Supermicro has abandoned an ambitious goal. The company's stock plummeted

Server component maker Super Micro Computer no longer hopes to grow its revenue to $40 billion in the new fiscal year. The company originally announced this target in February, and investors immediately doubted that it would be able to achieve it. Now Supermicro itself has signaled that it is backing off from its ambitious goal. Wall Street reacted to the new forecast - lowered but still optimistic - by selling off shares.

Supermicro reported that it now expects at least $33 billion in revenue in fiscal 2026, which began in July. In the server vendor's just-concluded last fiscal year, sales totaled $22 billion. The $40 billion benchmark Supermicro announced in February, but as early as May, the company's executives announced that they were withholding official projections until "the situation is clearer.

The company also set its revenue guidance for the current quarter in a range of $6 billion to $7 billion. The middle of that range was $130 million below what analysts tracked by FactSet on average expected from Supermicro, reports MarketWatch. Supermicro's sales and earnings last quarter also fell short of Wall Street's expectations, the stock publication noted.

Supermicro shares collapsed after the close of the main trading session on August 5 in New York by more than 16%. The decline sustained in pre-market trading on August 6.

Since the beginning of the year, Supermicro shares have surged 88% on a wave of optimism - investors expected the company to capitalize on a frenzy of demand for AI hardware. But the revised full-year forecast casts doubt on Supermicro's ability to convert that demand into sales, accounts Bloomberg analyst Woo Jin Ho. The company is also having margin problems -- it has to cut prices to win AI server contracts in the face of stiff competition.

"Supermicro's outlook for the first quarter of fiscal 2026 and for the fiscal year as a whole lowers the bar of expectations. However, it takes into account the extremely competitive pricing environment in mega server deals, especially from Dell," noted Ho.

Margin remains a "potential point of weakness" for Supermicro, underlined by investment firm Wedbush. Conversations between Wedbush analysts and industry representatives revealed that Nvidia components are increasing their share of the server cost structure, and this is reducing vendor profitability. 

Supermicro's gross margin fell from an already low 18% at the end of 2022 to below 10% last quarter, and Wall Street doesn't expect it to grow, writes Barron's. "While Supermicro now has the manufacturing scale, ability to continue to grow revenue and market share, we believe this will come at the expense of margins," quotes Barron's quoted Bank of America analyst Ruplu Bhattacharya.

BofA's price target for Supermicro shares, is at $35 and the rating is "below market," consistent with a recommendation to sell the company's securities. However, most on Wall Street in recent months have recommended holding them if they are already in a portfolio, data from FactSet shows. Meanwhile, the average target price of $42.6 per share calculated by the service is 25 percent below current quotes, even taking into account the Aug. 5 collapse.

This article was AI-translated and verified by a human editor