Key Highlights
- Wall Street forecasts Q3 adjusted EPS of $0.62 on revenue of $12.4 billion, compared to $0.31 EPS and $4.6B revenue in the prior-year period.
- Shares have declined 5.6% year-to-date and sit 77% below the March 2024 peak of $118.81.
- DOJ charges filed in March against co-founder “Wally” Liaw for allegedly shipping AI servers to China triggered a 33% single-day decline.
- Reports of a lost Oracle contract sent shares down 8.3% on April 23.
- The consensus price target among 18 analysts stands at $33.20, with most assigning a hold rating.
Super Micro Computer (SMCI) delivers fiscal third-quarter results Tuesday after market close, with investors seeking clarity on issues extending well beyond financial performance.
Super Micro Computer, Inc., SMCI
Shares traded at $27.65 on Tuesday, slipping approximately 1% during the session. The stock has posted a 5.6% decline year-to-date.
FactSet consensus estimates call for adjusted earnings of $0.62 per share on revenue of $12.4 billion. This represents significant growth from the year-ago quarter’s $0.31 per share on $4.6 billion in revenue — translating to approximately 169% revenue growth year-over-year.
However, the projected figures indicate a sequential decline from the previous quarter’s $12.7 billion in revenue and $0.69 in earnings, results that exceeded expectations by 41%.
Financial metrics present one narrative. Recent developments present quite another.
DOJ Investigation Casts Shadow Over Company
March brought a Department of Justice indictment targeting three individuals, including company co-founder Yih-Shyan “Wally” Liaw, on charges of conspiring to illegally export U.S.-assembled AI servers to China, breaching export control regulations. While Super Micro was excluded from defendant status and maintains it is cooperating fully, Liaw has stepped down from the board.
Shares plummeted 33% following news of the indictment.
Super Micro initiated an internal investigation, though investors await substantive updates from management regarding the probe’s status. Any commentary on this matter will attract intense scrutiny.
Additional turbulence arrived with Oracle-related news. Research firm Bluefin reported on April 23 that Super Micro had forfeited a significant Oracle contract. The stock fell 8.3% following that report. Company representatives declined comment.
BofA analysts raised concerns that suppliers — Nvidia among them — might limit GPU allocations to Super Micro, while customers could be redirecting orders toward competitors such as Dell and HPE.
Margin Deterioration Raises Questions
Gross margins have contracted to approximately 8%, down sharply from levels exceeding 18% in fiscal 2023. Market participants want confirmation that margins can find a floor, or whether legal and compliance expenses will drive further compression.
Wall Street sentiment has cooled considerably. Eighteen analysts assign SMCI a hold rating on average. The mean price target of $33.20 suggests roughly 19% potential upside from current levels, yet remains far below the targets exceeding $50 that were prevalent earlier this year.
Northland downgraded the stock recently, with analysts characterizing recent management shifts as “reactionary rather than proactive.” Rosenblatt’s Kevin Cassidy noted that managing alleged unauthorized employee conduct remains outside the company’s core competencies.
SMCI stock reached an all-time closing high of $118.81 on March 13, 2024. Shares have surrendered 77% of their value since that pinnacle.
Regarding product developments, Super Micro has grown its Silicon Valley presence and unveiled new Arm-based server platforms. EPS projections have edged higher by 0.3% over the past 60 days while remaining unchanged over the past week.
The company releases earnings after Tuesday’s market close.
