Financials

Financials — what the numbers say

Wolfspeed is a post-bankruptcy, vertically integrated silicon carbide (SiC) semiconductor manufacturer whose financial statements right now describe one thing above all else: a company whose income statement has not yet caught up with its rebuilt balance sheet. Annual revenue ($758M in FY2025) is roughly flat with three years ago, gross profit turned negative in FY2025 (cost of goods sold exceeded revenue), free cash flow has been below zero every year since FY2020 — cumulative FY2020–FY2025 FCF burn is roughly -$7.8B — and the legacy capital structure imploded in a pre-packaged Chapter 11 (filed 30 June 2025, emerged 29 September 2025) that wiped out the old equity, equitized noteholders, and cut total debt by ~70%. Post-emergence, net debt fell from ~$5.6B to ~$0.6B, cash interest expense was cut ~60%, and a $476M private placement in early 2026 retired more first-lien notes, but the operating problem — a 200mm Mohawk Valley fab running at low utilization driving deeply negative gross margins — is unfixed. The single financial metric that matters most is gross margin trajectory: until the device fab loads up, every dollar of revenue still destroys value at the gross-profit line.

1. Financials in one page

How to read this strip. Revenue, operating margin, and FCF describe the income engine — they are still broken. Net debt and cash describe the resilience the restructuring bought — much better than the pre-Ch11 levels of net debt $5.6B and shareholders' equity of -$447M. Stock price is the post-emergence price for the new equity (~48M post-emergence shares outstanding per Q3 FY26 10-Q; legacy 155.6M predecessor shares were cancelled at emergence, with old equity holders receiving ~5% of new common stock), not historically continuous with the pre-Ch11 chart. Definitions used on this page: gross margin = (revenue − cost of goods sold) / revenue; operating margin = operating income / revenue; FCF = operating cash flow − capital expenditure; net debt = total debt − cash & equivalents.

2. Revenue, margins, and earnings power

The first thing to know about Wolfspeed's income statement: this company has two histories. From FY2005 through FY2016 it was Cree, Inc. — a profitable LED + lighting business with normal 30–55% gross margins and positive operating income. After Cree sold the LED Products business in March 2021 and rebranded to Wolfspeed in October 2021, the company became a pure-play SiC semiconductor manufacturer carrying the cost of building two greenfield 200mm SiC plants (Mohawk Valley device fab, NY; John Palmour Manufacturing Center materials plant, NC). Revenue resets to ~$471M in FY2020, and the income statement turns sharply negative as fixed factory costs roll on faster than revenue.

Interpretation. Earnings power is deteriorating, not improving, even after the restructuring. Quarterly revenue has now declined for three straight quarters ($197M → $169M → $150M) and Q4 FY2026 guidance ($140–160M) implies a fourth consecutive decline. Management on the May 2026 call attributed negative gross margins to "underutilization at Mohawk Valley" — i.e., not enough wafer starts to spread the fab's fixed depreciation, labor, and overhead. This is a classic fixed-cost-leverage problem, not a pricing or mix issue. SiC peers Infineon, onsemi, and STMicroelectronics all earn positive gross margins on the same end markets (EV traction, industrial, AI data-center power), which means the problem is internal scale, not external demand for SiC. Until the 200mm fab loads, the income statement cannot inflect.

3. Cash flow and earnings quality

Earnings quality cannot be tested in the usual way — comparing net income to operating cash flow — because both numbers are negative and noisy. The more honest test is free cash flow vs revenue: even if you assume Wolfspeed's GAAP losses include non-cash impairments and restructuring charges, the cash going out the door is what funds the build. That number was about -$2.0B in FY2025 alone (operating cash flow -$712M, capex -$1.27B) on $758M of revenue.

The chart above is the single most important picture on this page. Capex hit 2.8× revenue in FY2024 as Wolfspeed accelerated the Mohawk Valley and JP Manufacturing Center builds. That is what fully drained the balance sheet and tripped the debt covenants that led to Chapter 11. Capex has since rolled over (down to roughly $1.27B in FY2025, with further cuts expected in FY2026 as the major construction is done), but operating cash flow remains deeply negative because the new fab cannot yet earn enough gross profit to cover fixed cost.

Major cash-flow distortions to note.

Bottom line on earnings quality. Reported net income, EPS, and net cash are all polluted by restructuring accounting in FY2025 and FY2026. The only clean operating cash metric right now is operating cash flow ex-restructuring, which management is guiding to roughly break-even by unlevered operating cash flow in FY2026 (i.e., before $125M+ of cash interest). On a fully levered basis, FCF will stay negative.

4. Balance sheet and financial resilience

Wolfspeed's balance sheet is the part of the financial picture that changed the most. Read it in two snapshots: before Ch11 (FY2025 balance sheet, dated 29 June 2025 — the day before filing) and after emergence (management commentary from Q1–Q3 FY2026).

The story in numbers. Between FY2022 and FY2024 Wolfspeed added about $5.1B of new debt to fund Mohawk Valley and the JP plant — total debt went from $1.0B to $6.2B while cash burn stayed >$700M a year. By FY2025 fiscal-year-end (which is one day before the Chapter 11 filing), the current portion of long-term debt was $6.54B — meaning the entire stack had been reclassified to current as covenants tripped. Shareholders' equity was -$447M (i.e., balance sheet was technically insolvent). The current ratio collapsed to 0.36 (current assets $2.54B vs current liabilities $7.09B). This is exactly the state in which a pre-packaged plan delivers more value than a fight.

What emergence bought. Per management commentary on the Q3 FY2026 call (5 May 2026):

• Total debt cut by ~70% (i.e., from ~$6.5B down to roughly $1.8B post-refinance)
• Net debt of approximately $600M
• Annual cash interest expense reduced by ~60%
• $1.2B in cash and short-term investments at Q3 FY2026 quarter-end
• Approximately $700M of Section 48D CHIPS Act tax refunds secured
• Senior Secured Notes due 2030 are the new principal long-dated obligation
• Subsequent refinancing retired another ~$476M of first-lien notes, saving ~$62M/yr of interest

Resilience verdict. The balance sheet is no longer the binding constraint. It was; it isn't. The Altman Z-Score and Piotroski F-Score that flagged distress through FY2025 are now irrelevant — they were measuring an insolvent legal entity. The new question is whether Wolfspeed can reach unlevered cash-flow break-even before chewing through the rebuilt $1.2B liquidity at the current burn rate. At Q3 FY2026's $84M of operating cash flow drain, the runway is roughly 12–14 quarters without further capital raises if capex stays moderated.

5. Returns, reinvestment, and capital allocation

The historical return profile shows what Cree's LED business once was, and how completely the SiC pivot destroyed those returns.

Capital allocation verdict. Pre-Ch11 management's capital allocation was a single bet: borrow ~$5B of long-term debt and reinvest it as growth capex into a 200mm SiC fab that did not yet have the design-wins to fill it. With hindsight, that bet was sized wrong for the realized EV ramp. There were no meaningful buybacks or dividends (Wolfspeed has never paid a dividend); stock-based comp ran ~$50–85M per year, diluting steadily. Post-Ch11 the picture is reset:

• The board has been entirely reconstituted (new 7-person board), with a new CEO (Robert Feurle, May 2025) and new CFO (Gregor van Issum, Sept 2025).
• Capex priorities have been re-ranked. Management said on the Q3 FY2026 call: "the restructuring on our device side is done" — i.e., further fab expansion is on hold pending utilization.
• The only intelligent capital-allocation lever remaining is to harvest the existing capacity before adding more.

The verdict on whether management is compounding per-share value: not yet. Post-emergence shareholders are riding on the option that the fab fills before liquidity runs out — they are not earning a return on capital today.

6. Segment and unit economics

Wolfspeed reports a single operating segment (it consolidated to one segment after the LED Products divestiture in 2021), so the segment-revenue chart we'd normally show does not exist. The closest disaggregation comes from management commentary on product-line revenue:

End-market commentary (from earnings calls). Power devices serve four verticals: (1) EV traction inverters — historically the largest end market and the one underperforming most relative to plan as European EV adoption slowed; (2) AI data-center power — fastest-growing pocket, up ~30% sequentially in Q3 FY26; (3) industrial & energy (I&E), including renewables and motor drives; and (4) aerospace/defense and RF (note that the RF business was sold to Macom in late 2023 and to Infineon in 2024 — so the residual is materials-only RF SiC). Geography mix is dominated by the U.S. and EU, with limited China exposure relative to peers because Wolfspeed sells primarily to global Tier-1 OEMs rather than to Chinese device makers.

Unit-economics verdict. Until the Mohawk Valley fab is loaded to a utilization threshold management has historically pegged at "50%+", the unit economics of every wafer carry an over-absorption penalty. The fastest-improving sub-segment (AI data center) is too small relative to the cost base to fix this on its own. The fix has to come from EV-traction design-wins converting to production volume — and that is multi-quarter, not multi-month.

7. Valuation and market expectations

Valuation here is non-standard because the equity is essentially an option on a return to operating profitability. P/E is not interpretable (the company has negative earnings, and FY2025 EPS of +$27.85 reflects bankruptcy-accounting one-offs). EV/EBITDA is not interpretable (EBITDA is negative). The two multiples that can be read are EV/Sales and Price/Book, plus a forward-looking break-even sensitivity.

Where today's multiple sits. At the 13 May 2026 close of $65.78 and post-emergence shares outstanding of ~48M (per Q3 FY26 10-Q; predecessor common stock was cancelled at emergence with legacy holders receiving ~5% of new common stock), equity market cap is roughly $3.2B; add ~$0.6B net debt and EV is ~$3.8B. Against trailing-9M revenue of ~$515M (Q1–Q3 FY2026: $196.8M + $168.5M + $150.2M), annualized run-rate revenue is ~$687M. That implies EV/Sales ≈ 5.5× on run-rate revenue — above the established SiC peer band of 1.7–3.7× and despite revenue declining. The market is plainly not pricing in the current revenue run-rate; it is pricing in a multi-year recovery.

Bear / base / bull frame for the equity. This is a stress test of what the current ~$3.8B EV implies — not a price target.

8. Peer financial comparison

Peers are pulled from the FY2025 10-K named-competitor list (COHR, IFX, ON, STM) and the closest size-and-stage analog (NVTS). Ratios reflect each company's most recent reported fiscal year via the structured-data pull; WOLF row uses Q3 FY2026 run-rate where indicated. Currencies normalized to USD; IFX figures sourced in EUR and shown in EUR for revenue/EBITDA where indicated, but multiples are currency-neutral.

The peer gap that matters. Wolfspeed trades at roughly 2–3× the EV/Sales multiple of the three established SiC competitors (IFX 3.3×, ON 3.7×, STM 1.7×) — a recovery-option premium, not a present-economics multiple. But unlike NVTS (which is asset-light, fabless, and burns ~$130M a year), WOLF is heavily fixed-cost — its fab is built. The premium is therefore only justified by the operating leverage embedded in the existing capacity. If gross margin returns to ~30% (the level peers earn) at ~$1.5B of revenue, Wolfspeed would generate ~$450M of gross profit on a fixed cost base of ~$400M — an inflection. If gross margin stays negative, the premium is unjustified. There is no middle ground.

9. What to watch in the financials

What the financials confirm. Wolfspeed's pre-emergence balance sheet was on a one-way trip to insolvency, and the Chapter 11 process did the deleveraging that nothing else could have done in time. Net debt is no longer the binding risk.

What the financials contradict. The narrative that the company is "fixed." It isn't. Revenue is declining, gross margin is at a historic low, and operating cash flow is still negative by ~$84M per quarter. The post-emergence equity market cap of ~$3.2B (EV ~$3.8B) implies an operating turnaround that the income statement is not yet showing in any line.

The first financial metric to watch is the GAAP gross margin in Q1 FY2027 (the August 2026 earnings release). Q4 FY2026 is likely too soft on revenue ($140–160M guide) to test the thesis. Q1 FY2027 is the first quarter where utilization could benefit from the FY2026 refinancing and the AI data-center ramp, and the gross margin trajectory will indicate whether the post-emergence model can earn its keep. If gross margin is still below -15% by then, the current EV becomes much harder to defend.