Super Micro Computer (NASDAQ:SMCI) shares traded near $30.98 on Friday, down 0.7% in afternoon trading, but still up 28.1% from the July 17 close. The stock has held onto most of its weekly gains following a significant revision in projected gross profit that analysts say could reshape the company’s financial trajectory for the fiscal fourth quarter.
Revised Margin Forecast
According to preliminary company data, Super Micro now expects a gross margin of 15% to 17%, a substantial increase from the earlier midpoint of 8.3%. Based on $11 billion in revenue—the lower end of the $11 billion to $12.5 billion range—the new margin implies gross profit of approximately $1.65 billion to $1.87 billion. That compares with the previous estimate of $913 million, marking a potential increase of between $726 million and $968 million, with the midpoint difference at $847 million, or a 93% surge.
The company’s initial projection had indicated a 16% margin on $11 billion in revenue would yield gross profit of $1.76 billion. Analysts surveyed by Wall Street had estimated revenue of $11.67 billion, but Super Micro expects fourth-quarter sales to come in at the lower end of its forecast.
Orders Surge, Cash Flow Concerns
New orders received in the fourth quarter exceeded $60 billion, more than 4.8 times the maximum revenue cap of $12.5 billion. However, the company noted in its SEC filing that certain orders may be subject to cancellation, postponement, or may not have binding commitments. Shipments are expected to be delivered over the coming quarters.
The $847 million potential gross profit increase represents roughly 13% of the previous quarter’s $6.6 billion operating cash outflow. Cash flow figures for the fourth quarter have not yet been disclosed, and the final results are scheduled for release on August 11, with a conference call at 17:00 EDT.
Analyst Reactions
JPMorgan Chase & Co. (NYSE:JPM) analysts indicated that fourth-quarter earnings per share might exceed current forecasts by at least 80%, but cautioned that investors would likely scrutinize the sustainability of the improved margins. Wedbush analyst Matt Bryson attributed the margin expansion to limited supply of AI servers, suggesting Super Micro “was able to take advantage of scarcity” through its pricing strategy and product mix.
Mizuho Securities lowered its price target to $34 from $44 on Thursday, maintaining a Neutral rating. The new target is 9.7% higher than Friday’s quote. Meanwhile, Dell Technologies Inc. (NYSE:DELL) climbed 10% on Wednesday, and Hewlett Packard Enterprise Co. (NYSE:HPE) advanced 5.6%.
Capital and Financing
In June, Super Micro revealed a $7 billion equity and equity-linked financing initiative to purchase components supporting around $39 billion in AI-server orders. As of March 31, the company held $1.3 billion in cash, with total bank debt and convertible notes of $8.8 billion.
Risks and Outlook
The data remain preliminary, and certain orders could be postponed or canceled. Additional equity offerings could lead to shareholder dilution. The final report on August 11 will confirm whether the margin increase translates into improved operating cash flow.
