Wolfspeed's Mixed Quarter Sends Shares Tumbling

MarketDash

Aug 20, 10:20 AM • 3 hours ago

Wolfspeed (WOLF) stock drops in premarket trading following mixed Q4 results, a revenue miss, and ongoing margin pressure.

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Wolfspeed Inc. (Wolfspeed (WOLF)) is having a rough Thursday morning. The silicon carbide chip maker saw its shares drop more than 12% in premarket trading after delivering a mixed bag of fourth-quarter results that left investors wanting more.

Earnings Snapshot

Here's the quick rundown: Wolfspeed reported an adjusted loss of $2.26 per share, which actually beat the consensus estimate for a loss of $2.45. That's the good news. The not-so-good news? Revenue came in at $149.6 million, well below the $224.48 million that Wall Street had penciled in.

On the margin front, adjusted gross margin improved 70 basis points sequentially to negative 19.9%. Yes, still negative, but moving in the right direction. A favorable product mix helped, with higher AI sales in the Power segment and stronger RF sales in Materials providing a boost.

Operating cash flow was negative $54 million, though that included a $41 million benefit from lower inventory. The company ended the quarter with about $1.1 billion in cash and short-term investments and roughly $600 million in net debt. So there's a cushion, but it's not infinite.

AI Data Center Demand Drives Device Sales

Let's talk about what's actually working. Device revenue reached about $106 million, up 6% sequentially, driven by AI data center demand. Materials revenue totaled about $43 million.

AI data center revenue rose about 20% sequentially and more than doubled from fiscal 2025 to fiscal 2026. That's a bright spot, and it's partly offsetting weaker automotive results.

Wolfspeed also locked in new design wins with power supply companies Lite-On and Magmeet, both of which serve multiple hyperscalers. The company is chasing opportunities tied to high-voltage direct current AI architectures, battery backup units, supercapacitors, and other data center applications.

The company argues that its silicon carbide technology and vertically integrated 200-millimeter manufacturing capacity put it in a strong position to ride the long-term AI data center infrastructure wave. That's the story, anyway.

But here's the catch: factory underutilization remains the biggest drag on margins. Until those factories run closer to full capacity, margin improvement will be limited. It's a classic chicken-and-egg problem: you need volume to improve margins, but you need margins to attract investment.

Wolfspeed Expands Data Center Push

Wolfspeed isn't sitting still. The company launched a dedicated Data Center Solutions team focused on its fastest-growing end market. Two industry veterans with expertise in high-voltage AI and data center power will lead the group.

The company also highlighted its Gen 5 silicon carbide MOSFET technology, which it's developing and producing at its automated 200-millimeter Mohawk Valley facility in New York. That's a big deal because 200-millimeter wafers are more efficient and cost-effective than the older 150-millimeter ones.

In aerospace and defense, Wolfspeed signed an agreement with GE Aerospace (GE) to accelerate high-voltage silicon carbide adoption across industrial, aerospace, and defense markets. That's a nice feather in the cap.

In automotive, Wolfspeed continues to expand its relationship with Toyota through an onboard charging partnership. It also secured new business with a European Tier 1 supplier supporting a large German automaker's onboard charger. So the auto business isn't dead, just softer.

Meanwhile, the Materials business continues to serve 150-millimeter long-term agreement customers as they transition to 200-millimeter technology. The company has also begun shipping initial 300-millimeter substrate engineering samples to several customers for evaluation. That's forward-looking stuff.

Wolfspeed Issues First-Quarter Outlook

Looking ahead, Wolfspeed expects first-quarter revenue of $140 million to $160 million, compared with the $150.4 million analyst estimate. So the midpoint is right in line, but the range is wide.

The company also expects adjusted gross margin to remain negative during the quarter. That's not a surprise, given the underutilization issue, but it's still a tough pill to swallow.

WOLF Stock Price Action: Wolfspeed shares were down 12.38% at $25.49 in Thursday's premarket trading.