Shares of Wolfspeed (NYSE: WOLF) fell sharply in premarket trading on Thursday after the company reported fiscal fourth-quarter results that revealed a widening gap between its artificial intelligence growth narrative and the operational realities of its manufacturing footprint. The stock dropped 9.42% to $26.35, erasing roughly $142 million in market value, before rebounding 2.09% to $26.90 in early premarket activity.
The Durham, North Carolina-based silicon carbide chipmaker posted revenue of $149.6 million for the quarter ended June 30, a 24% decline from the same period last year. While the top line came in line with the midpoint of management's guidance, it was 0.3% below analysts' consensus estimate. More troubling, the adjusted loss per share of $2.26 was significantly wider than the $1.46 loss that Wall Street had expected.
The company's adjusted gross margin came in at negative 20%, meaning that for every dollar of sales, Wolfspeed lost approximately 20 cents on a gross basis. This was a slight improvement from the negative 21% margin reported in the prior quarter, but it underscores the persistent profitability challenges the company faces as it scales production.
Management highlighted that revenue from AI data centers more than doubled year-over-year and rose approximately 20% sequentially in the fiscal fourth quarter. However, the company did not disclose the dollar amount of that revenue, leaving investors without a clear picture of its contribution to the overall mix. Power products revenue totaled approximately $106 million, up 6% sequentially, while materials revenue was about $43 million, accounting for 29% of total sales.
The cash flow picture improved on the surface, but the underlying burn rate remains concerning. Operating cash flow in the quarter was negative $54 million, an improvement from negative $84 million in the prior quarter. However, management noted that this improvement was aided by a $41 million reduction in inventory. Excluding that one-time working capital benefit, the adjusted cash burn would have been approximately $95 million.
Wolfspeed ended June with approximately $1.1 billion in cash and short-term investments, down from $1.2 billion in the previous quarter. Based on the reported operating cash burn, that liquidity would cover about 20 quarters, but when adjusted for working capital effects, the coverage drops to approximately 11.6 quarters. These figures exclude pending debt repayments or capital expenditure requirements.
The company's growth composition improved, with power products growing sequentially and AI data-center demand appearing robust. However, factory utilization remains the primary constraint on profitability. Management indicated that adjusted gross-margin breakeven requires an annual revenue run rate of around $800 million, depending on product mix. The latest quarterly results annualize to just $598.4 million, implying the company needs roughly 34% additional scale to reach that threshold.
Chief Executive Robert Feurle said the company continued to expand its device business as AI data-center activity increased. Wolfspeed also announced that its silicon carbide technology has been qualified for LITEON's upcoming 800-volt power platform, a potential catalyst for future growth in electric vehicle and industrial applications.
Looking ahead, the company's guidance for the first quarter of fiscal 2027 is cautious. Wolfspeed forecasts revenue between $140 million and $160 million, with the midpoint indicating little change from the fourth quarter. Adjusted gross margin is expected to remain negative, and adjusted operating expenses are projected to be in the range of $62 million to $66 million.
Analyst reactions have been measured. Susquehanna's Christopher Rolland reiterated a Hold rating with a $30 price target, implying 13.9% upside from Thursday's close. TD Cowen's Joshua Buchalter also maintained a Hold with a $25 target, suggesting 5.1% downside. Both analysts acknowledge the operational promise but see no immediate catalyst for margin improvement.
The key risk remains the company's ability to bridge the gap between its AI narrative and its financial performance. While AI demand may grow faster than anticipated, low factory utilization, negative margins, ongoing cash burn, and outstanding debt could offset those gains. Weaker automotive demand and pricing pressure in silicon carbide could further delay breakeven.
Investors will be looking for more concrete details on the AI revenue stream and a credible strategy to reach the $800 million scale threshold. Without that, the stock may continue to face headwinds despite the long-term potential of silicon carbide technology.
