Wolfspeed Q2 Earnings Beat Estimates: Will 3Q25 Outlook Hurt Shares?

Core Viewpoint - Wolfspeed reported a narrower non-GAAP loss in Q2 fiscal 2025 compared to estimates, but the loss widened year-over-year, indicating ongoing challenges in the market [1][5]. Financial Performance - The company reported revenues of $180.5 million, a decrease of 13.4% year-over-year, but slightly above consensus estimates by 0.63% [2]. - Non-GAAP gross margin fell to 2%, down from 16% in the same quarter last year, primarily due to $28.9 million in underutilization costs [4]. - Non-GAAP operating loss was $105.2 million, wider than the $70.8 million loss reported in the previous year [5]. Revenue Breakdown - Mohawk Valley Fab contributed $52 million in revenues during the quarter [2]. - Power Products accounted for 50.3% of total revenues, while Materials Products contributed 49.7% [2]. - Power Products revenues decreased by 15.7% year-over-year to $90.8 million, and Materials Products revenues decreased by 10.9% year-over-year to $89.7 million [2]. Balance Sheet and Cash Flow - As of December 29, 2024, the company had cash and short-term investments of $1.40 billion, down from $1.69 billion as of September 29, 2024 [6]. - Long-term debt increased to $3.38 billion from $3.13 billion over the same period [6]. - Free cash outflow was $598.1 million, consisting of $195.1 million in operating cash outflow and $401.8 million in capital expenditures [6]. Future Guidance - For Q3 fiscal 2025, Wolfspeed expects revenues between $170 million and $200 million, with a non-GAAP loss projected between 88 and 76 cents per share [7]. - The company anticipates a non-GAAP gross margin ranging from negative 3% to 7% and operating expenses between $104 million and $99 million [7]. - Restructuring-related costs of $72 million are expected, with $35 million in cost of revenues and $37 million in operating expenses [8]. Market Performance - Wolfspeed's shares have declined by 82.3% over the past year, significantly underperforming the Zacks Computer & Technology sector, which returned 26.7% [3].