Wolfspeed's Flat $150 Million Quarter Puts AI Growth And Margin Grind To The Test

Wolfspeed heads into its fiscal first-quarter report with a story that has quietly shifted from survival to execution, yet the stock is trading as if few people believe it. Revenue has settled into a holding pattern near $150 million, gross margins are still negative but inching toward less negative, and a fast-growing AI data center business is being asked to carry more weight each quarter. The report due after the close on November 4 will show whether that slow grind is real progress or just a plateau.

The Street expects a loss of $2.18 per share on revenue of about $150 million. That revenue figure sits squarely at the midpoint of management's $140 million to $160 million outlook, so analysts are not asking for heroics. It would be essentially flat with the prior quarter's $149.6 million but down roughly 24% from a year ago, a reminder of how far the top line has fallen since the $197 million quarter that opened fiscal 2026. The projected loss is a touch narrower than last quarter's $2.44, and the steep year-over-year deterioration in per-share losses partly reflects a balance sheet and accounting base reshaped by restructuring, making sequential comparisons more useful than annual ones.

The most important line item may be gross margin. It improved from minus 34% two quarters ago to minus 20.6% and then minus 19.9% last quarter, but that last step was only 70 basis points. Management has said gross margin breakeven requires an annual revenue run rate near $800 million, versus roughly $600 million today. With revenue flat, further margin gains must come from cost and utilization rather than volume, so another modest improvement would validate the plan while a reversal would raise questions about how long the climb really is. Operating expenses are the second checkpoint, since management guided to $62 million to $66 million and landing at or below that range would support its claim of delivering on commitments.

AI data center revenue is the growth engine, and its trajectory deserves close attention. Sequential growth has gone from 50% to 30% to 20%, which is still impressive but clearly decelerating. Management pointed to new design wins supporting multiple hyperscalers and the industry move toward 800-volt architectures. Evidence that this business can keep growing at a double-digit sequential clip would confirm it can offset automotive softness, which management has repeatedly declined to call a bottom. Materials is the other soft spot, having slipped to about $43 million as older 150mm supply agreements roll off ahead of the 200mm transition. Any update on customer reception of the first 200mm substrate samples, the Gen 5 MOSFET ramp, the new European Tier 1 onboard charger win, or the GE Aerospace partnership would help show whether the next leg of demand is forming.

Cash and debt remain the backdrop. Capital spending fell to just $5 million last quarter and inventory reductions helped cash flow, but roughly $630 million of first lien debt still carries interest near 16%. Progress on refinancing would directly lower the cost of waiting for the revenue recovery.

Investors have not rewarded the improving tone. Shares are down nearly 12% since the last report while the S&P 500 was flat, and at $23.38 the stock sits well below its 200-day average of $30.14 and near the bottom of its post-earnings range of $21.80 to $36.49. Sentiment is only marginally bearish, suggesting skepticism rather than capitulation. Ultimately, the narrative holds if Wolfspeed can show margins still moving up and AI demand still compounding while revenue merely holds steady; if either stalls, the long road to $800 million looks longer still.

This earnings preview was originally published on Earnings Whispers.

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