What's Next for Super Micro Computer After Stock's 20% Post-Earnings Plunge?

Key Takeaways

• Super Micro Computer shares plunged on Wednesday after the company posted a quarterly earnings miss as low margins take a toll on its business despite increased demand.

• Analysts said investors are watching for Super Micro margin improvement to demonstrate its ability to navigate the competitive tech hardware market in the artificial intelligence era.

• Super Micro also announced a 10-for-1 stock split that analysts say could moderate the stock's volatility.

Super Micro Computer (SMCI) shares fell 20% on Wednesday after the company late Tuesday reported quarterly earnings that fell short of analysts' expectations and announced a 10-for-1 stock split.

Analysts say low margins are weighing on the company's financial performance despite increased demand for Super Micro's tech amid the artificial intelligence (AI)  boom.

Company is Now a 'Show-Me Story' on Margins

Super Micro "will be a show-me story on margin improvement following challenging margins" seen in the fiscal fourth quarter, J.P. Morgan analysts wrote.

Bank of America analysts downgraded their Super Micro stock rating to "neutral" from "buy," saying they expect "the next several quarters" to be "margin-challenged, despite higher revenues," as the company "navigates a competitive pricing environment, delayed shipment of Blackwell GPU systems that require liquid cooled racks (higher margin), and on-going issues with component availability."

Super Micro said the "overall impact should be minimal" from the reported delays in Nvidia's (NVDA) new Blackwell AI chips.

Rosenblatt Securities analysts were less concerned with margins, holding a bullish view on Super Micro after the latest earnings report, saying the company is the "Switzerland of AI" given its position to provide liquid cooling amid the AI boom. They highlighted the company's ties to Nvidia's AI chips, including the highly anticipated Blackwell platform.

Stock Split Could Ease Volatility

The 10-for-1 stock split that Super Micro unveiled Tuesday is set to take effect at the start of trading on Oct. 1.

J.P. Morgan analysts said the split is "likely to help in reducing volatility" as it is expected to diversify the shareholder base.

Super Micro shares closed 20.1% lower at $492.70. The stock is still up 75% since the start of the year, but it's down nearly 60% from it's March record high.

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