AI's profitability is questioned again! SMCI.US's after-hours trading fell more than 10% after its profit fell short of expectations.

SMCI.US, a semiconductor company, missed Wall Street's fourth-quarter revenue and profit expectations but guided to revenue well above Wall Street's expectations for 2025, sending its shares down more than 10% in after-hours trading.

The company reported Q4 revenue of $5.31 billion, up 143.6% year-over-year, but below the $5.32 billion expected by the market; net income of $353 million, up from $194 million in the same period last year; and adjusted earnings per share of $6.25, below SMCI's own forecast and the consensus analyst estimate of $8.25.

Operating cash flow for the quarter was $635 million and capital expenditure was $27 million.

The company expects revenue for the fiscal year ending June 30, 2025, to be between $26 billion and $30 billion, compared with the consensus analyst estimate of $23.6 billion.

Analyst Woo Jin Ho said investors were concerned about the long-term profitability of AI-optimized servers sold by companies like SMCI, Dell Technologies and HP Inc., and that the company's failure to meet its own profit target in the most recent quarter may have exacerbated those concerns.

Management laid out a plan during a conference call after the earnings announcement to hit a range of 14% to 17% for its traditional gross margin as it builds supply chain and manufacturing capabilities in Taiwan and Malaysia.

The company's gross margin was 11.2% in the fourth quarter, down from 15.5% in the third quarter and 17.0% in the same quarter last year.

Management said the margin was hurt by the company's business with large cloud service providers and a higher mix of new liquid-cooled servers (which require investment in supply chain), which typically get discounts in return for large orders.

Chief Executive Charles Liang said in a statement, "We have the ability to be the largest IT infrastructure company."

The stock rose as much as 18% in after-hours trading on the expectation before falling back and dropping about 13% around 6 p.m. Eastern time. Shares of SMCI were down 11.5% at $54.60 at the time of publication.

The stock has more than doubled this year as server demand has increased and the company has been added to the S&P 500 and Nasdaq 100 indexes, but has fallen about 48% from its high in March.