Super Micro Computer, a leading artificial intelligence server maker, reported third-quarter revenue below estimates on Tuesday, citing a shortage of crucial components and concerns over the profitability of a new line of servers. The news sent shares of the San Jose-based company tumbling 14% in after-hours trading.
Despite the disappointing third-quarter results, Super Micro remains optimistic about its future prospects. The company, which builds powerful AI servers using chips from Nvidia, Advanced Micro Devices, and others, expects fourth-quarter revenue to exceed estimates as it anticipates steady demand for its products.
However, analysts raised questions during an earnings call about the company’s spending to support the transition to a new generation of Nvidia chips that require liquid cooling. There are concerns about whether the new servers, set to hit the market later this year, will be priced high enough to boost Super Micro’s profit margins.
CEO Charles Liang assured analysts that the company’s in-house liquid cooling technology would help it gain market share in a competitive industry. Despite paying a premium to secure supplies for the new servers, Liang stated that customers would only pay a minimal premium for the liquid-cooled servers compared to older, air-cooled models.
Super Micro’s inventory at the end of the March quarter stood at $4.12 billion, a significant increase from $1.45 billion at the end of the previous fiscal year. Chief Financial Officer David Weigand acknowledged that the higher inventory hurt cash flow but emphasized its importance for fourth-quarter shipments.
The company aims to maintain its gross margin range of 14% to 17% over the long term, despite concerns from some analysts about the quarterly forecast implying margins below that range. Super Micro raised its annual sales forecast to a range of $14.7 billion to $15.1 billion, up from the previously stated $14.3 billion to $14.7 billion.
In the first quarter, Super Micro reported an adjusted profit of $6.65 per share, surpassing analysts’ estimates of $5.78 per share. Revenue for the quarter ended March 31 was $3.85 billion, slightly below estimates of $3.95 billion. The gross margin for the period was 15.5%, down from 17.6% a year earlier.
Despite the challenges faced in the third quarter, Super Micro remains confident in its ability to meet the growing demand for AI servers and maintain its position as a key player in the industry.
