why is WOLF "Negative Gross Margin"

The deep research logic is organized as follows: 

Okay, let's tackle why WOLF has a negative gross margin. First, I need to look at the data provided. The user mentioned the stock code WOLF, which is Wolfspeed. From the references, there's a query result for WOLF's revenue, COGS, and gross margin as of 20241231. The numbers show a revenue of $185.4 million, COGS of $207.9 million, leading to a gross margin of -17.11%. That's a negative number, which means their costs exceeded their revenue in that period.

Hmm, why would that happen? Let's check the background. There's a title from 2025-03-31 about Wolfspeed's crisis, mentioning financial difficulties, including a gross margin of -21% in the second quarter of 2025. Also, they lost key customers like Tesla and Volkswagen, which reduced their revenue by $900 million. That's a significant drop, which would impact their margins.

Another reference from 2025-06-30 talks about their debt restructuring. Their gross margin was 2.21% in Q3, but they had a free cash flow burn of $168 million. The low production efficiency at their 8-inch wafer factory, with yields below 30%, is a big issue. High COGS due to inefficiencies would drag down the gross margin.

Looking at the restructuring plan, they filed for Chapter 11 bankruptcy in July 2025, aiming to cut $4.6 billion in debt. The market reaction was positive, with the stock surging, but the underlying issues like high COGS and low revenue from customers are still there. The negative gross margin is a symptom of these operational and financial challenges.

Also, the user's profile mentions they're a short-term trader with a focus on tech stocks. They might be interested in the short-term volatility but need to understand the fundamentals. The negative gross margin indicates immediate financial stress, which could be a risk but also a potential turnaround opportunity if the restructuring works.

Putting it all together, the negative gross margin is due to high COGS from production inefficiencies, loss of major customers, and financial restructuring pressures. The user should consider these factors alongside the recent bankruptcy filing and market reaction when evaluating WOLF as an investment.

### **Conclusion** 🚨
Wolfspeed (WOLF) reported a **negative gross margin of -17.11%** as of December 31, 2024 , driven by **excessive cost of goods sold (COGS)** relative to its revenue. This reflects severe operational and financial challenges, including **production inefficiencies**, **customer losses**, and **uncertainty over federal subsidies** under the CHIPS Act. Below is a detailed breakdown of the root causes and implications for investors.

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### **Analysis** 📊
#### 1. **High COGS and Low Revenue**
- **COGS vs. Revenue**: Wolfspeed’s COGS ($207.9M) exceeded its revenue ($185.4M) by **$22.5M** in Q4 2024 .
- **Gross Margin Trend**: The company’s gross margin has deteriorated significantly over the past year, dropping from **9.59% in Q4 2024** to **-17.11% in Q4 2024** .
- **Key Driver**: The **8-inch wafer factory in North Carolina** operates at **<30% yield**, far below the industry standard of ~70% . This inefficiency drives up production costs and reduces profitability.

| Metric | Q4 2024 (WOLF) | Industry Average |
|------------------------|------------------|-------------------|
| Gross Margin | -17.11% | +15%–+25% |
| Wafer Yield | <30% | ~70% |
| COGS/Revenue Ratio | 112.2% | ~80%–90% |

#### 2. **Customer Losses and Revenue Decline**
- **Key Customers**: Wolfspeed lost **$900M in contracts** with Tesla and Volkswagen, representing a **15% revenue reduction** .
- **Market Competition**: Chinese competitors like TankeBlue and SICC are undercutting prices, with 6-inch SiC wafers priced at **$500–$1,000** vs. Wolfspeed’s **$1,500+** .
- **Revenue Growth**: Despite a **92% YoY increase in EV-related revenue** , total revenue fell **13.4% YoY** in Q2 2025 .

#### 3. **Financial Pressures and Restructuring**
- **Debt Load**: Wolfspeed’s debt-to-equity ratio hit **7.13x**, with a **negative interest coverage ratio (-1.51)** .
- **CHIPS Act Subsidies**: The company is awaiting **$750M in federal funding** under the CHIPS Act, which is critical for its survival .
- **Bankruptcy Filing**: Wolfspeed filed for **Chapter 11 bankruptcy** in July 2025, aiming to reduce debt by **70% ($4.6B)** and slash annual interest payments by **60%** .

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### **Implications for Investors** 📉
- **Short-Term Risk**: The negative gross margin and high debt levels make Wolfspeed a **high-risk, speculative play**. The stock surged **83%** post-bankruptcy filing , but long-term viability depends on **CHIPS Act funding** and **operational turnaround**.
- **Long-Term Opportunity**: Wolfspeed remains a **leader in SiC technology**, with a **$1.4B automotive backlog** and partnerships with Ford and GM . Success in restructuring could position it to capitalize on the **$50B SiC market** by 2030 .

| Risk/Reward Profile |
|----------------------|
| **Risk**: High debt, production inefficiencies, customer losses. |
| **Reward**: Dominance in SiC semiconductors, EV market growth, potential restructuring success. |

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### **Conclusion** 🚨
Wolfspeed’s negative gross margin is a **symptom of deep operational and financial challenges**, but the company’s **strategic position in SiC technology** and **recent restructuring efforts** offer a **high-risk, high-reward opportunity** for investors. Stay vigilant on **CHIPS Act developments** and **production efficiency metrics** as key indicators of future success.

|code|Ticker|Name|Date|Gross Profit Margin|Cost of Goods Sold|Total Revenue|market_code|
|---|---|---|---|---|---|---|---|
|WOLF|WOLF.N|Wolfspeed|2024 Q4|9.5887|1.983E8|2.007E8|169|
|WOLF|WOLF.N|Wolfspeed|2025 Q1|-18.5927|2.309E8|1.947E8|169|
|WOLF|WOLF.N|Wolfspeed|2025 Q2|-19.5629|2.177E8|1.805E8|169|
|WOLF|WOLF.N|Wolfspeed|2025 Q3|-17.1067|2.079E8|1.854E8|169|