Super Micro gives margin, profit forecasts below estimates; shares tumble

:Super Micro Computer reported quarterly adjusted gross margin below estimates on Tuesday, as high costs tied to the production of servers with the latest AI chips weighed on profits, sending its shares down 14 per cent and dragging chipmakers.
Its shares, which have more than doubled this year on expectations of booming AI computing demand, swung wildly after announcements of the results and a stock split. They initially jumped 12 per cent in extended trading before reversing course.
Nvidia shares, which rose 3 per cent in trading after the bell, reversed course and fell 2 per cent. Shares of Arm Holdings and AMD fell 2.1 per cent and 1.2 per cent, respectively, while those of rival Dell Technologies were down about 5 per cent.
AI-related stocks have come under immense pressure following a relentless rally for most of this year, amid worries about the high cost of building new data centers and other infrastructure to power the new technology.
The company also forecast profit below Wall Street targets but estimated first-quarter and annual sales above estimates.
“The initial aftermarket reaction was better than I thought it would be,” Running Point Capital Chief Investment Officer Michael Ashley Schulman said.
“The focus must have been on the higher-than-expected 2025 estimates, but as you dig through the numbers, all the actual misses and especially the much lower-than-expected gross margin may make portfolio managers question whether management can effectively and efficiently scale to handle the growth.”
CEO Charles Liang said on a conference call with analysts that margins would return to a normal range before the end of fiscal 2025. The company reiterated its gross margin target of a range of 14 per cent to 17 per cent.
The company’s fourth-quarter adjusted gross margin was 11.3 per cent, compared with analysts’ average estimate of 14.1 per cent, according to LSEG data.
Competitive pricing also impacted gross margin, CFO David Weigand said on the call. The company has resorted to lowering prices for its servers to stave off competition from rivals like Dell and HP Enterprise .
Super Micro expects adjusted profit between $6.69 to $8.27 per share for the first quarter, the midpoint of which is below estimates of $7.58.
Analysts have questioned the company’s hefty spending on supporting new generation of AI chips, such as those sold by Nvidia.
The company is also grappling with higher supply chain costs and a tight supply of key components, CFO Weigand said.
Super Micro expects net sales between $6 billion to $7 billion for the first quarter, compared to analysts’ average estimate of $5.46 billion, according to LSEG data. 
Analysts also peppered executives with questions over potential delays in shipments of Nvidia’s latest Blackwell processors. CEO Liang said the overall impact from a possible delay “should not be too much.”