Supermicro (SMCI) reported its Q4 earnings with mixed results, showing strong growth in some areas but missing key expectations. The company posted an adjusted EPS of $6.25, significantly higher than the previous year's $3.51, but below the consensus estimate of $8.25. Net sales came in at $5.31 billion, a substantial increase from $2.18 billion year-over-year, yet slightly missing the expected $5.32 billion. Despite these mixed results, the company announced a 10-for-1 stock split, initially driving shares up 18% before a sharp reversal to a 7% decline due to weak margins.
The reversal is notable as the company provided a strong outlook and announced the share split which usually is viewed as favorable by traders. However, the stock was unable to hold the initial 18% move and would end lower, suggesting sellers are still willing to sell into pops. The miss on the bottom line and margins aided the reversal but this price action will keep investors cautious around AI plays.
In terms of guidance, Supermicro provided an optimistic outlook. For Q1, the company expects adjusted EPS between $6.69 and $8.27, compared to the analyst consensus of $7.68. Net sales for Q1 are projected to be between $6.0 billion and $7.0 billion, well above the consensus estimate of $5.47 billion. For the full fiscal year 2025, Supermicro forecasts net sales between $26.0 billion and $30.0 billion, significantly higher than the expected $23.64 billion.
Key metrics revealed challenges in profitability. The adjusted gross profit was $599.5 million, below the estimated $730.1 million. Adjusted gross margin fell to 11.3%, missing the 14% estimate and dropping from 17.1% year-over-year. Adjusted operating income was $415.1 million, short of the expected $554.7 million, with an adjusted operating margin of 7.82%, below the 10.5% consensus.
Despite these setbacks, Supermicro highlighted robust cash flow, with cash flow from operations reaching $635 million, far surpassing the estimated $104.6 million. However, the company reported higher-than-expected adjusted operating expenses at $184.5 million compared to the $183.8 million estimate. The adjusted net income was $405.3 million, falling short of the $525.6 million consensus.
Supermicro's Q4 performance was marked by significant revenue growth driven by demand in AI infrastructure. The company’s total cash and cash equivalents stood at $1.67 billion, with total bank debt and convertible notes amounting to $2.174 billion. CEO Charles Liang emphasized the company's strong position in the market and the benefits of technological leadership and strategic investments in AI infrastructure.
The announcement of the 10-for-1 stock split and positive guidance initially boosted investor confidence, but concerns over weak margins and missed expectations led to a sharp reversal in the stock price. The shares initially surged by 18% before plummeting by 7%, reflecting market volatility and investor concerns over profitability.
Looking ahead, Supermicro aims to leverage its position in the IT infrastructure market, driven by investments in technology and strategic expansions. The company’s focus on AI and infrastructure solutions, coupled with robust revenue projections, sets a positive tone for future growth despite the current challenges in margins and expenses.