GlobalFoundries published its second-quarter report on 5 August 2026. We are writing about it today, 6 August.
And it is a report where the first two lines are excellent and the third reverses the direction.
What was reported
| Quarter | Year ago | Change | |
|---|---|---|---|
| Revenue | 1,786 | 1,688 | +5.8% |
| Cost of revenue | 1,281 | 1,280 | +0.1% |
| Gross profit | 505 | 408 | +23.8% |
| Gross margin | 28.3% | 24.2% | +4.1pt |
| Research and development | 174 | 134 | +30% |
| Selling, general, administrative and other | 157 | 78 | +101% |
| Total operating expenses | 331 | 212 | +56% |
| Operating income | ~174 | ~196 | -11% |
In millions of dollars. Operating income computed as gross profit less operating expenses.
The good part
Cost of revenue barely moved - $1,281 million against $1,280 million.
Meaning the company produced more, sold more, and did not pay more for it. That is exactly what happens when an underutilised fab fills up: almost every additional revenue dollar drops into gross profit.
The result: a gross margin widening from 24.2% to 28.3% - four full percentage points in a year.
And the part that reversed the direction
Operating expenses jumped 56%
Against gross profit growing by $97 million, operating expenses grew by $119 million.
- Research and development: $174 million against $134 million - up 30%, justified in this industry
- Selling, general, administrative and other: $157 million against $78 million - more than a doubling
And the second line is the one requiring explanation. Administrative costs doubling in a year, at a company whose revenue grew 5.8%, are not explained by growth in activity.
The result at the operating line: roughly $174 million against roughly $196 million a year ago - a decline of about 11%.
And the operating margin fell to 9.7% from 11.6%.
And the cash
Cash and cash equivalents fell to $1.087 billion, from $1.809 billion at the end of 2025 - a decline of more than $700 million in six months. Marketable securities rose slightly to $1.270 billion from $1.241 billion.
And why this is interesting in the context of the week
GlobalFoundries is a foundry - it manufactures chips for others, like Tower and unlike AMD, which designs and sells its own chip.
And the comparison is instructive: Tower reported revenue growth of 24% and gross profit up 72%, with a gross margin of 29.9%. GlobalFoundries posted 5.8% growth and a 28.3% margin.
The margins are similar. The growth rates are entirely different. And the explanation, at least partly, is in the mix: Tower sells silicon photonics into data centers at a $680 million annual run rate.
My Angle
A personal opinion of Ilan Abramov - not advice, not a recommendation
This report is a good reminder that gross margin is not the end of the story.
What happened at the gross line is genuinely impressive: cost of revenue did not move while revenue rose, and the margin widened by four percentage points. That is the classic sign of a fab filling up, and exactly what a foundry investor wants to see.
And what happened below it cancels most of it. Administrative and selling costs more than doubled - from $78 million to $157 million - at a company whose revenue grew 5.8%. The filing I read does not break down the reason, and that is precisely the question I would ask on the call.
Bottom line: the company got better at manufacturing and worse at the operating line in the same quarter. If those costs are one-off, this is a good quarter that was obscured. If they are permanent, the improved gross margin is simply swallowed. The difference between those two possibilities is the whole investment case here.
