Supermicro raised its sales forecast, and the stock soared. But there's reason to worry

US-based Super Micro Computer (Supermicro), one of the beneficiaries of the artificial intelligence boom, raised its full-year sales forecast thanks to sustained demand for its AI-optimized servers. The realization of pending orders allowed the company to report record revenue last quarter, but aggressive competition and supplier issues hit margins hard.

Supermicro said in a quarterly filing that it now expects revenue for fiscal 2026 (ending in June) to be at least $40 billion instead of the previous $36 billion. Sales in the second fiscal quarter (October-December) rose 2.2 times to a record $12.7 billion from a consensus forecast of $10.2 billion, which included about $1.5 billion in shipments postponed from the previous quarter by a major customer. For the current quarter, Supermicro expects revenue of about $12.3 billion, also above forecast, Reuters reports.

Supermicro shares jumped 7% on the Nasdaq after-market on February 3. In the morning of February 4, the server maker's shares are up 7.5% on the U.S. over-the-counter market.

Despite record revenue growth, Supermicro's gross margin collapsed from 9.3% in the first fiscal quarter to 6.3% in the second -- 0.2% below the level that management had forecast, MarketWatch notes. The company is experiencing "near-term margin pressure" due to customer mix and supply chain challenges, but a focus on enterprise customers will support "higher gross and net margins going forward," Supermicro CEO Charles Liang said at the confab.

Wedbush analyst Dan Ives suggested that the recent price hike in memory chips used in servers could pose a bigger challenge to Supermicro than its competitors because of the company's ad hoc purchasing strategy instead of entering into strict long-term contracts with suppliers. In addition, while the AI boom has generated record demand for server clusters based on Nvidia chips, that segment generates margins lower than Supermicro's traditional enterprise server business, MarketWatch states.

"Demand for AI servers remains strong, and Supermicro could benefit from volume growth from existing customers as well as attracting new customers," Bloomberg quoted Bank of America as saying in a research note to clients. - However, the market remains very competitive, and future large bidding deals may come at low margins."

FactSet's consensus forecast for Supermicro shares is "Above Market" (Overweight, Buy recommendation). Nine experts recommend buying the stock, eight recommend holding (Hold), and three recommend selling (Sell or Underweight). The average target price of $42.7 per security calculated by the service implies a 44% upside potential over the year.

Supermicro shares have fallen more than 40% in the past three months due to increased competition and growing skepticism about management's financial projections. Supermicro is also grappling with the fallout from accounting problems that began when it missed the August 2024 annual report deadline. At that time, auditor EY refused to continue working with Supermicro, expressing doubts about management's integrity. Supermicro eventually did publish its accounts, but warned again in 2025 that it had identified weaknesses in its financial controls.

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