Super Micro Computer (SMCI) Stock: Why Shares Crashed 17% After Earnings

TLDR

Table of Contents

Adjusted earnings per share fell to 41 cents, missing the 45-cent estimate
Revenue of $5.8 billion came in below the $6 billion expectation
Gross margin dropped to 9.6%, below the projected 10%
CEO cited working capital constraints limiting production expansion
Fiscal 2026 revenue guidance of $33 billion exceeded expectations

Super Micro Computer shares dropped 17% to $47.77 in premarket trading Wednesday after the AI server assembler reported disappointing fourth-quarter results. The earnings miss highlighted ongoing challenges in a competitive market where margins continue to shrink.

The company posted adjusted earnings of 41 cents per share for the fiscal fourth quarter. This fell short of Wall Street’s consensus estimate of 45 cents and marked a decline from 63 cents in the same quarter last year.

Revenue reached $5.8 billion for the quarter, representing 8% growth year-over-year. However, this figure came in below analyst expectations of $6 billion.

🚨 $SMCI Q4 Earnings 🚨
• Sales $5.8B vs Est. $5.9B
• EPS $0.41 vs Est. $0.44
• Gross Margins: 10% vs. Est. 10%
Q1 Outlook
• Sales $6.5B vs Est. $6.6B
• EPS $0.46 vs Est. $0.56
FY26 Outlook
• Sales $33.0B vs Est. $29.8B pic.twitter.com/VIWvzcxdAX
— Shay Boloor (@StockSavvyShay) August 5, 2025

The gross margin disappointment proved particularly concerning for investors. At 9.6%, it fell below the expected 10% and represents a continued decline from previous quarters.

CEO Charles Liang addressed several factors contributing to the weaker performance during the earnings call. He pointed to insufficient working capital as a key constraint preventing faster production expansion.

The company addressed this issue through a $2.3 billion convertible bond offering in June. This followed an earlier $700 million funding round completed in February.

Working Capital and Customer Issues

Liang also cited timing issues with revenue recognition for one new customer. These delays contributed to the revenue shortfall for the quarter.

Trump administration tariffs on imported goods created additional pressure on margins. The company reported that tariffs impacted net income, though management indicated steps were being taken to reduce this effect.

Net income fell to $195.2 million, or 31 cents per share, down from $297.2 million in the same quarter a year ago. The decline reflected both the tariff impact and operational challenges.

Super Micro’s first-quarter guidance came in below analyst projections. The company forecasts adjusted earnings of 40 to 52 cents per share on revenue of $6 billion to $7 billion.

Analysts had expected 59 cents per share and $6.6 billion in revenue for the current quarter. This guidance suggests continued near-term pressure on the business.

Strong Long-Term Revenue Outlook

Despite quarterly disappointments, Super Micro provided strong fiscal 2026 revenue guidance. The company expects at least $33 billion in revenue, well above the consensus estimate of $29.94 billion.

This guidance suggests revenue will be weighted toward the back half of the fiscal year. It reflects expected continued demand for AI servers despite current challenges.

The company has benefited from the artificial intelligence data center investment boom. Along with competitors like Dell Technologies and Hewlett Packard Enterprise, Super Micro assembles expensive AI server components.

Sales grew 110% in fiscal 2024 and 47% in fiscal 2025. However, the service is becoming commoditized, forcing the company to compete primarily on price.

This price competition has pressured gross margins significantly. Margins dropped from 18% at the end of 2022 to under 10% in the fourth quarter.

Bank of America analyst Ruplu Bhattacharya expects the low profitability trend to continue. He maintains an Underperform rating with a $35 price target on the stock.

Super Micro faces several additional risk factors that concern analysts. Two customers represent 64% of accounts receivable as of the end of March, creating concentration risk.

The company still deals with accounting control weaknesses from last year. These issues caused delayed annual report filings and preliminary result restatements, leading to shareholder lawsuits.

Super Micro also conducts business with companies owned by CEO Charles Liang’s brother. This relationship has raised questions about potential self-dealing practices.

The company avoided Nasdaq delisting after falling behind on quarterly filings and losing its auditor. These issues were resolved, allowing continued trading.

Despite recent challenges, SMCI shares remain up approximately 88% year-to-date through Tuesday’s close. The S&P 500 has gained 7% over the same period.

Analyst price targets range from $15 to $70 with an average of $42.64. This represents an implied 26% decline from Tuesday’s closing price of $57.26.

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