Wolfspeed Losses Widen as Scaling Costs Outpace AI Growth
The silicon carbide leader reported a $2.26 per share adjusted loss, missing estimates as negative margins offset gains in AI infrastructure.
Wolfspeed shares fell sharply following a fourth-quarter fiscal 2026 report that revealed losses significantly deeper than Wall Street anticipated. The results underscore the financial strain of scaling advanced semiconductor production even as demand for AI infrastructure climbs.
The company reported an adjusted loss of $2.26 per share, a stark contrast to the $0.52 loss analysts had projected. Revenue for the quarter totaled $149.6 million, missing the consensus estimate of $223.55 million and marking a 24% decline year-over-year. Profitability remained elusive, with GAAP gross margins hitting -25% and adjusted gross margins landing at -20%.
The Cost of Scaling
Wolfspeed specializes in silicon carbide (SiC) and gallium nitride (GaN) semiconductors, materials essential for power efficiency in electric vehicles and AI data centers. While the company has been aggressively transitioning its manufacturing capabilities to meet this demand, the process has been marred by high capital expenditures and operational overhead.
Despite these headwinds, the company found a bright spot in the AI sector. Revenue from AI data center applications more than doubled year-over-year in fiscal 2026 and grew approximately 20% sequentially in the fourth quarter. CEO Robert Feurle noted that the company continued to expand its device business, specifically highlighting the launch of its fifth-generation SiC MOSFET and the strength of AI-driven applications.
Market Implications
The disconnect between revenue growth in AI and the company's bottom line highlights a growing market impatience with the costs of scaling SiC production. The inability to reach positive gross margins suggests that the operational costs of expanding production are currently outweighing the benefits of the AI boom. This creates a cautionary precedent for other specialized chipmakers attempting to scale power semiconductor capacity in a high-cost environment.
Outlook and Next Steps
The immediate future remains challenging. Wolfspeed provided revenue guidance for the first quarter of fiscal 2027 between $140 million and $160 million, warning that adjusted gross margins are expected to remain negative.
To stabilize the balance sheet, CFO Gregor van Issum stated the company is aggressively targeting initiatives to reduce its debt and the overall cost of capital. Investors will be watching closely to see if these cost-cutting measures can eventually align with the company's growth in the AI and EV sectors to produce a sustainable profit.