Key Takeaways:
Super Micro Computer Inc. reported preliminary Q4 gross margins of 15% to 17%, nearly double its prior 8.2% guidance, sending shares up 24%.
"The margin surprise is structurally important after governance scrutiny and dilution tied to the company's June $7 billion financing," Rosenblatt analysts said, raising their price target to $45 from $40 with a Buy rating.
Revenue came in near the low end of the $11 billion to $12.5 billion guidance range, below the $11.67 billion analyst consensus. New orders exceeded $60 billion during the quarter, pushing the company's backlog to a record. Barclays raised its target to $38 from $34, maintaining Equal Weight. The company attributed the margin improvement to a favorable customer and product mix.
The results provide a downstream read-through for AI infrastructure demand, as SMCI's server clusters are built on Nvidia GPU architectures and have historically contributed roughly 9% of Nvidia's revenue. The stock traded at $31.66 after the initial surge but slipped about 2% on July 27 as the market weighed the top-line miss against the margin beat.
The $60 billion order intake signals that hyperscaler AI infrastructure spending remains strong, even as macro concerns have emerged about the sustainability of cloud providers' multibillion-dollar capital expenditure cycles. SMCI's record backlog of liquid-cooled AI computing racks suggests customer demand is accelerating rather than slowing.
However, the stock's valuation reflects the legal overhang from March 2026, when federal prosecutors indicted co-founder Wally Liaw and two others for allegedly smuggling $2.5 billion in Nvidia-powered AI servers to China in violation of US export regulations. SMCI trades at a forward P/E of about 9 times, less than half the hardware sector median of roughly 24 times, and a PEG ratio of around 0.4 — levels that typically indicate deep undervaluation.
Mizuho lowered its price target to $34 from $44, citing potential financing needs to manage the order volume. The company's net debt to trailing 12-month EBITDA ratio stands at 3.8 times, compared with Dell's 1.2 times.
The margin recovery, if confirmed in audited results due Aug. 11, would mark a structural shift for SMCI after quarters of thin profitability. Investors will watch the full Q4 filing for segment-level margin details and order-book conversion rates.
This article is for informational purposes only and does not constitute investment advice.
