Key Highlights
- Wall Street forecasts Q3 adjusted EPS of $0.62 on $12.4 billion revenue, compared to $0.31 EPS and $4.6B revenue in the prior-year period.
- Shares have declined 5.6% year-to-date and plummeted 77% from the March 2024 record high 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 lost a significant Oracle partnership.
- Consensus price target stands at $33.20, with 18 analysts maintaining a hold rating.
Super Micro Computer (SMCI) is set to unveil its fiscal third-quarter financial results following Tuesday’s closing bell, but shareholders are demanding clarity on issues extending far beyond standard financial metrics.
Super Micro Computer, Inc., SMCI
Shares traded at $27.65 on Tuesday, slipping roughly 1% during the session. The stock has shed 5.6% since the beginning of the year.
Wall Street consensus from FactSet anticipates adjusted earnings of $0.62 per share alongside $12.4 billion in revenue. This represents a substantial increase 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 projections also suggest a sequential decline from the previous quarter’s $12.7 billion revenue and $0.69 earnings per share, which had exceeded forecasts by 41%.
While the financial figures present one narrative, recent developments paint a more complex picture.
DOJ Investigation Casts Shadow Over Operations
The Department of Justice issued an indictment in March targeting three individuals, including company co-founder Yih-Shyan “Wally” Liaw, alleging a conspiracy to illegally export U.S.-manufactured AI servers to China in breach of export regulations. While Super Micro itself was not charged and has stated it is cooperating with authorities, Liaw subsequently stepped down from the board.
The announcement triggered a 33% single-day plunge in the stock price.
Super Micro has initiated an internal review of the matter, though investors are eagerly awaiting substantive commentary from leadership regarding the investigation’s status. Any guidance or disclosure related to the probe during the earnings call will draw significant attention.
The challenges intensified when Bluefin Research published a report on April 23 indicating Super Micro had forfeited a major contract with Oracle. The news sent shares tumbling 8.3% that trading session. The company has not issued a statement on the matter.
Bank of America analysts have cautioned that suppliers — including Nvidia — may limit GPU allocations to Super Micro, while customers could be quietly redirecting purchase orders to rivals such as Dell and HPE.
Profitability Metrics Under Pressure
Gross profit margins have contracted to approximately 8%, a sharp decline from levels exceeding 18% during fiscal 2023. Market participants are looking for signs that margins can find a floor, or whether mounting legal and compliance expenditures will drive them even lower.
Analyst sentiment has grown more reserved. Eighteen analysts currently assign SMCI an average hold rating. The mean price objective sits at $33.20 — suggesting potential upside of about 19% from present levels, though considerably below the $50-plus targets that were prevalent earlier in the year.
Northland recently lowered 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 organization’s core competencies.
SMCI shares reached an all-time closing peak of $118.81 on March 13, 2024. The stock has surrendered 77% of its value from that high-water mark.
On the operational front, Super Micro has broadened its Silicon Valley presence and introduced new Arm-based server solutions. EPS projections have edged up 0.3% during the past 60 days but have remained unchanged over the past week.
The earnings announcement is scheduled for release after market close on Tuesday.
