Super Micro Computer's guidance for this season is disappointing, unable to predict when the annual report will be released, increasing delisting risk, and plunging nearly 20% in after-hours trading | Financial Report Insights

The "meme stock" Super Micro Computer, driven by artificial intelligence (AI), has failed to meet Wall Street expectations for both the last quarter and the current quarter, and it remains uncertain when it will release its annual report for the last fiscal year, increasing the risk of delisting. The company's stock price, which had previously rebounded, plummeted in after-hours trading.

On November 5th, Tuesday, Eastern Time, Super Micro Computer announced preliminary estimated financial data for the first fiscal quarter of 2025 (referred to as the third quarter) ending September 30, 2024, along with performance guidance for the second fiscal quarter of 2025 (referred to as the fourth quarter) ending December 31, 2024.

1) Key Financial Data

Revenue: Third-quarter net sales are estimated to be between $5.9 billion and $6 billion, representing a year-on-year growth of 178.3% to 183%. Analysts had expected $6.47 billion, while the company's guidance range is $6 billion to $7 billion, with the previous quarter showing a year-on-year growth of 143.6%.

EPS: The adjusted and diluted earnings per share (EPS) for the third quarter under non-GAAP standards is estimated to be between $0.75 and $0.76, with analysts expecting $0.74. The company's guidance range is $0.67 to $0.83, with the previous quarter showing a year-on-year growth of 78.1%.

Gross Margin: The gross margin for the third quarter is 13.3%, a decrease of 3.4 percentage points year-on-year, compared to a gross margin of 11.2% in the previous quarter, which was a decrease of 5.8 percentage points year-on-year.

2) Performance Guidance

Revenue: Fourth-quarter net sales are expected to be between $5.5 billion and $6.1 billion, representing a year-on-year growth of 50.3% to 66.7%, with analysts expecting $6.79 billion.

EPS: The adjusted EPS for the fourth quarter is expected to be between $0.56 and $0.65, while analysts expect an EPS of $0.83. The fourth-quarter guidance does not include approximately $54 million in expected stock compensation and other expenses.

After the earnings report was released, Super Micro Computer's stock, which had risen 6.4% on Tuesday, quickly expanded its after-hours decline to over 10%, with the after-hours drop approaching 20%.

Super Micro Computer produces high-performance GPU servers required for AI data centers, and the strong demand for AI servers drove a significant surge in its stock price in the first quarter of this year. By the close on March 13, when it reached an all-time high, Super Micro Computer's stock had increased by approximately 318% year-to-date, with an astonishing cumulative increase of nearly 1300% over the year, leading to its inclusion in the S&P 500 index in March. However, since being targeted by the well-known short-selling firm Hindenburg Research at the end of August, the situation has turned sharply, and Super Micro's stock price has gradually erased its gains for the year, closing down nearly 2.6% as of this Tuesday.

If the after-hours decline continues on Tuesday, the cumulative decline for the year will exceed 10%.

Fourth-quarter guidance significantly below expectations; independent committee investigation found no fraud or misconduct by management

Preliminary financial data shows that Super Micro Computer's sales maintained a triple-digit growth momentum in the third quarter, but even the highest estimated sales growth rate of 183% fell short of analysts' expectations of 205%. In contrast, the guidance for the fourth quarter is even weaker.

Super Micro Computer expects the sales growth rate in the fourth quarter to slow to a minimum of 50.3%, an increase that is less than 30% of the lower end of the estimated sales range for the third quarter, while analysts expect the growth rate to slow to 85.5%.

At the same time as announcing its financial report, Super Micro Computer disclosed that it is continuing to work on the annual 10-K report for the fiscal year ending June 30, 2024, "but is currently unable to predict when the 10-K form will be submitted." The original deadline for this report was August 29 of this year, and it now appears that, after a delay of more than two months, Super Micro is still unable to submit the report. This undoubtedly increases the risk of delisting for Super Micro.

On August 27, Hindenburg released a short report, alleging that Super Micro Computer engaged in "accounting manipulation," has a poor track record in financial matters, and is involved in "undisclosed related party transactions, sanctions, and export control failures." The next day, Super Micro announced a delay in releasing its annual 10-K report, and its stock price plummeted by 19% that day. On September 26, media reports revealed that following Hindenburg's short report, the U.S. Department of Justice launched an investigation into Super Micro for suspected "accounting violations," causing Super Micro's stock price to drop about 12.2% that day.

On October 30, last Wednesday, Super Micro was again caught in an audit storm, disclosing in documents submitted to regulators that accounting firm Ernst & Young resigned from the company's audit work, raising questions about the company's commitment to integrity and ethics. The stock price plummeted by 32.8% that day, and the following Thursday it fell by about 12%, with the stock price nearly halving over two days, erasing all cumulative gains since the beginning of the year. As of the close on Tuesday of this week, Super Micro's stock price had dropped nearly 77% from the closing record high set in March.

Ernst & Young's resignation means that Super Micro is increasingly likely to be delisted. According to Nasdaq regulations, Super Micro must resubmit its annual report or restore compliance by November 16 to regain compliance with the Nasdaq exchange.

On Tuesday of this week, while announcing updated financial data, Super Micro stated that its board of directors has commissioned an independent special committee to investigate the concerns raised by Ernst & Young. After three months of investigation, the committee found "no evidence of fraud or misconduct" by management.

Super Micro stated that the investigative committee recommended that the company take a series of remedial measures to strengthen internal governance and oversight functions, and the committee is expected to submit a complete report of its work this week or next week. Super Micro also stated that it intends to take all necessary measures to remain listed on Nasdaq and avoid delisting