MW Wolfspeed is uncertain about its future. Its stock drop shows investors are, too.

By Britney Nguyen

The chip company is looking to slash costs, improve its finances and cope with growth woes

Wolfspeed Inc. reported fiscal third-quarter earnings in line with expectations, but uncertainty over a restructuring of its finances has investors worried.

On Wolfspeed's (WOLF) earnings call after the bell Thursday, the company said it is focused on improving its finances, and has "engaged external experts to continue to identify additional cost-saving measures" in addition to current efforts, including cutting 30% of its senior leadership team.

Wolfspeed makes silicon-carbide technology that's used in the automotive industry, but analysts at Mizuho said that muted demand for electric vehicles in the U.S. and Europe is pinching the company's growth prospects.

See more: Wolfspeed posts revenue beat, cites 'significant progress' on new operating plan

The chip company's stock was down 25% during midday trading on Friday, after it reported its March-quarter results and offered no guidance for the June quarter. Wolfspeed reported total revenue of $185 million for the fiscal third quarter - down more than 7% from the previous year - and $78 million in revenue for its Mohawk Valley fabrication facility.

TD Cowen analysts suspended their rating and price target on the stock because of the company's "increasing likelihood of financial restructuring," they said in a Thursday note.

"Given uncertainty regarding the company's capital structure and the impact on earnings going forward, we are unable to establish a valuation framework at this time, and suspend our rating, price target and estimates," TD Cowen said.

On the company's earnings call, Wolfspeed said it doesn't anticipate its debt negotiations to materially impact stakeholders, but that because it "may elect to pursue either in-court or out-of-court options" as part of the negotiations, the company expects to add "going-concern language in the footnotes to the financial statements" of its next 10-Q regulatory filing.

The disclosure is "perhaps a sign of looming liquidation," analysts at Susquehanna International Group said in a note on Friday.

And Wolfspeed's 8-K filing with the Securities and Exchange Commission "revealing it would not pursue a proposed transaction (involving equitization) as part of negotiations with its creditors" is worrying, Susquehanna analysts added.

Susquehanna reduced its top-line forecast for fiscal-year 2026 to $850 million from $962 million and cut its forecast for fiscal-year 2027 to $1 billion from $1.3 billion, after reviewing the long-term model in Wolfspeed's 8-K filing.

Wolfspeed Chief Executive Robert Feurle said on the earnings call that the company needs to focus on serving its blue-chip customers with its fully automated, 200-millimeter silicon-carbide solutions manufacturing platform, which "sets us apart."

However, Susquehanna analysts said they "continue to worry about [Wolfspeed's] ability to compete with Chinese substrates" as the chip company ramps up its silicon-carbide technology manufacturing.

Meanwhile, Wolfspeed said it is holding "constructive dialogue" over federal funding from the Biden administration's 2022 Chips Act with the program's office and the Trump administration.

The chip company is expecting to receive $750 million in federal funding, which was designed to bring more of the semiconductor supply chain stateside.

"Wolfspeed is positioned to help achieve some of this administration's important initiatives, leading the American semiconductor revolution, reassuring the manufacturing of critical mineral derivatives, boosting domestic production of technologies critical to national security and securing domestic supply chain," Wolfspeed Chairman Tom Werner said on the company's earnings call.

Citi analysts downgraded Wolfspeed's stock to sell and lowered estimates, citing "significant financial challenges in a sluggish macro environment," including financial losses and concerns over its Chips Act funding.

Wolfspeed announced Friday morning that it was appointing Paul Walsh and Mark Jensen, who have both served as chief financial officers elsewhere, to its board of directors.

"Their backgrounds position them well to help the board and company navigate ongoing discussions with lenders and reach a comprehensive solution to address our balance sheet," Werner said in a release.

The company's stock is down 50% so far this year.

-Britney Nguyen

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May 09, 2025 15:11 ET (19:11 GMT)

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