Wolfspeed shares are experiencing a severe downturn, driven overwhelmingly by a deeply concerning forecast for the upcoming quarter. The semiconductor manufacturer’s recent earnings report was completely overshadowed by this guidance, triggering a dramatic after-hours sell-off that erased a significant portion of the stock’s value.
Gloomy Forecast Trumps Earnings Beat
For the first quarter of its 2026 fiscal year, Wolfspeed managed to post a smaller-than-anticipated loss. The company reported an adjusted loss of $0.55 per share, which was an improvement over the estimates compiled by market analysts. Revenue also saw a modest year-over-year increase, reaching approximately $197 million. However, this positive earnings surprise was entirely disregarded by investors, whose attention was captured by a far more alarming development.
Guidance Shock Sparks Investor Flight
The primary catalyst for the sell-off was the company’s projection for the second fiscal quarter. Management issued a revenue forecast of just $150 to $190 million. This outlook falls dramatically short of Wall Street’s expectations and signals the company is facing substantial headwinds. The market’s response was immediate and severe, with the stock plunging more than 17% in post-market trading, cementing a clear downward trajectory.
Underlying Challenges Compound Troubles
Having only recently emerged from Chapter 11 bankruptcy protection in September 2025, Wolfspeed continues to grapple with a complex set of operational hurdles. Company leadership explicitly acknowledged the difficult market environment, indicating that persistent weakness is expected to characterize the entirety of fiscal year 2026, with a rapid recovery not on the horizon.
Should investors sell immediately? Or is it worth buying Wolfspeed?
Several key issues are weighing heavily on the business:
- Persistent Market Softness: The industry continues to be pressured by muted demand, particularly from the automotive sector.
- Inventory Adjustments: A situation where customers pulled forward purchases in the prior quarter is now resulting in a reduction of new orders.
- Intensifying Competition: The competitive landscape is tightening, with increased pressure from larger rivals such as STMicroelectronics and Infineon.
Financial Strain and Strategic Pivot
The company’s difficulties are further exacerbated by the financial impact of running its production facilities well below capacity. These significant underutilization costs are severely depressing profitability. In Q1, the adjusted gross margin deteriorated drastically to negative 26%.
While the bankruptcy process did enable Wolfspeed to reduce its debt load, the company is still contending with overcapacity and uncertain demand. In an effort to counter the downturn in its core markets, the chipmaker is now pivoting its strategy toward new growth applications, including AI data centers, aerospace, and energy storage systems.
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