Super Micro Computer (SMCI) is set to release its fiscal third-quarter financial results after the closing bell on Tuesday, May 5, followed by an earnings call at 5 p.m. ET. The report comes at a critical juncture for the AI server maker, as robust revenue forecasts collide with pressure from shrinking profit margins and ongoing export-control investigations.
Options markets are signaling significant volatility, with traders bracing for a potential 12.55% swing in SMCI shares following the announcement. This expected move exceeds the stock's average absolute move of 11.2% over the past four quarters, indicating heightened uncertainty around the results.
In February, the San Jose-based company guided for fiscal third-quarter net sales of at least $12.3 billion, with a full-year fiscal 2026 revenue target of no less than $40 billion. This follows a sharp sequential jump in the second quarter, where net sales reached $12.7 billion, up from $5.0 billion in the prior quarter and $5.7 billion in the year-ago period. However, gross margin contracted to 6.3% in Q2, down from 9.3% in the previous quarter and 11.8% a year earlier. CEO Charles Liang attributed the margin compression to the company's rapid scaling to support AI and enterprise customers.
Investors are now closely watching for signs of margin stabilization, improvements in cash flow, and updates on the company's Blackwell systems, which are built on Nvidia's latest AI chips. IG market analyst Tony Sycamore noted that margins are as critical as revenue, with Dell and Hewlett Packard Enterprise emerging as key competitors in the AI server market.
Zacks projects fiscal Q3 revenue at $12.3 billion, slightly below the $12.4 billion consensus, which would represent a 168.75% year-over-year increase. On the earnings side, Zacks' non-GAAP estimate stands at 63 cents per share, above the company's own guidance of 60 cents. Non-GAAP earnings typically exclude items like stock-based compensation to provide a clearer view of adjusted profitability.
Despite the strong revenue outlook, risks remain. In April, Super Micro initiated an independent probe after U.S. prosecutors charged three individuals connected to the company, including co-founder Yih-Shyan Liaw, in an alleged export-control plot. The company itself was not charged, and it stated that those individuals no longer have any affiliation with Super Micro. The independent board has not provided a timeline for completing the investigation. Liang has emphasized the company's commitment to protecting America's advanced technologies and intellectual property, and Super Micro has launched an internal review of its global trade compliance program.
Wall Street remains cautious. According to TipRanks, Citigroup's Asiya Merchant raised her price target to $28.81 from $25, maintaining a Hold rating, while JPMorgan's Samik Chatterjee lowered his target to $28 from $40, also with a Hold. The consensus rating for SMCI is Hold, with three Buys, eight Holds, and two Sells. Shares of SMCI rose 4.8% to $28.39 on Monday ahead of the earnings report, outpacing the broader market.
For Super Micro, simply topping revenue expectations may not be enough. Investors are seeking clarity on supply chain dynamics, pricing power, working capital management, and the resolution of legal issues. Without these, the rally in AI server stocks could face headwinds, even as demand for AI infrastructure continues to surge.
