Wolfspeed Shares Plunge Following Disappointing Outlook

Semiconductor specialist Wolfspeed witnessed a severe stock decline on October 30, with shares plummeting more than 17 percent in a single trading session. The company's stock price fell to approximately $26.76, marking one of the most significant single-day drops in recent months. This dramatic sell-off occurred despite the company reporting quarterly revenue that modestly exceeded expectations, with the downturn primarily triggered by a concerning forward-looking forecast and substantial financial losses.

For the first quarter of fiscal year 2026, Wolfspeed posted revenue of approximately $197 million, slightly surpassing analyst projections of $195.4 million. However, this minor victory was overshadowed by troubling financial metrics that highlighted the company's ongoing struggles.

Key financial indicators painted a concerning picture:

• Non-GAAP loss per share reached $0.55, though this was better than the anticipated $0.77 loss
• GAAP operating losses expanded significantly to $161.4 million
• Non-GAAP gross margins deteriorated to negative 26 percent
• Underutilization costs totaled $47 million for the quarter

Diverging Performance Across Business Segments

The company's Mohawk Valley fabrication facility emerged as a relative bright spot, generating $97 million in revenue compared to just $49 million during the same period last year. Despite this impressive growth, the strong performance from this segment failed to offset weaknesses elsewhere in the business.

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

The company's materials products division experienced a sharp contraction, with revenue declining from $97.6 million to $65 million. Conversely, the power products segment showed improvement, advancing from $97.1 million to $131.8 million in revenue.

Guidance Shock Triggers Market Reaction

The primary catalyst for the market's negative response came from management's second-quarter revenue projection. The company anticipates revenue between $150 million and $190 million, representing a substantial sequential decline from the first quarter and falling well below investor expectations.

Company leadership attributed the anticipated revenue contraction to several factors. Customers reportedly increased their purchasing activity in the first quarter ahead of the Durham facility closure. Additionally, during the bankruptcy proceedings, certain clients secured alternative suppliers. Management expects the broader semiconductor market weakness to persist throughout the entire 2026 fiscal year.

Post-Bankruptcy Position and Ongoing Challenges

Wolfspeed successfully emerged from Chapter 11 bankruptcy protection in late September, now holding approximately $926 million in liquid assets. However, this financial restructuring came at a significant cost to previous stakeholders, with former shareholders receiving only 3 to 5 percent of the reorganized company.

Despite the improved balance sheet position, Wolfspeed continues to navigate the headwinds affecting the semiconductor industry. Company executives anticipate ongoing operational challenges throughout the current fiscal year as market conditions remain unfavorable.