TLDR:
- Super Micro Computer slashed Q3 revenue guidance from $5-6 billion to $4.5-4.6 billion
- Adjusted EPS forecast reduced to $0.29-0.31 from previous $0.46-0.62
- Customer purchasing delays and inventory write-downs cited as key reasons
- Stock plunged 11.5% on Wednesday following the announcement
- Growing concerns about potential AI infrastructure market slowdown
Super Micro Computer, a manufacturer of artificial intelligence servers, shocked investors this week by releasing preliminary results for its fiscal third quarter that fell well short of expectations. The company dramatically reduced its revenue guidance to between $4.5 billion and $4.6 billion, down from its previous forecast of $5 billion to $6 billion.
The adjusted earnings per share outlook was also slashed to a range of $0.29 to $0.31, far below the earlier projection of $0.46 to $0.62.
Super Micro’s stock plunged 11.5% on Wednesday following the announcement. The drop adds to the company’s woes, with shares down about 74% from their early 2024 peak.
The company’s market capitalization has tumbled to roughly $18 billion. This gives the stock a price-to-sales ratio below 1 based on analyst estimates for fiscal 2025 sales.
In its preliminary report, Super Micro explained that some customers delayed purchasing decisions during the third quarter. These delays pushed sales back into the fourth quarter, leading to the revenue shortfall.
Customer Delays and Inventory Concerns
The company also disclosed that its gross margin would be approximately 220 basis points lower compared to the second quarter. This decline stems from higher inventory reserves and costs related to expediting new products.
Essentially, Super Micro is writing off inventory that will either never sell or will sell at a substantial discount. This has raised red flags among investors about potential oversupply issues.
One bright spot in the report was Super Micro’s claim that design wins for newer products remain robust. However, the company provided no specific numbers to support this assertion.
The timing of this announcement is particularly troubling as Super Micro had only recently regained compliance with the Nasdaq exchange. The company had delayed filing its annual 10-K report last year due to internal control issues.
Signs of AI Market Cooling?
Super Micro’s disappointing results arrive amid growing concerns about the AI infrastructure market. Several signs suggest the red-hot demand for AI servers could be cooling.
In China, reports indicate an oversupply of AI computing capacity following a building boom. Meanwhile, DeepSeek’s efficient AI models, which require fewer computing resources, have raised questions about future capacity needs.
There are also reports that tech giants like Microsoft and Amazon are pulling back on some data center leases. While both companies continue to expand their AI computing capacity, economic uncertainty may be causing them to become more cautious about spending.
Some analysts speculate that Super Micro’s guidance miss might be driven by customers shifting from Nvidia’s Hopper to Blackwell during the quarter. Barclays analyst George Wang slashed his price target for Super Micro stock to $34 from $59 while maintaining a Hold rating.
Wang suggested that Super Micro’s previous outlook was too optimistic. He also pointed to substantial uncertainty around AI server builds, with limited visibility into calendar year 2025 as customers undergo product transitions.
The company’s high dependence on customers like xAI and Coreweave makes it vulnerable to quarter-to-quarter volatility, with potential share loss to Asian original design manufacturers.
Not all analysts are pessimistic, though. Northland Securities analyst Nehal Chokshi maintained a Buy rating with a $70 price target. Chokshi believes Super Micro’s statement about robust new generation product design wins indicates that the company’s Q4 FY25 and FY26 estimates are “correctly calibrated.”
Wall Street remains divided on Super Micro’s prospects. The stock currently has a Hold consensus rating based on four Buys, five Holds, and two Sell recommendations. The average price target of $43 implies 35% upside potential from current levels.
Investors will be closely watching Super Micro’s full earnings report on May 6. Management’s commentary should provide greater clarity on the company’s performance and the demand outlook for AI servers.
Super Micro now expects its Q3 FY25 adjusted EPS in the range of $0.29 to $0.31 on revenue between $4.5 billion and $4.6 billion.
