Super Micro Reports Weak Earnings. The Stock Is Falling Sharply.

The assembler of artificial-intelligence servers could see revenue grow but gross-profit margin slip. (David Paul Morris/Bloomberg)

Super Micro Computer’s latest quarterly results missed expectations Thursday afternoon. Its shares were falling sharply in after-hours trading.

Adjusted earnings-per-share for the fiscal fourth quarter fell to 41 cents versus Wall Street’s consensus estimate of 45 cents, according to FactSet, and down from 63 cents last year. Revenue for the quarter was $5.8 billion, below expectations of $6 billion, and up 8% on the year.

Adjusted gross margin also disappointed at 9.6%, with analysts expecting 10%.

On an earnings call with investors, CEO Charles Liang said that Super Micro lacked the working capital to expand production as quickly as he would have liked. That was addressed through a $2.3 billion convertible bond offering in June, after a similar $700 million funding round in February.

Liang also cited the timing of revenue recognition with one new customer.

Super Micro’s outlook for first-quarter revenue and adjusted EPS also came in below projections, but revenue guidance for fiscal 2026 was strong at $33 billion, versus expectations of $20 billion. That suggests that fiscal 2026 sales will be weighted toward the back half of the year.

Super Micro stock was down around 15% in late trading following the release.

Super Micro has ridden on the coattails of the artificial-intelligence data-center investment boom. Along with competitors such as Dell Technologies and Hewlett Packard Enterprise , Super Micro takes the very expensive parts for an AI server and assembles them. Sales were up 110% in its 2024 fiscal year and now 47% in 2025.

Though this is delicate work, the service is being commoditized, and Super Micro is being forced to compete on price, as evidenced by its gross-profit margin dropping from an already-low 18% at the end of 2022, to under 10% in its fourth quarter. Analysts are expecting that low profitability to continue this quarter.

“In our opinion, while Super Micro today has manufacturing scale, and has the ability to continue to grow revenue and gain market share, we think this will come at the cost of margin,” says analyst Ruplu Bhattacharya of Bank of America.

Bhattacharya points to a long list of other risks shouldered by Super Micro shareholders, including having two customers represent 64% of accounts receivable as of the end of March. It still has accounting control weaknesses that linger from last year, which had caused its annual report to be filed late, and restatements of preliminary unaudited quarterly results, leading to shareholder lawsuits. Super Micro also does significant business with two companies owned by the brother of CEO Charles Liang, bringing charges of self-dealing.

Bhattacharya has a $35 price target on Super Micro stock and an Underperform rating.

On average, analysts have a Hold rating. Price targets range from $15 to $70 with average of $42.64, which is an implied 26% drop-off from Tuesday’s closing price.

Write to Adam Levine at adam.levine@barrons.com