The "AI Monster Stock" experienced a huge shock, with Super Micro Computer's revenue doubling sharply last quarter, but profits falling far short of expectations, leading to mixed feelings. The stock surged nearly 20% after hours before turning lower | Financial Report Insights

This year, the performance of Super Micro Computer, a "darling" of artificial intelligence (AI) concept stocks, is mixed. The revenue in the last quarter exceeded expectations with a sharp increase, but the profit margin was weak. Profit growth fell far short of expectations, while revenue guidance continues to exceed expectations, but profit guidance is equally disappointing. Following the news of NVIDIA's most advanced AI chip shipment delay, the financial report of Super Micro has made the future of AI concept stocks even more uncertain.

After the U.S. stock market closed on Tuesday, August 6th, Super Micro Computer, which produces high-performance GPU servers for fields such as artificial intelligence (AI), announced its financial data for the fourth quarter of the 2024 fiscal year ending on June 30, 2024 (referred to as the second quarter), as well as the performance guidance for the first quarter of the 2025 fiscal year ending on September 30 and the full fiscal year of 2025.

1) Key Financial Data

Revenue: Net sales in the second quarter were $5.31 billion, a year-on-year increase of 143.6%. Analysts expected $5.3 billion, while the company's guidance range was $5.1 billion to $5.5 billion. The year-on-year growth in the previous quarter was 200.8%.

EPS: Non-GAAP adjusted and diluted earnings per share (EPS) in the second quarter were $6.25, a year-on-year increase of 78.1%. Analysts expected $8.14, while the company's guidance range was $7.62 to $8.42. The year-on-year growth in the previous quarter was 308%.

Gross Margin: The gross margin in the second quarter was 11.2%, a year-on-year decrease of 5.8 percentage points. In the previous quarter, the gross margin was 15.5%, a year-on-year decrease of 2.1 percentage points.

2) Performance Guidance

Revenue: The net sales for the 2025 fiscal year are expected to be $26 billion to $30 billion, with analysts expecting $23.6 billion. For the third quarter, net sales are expected to be $6 billion to $7 billion, while analysts expect $5.47 billion.

EPS: Adjusted EPS for the third quarter is expected to be $6.69 to $8.27, with analysts expecting $7.58.

After the financial report was released, Super Micro Computer's (SMCI) stock price surged more than 1.3% on Tuesday and jumped over 17% after hours, but later gave back all gains and turned into a decline, dropping over 10% after hours.

Second Quarter Revenue Exceeds Expectations by Over 140%, EPS 23% Lower Than Expected, Gross Margin Hits Record Low

For the entire 2024 fiscal year ending in June, Super Micro Computer's net sales were $14.94 billion, roughly in line with the midpoint of the company's guidance range of $14.7 billion to $15.1 billion, representing an increase of approximately 110% compared to the previous fiscal year. This reflects strong market demand for AI chip infrastructure servers. The growth in the second quarter, compared to the first quarter of this year, has slowed down but still maintained a triple-digit growth rateThe growth of EPS profit in the second quarter slowed down more significantly, falling 23% below analysts' expectations. FactSet data shows that this is the largest deviation of Super Micro Computer's profit from market expectations in at least five years. At the same time, the gross profit margin in the second quarter accelerated its decline, hitting a new low since the company began disclosing quarterly financial reports in May 2007.

Charles Liang, CEO of Super Micro Computer, stated that the company continues to experience record demand for new AI infrastructure, driving a projected 110% revenue growth for the fiscal year 2024. Super Micro is capable of becoming the largest IT infrastructure company, thanks to its leadership position in technology, including rack-level DLC liquid cooling and the commercial value of new data center building block solutions.

Third-quarter revenue guidance doubles, exceeding expectations, while EPS guidance surpasses 110% but remains below expectations

In terms of performance guidance, the gap between Super Micro Computer's revenue and profit compared to Wall Street expectations is even larger. Calculated based on the midpoint of the guidance range, Super Micro expects third-quarter revenue of $6.5 billion, a year-on-year increase of approximately double, far exceeding analysts' expected growth of about 250%.

The guidance range indicates that for the fiscal year 2025, Super Micro expects annual revenue growth of 74% to 101%, a slower pace compared to the fiscal year 2024, but the slowdown is not as severe as analysts expected, still stronger than the approximately 58% growth expected by analysts.

Profit guidance from Super Micro remains lackluster. The median EPS expected by Super Micro for the third quarter is $7.48, a 113% year-on-year increase, while analysts expected a 122% increase.

Stock split of 1 for 10 effective from October 1

Alongside the financial report, Super Micro Computer disclosed that its board of directors has approved a stock split of 1 for 10 for the company's common stock, expected to commence trading from October 1, 2024.

Commentators noted that investors had previously hoped for Super Micro Computer to follow in the footsteps of NVIDIA in splitting its stock, so this action by Super Micro was anticipated.

Some market analysts and investors are keen to use Super Micro Computer's financial report as a window to gain deeper insights into NVIDIA's performance and the overall investment situation in the AI field. Prior to the release of Super Micro's financial report, NVIDIA had just announced a delay in the release of its most powerful AI chip, casting a shadow over the performance prospects of AI concept stocks.

NVIDIA's delay in shipping Blackwell chips may impact Super Micro's performance

Last week, it was reported by the media that due to design issues with the Blackwell architecture chips in recent weeks, engineers at TSMC discovered defects when preparing for mass production of the chips. NVIDIA informed major customers Microsoft and another large cloud service provider last week that the release of its latest Blackwell series AI chips, including the most advanced AI chip, will be delayed by three months or longer, with the bulk shipment of Blackwell chips possibly postponed to the first quarter of next year.

Subsequently, Lynx Equity Strategies released a research report stating that due to the addition of new NVIDIA products, Super Micro Computer's management recently expected strong growth in the fiscal quarters ending in September and December. Reports of the delayed release of the aforementioned NVIDIA products may lead Super Micro to adjust its growth expectationsThis research report predicts that Super Micro may lower its guidance for the 2025 fiscal year, not only due to the delayed shipment of the Blackwell chip, but also because of the slowing growth in shipments of the H200 chip.

Furthermore, Microsoft's earnings call for the second quarter financial report last week has made the situation more complicated. Microsoft hinted at AI production capacity shortages at the time, but Lynx Equity Strategies believes that it is more of an issue with data center shell space, rather than a significant impact on the supply situation of AI servers