Super Micro Impacted By AI Server Delays And Nvidia Supply Limits, Analysts Lower Forecast
Super Micro Computer (NASDAQ:SMCI) stock price dropped on Wednesday after the company reported worse-than-expected third-quarter financial results on Tuesday.
Wall Street analysts rerated the stock.
Needham analyst Quinn Bolton reinstated Super Micro Computer with a Buy and a $39 price target.
Wedbush analyst Matt Bryson reiterated Super Micro Computer with a Neutral rating and lowered his price target to $30 (from $40).
JP Morgan analyst Samik Chatterjee gave Super Micro Computer a neutral rating and a price target of $35 (down from $36).Needham: Super Micro posted third-quarter revenue of $4.6 billion, -19.0% Q/Q and +19.5% Y/Y, in line with the company's preliminary announcement but well below previous guidance (midpoint at $5.5 billion). The weakness was due to customers waiting and evaluating next-gen AI platforms (Blackwell), which led to delayed commitments.
The quarterly adjusted gross margin came in at 9.7%, below the Street's 10.1% estimate. Margins were negatively affected by higher inventory reserve charges on older Hopper systems, lower volume, and accelerated new-product costs.
The quarterly adjusted EPS was $0.31, which is in line with the preliminary announcement but well below the previous guidance (midpoint at $0.54). The miss was driven by lower revenue and margins.
The company guided fourth-quarter revenue to $6.0 billion at the midpoint, +30.4% Q/Q and +13.0% Y/Y, well below Bolton's estimate of $7.0 billion and the Street's estimate of $6.59 billion.
The quarterly adjusted EPS should come in at $0.45 at the midpoint, below Bolton's prior estimate of $0.74 and the Street's estimate of $0.64.
Super Micro has been at the forefront of liquid cooling technology, and the announcement of DLC-2 further solidifies its leadership.
Management highlighted product transitions from Hopper to Blackwell and tariff uncertainty as key contributors to near-term weakness.
Despite near-term headwinds, Bolton became incrementally more positive for the company as it filed its 2024 10-K and 2025 10-Qs and added to its management bench. The analyst found the valuation extremely attractive for a company targeting AI/HPC end markets and being at the forefront of liquid-cooled data centers.
Wedbush: Bryson noted that GB200 and B200 availability was limited early in the quarter, with initial parts primarily shipping to select Nvidia Corp (NASDAQ:NVDA) accounts.
This situation has been largely rectified, supporting a rebound in the next quarter. Super Micro is effectively guiding for a slight dip in gross margins on older products that it likely needs to discount to sell. The analyst noted OEMs were pushed to take Hopper, given B200 shortages.
He said Super Micro's choice to step away from guiding for a gross margin rebound was properly pragmatic, particularly given uncertainty around the US administration's next steps. In the intermediate to longer term, Bryson expects better pricing and margins on initial B200 servers in light of the tight supply. Super Micro's diversified manufacturing presence could allow it to better navigate US policy than some of its peers.
Bryson projected fourth-quarter revenue of $5.95 billion and adjusted EPS of $0.45.
JP Morgan: Super Micro posted results primarily in line with the pre-announcement that had represented a roughly $900 million miss on revenue and an approximately 200 bps+ miss on gross margins to the earlier stated outlook for the fiscal third quarter.
With the company pre-announcement implying that the miss was led by one-off factors like customer platform decisions and inventory write-downs, expectations were for a sharper earnings rebound through revenue and margins.
However, the update from the company about fiscal fourth-quarter expectations highlights customer push-out of deployments in fiscal third-quarter was not limited to one or two customers and represents an ongoing challenge about customers deciding between multiple platforms as well as data center readiness to accept shipments as planned.
Lower cost inventory-related headwinds to gross margins are still not entirely behind the company, with up to 100 bps of gross margin impact in the fiscal fourth quarter, driving guidance for ~10% gross margins.
There remains the potential for further risks to gross margin if the company does not manage to sell its Hopper inventory. On the business drivers, the company continued to highlight leadership relative to the time to market for the latest technology-based servers in the high-growth AI servers market, as well as the expected launch of Data Canter Building Block Solutions (DCBBS), featuring their next-generation Direct Liquid Cooling (DLC 2.0) capabilities.
Chatterjee projected fourth-quarter revenue of $6 billion and adjusted EPS of $0.44.
Price Action: SMCI stock closed at $32.48 on Wednesday.
Read Next:Photo courtesy: CryptoFX via Shutterstock
Date
Firm
Action
From
To
May 2021
Susquehanna
Maintains
Positive
May 2021
Northland Capital Markets
Maintains
Outperform
Jun 2020
Northland Capital Markets
Initiates Coverage On
Outperform
View More Analyst Ratings for SMCI
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