Super Micro Computer (NASDAQ:SMCI) has now put the auditing drama of the past year behind it, and with the threat of NASDAQ delisting no longer looming, investors could once again focus solely on the company’s performance. However, its latest earnings failed to impress.
For the third quarter of fiscal 2025 (the March quarter), Supermicro delivered $4.6 billion in revenue, a figure that matched its preliminary estimate and marked a 19.5% year-over-year increase. However, the number fell $450 million short of Wall Street’s consensus and significantly missed the company’s earlier midpoint guidance of $5.5 billion.
Management cited system transitions and tariffs as major challenges impacting short-term demand. Customers are apparently cutting back on orders for Hopper systems, prompting the company to write down the value of legacy products, while many are waiting for the release of Blackwell systems. As a result, some expected revenue has been delayed from FQ3 to FQ4 and beyond. Tariffs and broader economic uncertainty were also mentioned as reasons for customer delays. Importantly, the company withdrew its $40 billion revenue target for FY2026 due to reduced visibility.
The expected pushouts didn’t help the near-term outlook though. For FY2025, the company revised its revenue guidance downward from the range of $23.5 billion to $25 billion to between $21.8 billion and $22.6 billion, falling short of the $23.5 billion consensus estimate.
Meanwhile, adj. gross margin declined from 11.9% in Q2 to 9.7%, with the drop including an approximately 200 basis point impact from inventory write-downs related to older-generation Hopper systems. That said, at the bottom line, adj. EPS of $0.31 outpaced consensus by $0.01.
While the lackluster showing generated a negative response from investors, Needham’s Quinn Bolton likes how the story is developing and thinks it’s time to dive back in.
“Despite near term headwinds, we are becoming incrementally more positive on the company as it has filed its 2024 10-K and F1Q25 and F2Q25 10-Qs and added to its management bench,” the 5-star analyst said. “We find the valuation to be extremely attractive for a company targeting AI/HPC end markets and at the forefront of liquid cooled data centers. With filing risks behind the company, along with an attractive valuation, we are stepping off the sideline and resuming coverage with a Buy.”
Along with that Buy rating, Bolton set a $39 price target for SMCI shares, implying the stock will appreciate by 20% in the months ahead. (To watch Bolton’s track record, click here)
5 other analysts are in the bullish camp, while 5 are sitting on the fence, and two are leaning bearish. That mix lands SMCI a Moderate Buy consensus rating. With an average price target of $38.67, Wall Street is eyeing a potential 19% return over the next year. (See SMCI stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.