After months of delays, Super Micro Computer (SMCI) finally updated investors on its financials. While it still needs to file its quarterly and annual reports for the last six months, the data center computer maker says it will get them in ahead of a threatened Nasdaq exchange listing.
But despite Supermicro, as the company is known, forecasting significant growth due to increased artificial intelligence spending, there appears to be something missing from the AI stock’s update.
Super Micro Computer makes AI-optimized computers, servers, networks, storage solutions, and data center workstations. Based on the express needs of its top-shelf hyperscaler customers, the company can quickly tailor its equipment to match their exact specifications as it uses AI chips from the all leading manufacturers.
Yet the data center equipment supplier ran into a buzzsaw of controversy last year after noted short-seller Hindenburg Research published a report accusing Supermicro of accounting manipulation.
It didn’t help SMCI stock that its auditor, Ernst & Young, subsequently resigned and raised concerns about the company's internal controls, transparency, and governance. And then the Justice Dept. and Securities & Exchange Commission opened investigations into the company.
All of that caused Supermicro to not file its financial reports with the SEC. The Nasdaq exchange threatened to delist its stock if it failed to get the paperwork in by Feb. 25.
While an independent audit of its books cleared Supermicro of any wrongdoing, and management says it doesn’t expect to have to recast any of its previous financial statements, there remains a cloud hanging over SMCI stock.
That’s why investors have been waiting for Supermicro to issue this business update. While detailed financials were not expected, investors wanted to see where the company just came from and where it thought it was heading. The results are mixed.
For the fiscal second quarter of 2025, Supermicro expects net sales in the range of $5.5 billion and $5.6 billion. That’s up 54% from the year-ago period at the midpoint, except that in November when the company issued preliminary results for the period, it had forecast sales between $5.9 billion and $6 billion and that was down from its prior guidance of $6 billion to $7 billion.
Gross margins are expected to be between 11.9% and 11.9%, which is down from the 13.3% it previously guided toward, though it does tend to be at the upper end of the range it typical reports.
Adjusted earnings of $0.58 to $0.60 per share, a 5% increase year-over-year, are well below the $0.75 to $0.77 per share it had expected before. Notably, the November guidance forecast a broad range of $0.67 to $0.83 per share. That means the latest numbers are a good 21% or more below both forecasts.
What’s concerning here, aside from everything being much lower than what it originally projected, is it is not seeing any profitable growth. Sales are growing 54%, but earnings are only 5% higher. On a GAAP basis they are flat from last year.
Because we have no insight yet into why this is occurring, it remains potentially problematic. And there were more revisions lower for the full year, too.
Supermicro forecasts revenue of $23.5 billion to $25 billion, down from $26 billion to $30 billion. However, management really sees business taking off in 2026 due to AI. It is forecasting revenue of as much as $40 billion then.
President and CEO Charles Liang said, “We anticipate this technology transition sets a strong foundation for us now, resulting in FY25 revenue in the range of $23.5 billion to $25 billion, paving the way for $40 billion revenue in FY26.”
SMCI stock rose 6.5% yesterday after the financial update was provided and it is rising another 5% at the open. The market clearly liked what Super Micro Computer had to say.
I’m not so sure. While it is getting its financial house in order again and the long-term growth of AI and data centers is clearly a tailwind for the stock, there are too many unknowns yet.
Beyond just the lowered numbers for the last quarter and the coming year, even if we grant it will get its quarterly reports filed on time, there are still Justice Dept. and SEC investigations going on that potentially could result in fines. Supermicro may yet have to restate its previous financial reports.
While I like the position in the marketplace Supermicro finds itself, I’m much more cautious about jumping in until we get more clarity.
