Super Micro Computer Faces 11% Drop After Weak Earnings Forecast
Super Micro Computer (NASDAQ: SMCI) experienced an approximate 11% decline on Tuesday after releasing preliminary results for its March quarter that significantly underperformed expectations. The company now anticipates revenue in the range of $4.5 billion to $4.6 billion, a stark decrease from its earlier guidance of $5 billion to $6 billion. Earnings per share are also expected to be disappointing, projected at only $0.29 to $0.31. Super Micro attributed this shortfall to “delayed customer platform decisions,” which led to some orders shifting into the next quarter. This significant drop raises concerns regarding broader demand trends and may indicate potential market share losses to competitors such as Dell Technologies.
Challenging Economic Outlook
As the U.S. economy contracted in the first quarter of the year, the outlook appears increasingly difficult. Proposed tariffs from President Donald Trump on key trading partners are beginning to take effect, which heightens the risk of inflation resurgence. The artificial intelligence sector may face greater vulnerability to cost-cutting during economic downturns, as most companies’ AI investments remain unprofitable. Export restrictions could further burden U.S.-based server manufacturers like Super Micro. Additionally, after years of significant spending on AI infrastructure, companies might begin prioritizing code efficiency over simply expanding computing power. In February, Super Micro projected fiscal 2026 revenue could reach $40 billion, indicating a 70% increase over FY’25. However, these ambitious forecasts may be challenging to meet given the current macroeconomic headwinds and the recent earnings setback.
Valuation Appears Attractive
Despite these challenges, there are positive aspects for Super Micro. The company’s server products are closely linked to Nvidia’s GPU ecosystem. With Nvidia increasing production of its new Blackwell chips, demand for SMCI’s server platforms could rise. Furthermore, Super Micro is expanding into the direct-liquid-cooled (DLC) server market, a key technology for managing compute-intensive AI workloads. The company’s valuation remains appealing, with SMCI trading at approximately 13 times estimated 2025 earnings, well below the S&P 500’s forward multiple of over 20 times. This valuation is particularly notable when considering a 74.5% annual revenue growth rate over the past three years.
Investors Should Proceed With Caution
Nonetheless, investors should approach with caution. Over the past year, Super Micro has been embroiled in controversy, facing allegations of accounting irregularities, delays in SEC filings, and scrutiny from short-sellers. While some of these issues have dissipated in recent months following the company’s filing of its financial statements, the recent earnings shortfall combined with an inconsistent corporate governance track record suggests that investors may want to be wary of SMCI stock.
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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.