Wolfspeed Slashes Costs and Expands AI Datacenter Revenue by 50%: What’s Driving the Turnaround After Chapter 11?

AI Datacenter Revenue Surges 50% in One Quarter

Wolfspeed (NYSE: WOLF) announced financial results for its fiscal Q2 2026, marking a pivotal phase in its transformation. The headline: AI datacenter-related revenue grew by 50% sequentially, now representing a meaningful and rapidly expanding segment of the business. This momentum highlights the successful push into high-growth markets tied to next-gen technologies.

Expenses and CapEx Cut Sharply—$200 Million Saved Annually, 90% Lower CapEx

Management leaned hard into cost control: annualized operating expenses dropped by approximately $200 million compared to Q2 last year, and capital expenditures (CapEx) plummeted by 90%. These savings were part of a broader restructuring plan to steer the company through and beyond its Chapter 11 bankruptcy process. Notably, all CapEx was limited to prior commitments, providing additional discipline as the company emerges with a renewed capital structure.

Balance Sheet Rebuilt, Debt Reduced, and Cash Position Strengthened

The financial overhaul is further reflected in the balance sheet. Wolfspeed ended Q2 with $1.3 billion in cash, cash equivalents, and short-term investments. Proactive moves included securing $700 million in Section 48D tax refunds and using $175 million to retire debt, bringing greater stability by reducing both leverage and interest expense. Working capital initiatives (excluding some liability management costs) contributed about $90 million in improvements, reflecting tighter operational alignment with demand.

Profitability Still Challenged, but Loss Trends Improve

Despite these operational wins, profits remain under pressure, with Q2 showing a GAAP net loss of $150.6 million and adjusted EBITDA at negative $82 million. Gross margins were impacted by $48 million in underutilization costs and a $23 million inventory adjustment due to fresh start accounting—a reminder that the turnaround isn’t complete yet. Non-GAAP gross margin was -34%, a sequential improvement but still in negative territory.

Product and Operational Moves: Transition, Technology, and Customers

Operationally, Wolfspeed completed the shutdown of its 150-mm fab in Durham one month early and transitioned production to its newer 200-mm Mohawk Valley facility. This dovetails with capital discipline and sets the company up for future scalability. On the technology front, Wolfspeed showcased its 300-mm silicon carbide wafer—a long-term bet to penetrate markets beyond traditional power devices.

Customer traction was notable: wins with Toyota (onboard charging systems for BEVs) and Hopewind (industrial and renewable inverters) reinforce Wolfspeed’s momentum in both automotive and industrial verticals.

Guidance Signals Revenue Dip, But Expense Discipline Continues

Looking ahead, Wolfspeed projects Q3 revenue between $140 million and $160 million, down sequentially, mainly due to accelerated customer orders ahead of the Durham fab closure and some customers seeking product alternatives during bankruptcy. Operating expenses are expected to stay flat or decrease slightly, with further incremental improvements in gross margin anticipated—though still negative for at least one more quarter.

Takeaway: Watch Cash Discipline and End-Market Growth

Wolfspeed’s Q2 reflects a company retooling its business with rigorous expense cuts and renewed capital focus. The 50% growth in AI datacenter revenue stands out as a sign of diversification and long-term potential, even as overall profitability remains a work in progress. The company’s $1.3 billion cash position and meaningful reduction in debt provide leeway for further self-funded growth. Investors may want to monitor progress on margin recovery and continued traction in AI, automotive, and renewables as leading indicators of a full turnaround.

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