Wolfspeed (NYSE: WOLF) experienced a sharp 19% decline in its stock price last week, closing Friday at $25.76. The sell-off followed the company's fiscal fourth-quarter earnings report, which revealed that while revenue from AI data centers more than doubled, the surge has not been enough to bridge the gap to profitability.
Revenue Shortfall Persists
The company's quarterly revenue came in at $149.6 million, down 24.1% year-over-year. Annualized, that figure stands at $598.4 million—a full 34% below the $800 million threshold that Chief Financial Officer Gregor van Issum identified as the breakeven point, which varies with product mix. This translates to an annual shortfall of approximately $202 million.
For the current quarter, management forecasts revenue between $140 million and $160 million, with a midpoint of $150 million, indicating no significant improvement. The annualized gap at the midpoint remains around $200 million, or 33.3% below the breakeven target.
AI Growth Not Enough
Despite the overall weakness, AI data-center revenue more than doubled compared to fiscal 2025 and grew roughly 20% sequentially. However, Wolfspeed has not disclosed the dollar amount for this segment, making it difficult for investors to gauge its impact on the bottom line.
CEO Robert Feurle highlighted "strong growth in AI data center applications," and the company announced that its silicon-carbide devices are now qualified for use in LITEON Technology Corporation's (TPE: 2301) upcoming 800-volt data center power platform. Still, factory utilization remains the primary constraint, with adjusted gross margin improving only 0.7 percentage points sequentially to negative 19.9%.
Stock Performance and Analyst Views
The stock fell in every trading session last week, with the steepest declines occurring on Tuesday and Wednesday. Friday's drop of 2.24% was followed by a modest after-hours rebound to $25.96. Trading volume spiked to 9.72 million shares on Thursday following the earnings release.
Wall Street remains divided: four analysts rate the stock a buy, five a hold, and four a sell. The average price target stands at $16, representing a 37.9% discount to Friday's close. Even the most recently disclosed target of $25 implies only a 3% upside.
Balance Sheet and Debt Concerns
Wolfspeed holds $1.09 billion in cash and short-term investments against $1.69 billion in gross debt, resulting in net debt of approximately $600 million. The company's capital expenditures fell to $5 million in the fourth quarter from $38 million, but debt servicing costs are substantial: $630 million in first-lien debt carries an interest rate of about 16%, leading to an estimated $101 million in annual interest payments before any refinancing.
Market Implications
The key test for investors will come on Monday, as they watch whether shares can hold above Friday's low of $25.44. A break below that level could intensify scrutiny of the company's cash burn, while stability would shift focus to the persistent revenue gap.
Risks include a potential surge in AI orders that could boost factory utilization, but also headwinds such as slow adoption of 800-volt systems, continued softness in automotive markets, or additional equity conversions that could dilute shareholders. The path to positive gross margins remains uncertain, and the stock's valuation reflects that skepticism.
