Wolfspeed after Debt Relief: Layoffs and Cost Reduction Can Mitigate Losses, Profitability Still Depends on Growth

Wolfspeed (WOLF.N) released its financial report for the first quarter of fiscal year 2026 (ending September 2025) in the post-market hours of the U.S. stock market on October 30, 2025, Beijing time. The key points are as follows:

1. Core Metrics: In the first quarter of fiscal year 2026 (i.e., 25Q3), Wolfspeed achieved revenue of $197 million, a year-on-year increase of 1.1%, mainly affected by the slowdown in automotive market demand and high inventory levels among industrial & energy sector customers.

The company's gross margin for the quarter was -39.2%, which includes a specific inventory reserve of $29 million and underutilization costs of approximately $47 million from the Mohawk Valley and JP factories combined. Without the impact of these two items, the company's gross margin for the quarter would be around 0%.

2. Operating Expenses: Wolfspeed's core operating expenses for the first quarter of fiscal year 2026 (i.e., 25Q3) were $70 million, a year-on-year decrease of 38.4%. Since fiscal year 2025, the company has been undertaking layoffs and cost reduction measures, with significant declines in R&D and sales and administrative expenses, including the closure of the Durham 150mm factory, which will cut approximately 1,000 jobs. Due to the lack of growth on the revenue side, the company's current core operating expense ratio remains at 35.4%.

3. Net Profit: Wolfspeed reported a net loss (GAAP) of $644 million for the first quarter of fiscal year 2026 (i.e., 25Q3), with losses exceeding $600 million for the past two quarters.

It is noteworthy that the company's loss for the quarter includes $504 million in restructuring-related expenses. Excluding this impact, the company's loss for the quarter would fall to $140 million, showing a significant reduction compared to fiscal year 2025, indicating that layoffs and cost reductions have helped mitigate losses.

4. Next Quarter Guidance: Wolfspeed's revenue guidance for the second quarter of fiscal year 2026 (i.e., 25Q4) is $150-190 million, influenced by customers stocking up before the closure of the Durham factory and some customers seeking a 'second supplier' during the restructuring period. As the company will record 'significant restructuring and accounting adjustments,' no earnings guidance is provided for the next quarter.

Dolphin Research's Overall View:$Wolfspeed(WOLF.US) Overcoming Bankruptcy Crisis, Focus on Long-term Planning

Wolfspeed's revenue did not show growth this quarter, and the profit side continued to experience losses. For the next quarter, the company provided guidance for a sequential decline and did not provide earnings guidance. This is mainly due to the company's current 'bankruptcy protection' phase, with some customers stocking up in advance or seeking 'second suppliers.'

Although the company's loss exceeded $600 million this quarter, mainly due to restructuring-related expenses. Excluding this impact, the company's loss would reduce to $140 million, primarily driven by layoffs and cost reductions. However, it should not be overlooked that the company's current operating expense ratio remains at 35.4%, and it still relies on revenue expansion or gross margin improvement to achieve 'profitability.'

Due to Wolfspeed's previous continuous losses and near-bankruptcy status, the market had stopped tracking the company. Currently, the company has reduced its total debt by nearly 70% and annual cash interest expenses by about 60% through a restructuring plan, exiting Chapter 11 bankruptcy protection under U.S. bankruptcy law.

For this financial report, Dolphin Research mainly focuses on the changes in Wolfspeed before and after the restructuring:

Step 1: Change CEO, Adjust Strategic Focus. The company decided to close the Durham 150mm SiC factory, laying off 20%, nearly 1,000 people, and focusing its strategy on the Mohawk Valley 200mm wafer production line;

Step 2: Initiate Bankruptcy Protection, Conduct Debt Restructuring. The company initiated bankruptcy protection procedures and plans to reach a restructuring plan with major creditors, reducing $4.6 billion in debt (70% of total debt). In the debt restructuring, the company exchanged old shares for new shares at a ratio of 1:120, leaving original shareholders with only 3-5% equity, while major creditors like Renesas and Apollo conducted 'debt-to-equity swaps';

Step 3: Bankruptcy Resolution, Strategic Advancement. After completing the restructuring, the company successfully reduced its total debt by about 70%, extended the debt maturity date to 2030, and reduced annual cash interest expenses by about 60%, officially exiting the bankruptcy process. The company appointed Matthias Buchner (former Senior Vice President of Marketing at Infineon) as Senior Vice President of Global Sales and Chief Marketing Officer, and the company will continue to advance its silicon carbide business.

After completing this 'restructuring plan,' Wolfspeed avoided the direct 'bankruptcy' situation. By reducing the company's main debt through 'debt-to-equity swaps,' it can significantly alleviate the company's 'pressure.' With a 'lighter load,' Wolfspeed can focus more on its main silicon carbide business.

Coincidentally, Intel has also recently received support from the U.S. government, SoftBank, Nvidia, and others, pulling Intel back from a 'break-even' state. If we look at both events together, they reflect the current U.S. emphasis on 'domestic semiconductor capacity.'

Overall, although the company is still in a state of weak business growth and continued losses, Wolfspeed's restructuring at least helped the company overcome the current 'bankruptcy' crisis. The company's operational goal remains 'profitability,' which requires the expansion of the company's main business and improvement in gross margin to achieve, but there are no clear signs yet.

Even though the company still faces the 'loss' problem, the background of 'manufacturing returning' in the U.S. still brings 'bottom-line' confidence to the market. This is the company's first financial report after completing the restructuring, and the company did not provide much information on the operational side.

The company will announce a 'comprehensive long-term strategic plan' in the first half of 2026, at which time the new management's specific plans for the company's future development will be seen. The company's primary task remains how to achieve business expansion and quickly achieve 'sustainable profit growth' in its operational performance. For more detailed information, please follow Dolphin Research's subsequent management communication minutes and other content.

The following are specific data and charts of Wolfspeed: