Key Takeaways
- Wall Street forecasts Q3 adjusted earnings of $0.62 per share with revenue reaching $12.4 billion, compared to $0.31 EPS and $4.6B in sales a year earlier.
- SMCI shares have declined 5.6% year-to-date and plunged 77% from the March 2024 peak of $118.81.
- A DOJ indictment in March accused co-founder “Wally” Liaw of illegally shipping AI servers to China, triggering a 33% stock decline.
- Shares fell 8.3% on April 23 following reports that Super Micro had lost a significant Oracle partnership.
- The consensus price target among analysts stands at $33.20, with 18 analysts maintaining a hold rating.
Super Micro Computer (SMCI) is set to release its fiscal third-quarter financial results after Tuesday’s closing bell, with shareholders seeking clarity on issues extending far beyond typical earnings metrics.
Super Micro Computer, Inc., SMCI
Shares were changing hands at $27.65 during Tuesday’s session, reflecting a roughly 1% intraday decline. The stock has lost 5.6% since the beginning of the year.
Wall Street consensus, compiled by FactSet, anticipates adjusted earnings of $0.62 per share alongside revenue of $12.4 billion. These figures would represent substantial growth from the year-ago period’s $0.31 per share and $4.6 billion in sales — translating to approximately 169% revenue growth year-over-year.
However, the projected results would represent a sequential decline from the previous quarter’s $12.7 billion revenue and $0.69 earnings per share, which exceeded analyst estimates by 41%.
While the financial metrics present one narrative, recent controversies paint a vastly different picture.
Legal Challenges Cast Shadow Over Company
The Department of Justice delivered a significant blow in March when it indicted three individuals, including company co-founder Yih-Shyan “Wally” Liaw, on charges of conspiring to illegally export U.S.-manufactured AI servers to China, violating export regulations. Although Super Micro itself wasn’t named as a defendant and has pledged full cooperation, Liaw subsequently stepped down from the board.
The indictment triggered a devastating 33% single-day stock plunge.
Super Micro has initiated an internal review, yet shareholders are eagerly awaiting substantive updates from leadership regarding the investigation’s status. Any commentary during the earnings call will likely draw intense scrutiny.
The challenges continued when Bluefin research firm reported on April 23 that Super Micro had lost a major Oracle contract. The news sent shares tumbling 8.3% that session. The company has refused to comment on the matter.
Bank of America analysts have raised concerns that key suppliers — including Nvidia — might limit GPU allocations to Super Micro, while customers could be discreetly redirecting business to rivals such as Dell and HPE.
Deteriorating Margins Compound Investor Worries
Gross profit margins have eroded to approximately 8%, a sharp contraction from levels exceeding 18% during fiscal 2023. Market participants are watching closely to determine whether margins can find a floor or if mounting legal and compliance expenses will drive them even lower.
Analyst sentiment has cooled considerably. The average rating from 18 analysts is hold. The mean price objective sits at $33.20 — suggesting approximately 19% potential upside from current trading levels, yet significantly below the $50-plus targets that were commonplace earlier this year.
Northland recently cut its rating on the stock, with analysts characterizing recent leadership adjustments as “reactionary rather than proactive.” Rosenblatt analyst Kevin Cassidy noted that managing alleged rogue 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. Since that high-water mark, the stock has surrendered 77% of its value.
On the operational front, Super Micro has broadened its Silicon Valley operations 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 last week.
The earnings release is scheduled for after Tuesday’s market close.
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