Super Micro’s Weak Profit Fuels AI Server Margin Anxieties
(Bloomberg) — Super Micro Computer Inc. fell more than 10% in extended trading after reporting quarterly revenue and profit that missed analysts’ estimates, outweighing an annual sales outlook that was billions above Wall Street projections.
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Profit, excluding some items, was $6.25 a share in the period ended June 30, the company said Tuesday in a statement. That’s short of Super Micro’s previous forecast and the $8.25 average analyst estimate. Sales were $5.31 billion, compared with an average projection of $5.32 billion, according to data compiled by Bloomberg.
A jump in demand for the equipment that powers artificial intelligence software has helped drive sales at San Jose, California-based Super Micro, which makes data center servers. The company forecast revenue of $26 billion to $30 billion in the fiscal year ending June 30, 2025. Analysts, on average, estimated $23.6 billion.
Still, investors are worried about the longer-term profitability of AI-optimized servers sold by companies like Super Micro, Dell Technologies Inc., and Hewlett Packard Enterprise Co., said Woo Jin Ho, an analyst at Bloomberg Intelligence. Super Micro missing its own profitability targets in the recent quarter will likely fuel these anxieties, he said.
Executives, speaking on a conference call after the results, laid out a plan to reach its traditional gross margin target range of 14% to 17% as the company builds out its supply chain for new products and manufacturing capacity in Taiwan and Malaysia.
Gross margin, or the percentage of sales remaining after deducting the cost of production, was above 11% in the fourth quarter. Executives said margins were negatively affected by the company’s business with a large cloud service provider and a higher mix of new liquid-cooled servers, which required investments in the supply chain. Large customers often are able to secure favorable pricing in return for big orders.
“We are well-positioned to become the largest IT infrastructure company,” Chief Executive Officer Charles Liang said in the statement.
The shares first jumped as much as 18% in extended trading on the forecast, before reversing and dropping about 13% at 6 p.m. in New York. The stock earlier closed at $616.94.
Super Micro also announced a 10-for-1 stock split, with trading beginning Oct. 1. The shares have more than doubled in value this year and been added to the S&P 500 and Nasdaq 100 indexes following increased demand for servers. Still, the stock has declined about 48% from a peak in March.
(Updates with gross margin in the fifth and sixth paragraphs.)
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