Shares of Wolfspeed cratered 10.5% to $26.00 on August 20, erasing more than $400 million in market value the morning after the silicon carbide chipmaker posted fiscal fourth-quarter results that technically cleared the bar. Revenue of $149.6 million hit the guidance midpoint, and a non-GAAP loss of $2.26 per share beat the Street's $2.45 estimate. Analysts had expected revenue of roughly $150 million. The sell-off tells a blunt story: investors are done grading Wolfspeed on a curve.
Losing Money on Every Chip Sold — With No Clear End Date. The real alarm was margins. Gross margin — what's left after the cost of making each chip — remained deeply negative, meaning Wolfspeed spends more to manufacture its products than it earns selling them. Non-GAAP gross margin was around negative 21% last quarter, and the company acknowledged margins would remain negative in Q4, citing continued underutilization of its factories. First-quarter fiscal 2027 guidance of $140–$160 million in revenue came with the same caveat. CFO Gregor van Issum stressed that "improving factory utilization remains one of the most important levers to drive margin expansion." Translation: until more orders fill Wolfspeed's expensive new plant in upstate New York, every quarter bleeds cash.
The AI Story Is Real but Still Tiny. AI data center revenue more than doubled year-over-year in fiscal 2026 and grew roughly 20% sequentially in Q4. Management launched a dedicated data center sales team in Silicon Valley and announced a partnership with LITEON Technology for high-voltage power platforms serving hyperscale AI customers. But these wins are growing off a small base. AI data centers and new power products are showing momentum, but are still ramping and not yet significant revenue sources compared to automotive.
Debt Is Down, but the Runway Isn't Infinite. Wolfspeed refinanced roughly $476 million of first-lien debt last quarter, cutting total debt by $97 million and expected annual interest expense by about $62 million.
The company ended the prior quarter with $1.2 billion in cash and short-term investments.
Management targets positive free cash flow in fiscal 2027 and an adjusted EBITDA break-even at $800 million in annual revenue — more than five times the current quarterly run rate. Wolfspeed still carries a financial-distress risk score of 85 out of 100.
Bottom line: Wolfspeed is a post-bankruptcy company burning cash, selling an AI narrative the market briefly bought, and now confronting the math. Until gross margins turn positive, every earnings beat is just a less bad loss.