SMCI stock tumbles as gross margin guidance overshadows Q3 beat

Super Micro Computer (NASDAQ: SMCI) reported mixed results for the fiscal Q3 2024 and said it expects gross margins to decline quarter-over-quarter, sending its shares tumbling more than 9% in premarket trading Wednesday.

For the third quarter, the company posted quarterly earnings per share (EPS) of $6.65, beating the analyst expectations of $5.80. However, revenue came in at $3.85 billion, notably below the consensus estimate of $3.99 billion.

The company's non-GAAP gross margin for the third quarter of fiscal year 2024 stood at 15.6%, after adjusting for $3 million in stock-based compensation expenses.

Looking ahead, Super Micro Computer projects its fourth-quarter 2024 EPS to be between $7.62 and $8.42, topping the analyst consensus of $7.14. It also anticipates fourth-quarter revenue to range from $5.1 billion to $5.5 billion, also above the projected $4.89 billion.

Gross margin, on the other hand, is anticipated to be down on a quarterly basis in Q4.

"SMCI expects gross margins to decline qoq, which likely reflects elevated COGS from securing liquid cooling components for upcoming shipments," Goldman Sachs analysts commented.

"While the potential margin dilutive impact from AI server sales and/or competition is a concern, SMCI reiterated its long-term 14-17% gross margin target and we believe elevated product costs from liquid cooling should normalize over time," they added.

In addition, AI demand remained strong, with SMCI achieving a record backlog in the third quarter, analysts highlighted.

For the full fiscal year 2024, Super Micro Computer expects EPS to be between $23.29 and $24.09, above the analyst estimates of $21.99. Total revenue for the year is raised to a range of $14.3 billion to $14.7 billion, compared to the consensus estimate of $14.6 billion.

By Vahid Karaahmetovic

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