Super Micro Computer shares tumbled in early Wednesday trading as Wall Street analysts weighed in on the tech infrastructure's mixed fourth quarter earnings.
Super Micro Computer (SMCI) shares have nearly doubled in value over the past year, giving the group a market capitalization of around $36 billion, as investors bet on its ability to provide high-end servers (and their liquid cooling enhancements) to help support the ongoing boom in artificial-intelligence chips and technologies.
The San Jose, Calif., group, which was added to the S&P 500 in March, also unveiled a 10-for-1 stock split that will take effect on Oct. 1.
Its fiscal fourth quarter report, however, unveiled some weakness in the group's profit story, as margins were squeezed thanks to supply-chain constraints linked to its liquid cooling technology and increasing competition from rivals such as Dell Technologies (DELL) and HP Enterprise (HPE) .
Fourth quarter gross margin narrowed nearly 6 percentage points from last year to 11.3%, well inside Wall Street's consensus forecast of 14.1%, while management indicated steady improvements back to a range of 14% to 17% in the coming fiscal year.
Margin pressure at Super Micro
Fiscal first quarter profit, however, was forecast at $6.69 to $8.27 per share, which was modestly shy of the LSEG midpoint estimate of $7.58 per share. Sales for the quarter were forecast between $6 billion to $7 billion, topping analysts' estimates.
Super Micro Computer CEO Charles Liang said the outlook wasn't linked to reports of a delay in production and shipment of Nvidia's (NVDA) new Blackwell processors, which are expected to drive a big boost in corresponding server-rack sales.
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"Overall impact should not be too much," Liang told investors on a conference call late Tuesday. "Blackwell may be postponed; how much we don't exactly know because new technology always can be pushed out."
"For [the fiscal third quarter] we did not expect any Blackwell volume. For Q4, the December quarter, we guess it will be very small, just engineering samples, small volume," he added "So, the real volume, I believe, will be in the March quarter next year. That's why our [fiscal 2025] guidance is only $26 billion to $30 billion."
"We are well positioned to become the largest IT infrastructure company, driven by our technology leadership including rack-scale DLC liquid cooling and business values of our new Datacenter Building Block Solutions," Liang said.
"The investments in Malaysia and Silicon Valley expansions will further strengthen our supply chain, security, and economies of scale necessary for the growing AI revolution,” he added.
Well-placed for AI boom
Bank of America analyst Ruplu Bhattacharya, who hived $390 from his Super Micro price target to take it to $700 a share, sees the Blackwell delay as a potential negative.
"While the long-term benefit from AI remains intact, we move to a neutral rating from buy," Bhattacharya said.
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["We] see the next several quarters remaining margin-challenged as Super Micro navigates a competitive pricing environment, delayed shipment of Nvidia's Blackwell GPU systems that require liquid cooled racks, and ongoing issues with component availability.
"We believe gross margins will only return gradually to their normal range by the end of 2025," he added.
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Rosenblatt analyst Hans Mosesmann held his $1,300 price target in place but noted the margin pressures from "a more considerable liquid cooling uptick, hyperscale mix, and significant expedite and component costs."
Wedbush analyst Matt Bryson, meanwhile, lowered his Super Micro Computer price target by $180 to $600 a share, while Barclays analyst George Wang cut his by $307 to $693 a share.
Super Micro shares were marked 16% lower in early Wednesday trading to change hands at $518.18 each, a move that would still leave the stock with a year-to-date gain of around 82%.
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