Wolfspeed: AI Data Center Revenue Doubles as Management Sets $800 Million Breakeven Target and Shuts Down Breakup Speculation
Fourth quarter fiscal 2026 earnings call, August 19, 2026
Wolfspeed closed out fiscal 2026 with revenue of $150 million, landing at the midpoint of guidance for what CEO Robert Feurle called another quarter of "delivering results" as the silicon carbide maker works through a leadership overhaul and balance sheet restructuring. The headline number was unremarkable, but two disclosures stood out for investors trying to handicap the company's path to breakeven: a specific revenue target for gross margin neutrality, and an unusually blunt rejection of long-speculated plans to split the materials and power devices businesses.
Management puts a number on breakeven
For the first time, CFO Gregor Issum gave investors a concrete target for when gross margins could turn positive. "In a ballpark, we would say on an $800 million annual run rate, that's probably the ballpark where a breakeven gross margin point lies right now," he said, adding the figure could swing "plus/minus several million" depending on product mix between devices and materials. That compares to the current annualized run rate of roughly $600 million, implying Wolfspeed needs approximately 33% more revenue before gross margins turn positive. Non-GAAP gross margin came in at negative 19.9% in the quarter, a 70 basis point sequential improvement driven by mix rather than volume. Issum reiterated that fixed costs and factory utilization, not underlying product economics, remain the binding constraint: "Fund utilization continues to be the primary driver of our gross margin profile... Inherent profitability of the products is quite okay, I would say. So it's really about asset utilization."
AI data center business doubles, but remains a small piece of the pie
The most tangible growth story on the call was Wolfspeed's data center power business, which more than doubled in fiscal 2026 versus fiscal 2025 and grew approximately 20% sequentially in the fourth quarter, helping offset continued softness in automotive. Design wins are ramping at power supply makers LITEON and MacMic to support multiple hyperscaler customers, and management pointed to the industry shift toward 800-volt power architectures as a structural tailwind that increases silicon carbide content per system. Feurle noted the company is also chasing adjacent opportunities in battery backup units, super capacitors, e-fuses, and high-voltage DC-to-DC conversion, and is engaging with solid-state transformer makers on higher-voltage 2.3-kilovolt and 3.3-kilovolt modules. He credited the company's completed transition to 200-millimeter manufacturing at its Mohawk Valley, New York fab as the key enabler: "The good news is with us having completed the 6- to 8-inch transition... we're vertically integrated. It means we got the substrates, we got the product. And again, we all can serve them out of the Mohawk Valley fab." Still, when pressed by TD Cowen's Joshua Buchalter on when the segment becomes financially meaningful, management offered no specific timeline, acknowledging the market "was not on anybody's radar screen a couple of years ago" and remains early-stage.
Capital structure: L1 refinancing is the priority, and a breakup is off the table
William Blair's Jed Dorsheimer pushed management on refinancing the company's first-lien debt, which carries a roughly 16% interest rate on $630 million outstanding. Issum confirmed it is "the highest priority debt to refinance" and that interest costs are a material drag on cash flow: the company burned $54 million in operating cash flow during the quarter, with $32 million of the $54 million tied to cash interest expense. Dorsheimer then asked whether retiring the first lien would free Wolfspeed to split its materials and power devices businesses, a structure previously constrained by lender covenants requiring sign-off from Apollo. Issum's response left little ambiguity: "We have absolutely no interest to break it in two... We believe that having a vertically integrated business drives really a performance differentiator when it comes to our device performance." He pointed to the newly launched Gen 5 MOSFET as evidence, arguing its performance leap over competitors is "to a certain extent, contributed by the fact that we are vertically integrated." Investors who had modeled a potential breakup as a value-unlocking catalyst should take this off the table for now. Separately, the quarter saw $46 million of second-lien convertible notes voluntarily converted to equity, trimming annual interest expense by roughly $1 million, a modest but directionally useful deleveraging step. The company ended the quarter with $1.1 billion in cash and short-term investments and net debt of approximately $600 million.
Technology roadmap: Gen 5 MOSFET and a GE Aerospace partnership
Wolfspeed used the PCIM power electronics conference in June to unveil its fifth-generation silicon carbide MOSFET, which the company says delivers the best specific on-state resistance in the industry while preserving the switching characteristics of its Gen 4 platform. Feurle framed the launch as giving customers flexibility to either shrink system size or boost power density, with applications spanning EV traction inverters, onboard chargers, AI data center power supplies, solid-state transformers, and renewable energy conversion. Separately, the company's 10-kilovolt MOSFET, aimed at aerospace and defense applications, was recognized as the conference's top innovation, and Wolfspeed announced a memorandum of understanding with GE Aerospace to co-develop high-voltage silicon carbide power modules, a partnership management framed as reinforcing supply chain resilience aligned with U.S. government priorities on AI, energy, and defense.
Automotive and industrial: stabilizing but unpredictable
On the core automotive and industrial business, Feurle said diversification efforts across a broader global customer base are "starting to pay off," pointing to a new design win with a European Tier 1 supplier for an onboard charger program with a large German OEM, alongside the existing Toyota onboard charging partnership. But he stopped short of calling a bottom, telling Susquehanna's Christopher Rolland that end-customer demand, particularly amid ongoing product mix shifts on the automotive side, remains "hard to predict."
Materials business in transitional limbo
Materials revenue came in at $43 million for the quarter as the company continues supporting legacy 150-millimeter long-term agreement customers while simultaneously shipping 200-millimeter engineering samples to multiple customers for evaluation. Feurle described the current period as a genuine transition point, with some 150-millimeter agreements winding down while others continue, and cautioned this dynamic will likely persist "for this year" before 200-millimeter materials begin contributing more meaningfully to results.