Super Micro's stock surges as Wall Street cheers its margin recovery

By Christine Ji

Shares of the AI server maker jump 18% as investors shrugged off a revenue miss and celebrated a rebound in gross margins

Super Micro missed on revenue in the latest quarter but surpassed expectations for profit.

Super Micro Computer's fiscal third-quarter earnings were a mixed bag, but the company delivered the above-consensus earnings and margins that investors were looking for.

Shares of Super Micro (SMCI) soared 18% in Tuesday's extended session following the announcement.

Revenue for the quarter came out to $10.2 billion, falling short of the $12.4 billion expected by analysts polled by FactSet. CEO Charles Liang shared on the earnings call that this was due to customer delays, and that the company expects to capture the revenue in coming quarters.

However, earnings of 84 cents a share exceeded the 62 cents forecast by Wall Street analysts. Investors also cheered the Super Micro's margin expansion: Gross margin for the quarter was 9.9%, up from 6.3% the previous quarter, indicating that the company is lowering costs while scaling up volume. This was driven by improving product mix, inventory management and reduced tariff impacts, CFO David Weigand shared on the earnings call.

The company guided for between $11 billion and $12.5 billion in revenue for the current quarter, while analysts are expecting $11.1 billion. Gross margins are expected to be in the range of 8.2% to 8.4%.

Super Micro is in the midst of a transformation from a traditional server-hardware provider to a comprehensive data-center solutions developer. The company's Data Center Building Block Solutions (DCBBS) business has showed "consistent and accelerating contribution to our top line and bottom line quarter-over-quarter," Liang said.

The CEO expects DCBBS to contribute more than 25% of the company's total profit in the coming years. Super Micro did not share how much net income from the third quarter came from DCBBS. In the December quarter, the business accounted for roughly 4% of net income.

Read: Super Micro's stock sinks 33% after co-founder's indictment. Here are Wall Street's biggest questions.

Investors have been skeptical of Super Micro's growth prospects following the March indictment of company co-founder Wally Liaw for allegedly violating export controls and smuggling Nvidia (NVDA) chips to China. While Super Micro itself is not named as a defendant in the case, some on Wall Street are concerned that the controversy could impact future sales and lead competitors to gain market share.

On the earnings call, Liang emphasized that Super Micro had terminated its relationship with Liaw, was strengthening its global trade compliance program and conducting an internal investigation. The company does not believe it needs to restate any of its financials.

In the wake of the indictment, Super Micro is also facing a class-action lawsuit claiming that the company failed to disclose that it was illegally selling servers to Chinese companies.

A representative for Super Micro pointed MarketWatch to Liang's March letter to shareholders on the matter.

-Christine Ji

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05-05-26 2031ET