Key Takeaways
- Wall Street forecasts Q3 adjusted EPS of $0.62 with revenue reaching $12.4 billion, compared to $0.31 EPS and $4.6B in revenue from the prior-year period.
- SMCI stock has declined 5.6% year-to-date and plummeted 77% from its March 2024 record closing high of $118.81.
- A DOJ indictment in March accused co-founder “Wally” Liaw of unlawfully exporting AI servers to China, triggering a 33% stock plunge.
- Shares tumbled 8.3% on April 23 following reports that Super Micro lost a major Oracle contract.
- Consensus Wall Street price target stands at $33.20, with 18 analysts maintaining hold ratings.
Super Micro Computer (SMCI) is set to release its fiscal third-quarter financial results after Tuesday’s closing bell, and shareholders are seeking clarity on far more than revenue and profit figures.
Super Micro Computer, Inc., SMCI
Shares were changing hands at $27.65 during Tuesday’s session, slipping roughly 1% intraday. The stock has lost 5.6% since the start of the year.
According to FactSet consensus estimates, analysts anticipate adjusted earnings of $0.62 per share alongside revenue of $12.4 billion. These figures represent substantial growth from the year-ago quarter’s $0.31 per share and $4.6 billion in revenue — translating to approximately 169% year-over-year revenue growth.
However, the projected results would represent a sequential decline from the prior quarter’s $12.7 billion in revenue and $0.69 earnings per share, which surpassed analyst expectations by 41%.
While the financial metrics present one narrative, recent news headlines paint a more complex picture.
DOJ Investigation Casts Shadow Over Company
The Department of Justice filed an indictment in March charging three individuals, including company co-founder Yih-Shyan “Wally” Liaw, with allegedly orchestrating a scheme to illegally export U.S.-manufactured AI servers to China in violation of export restrictions. While Super Micro itself was not charged and has stated it is cooperating with authorities, Liaw subsequently stepped down from the board of directors.
Shares plummeted 33% in the trading session following the indictment announcement.
Super Micro has initiated an internal review of the matter, yet investors remain eager for management to provide substantive updates on the investigation’s status. Any commentary regarding the probe during the earnings call will likely draw significant attention.
Adding to the company’s challenges was the Oracle situation. Research firm Bluefin reported on April 23 that Super Micro had been dropped from a significant Oracle contract. The stock fell 8.3% that session. Super Micro has not publicly addressed the report.
Bank of America analysts have cautioned that component suppliers — including Nvidia — might limit GPU shipments to Super Micro, while customers could be discreetly redirecting orders to rivals such as Dell and HPE.
Profitability Margins Under Pressure
Gross profit margins have contracted to approximately 8%, a substantial drop from levels exceeding 18% in fiscal 2023. Market participants are looking for signs of margin stabilization or further deterioration potentially driven by mounting legal and compliance expenses.
The Street has adopted a more conservative stance. The average recommendation from 18 analysts is a hold rating. The consensus price target of $33.20 suggests approximately 19% potential upside from current trading levels, though this represents a significant reduction from the $50-plus targets that were prevalent earlier in the year.
Northland recently cut its rating on the stock, with analysts characterizing recent leadership changes as appearing “reactionary rather than proactive.” Rosenblatt analyst Kevin Cassidy noted that managing alleged unauthorized employee conduct is “not” among the company’s core competencies.
SMCI stock reached an all-time closing peak of $118.81 on March 13, 2024. The shares have shed 77% of their value from that high-water mark.
On the operational front, Super Micro has expanded its manufacturing presence in Silicon Valley and introduced new Arm-based server offerings. EPS projections have edged up 0.3% during the past 60 days but have remained unchanged over the previous week.
The company will report earnings following Tuesday’s market close.
