TradingKey - On July 22, Eastern Time, Super Micro Computer ( SMCI) saw its pre-market stock price rise over 17% at one point. The company's preliminary Q4 results released pre-market showed that gross margin rebounded significantly from the previous quarter, with new orders exceeding $60 billion. This financial report indicates that demand for AI servers is still on the rise.
[Source: SMCI official website]
Super Micro Computer expects its fourth-fiscal-quarter gross margin to rebound to 15%-17% from 9.9% in the previous quarter (non-GAAP gross margin was 10.1%), far exceeding the previous pessimistic guidance of 8.2%-8.4%.
The company had previously attributed the decline in gross margin to rising supply chain costs and a product mix shifting toward lower-end servers. This rebound in gross margin suggests that supply constraints for core components like Nvidia GPUs have eased, and the company's bargaining power in AI server pricing negotiations is recovering.
New orders were equally impressive. Super Micro Computer's Q4 new orders exceeded $60 billion, with the total backlog climbing further. Super Micro Computer's current annualized revenue is approximately $25 billion; the $60 billion in new orders is equivalent to more than two years of revenue, making revenue visibility for the coming quarters highly clear.
Following the earnings release, Loop Capital raised its price target for Super Micro Computer to $100, Mizuho Securities raised its target to $52, and Citi ( C) raised its target to $38. All three institutions gave positive evaluations regarding the gross margin improvement and order growth, and market concerns about the sustainability of AI server demand are gradually fading.
Institution | Price Target | Rating | Core Reasons |
Loop Capital | $100 | Buy | Long-term bullishness on the supply chain, with record-breaking new orders of $60 billion |
Mizuho Securities | $52 | Outperform | The 15%-17% gross margin dispels the "price war" prejudice, and pricing power for liquid-cooled server racks has recovered |
Citi | $38 | Neutral | Revenue was temporarily below expectations due to delivery cycle bottlenecks, but the $60 billion backlog locks in two years of revenue visibility; slightly raised the price target |
Super Micro Computer's stock price has fallen by approximately 50% over the past year, and even after the pre-market rebound, it remains more than 40% below its year-to-date high. The previous decline was primarily driven by market concerns over whether demand for AI servers is sustainable and whether gross margins would continue to slide. This financial report addresses at least some of those concerns: orders have not decreased, and gross margins are rebounding.
Super Micro Computer's customer base is concentrated in a few large cloud service providers like CoreWeave ( CRWV ), and xAI, meaning order cuts from any of them would have a direct impact. Additionally, competition in the AI server market is intensifying. Traditional server manufacturers like Dell ( DELL) and HP ( HPQ) Enterprise and other traditional server manufacturers are ramping up AI server capacity, so whether long-term gross margins can continue to improve remains to be seen.
As of press time, Super Micro Computer's pre-market price stood at around $29.88, up 17.18%. This financial report validates that AI server demand has not yet cooled, and the market's pricing of the gross margin rebound will be gradually revealed after the official market open.
[Source: Futu]
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