Wolfspeed, Inc. (WOLF) Q2 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals mixed signals: weak near-term demand and operational restructuring challenges are concerning, but the company is actively diversifying and reducing debt. Financial metrics show significant impacts from fresh-start accounting, yet cash position and debt reduction are positive. The Q&A highlights strategic shifts and partnerships, but management's lack of clear guidance on key metrics tempers optimism. Given the market cap, the stock is likely to experience modest fluctuations, leading to a neutral sentiment.
Key Financial Performance
Net Debt Approximately $600 million, with annual cash interest expense lowered by approximately 60%. This improvement is attributed to financial restructuring.
Cash Position $1.3 billion, supported by approximately $700 million in 48D cash tax refunds recently secured.
Total Revenue $168 million, in line with the midpoint of the guidance range. Power revenue was $118 million, and materials revenue was $50 million. The revenue mix reflects weaker automotive market demand and growth in mid- to high-voltage revenue.
Non-GAAP Gross Margin Negative 34%, impacted by $39 million drag related to fresh start accounting, $23 million inventory step-ups, $4 million specific inventory reserves, and $48 million underutilization costs.
Adjusted EBITDA Negative $82 million, including impacts from fresh start accounting and underutilization.
Operating Cash Flow Negative $43 million for the successor period, with $90 million contributed from working capital improvements and offset by $64 million in final liability management payments.
CapEx $31 million in the second quarter, significantly reduced from approximately $400 million in the same quarter last year, reflecting disciplined capital allocation.
Debt Reduction $175 million of first lien debt retired and $18 million reduction from second lien convert, resulting in $25 million annual interest savings.
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Operating Highlights
200-millimeter silicon carbide manufacturing: Transitioned entire device platform to higher efficiency 200-millimeter manufacturing, shutting down 150-millimeter production ahead of schedule.
300-millimeter silicon carbide wafer: Produced a single crystal 300-millimeter silicon carbide wafer, demonstrating materials innovation and expanding long-term opportunities.
AI data center power systems: Achieved 50% quarter-over-quarter growth in AI data center revenue, with devices embedded in critical AI power systems.
Automotive partnerships: Announced partnership with Toyota to power onboard charging systems for BEVs, strengthening relationships with top global EV OEMs.
Industrial and energy applications: Expanded reach into AI data center power, grid storage, and grid modernization applications, leveraging expertise in high-voltage solutions.
Financial discipline: Implemented strict financial discipline, reducing net debt to $600 million and lowering annual cash interest expense by 60%.
Operational efficiency: Improved production efficiency and speed, optimizing earnings potential and reducing costs through streamlined processes.
Revenue diversification: Focused on diversifying revenue base across automotive, industrial and energy, aerospace and defense, and materials verticals.
Technology leadership: Streamlined R&D to focus on high-return programs in growth markets, advancing silicon carbide technology leadership.
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Risk or Challenges
Automotive Market Challenges: Muted EV demand due to macro and structural factors, including higher interest rates in the U.S. and Europe, elimination of certain government incentives in the U.S., excess supply across the market, and intensifying global competition, particularly from China.
Manufacturing Underutilization: Underutilization in manufacturing sites, leading to approximately $48 million in costs during Q2, despite efforts to improve factory utilization.
Materials Revenue Decline: Tightening demand environment and increased competition in the materials marketplace, leading to a decline in materials revenue.
Fresh Start Accounting Impacts: Adverse effects on financial results due to fresh start accounting, including a $39 million drag on gross margin in Q2 and non-cash adjustments impacting comparability of financial results.
Weaker Near-Term Demand: Weaker demand in the automotive sector and certain customers pursuing second sourcing of products, contributing to a projected revenue decline in Q3.
Operational and Financial Restructuring: Challenges in maintaining operational efficiency and financial discipline during restructuring, including the closure of the Durham 150-millimeter device fab and associated costs.
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Guidance & Outlook
Revenue Expectations: The company expects revenues between $140 million and $160 million for the third quarter of fiscal 2026, driven by accelerated customer purchases in the first fiscal quarter, second sourcing of products, and weaker EV demand.
Gross Margin: Gross margin is expected to remain negative in fiscal Q3, but quarter-over-quarter improvements are anticipated due to ongoing operational actions.
Long-Term Financial Targets: An update on the long-range plan, including long-term financial targets and capital allocation plans, will be provided in the first half of calendar 2026.
Automotive Market Outlook: The automotive end market remains volatile in the near term due to weaker EV demand, but the company is strengthening relationships with top global EV OEMs and sampling across several key strategic programs.
Industrial and Energy Applications: Momentum is growing in AI data centers and other industrial and energy applications, which represent meaningful long-term growth drivers but will take time to scale.
Operational Efficiency: The company is focusing on improving factory utilization and expects further benefits from the transition to 200-millimeter device manufacturing.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:What is the company's strategy for diversification away from EVs?
A:The company is pivoting from being EV-focused to an application-oriented approach, targeting automotive, industrial energy, aerospace, and defense sectors. They are focusing on building products based on application requirements and have made progress in AI data centers. They are also implementing a channel strategy and have brought in new talent from other semiconductor companies.
Q:Are there any expected interest rate step-ups on the first lien this year or next year?
A:The interest rate will step up around the middle of calendar year 2026. The company is actively exploring refinancing options for the first lien and converts, focusing on financial discipline and structured refinancing.
Q:What does the company's AI data center revenue consist of, and what are the future opportunities?
A:The AI data center revenue includes applications like energy generation, energy storage systems, solid-state transformers, uninterrupted power supply (UPS), and cooling devices. The company is working on multiple customer engagements and has developed a new topside cooling package. They are also exploring the use of silicon carbide for its thermal conductance and optical properties.
Q:What is the company's outlook on stability and growth, particularly regarding the transition from 150mm to 200mm devices?
A:The transition from 150mm to 200mm devices is complete, with the 150mm factory shut down. The company is now focused on scaling production based on demand. Long-term trends in EV adoption and data center opportunities are positive, but short-term visibility is uncertain due to macroeconomic factors.
Q:What are the potential savings in interest from refinancing the first lien?
A:The exact savings depend on the refinancing instrument and the size of the first step. The company is actively exploring options but has not provided specific figures.
Q:What is the framework for scaling production at Siler City and other facilities?
A:Production will be scaled based on customer demand and adoption of technology. The company has the facilities and capacity in place and is focused on diversifying the customer base and understanding end applications.
Q:What is Wolfspeed's positioning in the EV market following recent announcements like the partnership with Toyota?
A:Wolfspeed is diversifying globally and within EV makers. The partnership with Toyota highlights their focus on quality and vertical integration. Customers value their U.S.-based manufacturing capabilities and control over the supply chain.
Q:Review of Unclear Management Responses
A:Management avoided providing specific timelines or figures for certain topics, such as the exact savings from refinancing the first lien, the time frame for revenue from silicon carbide substrates, and short-term predictions for EV market demand.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
EV
RD
Slide presentation
accounting impact
adoption start
amortization
area AI
base
capital allocation
carbide wafer
clearance
discipline
emergence
equipment
example
expertise
good
government
grid modernization
headwind
income
inventory
knowledge
legacy
liability
momentum
month schedule
position
power density
power device
property
start accounting
successor period
system
update
volt
voltage
wind
WOLF Transcript
Wolfspeed, Inc. (WOLF) Q2 2026 Earnings Call Transcript
Unknown2-5
The earnings call reveals mixed signals: weak near-term demand and operational restructuring challenges are concerning, but the company is actively diversifying and reducing debt. Financial metrics show significant impacts from fresh-start accounting, yet cash position and debt reduction are positive. The Q&A highlights strategic shifts and partnerships, but management's lack of clear guidance on key metrics tempers optimism. Given the market cap, the stock is likely to experience modest fluctuations, leading to a neutral sentiment.
Wolfspeed, Inc. (WOLF) Q1 2026 Earnings Call Prepared Remarks Transcript
Unknown10-29
The earnings call highlights several negative factors: a decline in revenue expectations, operating losses with negative gross margins, and challenges from Chapter 11 bankruptcy. Despite some operational improvements, the lack of profitability guidance and ongoing soft market demand contribute to a negative outlook. The market cap suggests a moderate reaction, leading to an expected stock price movement of -2% to -8% over the next two weeks.
Wolfspeed, Inc. (WOLF) Q3 2025 Earnings Call Transcript
Unknown5-8
The earnings call presents mixed signals. Positive aspects include improved revenue and materials revenue, leadership changes, and cost-saving measures. However, the negative EPS, restructuring charges, and competitive pressures weigh down sentiment. The guidance for Q3 2025 indicates potential challenges with expected losses. The company's market cap suggests a moderate reaction. Overall, while there's potential for improvement, uncertainties and risks related to economic factors and leadership transitions balance the outlook, resulting in a neutral sentiment.
Earnings call transcript: Wolfspeed Q2 FY2025 sees stock uptick post-earnings
Unknown1-29
The financial performance shows a decline in revenue and gross margin, with significant free cash flow negativity and restructuring charges. Despite optimistic guidance and potential growth in EV revenue, there are concerns about underutilization costs, competitive pressures, and unclear management responses. The ATM equity offering and restructuring efforts might not offset negative sentiment due to revenue misses and operational inefficiencies. Given the market cap, the stock is likely to react negatively, with a potential decline of 2% to 8% over the next two weeks.
WOLF Slides
WOLF Report
Frequently Asked Questions
Where does this earnings call transcript come from?
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Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
