Shares in Super Micro (SMCI) stock fell over 7% in early trading on Wednesday as the AI server maker reported revenue and earnings that missed forecasts. The company reported revenue of $5.02 billion for the first quarter, down from $5.94 billion during the year-ago period and less than the $6.09 billion expected by Wall Street experts. Super Micro’s adjusted earnings per share of $0.35 were also lower than the $0.41 projected by analysts.
Before earnings, Super Micro lifted its full-year sales forecast to $36 billion from $33 billion, with executives noting recent “large-scale deals” for its Nvidia servers. That excited some investors, while making others wary of Super Micro’s focus on joining larger deals rather than maintaining solid profit margins.
“Robust demand for the AI server/ compute landscape continues to surprise,” JPMorgan analyst Samik Chaterjee wrote in a note to investors on Wednesday. “However, the profit opportunities have been dramatically different than the revenue opportunities in AI compute, with AI server leaders continuously sacrificing margins to participate in large deals, leaving limited profit upsides for investors to cheer about from the opportunities.”
Furthermore, rising competition in the artificial intelligence server market has also raised questions about Super Micro’s long-term stock profitability. The stock was volatile throughout the past year. Shares are up 45% year to date, but the 9% single-day drop. At press time, SCMI is trading with extreme volatility, trading in the middle of its 52-week moving average. Analysts generally see SMCI’s potential with most price targets above the current $47.40 market price, though Goldman Sachs remains bearish with a Sell rating.