Super Micro Computer’s Preliminary Q2 and Q3 Results Highlight Growth Challenges Amid Accounting Uncertainty

Super Micro Computer (SMCI) released preliminary financial results for its second and third fiscal quarters, offering updated guidance while continuing to address accounting concerns. The company revised its full-year revenue forecast downward, reflecting a slowdown in growth, but maintained confidence in its long-term outlook. Shares initially fell sharply on the news but rebounded, reflecting the high volatility in the stock, which has a short interest of approximately 15 percent.

Updated Guidance and Future Outlook

Supermicro now expects fiscal year 2025 revenue in the range of $23.5 billion to $25 billion, a notable reduction from its prior forecast of $26 billion to $30 billion. The company attributed this to slowing revenue growth despite continued strong demand in AI infrastructure. For the second quarter of fiscal 2025, Supermicro expects net sales between $5.6 billion and $5.7 billion, representing 54 percent year-over-year growth. However, GAAP diluted net income per share is projected at $0.50 to $0.52, flat compared to last year, while non-GAAP diluted earnings are expected to come in at $0.58 to $0.60, reflecting only 5 percent year-over-year growth.

For the third quarter, Supermicro expects net sales between $5.0 billion and $6.0 billion, with GAAP EPS projected at $0.36 to $0.53 and non-GAAP EPS at $0.46 to $0.62. Despite these mixed near-term projections, CEO Charles Liang reaffirmed confidence in long-term growth, citing an anticipated surge in AI infrastructure demand, specifically with NVIDIA’s Blackwell chips and direct-liquid cooling technology. Management is targeting $40 billion in revenue for fiscal 2026, well above current estimates.

Accounting Issues and Filing Delays

Supermicro remains under scrutiny due to prior accounting concerns. The company previously delayed its earnings filings following allegations raised in an August 2024 short-seller report, prompting subpoenas from the Department of Justice and the Securities and Exchange Commission. Despite these investigations, Supermicro has reconfirmed that no previously issued financial statements require restatement.

The company is working toward meeting the Nasdaq-mandated February 25 deadline to file its delayed annual report for fiscal 2024 and its quarterly reports for September and December 2024. If it fails to meet this deadline, it risks delisting. Supermicro has stated that it expects to file the required reports on time, potentially removing a major overhang on the stock.

Key Drivers of Performance

Supermicro’s growth remains tied to the AI infrastructue boom, particularly demand for high-performance servers optimized for AI workloads. Management cited strong adoption of its direct-liquid cooling technology, with over 30 percent of new data centers expected to implement this technology over the next 12 months. Additionally, the company continues to benefit from its partnership with NVIDIA, which is driving AI server demand.

However, revenue growth is slowing compared to the rapid expansion seen in prior quarters. While AI-driven demand remains strong, macroeconomic uncertainty, inventory management issues, and potential supply chain constraints are contributing to a more tempered outlook. The company also noted an unexpected increase in inventory reserves, reflecting a decline in the market value of certain components, which weighed on Q4 fiscal 2024 results.

Debt Offerings and Balance Sheet

Supermicro recently announced a $700 million private placement of new 2.25 percent convertible senior notes due 2028, while also amending terms for its existing 2029 convertible notes. As of December 31, 2024, the company reported total cash and cash equivalents of approximately $1.4 billion, with total debt of $1.9 billion. This includes $200 million in bank debt and $1.7 billion in convertible notes. While the balance sheet remains relatively stable, the company’s reliance on convertible debt raises concerns about potential future dilution if these notes are converted into equity.

Market Reaction and Volatility

Supermicro’s stock has been extremely volatile in response to the preliminary results. Initially, shares plunged to around $31 before rebounding sharply to close near $42. The high short interest of approximately 15 percent means the stock will likely remain highly reactive to news developments, particularly around the accounting investigation and earnings filings.

Investors remain divided on how to interpret the results. On the one hand, the lowered revenue forecast suggests that the explosive AI-driven growth that fueled SMCI’s recent rally is slowing. On the other hand, management’s long-term vision, particularly its FY26 revenue target of $40 billion, continues to attract bullish sentiment.

Conclusion

Supermicro remains a high-risk, high-reward stock in the AI infrastructure space. While demand for AI servers and data center cooling solutions remains strong, the company is facing near-term growth deceleration, accounting scrutiny, and the challenge of meeting its earnings filing deadline. If Supermicro successfully files its financial reports by February 25 and clears the cloud of regulatory uncertainty, the stock could stabilize. However, until that happens, volatility is likely to remain elevated, with short interest keeping the stock susceptible to large swings in either direction.