Wolfspeed Strengthens Leadership and Balance Sheet in Strategic Pivot

Wolfspeed US9778521024

Wolfspeed has taken decisive steps to secure its executive team for the long term while emerging from a major financial restructuring with a fortified balance sheet. The company's recent moves, including new equity incentives, a significant debt reduction, a substantial tax credit, and a key partnership, aim to position it for a sustainable turnaround.

Emerging from Chapter 11 bankruptcy proceedings on September 29, 2025, Wolfspeed completed an accelerated financial overhaul. The restructuring yielded several critical improvements to its financial health:
* A reduction of total debt by approximately 70%, with maturities extended out to 2030.
* Annual cash interest payments were cut by roughly 60%.
* The company issued $275 million in new second-lien secured convertible notes, backed by existing convertible noteholders.

A major liquidity boost followed on December 1, 2025, when Wolfspeed received a cash refund of $698.6 million from the U.S. Internal Revenue Service. This stemmed from the Advanced Manufacturing Investment Credit (AMIC) under the CHIPS and Science Act. Consequently, the company's cash reserves swelled to around $1.5 billion.

Chief Financial Officer Gregor Van Issum stated these funds bolster liquidity during a pivotal strategic development phase, supporting long-term growth, capital deployment, and investments across the silicon carbide supply chain. Per an agreement with senior secured lenders, $192.2 million of the tax refund will be used to retire approximately $175 million in outstanding obligations.

Executive Compensation Aligned with Long-Term Goals

On December 12, Wolfspeed revised the contracts for its top executives, including CEO Robert Feurle, CFO Gregor Van Issum, and COO David Emerson. The revisions center on substantial equity awards comprising Restricted Stock Units (RSUs) and Performance Stock Units (PSUs).

A notable retention package for CEO Feurle, valued at approximately $10 million in stock incentives, is designed to secure his commitment to the company through 2028. This equity compensation is tied to key performance metrics such as Total Shareholder Return, revenue targets, and leveraged free cash flow. These changes are part of the "2025 Management Incentive Compensation Plan," emphasizing continuity in leadership during the company's transformation.

Strategic Manufacturing Shift and Market Diversification

Operationally, Wolfspeed is transitioning its production from 150mm wafers at its Durham, North Carolina facility to more advanced 200mm wafers manufactured at its Mohawk Valley plant. The larger wafer diameter offers about 1.7 times the surface area, which is expected to lower per-chip costs over time through more efficient use of production capacity. The Durham site is slated for closure by the end of 2025.

Concurrently, the company is expanding its customer base beyond electric vehicles into several high-growth sectors:
* AI Data Centers: Efficient power supplies for energy-intensive computing infrastructure.
* Aerospace & Defense: High-reliability power electronics.
* Industrial & Energy: Solar inverters and industrial power systems.

Toyota Partnership Validates Technology

A significant endorsement came on December 9, 2025, with the announcement of a major supply agreement with Toyota Motor Corporation. Wolfspeed's silicon carbide MOSFETs will be integrated into the onboard charging systems for Toyota's future battery electric vehicles (BEVs).

CEO Feurle highlighted Toyota's stringent quality and reliability demands, noting that Wolfspeed's U.S.-based silicon carbide supply chain and manufacturing footprint provide the automaker with strategic planning certainty for its electrification roadmap. Securing a global volume manufacturer like Toyota supports Wolfspeed's technological standing in the silicon carbide market.

Financial Performance and Analyst Sentiment

For Q1 FY2026, reported on October 29, 2025, Wolfspeed posted revenue of $196.8 million and an adjusted loss per share of $0.55, which was better than the forecasted loss of $0.75.

However, guidance for Q2 FY2026 projects revenue between $150 million and $190 million, below consensus estimates. Management attributed this to pulled-in customer orders from the previous quarter and ongoing softness in certain end markets.

Analyst opinions currently reflect a cautious stance:
* 3 "Buy" recommendations
* 1 "Hold" recommendation
* 4 "Sell" recommendations
* Consensus Rating: "Reduce"
* Average Price Target: $10.50 (Susquehanna recently raised its target to $30.00)

This wide dispersion underscores the market's uncertainty regarding the mid-term success of Wolfspeed's transformation.

The Road Ahead

With a restructured balance sheet, strengthened liquidity, a key automotive partnership, and leadership incentives in place, Wolfspeed has created operational runway for its strategic pivot. Critical upcoming milestones include:
* Ramping production volume at the Mohawk Valley fab.
* Finalizing the closure of the Durham site by end-2025.
* Potentially accessing additional Section 48D tax credits worth approximately $300 million.
* The next quarterly earnings report, expected on January 28, 2026.

While near-term results are pressured by the production transition and demand weakness, the company's long-term trajectory will hinge on efficiently utilizing its new manufacturing capacity and securing additional major customers in the silicon carbide space.