Wolfspeed Shares Extend Decline Amid Bleak Outlook

Wolfspeed continues to face substantial headwinds even after emerging from bankruptcy protection. The semiconductor specialist's stock plunged more than 18% following disappointing quarterly results released on October 29, maintaining its downward trajectory as the company's weak guidance significantly missed market expectations.

For the first quarter of fiscal year 2026, the silicon carbide manufacturer reported revenue of approximately $197 million. This figure represents minimal growth compared to the previous year's $195 million and slightly exceeded analyst projections of $192.66 million. However, this modest revenue beat was completely overshadowed by devastating forward-looking statements.

The company's profitability metrics showed dramatic deterioration. GAAP gross profit margin collapsed to negative 39%, compared to negative 19% in the prior year period. On a non-GAAP basis, the loss per share came in at $0.55, which was better than the anticipated $0.67 loss but still deep in negative territory.

Guidance Revision Sends Shockwaves

The true catastrophe emerged with Wolfspeed's outlook for the current quarter. Management now projects revenue between $150 million and $190 million for the second quarter—far below the approximately $232 million that analysts had forecast. This represents a potential sequential decline of up to 24%.

Company executives attributed this dramatic reduction to two primary factors. First, customers made accelerated purchases in the first quarter to build inventory ahead of the planned year-end closure of the Durham fabrication facility. Second, during the bankruptcy proceedings, some clients sought alternative suppliers—an effect the company describes as one-time in nature.

Should investors sell immediately? Or is it worth buying Wolfspeed?

Manufacturing Challenges Persist

Wolfspeed's state-of-the-art Mohawk Valley fabrication facility increased its revenue contribution to $97 million, up significantly from $49 million in the previous year. Despite this progress, underutilization costs at both manufacturing sites totaled $47 million—nearly double the amount from the prior year period.

The company acknowledged broader industry challenges, stating: "Similar to others in our sector, Wolfspeed is experiencing persistent market weakness that we anticipate will continue throughout the entire 2026 fiscal year."

Restructuring Provides Limited Relief

Having exited Chapter 11 bankruptcy protection on September 29, Wolfspeed now holds $926 million in cash reserves. The financial restructuring eliminated 70% of the company's debt burden but came at a steep cost to existing shareholders. All previous shares were canceled, with prior equity holders receiving only 3-5% of the newly issued stock.

Despite this financial reset, fundamental challenges remain unresolved. The company continues to face weak demand from automotive manufacturers, intensified competition from rivals STMicroelectronics and Infineon, and operates within an industry experiencing a slow recovery from market softness.