automotive revenue growth in 2025. Our leadership in automotive microcontrollers has driven our strong partnerships with customers around the world. We have gained significant design interaction with China domestic fab-based customers, having secured design wins across battery management systems, radar, microcontrollers, and power management ICs with a dozen customers over the last four quarters. GF automotive products are already shipping to Chinese customers, which will help expand our automotive market share in China. More broadly, we're seeing accelerated design win traction across our portfolio of diversified applications within the automotive space. In the second quarter alone, we won designs with 25 unique customers. These include wins across automated driver assist processors, controllers, display controllers, radar sensors, battery management systems, and interior lighting on our 12LP, 22FDX, and 130BCD AutoPro platforms, respectively. Among these, GF won its first automotive design win with the 12LP+ AutoPro platform for the next-generation radar processor. These processors interpret high-resolution imaging radar data and are critical for initial object classification, meaning the speed and accuracy that GF provides will make our roads safer. In addition, as Tim mentioned, we secured a significant design win for a fifth-generation microcontroller with 4 megabytes of magnetic RAM on our 22FDX platform. With this win, GF not only demonstrates strong customer momentum in the era of software-defined vehicles, it highlights the value of integrated nonvolatile memory that our platforms can provide. Lastly, in June, Continental announced that GF was strategically brought on as the exclusive manufacturing partner for its newly formed Advanced Electronics & Semiconductor Solutions organization. We are proud to support Continental in this endeavor. This is a powerful testament to the trust in GF's auto-qualified process technologies, quality, and reliability. Through this partnership, GF will enable Continental to deliver innovative solutions for the next generation of safe, connected, and autonomous vehicles. Turning now to smart mobile devices. Revenue in the second quarter grew off of a seasonally low first quarter, but declined year-over-year due to a reduction in the customer underutilization payment from the prior year period as well as certain ASP adjustments that Tim mentioned. Notwithstanding this, our long-term outlook for content gains in the smart mobile end market is positive as we see strong commercial traction with new design wins and partnerships across a broad range of applications in smartphones and beyond. We also see a tailwind in this market, driven by the need for more U.S. sourcing. GF's market share continues to grow in RF front-end, where we lead the market with our 8SW and 9SW platforms. In the second quarter alone, we secured 36 design wins in RF front-end with 9 of the top 10 industry players, further expanding our customer base and GF's share of wallet. Beyond our market-leading position in the RF front-end, we built momentum in 5G transceivers on our FinFET platform by securing committed revenue over the next four years with a key customer. In addition to the smartphone, we engaged with leaders in the nascent but emerging smart glasses space. Leveraging our leading technology elsewhere in our portfolio, smart glasses are a new form factor, utilizing many of the same essential chips for connectivity, processing, power, imaging, and display. In the second quarter, we secured a new design win for the AI processors used in smart glasses, building on our design win for microLED displays in the first quarter to support GF's growth in this exciting application. In IoT, revenue grew year-over-year for the second consecutive quarter, and we secured several design wins with leading IoT connectivity players for Wi-Fi 7 and Wi-Fi 8 as well as next-generation Bluetooth, demonstrating our continued leadership in IoT connectivity products. These included wins on our 12LP+ and 22FDX platforms for Wi-Fi and Bluetooth System-on-a-Chip solutions that enable connected home automation applications. The increase in use cases for keyless entry systems and Bluetooth tags shows that these applications benefit from GF's strength in low power consumption and high security. Beyond connectivity, we are also seeing broad adoption of GF technologies to enable physical AI. These design wins enable important device capabilities such as time-of-flight sensors for home robotics and image and audio processors that bring AI-enabled vision and language functionality to home and industrial applications. Lastly, we see continued traction in MedTech and health applications where the need to acquire, process, and communicate data securely and at low power is paramount. In Q2, we won an audio design for ultra-low power AI-enabled hearing aids on 22FDX. Looking ahead to the second half of 2025, we expect full-year revenue in this end market to decline mid-single digits year-over-year, driven by residual consumer-facing IoT inventories. Going into 2026 and beyond, we remain bullish on GF's strength and growth potential for home and industrial IoT. As AI increasingly migrates to edge devices, we believe the need for ultra-low power and ubiquitous connectivity will only grow stronger. Finally, our communications infrastructure and data center end market grew double-digit percentage year-over-year in the second quarter, and we continue to expect high-teens percentage revenue growth in 2025. Thanks to our focus on differentiated and high-growth opportunities within communication infrastructure and data center, we expect to see multi-year secular growth opportunities for GF. These include high-growth, high-margin areas such as silicon photonics, which we expect to nearly double in revenue from 2024 to 2025 to over $200 million. Given the strength of our photonics products, we have expanded capacity to meet robust customer demand. We're ramping our silicon photonics capabilities to address the need for higher-performance solutions to support both pluggable and co-packed solutions for scale out and scale up networks. As the need for optical-driven speed, bandwidth, and power efficiency continues to grow, we believe GF is only in the early stages of this opportunity. GF is engaged with leading industry players in the CPO ecosystem across network and photonic innovators to support the development of integrated solutions as the demand for data grows exponentially. Satellite communications is another area of significant growth potential for GF as we design into the world's foremost satellite communication companies. GF content can be found in both rapidly launching satellites as well as user terminals, which are projected to reach millions of units. With RF front-ends on our SiGe and RF CMOS, digital beamformers on our 22FDX and modems on our 12LP platforms, GF is playing a critical role in enabling this new growth market. Starting from de minimis revenue in 2024, we expect Satcom to contribute approximately $100 million of revenue in 2025. Overall, we continue to make progress on our design win momentum across a wide breadth of applications, enabled by our portfolio. Thanks to the trust and partnership with our customers, I'm excited for us to capitalize on these long-term growth opportunities. I'll now pass the call over to John for a deeper dive on our financial results and guidance.

Thank you, Niels. For the remainder of the call, including guidance, other than revenue, cash flow, net interest income and second quarter CapEx, I will reference non-IFRS metrics, which are included in today's press release and accompanying slides. As Tim noted, our second quarter results exceeded the midpoints of the guidance ranges we provided in our last quarterly update. We delivered second quarter revenue of $1.688 billion, which represented a 6% increase over the prior quarter and an increase of 3% year-over-year. We shipped approximately 581,000 300-millimeter equivalent wafers in the quarter, up 7% sequentially and up 12% from the prior year period. ASP or average selling price per wafer was down high single-digit percentage year-over-year due to product mix, pricing adjustments and a reduction in customer underutilization payments from the prior year period. Wafer revenue from our end markets accounted for approximately 90% of total revenue. Non-wafer revenue, which includes revenue from reticles, nonrecurring engineering, expedite fees and other items, accounted for approximately 10% of total revenue for the second quarter. Let me now provide an update on our revenues by end markets. In line with our strategy, we continue to align our business to secular growth drivers and diversify our end market position. Smart mobile devices represented approximately 40% of the quarter's total revenue. Second quarter revenue increased approximately 17% sequentially and decreased approximately 10% from the prior year period. In the second quarter, revenue for the home and industrial IoT markets represented approximately 18% of the quarter's total revenue. Second quarter revenue decreased approximately 9% sequentially and increased approximately 2% from the prior year period. Automotive remained a strong growth driver for us and represented approximately 22% of the quarter's total revenue. Second quarter revenue increased approximately 19% sequentially and 36% from the prior year period. Finally, our communications infrastructure and data center end market represented approximately 10% of the quarter's total revenue. Second quarter revenue decreased approximately 2% sequentially and increased approximately 11% over the prior year period. For the second quarter, we delivered gross profit of $425 million, which was above the midpoint of our guided range and translates into approximately 25.2% gross margin. Operating expenses for the second quarter represented approximately 10% of total revenue. R&D for the quarter was $125 million and SG&A was $42 million. Total operating expenses were approximately flat quarter-over-quarter at $167 million. We delivered operating profit of $258 million for the quarter at an operating margin of 15.3%, which is at the high end of our guided range and 230 basis points above the prior year period. Second quarter net interest income was $17 million, other expense was $7 million, and we incurred income tax expense of $34 million in the quarter. We reported second quarter net income of $234 million, an increase of approximately $23 million from the year ago period. As a result, based on a fully diluted share count of approximately 557 million shares, we reported diluted earnings of $0.42 per share for the second quarter, which exceeded the high end of our guidance range. Let me now provide some key balance sheet and cash flow metrics. Cash flow from operations for the second quarter was $431 million. CapEx for the quarter was $159 million or roughly 9% of revenue. Adjusted free cash flow for the quarter, which we define as net cash provided by operating activities, plus the proceeds from government grants related to capital expenditure, less purchases of property, plant, and equipment and intangible assets as set out in the statement of cash flows, was $277 million, which represented an adjusted free cash flow margin of over 16% in the quarter. We view this as strong performance, especially considering market conditions. At the end of the second quarter, our balance sheet remains strong with our combined total of cash, cash equivalents and marketable securities stood at approximately $3.9 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 third quarter of 2025. We expect total GF revenue to be $1.675 billion, plus or minus $25 million. Of this, we expect non-wafer revenue to be approximately 12% of total revenue. We expect gross margin to be approximately 25.5%, plus or minus 100 basis points, which reflects a sequential and year-over-year growth in gross margin. Lastly, our teams are diligently managing the potential supply chain cost impacts associated with tariff uncertainties. Thanks to GF's global footprint and diversified sourcing strategy, we expect the cost impacts to be limited to roughly $20 million in the second half of 2025. Our third quarter revenue guidance reflects a slower-than-expected market recovery as well as volume adjustments requested by certain customers, which we expect to be fulfilled in the fourth quarter. Provided that we see continued growth in our high-margin end markets and the demand for consumer-centric goods stabilizes, we expect gross margin expansion in the fourth quarter. Excluding share-based compensation, we expect total operating expenses to be $190 million, plus or minus $10 million. We expect operating margin to be in the range of 14.2%, plus or minus 180 basis points. At the midpoint of our guidance, we expect share-based compensation to be approximately $56 million, of which roughly $18 million is related to the 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 $26 million and $40 million. For 2025, we expect GF's effective tax rate for the year to be in the mid-teens percentage range. Based on the multiple jurisdictions where we do business and the dynamic tax policy environment, we expect this indication to be consistent with our normalized tax run rate for the remainder of 2025. Based on a fully diluted share count of approximately 560 million shares, we expect diluted earnings per share for the third quarter to be $0.38, plus or minus $0.05. We expect CapEx, net of proceeds from government grants, to be approximately $700 million for the full year 2025. As our fabs meet expansion milestones around the world, we expect to increasingly benefit from government incentives in the second half of the year. As noted by Tim and Niels, free cash flow and profitability metrics are at the core of GF's long-term growth objectives, and we remain on track to achieve these. Our results today point to another quarter of strong cash flow generation, and for the full year, we still expect to generate over $1 billion of adjusted free cash flow. In summary, I want to thank our teams across the world for their efforts that drove the strong financial results this quarter. I'll now pass it back to Tim for closing remarks before we move to Q&A.

Thanks, John. At GF, our unwavering commitment is to serve as a trusted partner to our customers with our broad suite of differentiated essential chip technologies, and I'm encouraged by the ramp in the design wins, including many in exciting new applications that support the megatrends that will pull our industry into the future, including the permeation of AI, the criticality of power, and the transition to next-generation connectivity, all areas perfectly aligned with GF strengths. In addition, our unique and flexible global capacity not only ensures supply resilience and flexibility, it allows us to be wherever our customers need us. Our targeted China manufacturing strategy completes this picture and enables us to participate in growth across the industry. Overall, we are confident in our rock-solid foundation and long-term growth prospects of our core business. but we don't plan on stopping there. As our customers look for more technology solutions to enable their own success, we will expand our portfolio with acquisitions such as MIPS that bring critical capabilities to accelerate our business in the AI transition. None of this will be possible without the dedication and hard work of our employees. I'm looking forward to what we can achieve together. With that, let's open the call for Q&A.

Certainly. And our first question for today comes from the line of Joseph Moore from Morgan Stanley.

Great. With regards to Q3 I understand the headwinds you guys are talking about, but it looks like some of your foundry peers are guiding a little bit more optimistically. Can you just talk about what types of headwinds you're seeing? And how much follow through there may be beyond the third quarter?

Yes, Joe, this is John. I'll start with that. Our base outlook for the year is still focused on growth in fiscal 2025. Tim and Niels mentioned some aspects in their prepared remarks, but to elaborate by end market, we anticipate solid growth in both the automotive and communications infrastructure and data center markets, with growth rates in the mid-teens and high teens, respectively. However, we expect a decline in smart mobile and a modest decrease in IoT for the year, as our consumer-facing markets are adjusting inventory levels throughout the year. Specifically for the third quarter, we expect year-on-year growth in the automotive sector. One of our customers is managing inventory as we approach the end of the year for final deliveries in 2025, which may lead to a slight decline in automotive during the third quarter. On a positive note, we anticipate smart mobile will show sequential growth again in the third quarter. This provides an overview of our expectations for top line growth trends throughout the year.

That's helpful, thank you. For my follow-up, I wanted to discuss the China-for-China strategy a bit further. Can you share which partners you're collaborating with in that market? It seems to be of interest to many. Are your partners Western automotive manufacturers, Western semiconductor firms, or Chinese companies? Who will be your main customers as you begin manufacturing in China through this partnership?

Yes. Thank you, Joe. This is Tim. It's a great question. I mean our customers have been telling us loud and clear what they need and take for now our non-China customers as one group. For their non-China demand, very clearly, they're not sourcing. In China, their strategy is to remain sourcing globally, and the GF footprint is well suited for that. But for them and especially for those who focus on the automotive end market, they get significant interest from their customers in China to localize a portion of that manufacturing. And so those have been the driver customers for us to work with them why we've been focusing on those specific customers and the specific technologies, microcontrollers, BCD for power management, and those kind of applications, very focused on automotive. So that will be the first wave of these transfers. What's interesting is once we announced that, we actually started to get a significant amount of interest from Chinese customers. And what they're looking for is the reverse, but also the flexibility that this optionality provides. So sourcing locally with us in China with our manufacturing partner, but then also serving their non-China, non-Taiwan demand outside China. We actually have design wins in flight right now with Chinese customers for global sourcing, given many of these companies have strong export ambitions. When you net it out, this is why we've been quite clear that for us, China is more of an opportunity than anything else given the differentiation that we have and this unique ability to offer that flexibility.

And maybe if I can just add to that, Tim. Really the advantage here, both for the international customers as well as the Chinese customer is they can do one development, one tape out and take care of both the China market well as the non-China market.

And our next question comes from the line of Harlan Sur from JPMorgan.

Utilizations were around 80% in Q1, and with a growth perspective, the team expected to increase utilizations throughout the year. What were the utilizations in Q2? Given a slightly more cautious outlook for the second half, how is the team approaching utilizations as you transition into the latter part of this year?

Harlan, this is John. I'll take that one. So you're right, utilization was around 80% in the first quarter. We did progress into the low 80s in the second quarter with an uptick in wafer volume to 581,000 300-millimeter wafers. And we do see that progressing a bit further as we move our way through the second half of this year into the low- to mid-80s, and that is part of where we see the opportunity to expand our gross margins as we move into the end of the year.

I appreciate your comment. With utilizations expected to increase slightly in the second half of the year, I understand your team is collaborating with customers and possibly reducing some average selling prices for certain lifetime volume extensions. These seem like sensible adjustments for your consumer-focused products. Previously, the team expressed confidence in achieving full-year growth and closing the year with 30% gross margins. However, considering all these factors, including a somewhat weaker profile in the second half, how should we reassess the gross margin as we approach the end of the year? Can you provide any quantification on that?

Yes, Harlan, John, again. So first, we delivered on our second quarter gross margin at 25.2%. That was above the midpoint of our guidance range. And for the third quarter, I'll also point out that the second quarter year-on-year compare, if you take into account the fact that we had significant underutilization payments in the second quarter of 2024, was up significantly on a comparative basis in the second quarter of 2025. As we look ahead for our guidance, we do see gross margins expanding to 25.5%. That's up sequentially and year-over-year. So we're making progress on our gross margin improvement. The outlook for the rest of this year would be driven by several factors. One is richer mix in terms of our products as we move into the fourth quarter, a bit of improvement in utilization, as you indicated, as well as some further roll-off of our depreciation in the fourth quarter. And finally, we anticipate strong non-wafer revenue performance in the fourth quarter. Those factors together should deliver significant improvement in gross margin as we move through the fourth quarter.

And maybe, Harlan, since you brought up pricing, I'd like to kind of make a few comments about that. So overall, for the whole enterprise taking 2025 as a whole, on a like-for-like basis, we'll see ASPs down mid-single digits. But if you look at where that's happening, that's very much confined to that smart mobile device segment. And within that segment, very much confined to those customers with whom we have a dual-sourcing arrangement. And we've been very deliberate in thinking through both for the short term but also for the long term, what's the right strategy for GF in terms of supporting that customer and maximizing our share, again, not just for revenue today but also for the longevity of those sockets. So we've been very deliberate. By the way, if you exclude those impacts, then like-for-like pricing for the year for GF will be less than 1% down. So I think it's very fair to conclude the pricing environment overall is very stable, except for these areas where we're making these decisions deliberately in partnership with our customers.

And our next question comes from the line of Jim Schneider from Goldman Sachs.

I was wondering if you can maybe sort of comment on sort of the inventory levels at your customers that you highlighted in prepared remarks, and especially in IoT and smartphones, would you expect those to be at normal levels in Q4? Or could it take a little bit longer than that?

Yes. Thank you, Jim. I'll take a stab at that. I mean, if you take a big step back, right, if you look at the last three years, really '23, '24, '25, we've been closely monitoring inventory as a kind of long-term predictor of health of where we are in the cycle. And obviously, that's been a long duration, but inventories have, in all sectors come down materially. It hasn't always been smooth. And if you look at some of our customers reporting in Q2, there are some others still to report. But you saw actually some small, I'd say, modest upticks in inventory. That tells you something about kind of demand dynamic. And again, I'd say, particularly in the consumer-focused segments where there has been more demand uncertainty as we commented. I think overall, we continue to see the trajectory of inventories normalizing, and actually, we hear from customers that downstream of them, inventories could even be too low, right? And they see some pockets where there could be some tightness that could lead to some demand spikes in the future. So we continue to monitor this closely. It's difficult to call, but we see we're coming to the end of that inventory digestion long period over the last couple of years.

That's helpful. And then as a follow-up, can you maybe just kind of expand on the MIPS acquisition. What is the strategic importance of that acquisition for you? What customers did you kind of consult with in terms of before you announced that acquisition? And maybe talk about are there any different revenue models you expect to recognize as a result of that?

Yes, I'll take the first crack and then I'll ask John to add a little bit on the financial model of MIPS and MIPS type businesses. Obviously, we're very excited about this acquisition. It's a great fit for the GF portfolio. And there's a couple of reasons for that. MIPS has a long track record, a fantastic leadership team, really cutting-edge IP in processes. There are really some strong advantages around multi-threaded cores, software and subsystems, particularly targeted that physical AI space. And if you listen to industry pundits, people talk about things like everything that moves will be autonomous in the future, we strongly believe that. And MIPS is extraordinarily well positioned to capitalize on that from an IP perspective. So we love the business. We love what it can do, and it's a strong fit for GF customer base. And actually, the overlap of customers is very, very strong. In fact, many of GF's leading customers are already engaged with MIPS or, in some cases, have reached out post the acquisition to say, listen, let's explore, let's do more together. So we think of this as a way to accelerate our customer engagement to deepen it in new ways and to also increase our differentiation. And it has the added benefit of with an in-house team like MIPS, we'll get an in-house customer, if you like, for our technologies that's giving us real-time feedback on performance so we can continue to tune our technology platforms for the edge AI applications in order to be the best we can be for those platforms. Maybe I'll ask John to comment a little bit on the financial model.

Yes, Jim. We anticipate that this could add between $50 million and $100 million to our top line on a full-year run rate basis for GlobalFoundries. We are very excited about completing this acquisition. It will provide us with an IP-based, high-margin revenue stream, which can ultimately lead to increased hardware sales over time. We foresee the revenue opportunity over the next few years reaching hundreds of millions of dollars in additional revenue for GlobalFoundries, positively impacting our gross margin.

And our next question comes from the line of Ross Seymore from Deutsche Bank.

I just wanted to pivot back to answer, I think it was John that gave to an earlier question about a couple of things. Specifically, you said the base case remains for growth in revenue this year. And then you also mentioned non-wafer revenue as part of another question, as being strong this year. Could you clarify a little bit on those? And then I guess what I'm really getting at is, it seems like given your second quarter guidance is a little bit more cautious for a number of reasons. It seems to imply a big fourth quarter and wondered if that's incorrect read and if it is, why is the optimism kind of changing versus the third quarter?

Yes, Ross, this is John. You are understanding us and you got it right, the base case is for growth this year. And we do see a strong fourth quarter outlook for our non-wafer revenue, and that's really driven by NRE programs as well as tape-outs, strong tape-out quarter, is anticipated in the fourth quarter, which is a great precursor or leading indicator for hardware sales going forward. So that's what we see for the fourth quarter. And as we indicated, particularly in the automotive end market, year-on-year growth in the third quarter, but we do see it modestly down sequentially in the third quarter as certain customers are managing their inventory to the end of the year.

Got it. Regarding tariffs, I understand that predicting this area can be challenging. You mentioned some caution, and I recognize your China-for-China strategy. Concerning the pull-ins, I would have expected them to boost your business in the second quarter. While you had a good quarter, the expected upside wasn't as significant. Is there a concern that some pull-ins were already factored into your initial guidance, contributing to the cautious outlook going forward? I would appreciate more insight into where you experienced pull-ins during this headwind.

Yes. Thank you, Ross. So I'll comment on this. And I think we haven't seen very significant direct pull-ins at our level, right? And we haven't seen those orders change in a material way in Q2. Obviously, our customers have talked about some of their own dynamics and each one has had a bit of a different story of how they've seen it depending on the market. We think the overall overlay of tariff impact is consumer confidence and perhaps, if anything, a slight dent in short-term consumer confidence around ordering patterns. And we saw that particularly like we said, in the smart mobile device and IoT market, and I think that's consistent with what others are seeing. I think the bigger question for us on tariffs is really the longer-term opportunity. And I think what has definitely changed, I'd say, dramatically in 2025 and has been accelerating is really the inbound interest from customers to say, I need to now diversify my sourcing. I need U.S. manufacturing. We were very clear when we announced our long-term strategic investment plans, not just that we have those plans, but that a lot of major customers were very seriously backing those plans with projects and so on, and all the customers we announced have active projects with us today. And I think as those move forward from the initial conversations to the design wins to the ramps, we'll be able to update on all of those. But I think that's how we think of the tariff story more broadly is the strategic implications for GF from a long-term growth and market share gain perspective.

And our next question comes from the line of Chris Caso from Wolfe Research.

I would like to ask about the declines in average selling prices you are experiencing in mobile, as well as the actions you are taking in response. Can you provide more details on the reasons behind these actions and how they will impact GlobalFoundries as we approach calendar year '26? What additional volume do you anticipate from these actions, and how will they affect revenue and margins in the coming year?

Thank you, Chris. I mean maybe to just go a little bit deeper into it, as we said, this has been very much focused on the mobile space and there are reasons for that in terms of the dynamics of the market. And it's actually very much with a few customers where we are operating on a dual source basis, where we have decisions to make around what share we would like to have, how those customers grow in different applications is transitioning. And we make deliberate calls in partnership with them around what's the right way to maximize our revenue opportunity. And that's not just a tactical step for this year. That's also a long-term step for securing longevity in a number of those sockets. So we're not ready yet to quantify kind of '26, obviously not going to guide at this stage. But we see this as a strong upside around maintaining GF relevance in those technologies at higher share levels, and our customers are obviously pleased with that outcome as well.

Maybe I can just add to the share gains that we're targeting here, both short and long term, and I think that's an important detail to add. So some of these are long-term agreement oriented.

Yes. Macro picture, obviously, without getting too specific about 2026 financially at this stage, we definitely see the megatrends we've been underwriting to be continuing going into the year. You look across the markets that we are serving. We see the data center market, the CID market for us continued to deliver strong growth. Niels mentioned a couple of those ramps that are really from a standing start moving into the hundreds of millions of dollars, growth rates of sort of 2x year-on-year, and we see really at the early innings of that. So there are some secular drivers there that are compelling. We see a continued really strong story in automotive as we grow into new applications. Again, we more than doubled automotive sensing in 2025 over 2024. And that's a new category. A lot of people think of us as an MCU player, but actually our car content is growing and diversifying into new areas, like sensing, including radar, including imaging, but also areas like battery management and other applications. So there's a lot of content growth. There's a lot of diversification within those end markets. And then even within IoT within smart mobile, again, we're seeing content growth. We're seeing areas where we're taking share of new applications. And those are also beneficiaries of that U.S. sourcing dynamic that we talked about earlier. All of this to say, we see a pretty strong secular demand growth going into the next couple of years. We do that at a time where we have a very advantaged footprint, right? We finished some significant expansions in the last couple of years. So we're sitting with available capacity, able to ramp quickly globally. And then for the areas we will invest, we benefit from significant level of support. And in the U.S. alone, in The Big Beautiful Bill, increasing the ITC from 25% to 35% on top of our chips support, which, as we mentioned, we're already engaging with and receiving state-level incentives, we're talking that more than 50% of our CapEx to be supported by those government programs, which gives us a very good confidence on driving scale in a very capital-efficient way. And so it's a bit early to talk about the actual CapEx number for next year. There are pockets. We see really good demand. We will definitely invest behind those. But I think the macro story is great footprint, well positioned for that growth. And when the investments do come, they're going to come with a lot of support for efficiency given those government programs.

And maybe if I can just add a couple of things from a tactical standpoint. We've spent the last few years on building a very capital-efficient strategy around tool sameness across the factories, which enable us to be capital efficient as we move out and expand on that front. So I think as we look at some of these initiatives we put in place over the last few years, we expect to continue to be very capital efficient, and we expect to stay within the model that we laid out earlier.

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

I guess first question, implicitly with the vision for growth in '25, you're calling for revenues up 8% or more into the December quarter. So curious, with the benefit of greater non-wafer revenues there. Can you kind of quantify what the uplift to gross margins looks like, particularly when we reflect the lower ASP kind of impact from smart mobile?

Yes, it's John. The dynamics of the average selling price interact with utilization, which can offset each other in terms of the gross margin outcome from some decisions. As Tim and Niels mentioned, it's crucial for us to maintain our momentum in that opportunity for share gain. Regarding the fourth quarter and the potential for gross margin improvement, we'll observe how the quarter unfolds, but I expect a notable enhancement from the third to the fourth quarter in gross margin, driven by factors I discussed earlier, including a stronger product mix, some non-wafer revenue coming in, and additional improvements in depreciation and utilization.

Maybe, C.J., just on the mobile trajectory, again, a bit early to call very specifically. But again, all those growth drivers we've talked about for mobile, both that are for the market, but also idiosyncratically to GF, I think, are very much intact. And so we continue to see reasons for the market to grow overall, especially the premium handset, new form factors, new devices, there definitely are some refresh cycle dynamics that at some point will play through. And so we're bullish on that. Niels also talked about things like smart glasses as long-term drivers, new form factors. Hard to call how quickly. I think that's still a when, not an if, though, in terms of penetration. So we're quite bullish on overall market growth, especially taking a multiyear view. But I think we're even more bullish on our own execution in that space with taking more share. We talked about areas like haptics, display, imaging, power management, all critical features in the smart mobile device sector, including our strong base in connectivity, which still is a challenge, right, getting more and more bands in less in their space isn't easy, and that's an area we've historically had strength and continue to innovate. So I think we're actually bullish longer term on the category as an end market.

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

My first one, just a few Q4 clarifications. What is the percentage of sales contribution from non-wafer revenue? How much is the tailwind from lower depreciation, and I thought I heard you endorse the 30% gross margin exit rate from Q4, but I just wanted to double check that. So basically, non-wafer revenue contribution, tailwind from lower depreciation, and are you comfortable with the 30% gross margin exit rate from Q4?

Yes, this is John. Typically, non-wafer revenue accounts for about 10% of our revenue. We expect that percentage to increase in the fourth quarter, estimating it will be around 12% or 13%. Considering the three factors I mentioned — product mix, non-wafer revenue, and the combined impact of depreciation and utilization — you can roughly attribute about 1 point of contribution from each. Whether we reach the 30% gross margin target remains to be seen, but I believe we can make significant progress towards that goal in the fourth quarter.

Right. And from my follow-up, automotive, it has been a very strong area for you, but auto production has not been that great. I understand the content aspect of it. But what is the risk that we find that your auto customers have taken on excess inventory? Like what is your visibility, Tim, into the deployment of all these wafers into a product just because there's a big gap between your growth versus auto production?

Yes, it's a great question, Vivek, I'll comment and add a bit of color. We obviously spend a lot of time, and as you can see from our announcements, not just with the fab semiconductor companies like IBM serving the automotive sector, but also the Tier 1s, our partnerships with Continental, with Bosch, we talked about those in the past. We spent a lot of time with them. We even spent a lot of time with the OEMs. So I think we have a pretty good handle. I think it endorses a few key trends, and you name them. The content growth really is extraordinarily important and secular and continuing because the nature of the product is changing, right? A car is no longer a mechanical device. A car is a super complex electronic engine with a lot of the features being dependent on semiconductors in many different domains. So I think, again, first step is, are the secular trends fully intact. I think the answer is, absolutely. And then you try to understand the inventory dynamics across the chain, and that's where it's a bit more complex. And actually, what we hear, as I mentioned, is that the inventory is further down the chain of semiconductors, not in general of cars, but the semiconductors are actually pretty low at the Tier 1 level in particular. And again, it may move through the system in different lumps. But I think the overall chain is actually lighter than it could be. And that actually could lead you to believe there could be upsides on demand as those inventories get restocked. Obviously, rate and pace of restocking are always a difficult thing to call. But we continue to be very strongly supportive of the sector.

So maybe just to add a little bit to that. Since we went public, we have consistently outgrown the automotive market and gained share. And a lot of that has been done based on a very strong automotive microcontroller solution that has enabled us to outgrow the market. On top of that, if you look at the design wins we've had over the last few years, there's been a lot more in automotive power, battery management systems, smart sensors, and of course, driver assist overall. So that momentum building on top, we're starting to see what I would call substantial growth specifically in smart sensors already happening here in 2025 and we expect that to continue as we move forward. So these are technologies like, of course, 22FDX, you've seen several announcements from the radar suppliers in the industry that has almost become the de facto standard for radars. But we're also seeing 12LP finding its way into display controllers. We're even seeing 12LP+ AutoPro getting into next-generation radars, and then of course, the 130BCD in battery management systems is also a new leg of growth. So if you look at it from a projection standpoint, while we have been outgrowing the market for the last several years, we actually expect based on the solid design win pipeline we've had in the last few years to be able to continue to do that for the coming years in automotive.

Jonathan, we'll just take one last question.

Certainly. And our final question then for today comes from the line of Krish Sankar from TD Cowen.

I had two of them. One of them, MIPS deal. Can you talk a little bit about how you're seeing the RISC-V demand between Asia and Western companies? And then I had a quick follow-up.

Yes. So I think it's interesting. Obviously, the ecosystem is evolving. And if you look at it, there aren't a huge number of very scaled players in RISC-V and that's one of the feedback we get from the ecosystem that they actually want to see serious companies that they trust, like GF backing the ecosystem. And so I think that's a trend that's going to increase demand because people can rely on RISC-V solutions when they're backed by larger companies. I've been around the world talking to customers about MIPS and testing their reactions. As I said, they're very positive. I'd say it's global, Krish, in terms of good reputation in Asia. Markets like Korea, very strong, very strong interest in MIPS, to give you an anecdote. But we see it globally. We see it in Europe, given again the appetite to embrace open-source ecosystems for this cause. And of course, in the U.S. where MIPS has historically been very strong, engaged with a number of customers. So I think it's a global phenomenon, obviously, but too early to call the long-term trajectory of that mix, but there's strong demand across the board.

Got you. Very helpful. And then a quick question on your China-for-China. Have we disclosed who the Chinese foundry you're working with is? And how to think about the margin profile of the business? And any concerns on tech transfer or export controls?

Yes. We consider GF China as our commitment to support our customers based in China regarding quality and delivery. Our assurance is that everything expected from GF will be available through our manufacturing in China. We will manage our partner appropriately. Consequently, we are focusing less on identity and more on the offerings that we are introducing to our customers, which are generating significant interest. From a margin perspective, it aligns with our corporate expectations, both now and in the future, and we do not see this as a concern at all. Additionally, discussions about IP protection in China were factored into our choice of partner, along with implementing necessary controls on how we handle our customers' designs. Our customers are involved in this process as well, reviewing the entire setup, and they feel satisfied. These are automotive-grade companies that take their IP very seriously. Therefore, we are entering this situation with full awareness, supported by clear plans to manage our partnership effectively.

Thank you. This concludes the question-and-answer session. I'd like to turn the program back to management for any further remarks.

Thank you, Jonathan. Thank you, everyone, for joining us on the call today. We look forward to seeing many of you at the upcoming events that we announced at the beginning of the call, and we'll stay in touch and take many calls as we go through that. Thank you, everyone.

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