Error 404 when converting PNG to WEBP with file() method

When doing $file->thumb(['format'=>'webp'])->url() and uploading a PNG image I get a status 404 back; it doesn’t seem to convert the image? Am I doing something wrong?

But works with jpg?

No, doesn’t work with JPG either. I can upload a WEBP image and it shows up. The strange thing is, it worked before. I had a JPEG there, then I uploaded a PNG and it showed up. But then I replaced it using the built-in replace functionality, and since then it doesn’t work.
The strange thing is I have a staging site on the same server where it works without issues.

Is the PHP version the same for all sites on that server? Guess you are using the default gd library, not ImageMagick as your thumbs driver?

Yes, staging and production are the same except one is a subdirectory and accessible on a subdomain. No change in any library or whatever.