Super Micro Computer Stock Plummets 20% After Missed Earnings

Super Micro Computer, a prominent manufacturer of AI servers, experienced a significant drop in its stock price after the market closed on Tuesday. The company's preliminary earnings report for the third fiscal quarter fell short of analysts' expectations, indicating a slower-than-anticipated recovery in its business operations. The company reported an estimated revenue of $45 billion to $46 billion, which is significantly lower than the average analyst prediction of $53.5 billion and the company's previous guidance of approximately $55 billion. The adjusted earnings per share for the quarter ending March 31 were projected to be between $0.29 and $0.31, well below the market expectation of $0.53.

Super Micro Computer had previously been a star stock in the AI sector, benefiting from the surging demand for high-performance AI servers equipped with advanced graphics processing units (GPUs). In February, the company provided an optimistic long-term revenue forecast, projecting sales of $400 billion for the fiscal year ending in June 2026, nearly double the analyst estimates for the current fiscal year. The company's CEO, Charles Liang, expressed confidence in achieving or surpassing the growth of 2023 by 2025, provided the supply chain could meet the demand.

However, the company attributed the shortfall to some customers delaying their purchase plans, resulting in orders being pushed back to the current quarter. This disappointing report led to a nearly 20% drop in the company's stock price after it closed at $36 on Tuesday. Other major chip manufacturers, such as NVIDIA and AMD, also experienced declines, with NVIDIA's stock falling by approximately 2% and AMD's by about 1%.

Analysts have pointed out that Super Micro Computer's reliance on large AI orders has been exposed by the underperformance in the third fiscal quarter. The company's explanation for the weak performance—changes in customer delivery timelines—may not fully account for the issue. The accumulation of older GPU inventory suggests that customers might be waiting for products equipped with NVIDIA's new Blackwell chips before making purchases.

Over the past 12 months, Super Micro Computer's stock has declined by 60%. The company has faced challenges, including the failure to submit its 2024 fiscal year report on time and the resignation of its auditing firm, Ernst & Young, in October 2022 due to concerns over corporate governance and transparency. The company, based in Santa Clara, California, had previously faced the risk of delisting from the NASDAQ but managed to comply with the exchange's listing rules after submitting its financial reports in late February.

In its statement, the company also noted that the gross margin for the third fiscal quarter decreased by 220 basis points compared to the previous quarter. This decline was primarily due to increased inventory write-downs for older products and additional costs incurred to accelerate the launch of new products. The management team is scheduled to hold a conference call on May 6 to discuss the financial results in detail.

Concerns about slowing AI expenditures have been exacerbated by broader economic uncertainties, including the impact of trade policies on global economic growth. While tech giants like Google and Amazon have reaffirmed their AI investment plans, there are growing concerns on Wall Street about potential slowdowns in AI infrastructure investments. For instance, Microsoft has reportedly canceled several data center projects involving 2GW of power due to oversupply issues.

Analysts suggest that some large-scale customers may be adjusting their data center plans due to factors such as economic weakness, equipment tariff policies, and delays in the delivery of NVIDIA's Blackwell chips. Super Micro Computer had announced in February that its products equipped with NVIDIA's Blackwell chips were in full production. Despite the release of new-generation chips, the tight supply of advanced processors is expected to sustain demand for previous-generation AI chips.

Industry experts generally agree that Super Micro Computer's challenges are more specific to the company rather than indicative of broader industry trends. While trade policies may have influenced market sentiment, the primary cause of the stock price decline is internal issues, such as delayed customer spending and missed earnings targets. The company's competitors, such as Dell and HPE, experienced stock price declines of nearly 5% and approximately 2%, respectively, following the news. Some analysts suggest that customers may turn to alternative suppliers to avoid Super Micro Computer's internal problems, potentially leading to increased orders for Dell and HPE.