Super Micro Stock Tanks on Weak Q3 Forecast

• Super Micro Computer Inc.’s (SMCI) stock dropped nearly 18% to $29.54 in after-hours trading on Tuesday after lowering Q3 EPS guidance to $0.29-$0.31 from $0.46-$0.62, missing the $0.53 consensus.
• The company also cut Q3 revenue guidance to $4.5-$4.6 billion from $5.0-$6.0 billion, falling short of the $5.38 billion analyst consensus, due to delayed customer platform decisions.
• Gross margins fell 220 basis points from Q2, driven by higher inventory reserves for older products and expedited costs for new product launches, highlighting competitive pressures in the AI server market.

Super Micro Computer Inc. (SMCI) is grappling with investor disappointment as its stock plummeted nearly 18% to $29.54 in after-hours trading on Tuesday, driven by significantly lowered guidance for the third quarter of fiscal 2025. The company now expects earnings per share of $0.29 to $0.31, down from its prior range of $0.46 to $0.62 and well below the consensus estimate of $0.53. Revenue projections were also slashed to $4.5 billion to $4.6 billion, a sharp reduction from the earlier $5.0 billion to $6.0 billion forecast and missing the $5.38 billion analyst consensus. This downward revision signals challenges in maintaining the growth trajectory that has fueled Super Micro’s prominence in the AI server market.

The guidance cut reflects operational hurdles, including delayed customer platform decisions that pushed some sales into the fourth quarter. Despite robust design wins for next-generation products, Super Micro faced margin pressures, with GAAP and non-GAAP gross margins dropping 220 basis points from the second quarter. This decline was attributed to higher inventory reserves for older-generation products and expedited costs to accelerate time-to-market for new offerings. These factors highlight the competitive and fast-evolving nature of the AI infrastructure sector, where Super Micro competes with giants like Dell (DELL) and Hewlett Packard Enterprise (HPE).

Super Micro’s struggles come amid broader market scrutiny, as its reliance on Nvidia’s AI chips and a high valuation have made it sensitive to execution risks. The company’s focus on rapid product transitions to meet AI demand has strained profitability, particularly as older inventory accumulates. While Super Micro remains a key player in AI server deployments, the lowered guidance and margin erosion raise concerns about its ability to sustain growth in a crowded market, prompting investors to reassess its near-term prospects.

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