In the second quarter, Super Micro Computer's revenue exceeded expectations, with a year-on-year growth of over 140%, but EPS profits were 23% lower than expected, and gross margins accelerated to a record low. The revenue guidance for the third quarter is twice as high as expected, and the EPS guidance is expected to increase by more than 110%, but still lower than expected. Super Micro Computer will undergo a 1-for-10 stock split on October 1st. After the financial report was released, Super Micro Computer initially rose by more than 17% in after-hours trading, but then fell by more than 12%.
This year's concept stock darling is artificial intelligence (AI) $SMCI.US$ Mixed results for earnings this year for Super Micro Computer. Last quarter's revenue vastly exceeded expectations, but profit margins were weak and profit growth was not as high as expected, while revenue guidance continues to exceed expectations and earnings guidance falls short. After NVIDIA's announcement of the delay in shipping their most advanced AI chips, the future of AI concept stocks, including Super Micro Computer, became even more uncertain.
On Tuesday, August 6th, post-market trading in the US, Super Micro Computer, which produces high-performance GPU servers for fields such as artificial intelligence (AI), announced its financial data for the second quarter of fiscal year 2024, which ended on June 30, 2024 (hereinafter referred to as the second quarter), and also announced its performance guidance for the first quarter of fiscal year 2025 (hereinafter referred to as the third quarter) ending September 30 and the entire fiscal year 2025.
1) Main financial data
Revenue: The net sales for the second quarter are USD 5.31 billion, up 143.6% year-on-year, and analysts expected USD 5.3 billion. The company's guidance range is USD 5.1 billion to USD 5.5 billion, up 200.8% year-on-year in the previous quarter.
EPS: The adjusted and diluted earnings per share (EPS) for the second quarter on a non-GAAP basis are USD 6.25, up 78.1% year-on-year, and analysts expected USD 8.14. The company's guidance range is USD 7.62 to USD 8.42, and it increased 308% year-on-year in the previous quarter.
Gross Margin: The gross margin for the second quarter is 11.2%, down 5.8 percentage points year-on-year, and it is 15.5% for the previous quarter, down 2.1 percentage points year-on-year.
2) Performance guidance
Revenue: Net sales for fiscal year 2025 are expected to be USD 26 billion to USD 30 billion. Analysts expect USD 23.6 billion. Net sales for the third quarter are expected to be USD 6 billion to USD 7 billion, and analysts expect USD 5.47 billion.
EPS: The adjusted EPS for the third quarter is expected to be USD 6.69 to USD 8.27, and analysts expect EPS of USD 7.58.
Super Micro Computer's (SMCI) stock price initially rose by more than 1.3% after the financial report was released on Tuesday, but then jumped by more than 17% in after-hours trading and later gave up all gains, falling by more than 12% in after-hours trading.
Revenue in the second quarter exceeded expectations, with a growth of over 140%. However, EPS was 23% lower than expected, and gross margin hit a new low.
As of the end of June, Super Micro Computer's net sales for the entire fiscal year 2024 were USD 14.94 billion, roughly matching the midpoint of the company's guidance range of USD 14.7 billion to USD 15.1 billion, and an increase of about 110% over the previous fiscal year, reflecting strong demand for AI chip infrastructure servers in the market. The growth of the second quarter slowed down compared to the first quarter of this year, but still maintained a three-digit growth rate.
The growth of EPS profits in the second quarter slowed down more significantly, which was 23% lower than analysts' expectations. According to FactSet data, this is the largest gap between Super Micro Computer's profit and market expectations in at least five years. At the same time, the gross profit margin in the second quarter accelerated its decline and hit a new low since the company began publishing quarterly financial reports in May 2007.
Charles Liang, the CEO of Super Micro Computer, said that Super Micro is still experiencing a record demand for new AI infrastructure in the market, driving the company's revenue growth by 110% in fiscal year 2024. Super Micro has the ability to become the largest IT infrastructure company thanks to its leadership position in technology, including rack-level DLC liquid cooling and the commercial value of new data center building blocks and solutions.
Revenue guidance for the third quarter is expected to grow twice as much as expected, and EPS guidance is expected to grow more than 110% but is still lower than expected.
In terms of performance guidance, Super Micro Computer's revenue and profits were further behind Wall Street's expectations. Calculated by the midpoint of the guidance range, Super Micro is expected to achieve a revenue of USD 6.5 billion in the third quarter, an increase of about 200% year-on-year, which is much higher than analysts' expected growth of about 250%.
The guidance range shows that in fiscal year 2025, Super Micro is expected to achieve a yearly revenue growth of 74% to 101%, which is slower than that of fiscal year 2024, but the slowing down is not as severe as analysts' expectations, and the growth rate is still stronger than about 58% of analysts' expected growth rate.
Super Micro's profit guidance is still disappointing. The median EPS for the third quarter is expected to be USD 7.48, up 113% year-on-year, while analysts expect an increase of 122%.
From October 1, 1 share will be split into 10 shares.
At the same time as the financial report was released, Super Micro Computer disclosed that the company's board of directors had approved a stock split of one share into ten shares, which is expected to start trading from October 1, 2024, according to the adjusted split of stocks.
Commentators believe that investors had hoped that Super Micro Computer would follow in Nvidia's footsteps and split their stocks, so Super Micro's action was expected.
Some market analysts and investors expect to use Super Micro Computer's financial report as a window to gain in-depth insights into NVIDIA's performance and the overall investment situation in the AI field. Prior to the release of Super Micro's financial report, NVIDIA had just delayed the release of its strongest AI chip, casting a shadow over the performance prospects of AI concept stocks.
NVIDIA's delayed shipment of Blackwell chip may affect Super Micro's performance.
Last week, due to design problems with the Blackwell architecture chip in recent weeks, TSMC engineers preparing for mass production of the chip found defects. NVIDIA notified major customers Microsoft and another large cloud computing service provider last week that the latest, most advanced AI chip in its new Blackwell series chips would be delayed by three months or longer, with a large shipment of Blackwell chips possibly delayed until the first quarter of next year.
Lynx Equity Strategies subsequently released a research report stating that thanks to NVIDIA's new product additions, Super Micro's management recently expected strong growth in the fiscal quarters of September and December. Reports of the delayed release of the aforementioned NVIDIA product could lead to Super Micro adjusting its growth expectations. The report predicts that Super Micro may lower its guidance for the 2025 fiscal year, not only due to the delayed shipment of Blackwell chips, but also due to the slowing growth in shipments of H200 chips.
In addition, Microsoft's earnings call during its Q2 earnings report release last week complicated the situation. Microsoft hinted at AI production capacity shortages, but Lynx Equity Strategies believe that was more of an issue with data center outer-shell space rather than the supply situation for AI servers.
Editor/Somer