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Super Micro misses quarterly revenue estimates as stock rises and shares fall 14%

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By Akash Sriram and Stephen Nellis

(Reuters) -Artificial intelligence server maker Super Micro Computer on Tuesday reported third-quarter revenue below expectations, hurt by a shortage of some crucial components and questions about the profitability of a new line of servers.

Shares of Super Micro, which have more than tripled in value so far this year, fell 14% in trading after the bell.

The San Jose, California-based company, which builds powerful AI servers with chips from Nvidia, Advanced Micro Devices and others, expects fourth-quarter revenue to exceed expectations as it expects stable demand.

But during an earnings call, analysts peppered company leaders with questions about spending to support the transition to a new generation of Nvidia chips that require liquid cooling and whether those new servers, set to hit the market later this year, will come at high enough prices to ask. to increase Super Micro's profit margins.

The AI ​​server maker was added to the S&P 500 index last month.

Super Micro relies on its internal liquid cooling technology for its servers to gain market share in a competitive industry.

CEO Charles Liang told analysts that the company had paid a premium to secure supplies to quickly build those liquid-cooled servers in the coming quarters, but said end customers would only pay a “very minimal premium” for them compared to older, air-cooled servers. servers.

Inventory stood at $4.12 billion at the end of the March quarter, compared with $1.45 billion in the fiscal year ended June 30, 2023.

“It hurts our cash flow, but you know what, it doesn't matter because we need that inventory for fourth quarter shipments,” Chief Financial Officer David Weigand said.

Super Micro aimed to stay within the 14% to 17% gross margin range over the long term, he added, despite some analysts saying the company's quarterly forecasts implied margins below that range.

The company expects fourth-quarter revenue between $5.1 billion and $5.5 billion, compared with average analyst estimates of $4.89 billion, according to LSEG data.

“If we were not limited by shortages of key components, we could have supplied more,” Liang said.

The company increased its annual revenue forecast to $14.7 billion from the previously mentioned $14.7 billion to $15.1 billion.

Super Micro reported adjusted earnings of $6.65 per share in the first quarter, compared with analyst estimates of $5.78 per share.

Revenue for the quarter ended March 31 was $3.85 billion, compared with estimates of $3.95 billion, according to LSEG data.

Gross margin for the three-month period was 15.5%, compared to 17.6% a year earlier, in line with analyst expectations.

(Reporting by Akash Sriram in Bengaluru and Stephen Nellis in San Francisco; Editing by Tasim Zahid and Jamie Freed)

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