Sell SMCI Stock After Earnings Miss?

May 1st, 2025 by Trefis Team
SMCI: Super Micro Computer logo
SMCI
Super Micro Computer

Super Micro Computer stock (NASDAQ:SMCI) declined by roughly 11% on Tuesday after the company issued preliminary results for its March quarter that fell well short of expectations. The server maker now anticipates revenue between $4.5 billion and $4.6 billion, a sharp decline from its prior guidance of $5 billion to $6 billion. Earnings per share are also projected to come in well below estimates at just $0.29 to $0.31 per share. Super Micro has attributed the miss to “delayed customer platform decisions,” which pushed some orders into the next quarter.  But the magnitude of the shortfall does raise concerns about broader demand trends, or could also point to a potential loss of market share for Super Micro Computer to rivals such as Dell Technologies.

Outlook Could Get Tougher

The U.S. economy contracted over the first quarter of this year, and the outlook appears increasingly challenging. President Donald Trump’s proposed tariffs on key trading partners are beginning to take effect, and this raises the risk of a resurgence in inflation. The AI sector could be more vulnerable to cost cuts during a downturn, since AI investments are still unprofitable for the majority of companies. Export restrictions could also add pressure on U.S.-based server makers like Super Micro. There is also a possibility that companies, after years of heavy spending on AI infrastructure, could start prioritizing the efficiency of their code over brute force expansion of computing power. (Related: Should DeepSeek R2 Worry Nvidia Investors? ) Back in February, Super Micro projected fiscal 2026 revenue could reach $40 billion, marking a 70% increase over FY’25. However, these forecasts may prove difficult to achieve considering the mounting macroeconomic headwinds and the company’s recent earnings setback.

Valuation Is Cheap

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Now, there are some positives for Super Micro stock as well. Super Micro’s server products are closely tied to Nvidia’s GPU ecosystem, and with Nvidia ramping up production of its new Blackwell chips, SMCI’s server platforms could see demand pickup. The company has also been expanding into the direct-liquid-cooled (DLC) server market, which is seen as a key technology for handling compute-intensive AI workloads.  The company’s valuation, too, remains compelling. SMCI trades at just about 13x estimated 2025 earnings, well below the S&P 500’s forward multiple of over 20x. This appears even more reasonable when we consider the fact that revenue expanded at an annual rate of 74.5% over the past three years.

Proceed With Caution

That said, investors should proceed with caution. Super Micro has faced significant controversy over the past year, including allegations of accounting irregularities, delays in SEC filings, and scrutiny from short-sellers. Now, some of these issues have eased in recent months, following the company’s recent filing of its financial statements. That said, the latest earnings miss, coupled with a spotty track record of corporate governance, suggests that investors may need to proceed with caution with SMCI stock.

Investing in a single stock like SMCI can be risky. On the other hand, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index, less of a roller-coaster ride as evident in HQ Portfolio performance metrics.

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