Super Micro gives margin, profit forecasts below estimates; shares tumble
Adds CEO comments in paragraphs 8,15, CFO comments in paragraphs 10, 13; details throughout
By Arsheeya Bajwa
Aug 6 (Reuters) -Super Micro Computer SMCI.O reported quarterly adjusted gross margin below estimates on Tuesday, as high costs tied to the production of servers with the latest AI chips weighed on profits, sending its shares down 14% and dragging chipmakers.
Its shares, which have more than doubled this year on expectations of booming AI computing demand, swung wildly after announcements of the results and a stock split. They initially jumped 12% in extended trading before reversing course.
Nvidia shares, which rose 3% in trading after the bell, reversed course and fell 2%. Shares of Arm Holdings ARM.O and AMDAMD.O fell 2.1% and 1.2%, respectively, while those of rival Dell Technologies were down about 5%.
AI-related stocks have come under immense pressure following a relentless rally for most of this year, amid worries about the high cost of building new data centers and other infrastructure to power the new technology.
The company also forecast profit below Wall Street targets but estimated first-quarter and annual sales above estimates.
"The initial aftermarket reaction was better than I thought it would be," Running Point Capital Chief Investment Officer Michael Ashley Schulman said.
"The focus must have been on the higher-than-expected 2025 estimates, but as you dig through the numbers, all the actual misses and especially the much lower-than-expected gross margin may make portfolio managers question whether management can effectively and efficiently scale to handle the growth."
CEOCharles Liang said on a conference call with analyststhat margins would return to a normal range before the end of fiscal 2025. The company reiterated its gross margin target of a range of 14% to 17%.
The company's fourth-quarter adjusted gross margin was 11.3%, compared with analysts' average estimate of 14.1%, according to LSEG data.
Competitive pricing also impacted gross margin, CFO David Weigand said on the call. The company has resorted to lowering prices for its servers to stave off competition from rivals like DellDELL.N and HP EnterpriseHPE.N.
Super Micro expects adjusted profit between $6.69 to $8.27 per share for the first quarter, the midpoint of which is below estimates of $7.58.
Analysts have questioned the company's hefty spending on supporting new generation of AI chips, such as those sold by Nvidia NVDA.O.
The company is also grappling with higher supply chain costs and a tight supply of key components, CFO Weigand said.
Super Microexpects net sales between $6 billion to $7 billion for the first quarter, compared to analysts' average estimate of $5.46 billion,according to LSEG data.
Analysts also peppered executives with questions over potential delays in shipments of Nvidia's latest Blackwell processors. CEO Liang said the overall impact from a possible delay "should not be too much."
Reporting by Arsheeya Bajwa in Bengaluru, additional reporting by Akash Sriram in Bengaluru and Noel Randewich in Oakland, California; Editing by Anil D'Silva
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