Super Micro Computer (NASDAQ:SMCI) reported its latest quarterly earnings after the close on Tuesday, with its shares falling more than 14% in premarket trading in reaction to the report.
While the company showed robust revenue guidance, it struggled with gross margins, leading to mixed outlooks on its performance and future prospects.
Here's how Wall Street analysts reacted:
Rosenblatt highlighted that SMCI delivered "inline sales for the June quarter but missed earnings due to GM pressure from a more considerable liquid cooling uptick, hyperscale mix, and significant expedite and component costs."
Despite these challenges, analysts remain optimistic, noting that SMCI is strategically leveraging liquid cooling and hyperscale engagements, which should benefit the company in the long run. They maintain a Buy rating with a $1,300 price target, driven by SMCI's AI dynamics and strong building block architecture.
KeyBanc Capital Markets reiterated its Sector Weight rating on the stock, acknowledging the company's dominant industry position in AI infrastructure but noting margin pressures. Analysts observed, "Supply constraints drove 200+ bps of pressure in F4Q24, which should be improved in coming quarters."
However, they expressed concerns about the company's ability to achieve its long-term gross margin goals quickly.
Goldman Sachs also pointed out the gross margin challenges, stating, "Weaker than expected gross margins of 11.3% were impacted by SMCI's focus on strategic new design wins with competitive pricing to win market share."
Despite strong revenue guidance, analysts expressed concerns about SMCI's ability to return to its target gross margin range, maintaining a cautious outlook on the company's near-term performance.
JPMorgan echoed similar sentiments, highlighting that the "materially softer gross margin" overshadowed the positive revenue outlook. Analysts described SMCI as a "show-me story on margin improvement," indicating that investor confidence will hinge on the company's ability to improve margins. While they raised their EPS estimates for FY25, FY26, and FY27, they maintained their price target of $950, contingent on better margin execution.
Barclays focused on the gross margin headwinds, noting, "With June-Q GM miss and declining 430bps Q/Q, as well as guiding Sep-Q GM still at a low level of 12%+, it raises the question of how fast GM ticks up."
Analysts acknowledged the strong demand indicated by the revenue guide but emphasized that margin improvement remains a critical concern for investors.