Super Micro Computer shares closed Friday at $31.04, declining 6% on the day and extending a broader downturn that has seen the stock fall approximately 12.2% since May 8. The drop came as the Nasdaq Composite slid 1.54%, reflecting broader market weakness in technology and AI-related names.
The company reported March-quarter revenue of $10.24 billion, a figure that fell short of analyst expectations of $12.33 billion and marked a sequential decline from $12.7 billion in the prior quarter. Gross margin came in at 9.9%, a narrow level that has drawn investor scrutiny, while operating cash outflow reached $6.6 billion, raising questions about cash burn and working capital management.
Despite the revenue miss, Super Micro's year-over-year sales growth was robust, rising 122.7% from the same period last year, driven by strong demand for AI server infrastructure from data-center operators and AI startups. The company's ability to build custom, high-performance systems quickly has been a key competitive advantage, as noted by Reuters.
Management provided fiscal fourth-quarter guidance that offered some relief. The company forecasts revenue in the range of $11.0 billion to $12.5 billion, with adjusted earnings per share between $0.65 and $0.79. Both ranges exceeded Wall Street estimates, according to Reuters, helping to temper some of the negative sentiment from the quarterly miss.
CEO Charles Liang emphasized the company's transformation into a full data-center infrastructure provider, highlighting "margin recovery" and growth in its Data Center Building Block Solutions unit. However, the company faces significant headwinds, including a U.S. Department of Justice indictment of three individuals allegedly linked to the company for conspiring to export AI servers to China in violation of export controls. Super Micro has stated it is not named as a defendant and has placed two employees on leave while cooperating with an independent investigation.
Wall Street remains divided on the stock. Raymond James analyst Simon Leopold maintained an Outperform rating and raised his price target to $45 from $35, calling the quarter "mixed" but noting a "sharp improvement in gross margin." He also flagged reputational risk from the ongoing legal case, which could weigh on investor sentiment.
Broader market conditions added pressure, with the S&P 500 falling 1.24% and the Philadelphia semiconductor index dropping 4%, as Nvidia, AMD, and Intel all declined. Kenny Polcari, chief market strategist at Slatestone Wealth, told Reuters that the market "had gotten way ahead of itself" on the AI trade, suggesting that the recent sell-off may reflect a reassessment of valuations across the sector.
Investors now look to Monday, when Super Micro management will address attendees at the J.P. Morgan Global Technology, Media and Communications Conference in Boston. The fireside chat provides an opportunity for executives to discuss demand trends, margin outlook, legal issues, and the ongoing board review that could affect financial forecasts and past results. With shares down sharply, even minor updates could trigger significant price moves.
