Wolfspeed tanks as restructuring, factory start-up costs cripple earnings, outlook

Wolfspeed (NYSE:WOLF) shares shed 20% during early market action Thursday after its first quarter fiscal 2025 financial results and outlook came up short due to restructuring and factory start-up costs.

These latest results might leave investors howling, as shares have tumbled 75% year to date.

North Carolina-based Wolfspeed produces silicon carbide semiconductors for an array of industries, ranging from electric vehicles to renewable energy systems to military and industrial.

“Considering the slower growth of EV adoption and the continued weakness in industrial and energy, the steps we are taking will right-size the business and generate additional cash savings,” said Wolfspeed CEO Gregg Lowe.

First quarter revenue of $194.7M fell short of the consensus estimate of $200.3M. Meanwhile, the outlook for the quarter in progress with revenue ranging from $160M to $200M completely missed the estimate of $214.6M.

The company points to several reasons for the shortfalls. Wolfspeed closed a facility during the first quarter as it transitions from 150mm to 200mm silicon carbide devices. This led to $87.1M in restructuring-related costs during the quarter.

“The costs incurred as a result of this restructuring plan include severance and employee benefit costs, voluntary termination benefits and other facility closure-related costs,” the company said.

Factory start-up and underutilization costs are also affecting Wolfspeed’s bottom line, as the company incurred $19.7M of factory start-up costs and $26.4M of underutilization costs in the first quarter of fiscal 2025.

However, Lowe asserted these moves will eventually lead to profit windfalls.

“We will continue to improve our financial performance and grow revenue by aligning our robust backlog of $11B of design wins with industry cycles and targeted cash savings activities that significantly lower our breakeven point and accelerate our path to generate positive cash flows from operations,” he said.

Stone Fox Capital, Investing Group Leader for Out Fox The Street, believes the company is on the path to profitability as it has received $2.5B in funding recently from a combination of the U.S. Department of Commerce, financing from investment groups and an expected $1B windfall in tax refunds.

“With capital in place, Wolfspeed aims for $3B in annual revenue in a few years, driven by substantial design-ins and design-wins, especially in EVs,” said Stone Fox Capital in a recent analysis.

“The key investor takeaway is that Wolfspeed, Inc. now appears fully funded for a strong future,” he added. “The market can now shift its focus towards revenue growth, and the company will hopefully provide some sales boosts in the quarters ahead as the Mohawk facility ramps.”

Wolfspeed competitors edged slightly higher on Thursday, including ON Semiconductor (NASDAQ:ON) +0.5%, Texas Instruments (NASDAQ:TXN) +1.5%, and Infineon Technologies (OTCQX:IFNNY) +1%.