Wolfspeed Reports Mixed Results Amid Restructuring; Shares Fall on Wider-Than-Expected Loss
Wolfspeed Inc (NYSE:WOLF), the silicon carbide semiconductor specialist, reported financial results for its fiscal second quarter of 2026, delivering revenue that was roughly in line with expectations but a net loss that was significantly deeper than analysts had projected. The company, which recently emerged from a prepackaged Chapter 11 bankruptcy, is navigating a complex transition as it restructures operations and contends with shifting demand in key markets like electric vehicles.
Quarterly Performance Versus Estimates
The company reported revenue of $168.5 million for the quarter ended December 28, 2025. This figure came in slightly below the analyst consensus estimate of approximately $173.4 million. However, the more glaring miss was on the bottom line. Wolfspeed posted a GAAP net loss of $150.6 million, or $5.78 per share. On a non-GAAP basis, which management emphasizes to show core operating trends, the loss per share was $6.11. This was dramatically wider than the analyst estimate for a non-GAAP loss of $0.63 per share.
The severe discrepancy between GAAP and non-GAAP results, and the significant miss against estimates, is largely attributable to substantial one-time accounting impacts and operational challenges:
- Fresh Start Accounting: As a result of emerging from bankruptcy on September 29, 2025, the company adopted "fresh start accounting," which required it to remeasure all assets and liabilities to fair value. This process resulted in a $1.1 billion gain recorded in the predecessor period but also led to a $23 million inventory fair value step-up that flowed through cost of revenue in the current quarter, heavily depressing gross margin.
- Severe Gross Margin Pressure: The company's GAAP gross margin was negative 46%, while its non-GAAP gross margin was negative 34%. Management cited $48 million in costs related to factory underutilization as a primary driver, alongside the inventory accounting impact.
- Adjusted EBITDA, a measure of cash operating performance, was negative $82 million.
Market Reaction and Forward Guidance
Investors reacted negatively to the report, particularly the scale of the losses. In after-hours trading following the release, Wolfspeed shares fell approximately 9.7%. This extends a negative trend for the stock, which is down about 12.7% over the past month.
Looking ahead, management provided a subdued outlook for the current third fiscal quarter. The company expects revenue in the range of $140 million to $160 million, citing several headwinds:
- Accelerated customer purchases in the first half as clients built inventory ahead of the planned closure of the Durham 150mm device fab.
- Some customers pursuing second sources for products during Wolfspeed's bankruptcy process.
- Weaker overall electric vehicle demand.
This guidance range falls below the current analyst consensus estimate for Q3 2026 revenue of $170.2 million. The company did not provide specific numeric gross margin guidance due to the ongoing impacts of fresh start accounting but stated it expects further sequential improvement while gross margin remains negative.
Key Takeaways from the Earnings Report
Beyond the headline numbers, the earnings release and management commentary highlighted several critical developments for the restructured company:
- Balance Sheet Strengthened: The company received approximately $700 million in Section 48D Advanced Manufacturing Tax Credit cash refunds. It used $175 million of the proceeds to retire long-term debt, reducing leverage and interest expense. Wolfspeed ended the quarter with $1.3 billion in cash, cash equivalents, and short-term investments.
- Aggressive Cost Cutting: Management reported a cumulative reduction of operating expenses by approximately $200 million on an annualized basis. Capital expenditures were down 90% compared to the same quarter last year, limited only to previously committed investments.
- Operational Transitions: The company completed the shutdown of 150mm device production at its Durham, North Carolina fab one month ahead of schedule, shifting focus to its more advanced 200mm fab in Mohawk Valley, New York.
- Diversification Efforts: While EV demand remains soft, Wolfspeed highlighted growth in other verticals. Revenue from AI datacenter applications grew approximately 50% sequentially, albeit from a modest base. The company also announced design wins with Toyota for electric vehicle onboard charging and with Hopewind for industrial inverters.
- Technology Milestone: Wolfspeed demonstrated a single-crystal 300mm silicon carbide wafer, a step it describes as paving the way for future opportunities beyond power devices.
Conclusion
Wolfspeed's latest quarterly report paints a picture of a company in the midst of a painful but necessary transformation. While the balance sheet has been repaired through the bankruptcy process and tax credits, the operational path to profitability remains steep. The significant miss on earnings per share, driven by restructuring costs and low factory utilization, underscores the challenges of right-sizing the business in a softer demand environment. The lower-than-expected guidance for the current quarter suggests these challenges will persist in the near term. Investors will be watching closely for signs that the aggressive cost-cutting measures and the ramp of the Mohawk Valley fab can begin to translate into improved margins and a clearer path toward sustainable operations.
For a detailed look at Wolfspeed's historical earnings and future analyst estimates, you can review the data here.
Disclaimer: This article is for informational purposes only and does not constitute financial advice, nor does it recommend any investment action. Investors should conduct their own research and consult with a qualified financial advisor before making any investment decisions.
