Super Micro Computer (SMCI) Stock: AI Server Demand Powers Blowout Q2 Earnings Beat

TLDR

• Super Micro Computer crushed Q2 expectations with $12.7 billion in revenue versus $10.42 billion estimate, up 123.4% year-over-year
• Adjusted earnings per share hit $0.69, beating analyst consensus of $0.49 by 40.8%
• Q3 revenue guidance of at least $12.3 billion tops Street expectations of $10.25 billion
• Full-year revenue outlook raised to at least $40 billion from previous $36.27 billion consensus
• Gross margin contracted to 6.4% from 11.9% year-ago, with one customer accounting for 63% of quarterly revenue

Super Micro Computer delivered a knockout quarter that sent shares climbing in premarket trading. The AI server maker posted fiscal second-quarter results that blew past Wall Street’s expectations on nearly every metric.

Revenue for the quarter ending December 31 hit $12.7 billion. That’s a massive jump from the $10.42 billion analysts were expecting. The year-over-year comparison looks even better, with revenue more than doubling from $5.7 billion in the same quarter last year.

Super Micro Computer, Inc., SMCI

The earnings beat was equally impressive. Adjusted EPS came in at $0.69 compared to the consensus estimate of $0.49. That’s a 40.8% beat that caught many analysts off guard.

CEO Charles Liang pointed to the company’s AI server technology and expanding manufacturing footprint as key drivers. The company is scaling rapidly to meet demand from large AI deployments and enterprise customers.

Strong Guidance Signals Continued Momentum

The forward-looking numbers tell an equally bullish story. Super Micro expects Q3 revenue of at least $12.3 billion, well above the $10.25 billion analysts anticipated. Adjusted EPS guidance of at least $0.60 also tops the Street’s $0.52 estimate.

The full-year revenue outlook got a boost too. Management now expects at least $40 billion in revenue for the fiscal year, beating the previous consensus of $36.27 billion.

Barclays analysts called the results a “beat and raise” driven by strong customer demand. But they flagged a concerning concentration issue. One single client made up roughly 63% of total quarterly revenue.

That kind of customer concentration creates risk. If that major client reduces orders or switches suppliers, revenue could swing dramatically. Barclays expects customer diversification to improve in the second half of the fiscal year.

Margin Pressure Emerges Despite Revenue Growth

Not everything in the report looked rosy. Gross margin contracted to 6.4% on an adjusted basis. That’s down sharply from 11.9% in the year-ago quarter.

The margin compression raises questions about pricing power and product mix. As competition in the AI server space heats up, maintaining healthy margins could prove challenging.

Super Micro’s balance sheet shows cash of $4.1 billion as of December 31. Total bank debt and convertible notes stood at $4.9 billion.

Analyst sentiment remains mixed despite the strong results. The consensus rating sits at “Hold” with an average price target of $46.19. Eight analysts rate the stock a buy, eight have hold ratings, and two recommend selling.

Some firms raised their targets after the earnings report. Rosenblatt boosted its price target to $55. Meanwhile, JPMorgan Chase cut its target from $43 to $40, and Citigroup lowered its target from $48 to $39.

The stock closed at $29.67 on Tuesday. That’s well below the 52-week high of $66.44 and just above the 52-week low of $27.35. The company currently carries a market cap of $17.71 billion with a P/E ratio of 23.74.

The results reflect surging demand for AI infrastructure as companies worldwide invest heavily in the technology.

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