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Super Micro Surges Over 20% as Margins Soar, Sales Fall ShortSubmitted by Leo Miller. Posted: 5/7/2026. 
Key Points
- Super Micro Computer has gone on a wild ride in 2026, seeing single-day gains above 20% and falls of over 30%.
- Markets reacted positively to the company's latest earnings, favoring its EPS beat over its sales miss.
- Still, Super Micro faces multiple underlying issues, and Wall Street analysts were not as sanguine as the market.
- Special Report: Elon’s “Hidden” Company
Super Micro Computer (NASDAQ: SMCI) just roared back with its latest post-earnings pop. The artificial intelligence (AI) server company rose more than 24% after reporting. This marks the stock’s second consecutive post-earnings gain, as shares rose 14% following its February release.
Despite these large moves, Super Micro shares are only up 16% overall in 2026. That comes after the U.S. government laid out charges against Super Micro co-founder Yih-Shyan “Wally” Liaw, causing SMCI to plummet 33% in a single day in March. Overall, Super Micro showed some positive signs in its latest quarter, but its outlook remains highly uncertain. Here’s what investors need to know. Super Micro Falters on Sales, Storms Past EPS EstimatesIn its fiscal Q3 2026, Super Micro posted revenue of $10.24 billion, a massive 123% increase year over year (YOY). (Note that Super Micro’s fiscal reporting period is approximately two quarters ahead of the standard calendar year reporting period.) Although that growth rate is still extremely strong, it was far below what both the market and the company were expecting. Super Micro itself had forecast net revenue of “at least $12.3 billion.” The company missed that guidance by more than $2 billion. It also fell well short of Wall Street expectations, with analysts forecasting sales of $12.39 billion. On the other hand, the company beat estimates by a wide margin on adjusted earnings per share (EPS). Adjusted EPS rose 171% YOY to 84 cents, easily topping estimates of 63 cents and the company’s guidance of “at least 60 cents.” This divergence comes as Super Micro’s gross margin improved sharply in just one quarter. In Q2 of fiscal 2026 (FY2026), the firm’s revenue was $12.68 billion, but adjusted gross margin fell to 6.4%. That translated into adjusted gross profit of $812 million. In Q3 FY2026, by contrast, adjusted gross margin surged by 370 basis points to 10.1%. Even though revenue was much lower at $10.24 billion, adjusted gross profit rose significantly to $1.03 billion. That was one of the key factors that allowed Super Micro to miss revenue expectations by a wide margin while still exceeding adjusted EPS estimates by a wide margin. Gross Margin Improves, But at the Cost of RevenueSuper Micro’s very low gross margin was a major concern coming out of its previous earnings report. So it makes some sense that the market reacted positively to the improved margin in its latest results. Still, looking under the surface, it's hard to say Super Micro showed meaningful improvement. Its gross margin increase came as sales missed by more than $2 billion, with certain customers delaying deployments. If the company had booked those sales, gross margin could have been much lower than 10.1%. Super Micro’s guidance offers some evidence of this. The firm expects to recover some of the revenue it missed in Q3 next quarter. Based on midpoint figures, it sees sales rising to $11.8 billion, but gross margin falling to 8.3%. That suggests the company’s sales and gross margins are moving in opposite directions. While that is not necessarily negative in every situation, Super Micro’s already thin gross margin makes it a concern. Companies in a strong position are often able to grow revenue and margins at the same time. That does not appear to be the case for Super Micro. However, the company continues to express confidence in its Data Center Building Blocks Solutions (DCBBS). DCBBS carries higher gross margins, typically above 20%. The company’s goal is to scale DCBBS to over 20% of net income over the next two years, helping improve its overall margin profile. Still, Super Micro did not disclose DCBBS’s revenue contribution, making progress toward that goal difficult to assess. Super Micro: Reputational Risk Up, Price Targets DownThe Department of Justice has charged Liaw for allegedly conspiring to sell servers made in the U.S. to China in violation of export controls. Authorities arrested Liaw, and he resigned from Super Micro. While Super Micro says it is not a target of the investigation, its co-founder being implicated could create significant reputational damage. Notably, multiple analysts asked the company whether it would need to restate past financials because of the matter. Super Micro said, “we do not believe we will need to restate," but stopped short of giving an unequivocal no. This isn’t the first time accounting or legal issues have surrounded Super Micro. In 2024, the Big Four accounting firm EY resigned as Super Micro’s auditor. EY said it was “unwilling to be associated with the financial statements” prepared by Super Micro’s management. Super Micro’s sales and gross margin trade-off, as well as the indictment, highlight the significant uncertainty surrounding this stock. The reaction from Wall Street analysts following the report mirrors that uncertainty. Despite shares surging, JPMorgan Chase & Co. and Wedbush both significantly lowered their SMCI price targets. However, Needham & Company reiterated its Buy rating and issued a solid $40 price target. The MarketBeat consensus price target on Super Micro sits near $36, implying around 5% upside in the shares. The average of targets updated after the company’s report is slightly lower, near $35.30. Overall, the company’s profitability concerns have not gone away, and Super Micro now has a new reputational issue hanging over its head. |
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