Super Micro Computer's Star Dims as Q3 Results Shock Investors

On April 29th, following the close of markets, Super Micro Computer (SMCI.US) unveiled its preliminary third-quarter financial results for fiscal year 2025, sparking widespread investor concern due to their disappointing nature.

The company's projection for third-quarter sales stood at $4.5 billion to $4.6 billion—falling short of both the previous guidance of $5 billion to $6 billion and investor expectations. Similarly, adjusted earnings per share were estimated between $0.29 and $0.31, significantly below expectations as well.

Super Micro Computer attributed some of its third-quarter challenges to delays in customer platform decisions, resulting in the postponement of certain sales to the fourth quarter. Moreover, both GAAP and non-GAAP gross margins decreased by 220 basis points from the second quarter, primarily due to increased inventory of outdated products and additional costs incurred to expedite new product launches.

These unfavorable announcements triggered a dramatic plunge in Super Micro Computer’s stock price, with a 15% drop in post-market trading, warranting attention within the industry. During the recent AI boom, tech stocks like Nvidia (NVDA.US) and TSMC (TSM.US) have surged, and Super Micro Computer, by virtue of its sales of servers equipped with Nvidia chips, has also shone as a "star stock." Its stock performance even surpassed Nvidia’s at one point.

Earlier in February, Super Micro Computer provided an optimistic long-term revenue outlook. Founder, President, and CEO Charles Liang expressed confidence in the company's capability for expanding its leadership as a primary data center infrastructure solution provider in the U.S., foreseeing revenue between $23.5 billion and $25 billion for fiscal 2025, paving the way for $40 billion in 2026, significantly exceeding analyst expectations.

However, in a mere few months, the preliminary results fell markedly short of those hopeful projections, offering investors a cold reality check. Concurrently, reports emerged about companies like Microsoft and Amazon pausing data center construction, potentially due to overinvestment in AI computational capacity, amplifying investor unease further.

These developments, unfolding during a turbulent period for U.S. stocks under Trump's tariff policies, might have a reverberating effect across other tech stocks. Super Micro Computer's disappointing earnings may contribute to a broader negative stock performance within the sector, as it signals potential vulnerabilities amidst the AI frenzy.