Wolfspeed Faces Investor Skepticism Despite Operational Gains and EPS Surprise
Wolfspeed, Inc. (NYSE: WOLF 0.00%↑ ) is a global leader in silicon carbide (SiC) technology, a material critical for high-power and high-voltage applications in industries such as electric vehicles (EVs), renewable energy, and industrial power supplies. On May 8, 2025, Wolfspeed released its third-quarter fiscal 2025 earnings results, accompanied by significant board changes announced in a Form 8-K filing on May 9, 2025. This article provides a detailed analysis of Wolfspeed’s financial performance, operational updates, strategic initiatives, financial restructuring, governance changes, and market reaction, tailored for financial professionals and investors interested in the company’s trajectory. Drawing from the earnings call transcript, SEC filings, and recent news, we assess Wolfspeed’s current challenges and opportunities.
Financial Performance (Q3 2025)
Wolfspeed reported Q3 2025 revenue of $185.4 million, a 2.2% sequential increase but a 7.6% year-over-year decline, slightly missing the consensus estimate of $185.77 million (Nasdaq). The revenue breakdown included:
Power revenue: $107 million, driven by growth in the automotive sector.
Materials revenue: $78 million, with the Mohawk Valley facility contributing $78 million, reflecting 50% sequential and 175% year-over-year growth.
The non-GAAP gross margin was 2.2%, and the adjusted EPS was a loss of $0.72, surpassing the consensus estimate of a $0.82 loss per share (Yahoo Finance). Free cash flow was negative $168 million, comprising $142 million in operating cash outflow and $26 million in capital expenditures, partially offset by $192 million in tax refunds. As of March 30, 2025, Wolfspeed held $1.3 billion in cash, cash equivalents, and short-term investments, with long-term debt at $3.47 billion.
For the full fiscal year 2025, Wolfspeed projects total revenues of $756 million, with power and materials revenues of $410 million and $345 million, respectively, and a non-GAAP gross margin of approximately 2.1%. For fiscal 2026, the company forecasts revenues of $850 million, which falls short of analyst expectations of $958.7 million (Reuters).
Operational Updates
Wolfspeed is making significant strides at its Mohawk Valley facility, achieving a conditional certificate of occupancy and anticipating full occupancy by June 2025. This facility is pivotal to the company’s transition to 200-millimeter manufacturing, which is expected to enhance cost efficiency and product quality. As part of this shift, Wolfspeed is phasing out its 150-millimeter facilities, with the Farmers Branch facility already closed and the Durham facility slated for closure in 2025. These operational changes are designed to streamline production and position Wolfspeed as a leader in silicon carbide technology.
Strategic Initiatives
Under the leadership of new CEO Robert Feurle, who assumed the role shortly before the Q3 earnings call, Wolfspeed is focusing on stabilizing operations and capitalizing on high-growth markets such as AI data centers, EVs, and aerospace. The company has restructured its leadership team, appointing a new Chief Operating Officer, Chief Business Officer, and global Senior Vice President of Sales and Marketing to drive operational excellence and market expansion.
Wolfspeed is also actively engaging with the Trump administration to secure federal funding under the CHIPS program, positioning itself as a critical player in U.S. semiconductor production and national security (Wolfspeed News). While these discussions are promising, their outcome remains uncertain, adding a layer of risk to the company’s strategic outlook.
Financial Strategy and Restructuring
Wolfspeed is addressing its financial challenges through a multifaceted restructuring plan. Key components include:
Tax Refunds: The company received a $12 million tax refund and anticipates $600 million in future refunds, bolstering liquidity.
Cash Position: Wolfspeed maintains $1.3 billion in cash and liquidity, providing a buffer for ongoing operations.
Lender Negotiations: The company is in active discussions with lenders to optimize its capital structure, exploring both in-court and out-of-court options to manage its $3.47 billion debt.
Asset Divestiture: Wolfspeed plans to divest noncore assets for $150 million to streamline operations and raise capital.
Cost Savings: A restructuring initiative aims to achieve $200 million in annual cash savings and reduce the EBITDA breakeven point to $800 million annually, with a goal of positive free cash flow in fiscal 2026.
These efforts are critical to addressing Wolfspeed’s high debt levels and operational inefficiencies, but the complexity of lender negotiations and asset sales introduces significant execution risks.
Board of Directors Changes
On May 9, 2025, Wolfspeed announced the appointment of Mark Jensen and Paul V. Walsh, Jr. to its Board of Directors, both serving as members of the Audit Committee (Wolfspeed News). Mark Jensen, with extensive experience in finance and accounting from roles at Deloitte & Touche LLP, and Paul Walsh, former CFO of Allegro MicroSystems, bring expertise in restructuring and semiconductor finance. Their appointments are expected to strengthen Wolfspeed’s negotiations with lenders and enhance financial oversight.
Concurrently, director Stacy J. Smith announced he would not stand for reelection at the 2025 Annual Meeting and will resign before the meeting, citing no disagreements with the company. Additionally, on April 29, 2025, Wolfspeed disclosed that CFO Neill Reynolds will depart on May 30, 2025, to pursue another opportunity, remaining until then to ensure a smooth transition and participate in the Q3 earnings call (Wolfspeed News). The company has initiated a search for a permanent CFO, which could impact financial strategy continuity.
Market Reaction and Other News
Despite beating EPS estimates, Wolfspeed’s stock price plummeted after the Q3 2025 earnings release on May 8, 2025, with reports indicating an 11% drop in extended trading (Reuters). The revenue miss and a 2026 revenue forecast of $850 million, significantly below analyst expectations of $958.7 million, likely drove this negative reaction. As of May 8, 2025, the stock was trading at approximately $4.47, reflecting investor concerns about Wolfspeed’s financial health and growth prospects (TradingView).
Analyst sentiment remains cautious, with Wolfspeed carrying a Zacks Rank #4 (Sell) (Nasdaq). Contributing factors include slower-than-expected EV adoption, higher auto part prices due to tariffs, and macroeconomic challenges such as high interest rates and rising capital costs, which have delayed investment cycles in the industrial and energy sectors (Reuters).
Other notable developments include Wolfspeed’s receipt of $192.1 million in cash tax refunds under Section 48D, part of an expected $1 billion total, which strengthens its liquidity position (BusinessWire). However, competitive pressures from Chinese SiC manufacturers and delays in the Mohawk Valley fab ramp-up continue to challenge Wolfspeed’s market position (Yole Group).
Conclusion
Wolfspeed, Inc. is navigating a complex landscape marked by financial challenges, operational transitions, and strategic repositioning. The Q3 2025 earnings reflect modest progress, with an EPS beat and sequential revenue growth, but a year-over-year revenue decline and weak 2026 guidance have dampened investor confidence. The company’s focus on 200-millimeter manufacturing, high-growth markets, and potential CHIPS program funding offers long-term potential, but high debt levels, competitive pressures, and execution risks pose significant hurdles.
Investors should closely monitor Wolfspeed’s restructuring progress, lender negotiations, and leadership transitions, as these will be critical to achieving financial stability and capitalizing on the growing demand for silicon carbide technology. While the current market reaction suggests caution, Wolfspeed’s strategic initiatives and industry leadership may position it for a recovery if execution is successful.