GlobalFoundries (GFS): Margin Progress And Improving Business Mix Are Positives; Smart Mobile Weakness is an Offset; Lowering PT, Reit Neutral

GlobalFoundries (GFS) 3Q26 results and 4Q outlook reinforce an improving growth and profitability profile, with accelerating optical networking demand and stronger Auto/IoT revenues driving an improved business mix and higher profitability despite continued memory-related demand pressures in Smart Mobile. Revenues of $1.899B (+6% Q/Q, +13% Y/Y) exceeded the midpoint of guidance, although margins were the real standout, as GM reached a record 31.4% (+150 bps Q/Q, +540 bps Y/Y) moving well past the company's original goal of exiting CY26 at ~30% and driving an EPS of $0.53. Notably, this upside was driven by a richer business mix as well as the first Y/Y improvement in blended ASPs since 2023, with the 4Q guide implying continued revenue growth and margin expansion from here. From an end market perspective, management's commentary suggests that the optical networking opportunity is scaling faster than previously anticipated, with the CY26 Comms Infra & DC growth outlook raised to +60-70%