Super Micro Computer Misses Q3 Expectations, Revenue Drops 10%

Super Micro Computer, Inc. (SMCI) reported its third-quarter financial results for the fiscal year ending March 31, 2025, which fell short of market expectations. The company's earnings per share, excluding certain items, were $0.31, and revenue stood at $4.6 billion. These figures disappointed investors, as some analysts had already lowered their expectations following the company's preliminary results released the previous week.

The company attributed the underperformance to delayed procurement plans by its customers. Super Micro Computer's CEO, Charles Liang, stated that while many commitments are expected to be fulfilled in the June and September quarters, economic uncertainty and tariffs could have short-term impacts. The company also noted that its gross margin for the third quarter was 220 basis points lower than the previous quarter, primarily due to increased inventory levels from older products and higher costs associated with accelerating the launch of new products.

For the fourth quarter ending June 2025, Super Micro Computer projected revenue to be between $5.6 billion and $6.4 billion, with earnings per share, excluding certain items, ranging from $0.40 to $0.50. However, these projections fell short of analysts' average estimates of $6.59 billion in revenue and $0.64 in earnings per share.

The disappointing results and guidance have raised concerns among investors, particularly given the company's previous optimism about the AI server market. Super Micro Computer had previously forecasted strong long-term revenue growth, projecting sales of $40 billion for the fiscal year ending June 2026, nearly double the analyst estimates for the current fiscal year. This optimism was driven by the surging demand for AI servers equipped with high-performance graphics cards.

However, Super Micro Computer has faced challenges beyond market performance. The company failed to file its 2024 annual report on time, leading to its auditing firm, Ernst & Young, resigning due to concerns over corporate governance and transparency. The company, based in Santa Clara, had faced the risk of delisting from the Nasdaq until it submitted its financial reports in late February, bringing it back into compliance with the exchange's listing rules.

The company's struggles highlight the broader challenges in the AI server market, where demand has been volatile. While some customers may be waiting for Super Micro Computer's products to be equipped with NVIDIA's new Blackwell chips, uncertainties related to tariffs and macroeconomic issues could also pressure near-term demand. The company's CEO, Charles Liang, expressed confidence in the long-term goals but acknowledged the short-term impacts of economic uncertainty and tariffs. The company's gross margin decline and the delay in customer procurement plans further underscore the challenges Super Micro Computer is facing in the current market environment.