Wolfspeed has emerged from bankruptcy with a significantly improved balance sheet but continues to grapple with persistent challenges. Analysts had anticipated that the company, which specializes in silicon carbide technology, would present a compelling investment opportunity devoid of its previous debt burdens. However, the latest earnings report for fiscal Q2 2026 revealed that many of the issues that contributed to its bankruptcy remain unresolved.
In its recent financial disclosure, Wolfspeed reported a current trading price of $14.89, reflecting a decline of 5.40% or $0.85, alongside a market capitalization of $408 million. The stock has fluctuated between $14.85 and $16.16 throughout the trading day, with a year-long range spanning from $0.39 to $36.60. Despite a relatively healthy trading volume of 2.1 million shares against an average of 1.4 million, the company reported a staggering gross margin of -2317.77%.
The fiscal second-quarter results, ending December 28, 2025, were disappointing, highlighted by a negative gross margin of 46%. This detrimental figure resulted from ongoing challenges such as high inventory costs coupled with the impacts of fresh start accounting. The company’s manufacturing facilities continue to be underutilized, leading to predictions of sustained negative gross margins into fiscal Q3 2026 as operational issues persist.
While the company’s debt has been significantly decreased from $13.6 billion to $1.7 billion—primarily in the form of a convertible note—and maintains cash reserves of $1.3 billion, it is still experiencing heavy cash outflows. For the quarter, Wolfspeed recorded an operating cash flow deficit of $42.6 million, indicating continued financial strain. Its negative free cash flow posted at $72.6 million signals an ongoing liquidity challenge.
Wolfspeed’s revenue also fell by 7%, totaling $168.5 million in the latest quarter. This dip was exacerbated by a broader slowdown in electric vehicle (EV) sales, a market segment that was expected to thrive with advancements in silicon carbide technology. Such technology is known for its superior performance at high temperatures, making it particularly beneficial in the EV sector. However, as global EV sales have seen declines, Wolfspeed has begun to explore other markets for growth. Notably, the company reported a 50% sequential revenue increase within the artificial intelligence (AI) data center sector and is looking to future opportunities within aerospace, defense, and materials markets.
Looking forward, Wolfspeed has provided an outlook for fiscal Q3 revenue, predicting it will fall between $140 million and $160 million. This estimate is down from $185 million reported for the same period last year and even lower than the $201 million recorded two years prior. An increase in gross margins is anticipated, but the overall sentiment remains cautious.
Despite the positive adjustments to its financial structure, many analysts consider Wolfspeed to still be in a precarious position. As it wrestles with declining revenue in its primary EV market and ongoing operational challenges, the company’s potential lies significantly in its capability to pivot effectively into promising sectors like AI and defense. For now, the stock is viewed as speculative, prompting many investors to consider remaining on the sidelines until more concrete signs of recovery and growth emerge.
