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, in the post-market trading session of US stocks, Super Micro Computer, which produces high-performance GPU servers for fields such as AI, announced its financial data for the second quarter of fiscal year 2024 ended June 30, 2024, as well as its performance guidance for the third quarter of fiscal year 2025 and the entire fiscal year 2025.
1) Main financial data
Revenue: The net sales in the second quarter were $5.31 billion, a YoY increase of 143.6%, and the analyst expected it to be $5.3 billion. The company's guidance range is $5.1 billion to $5.5 billion, and the YoY growth in the previous quarter is 200.8%.
EPS: The adjusted and diluted EPS under non-GAAP standards for the second quarter are $6.25, a YoY increase of 78.1%. The analyst expected it to be $8.14, and the company's guidance range is $7.62 to $8.42, YoY growth in the previous quarter is 308%.
Gross Margin: The gross margin for the second quarter was 11.2%, a YoY decrease of 5.8 percentage points. The gross margin in the previous quarter was 15.5%, a YoY decrease of 2.1 percentage points.
2) Performance guidance
Revenue: The estimated net sales for fiscal year 2025 are $26 billion to $30 billion, and the analyst expects it to be $23.6 billion. The estimated net sales for the third quarter are $6 billion to $7 billion, and the analyst expects it to be $5.47 billion.
EPS: The estimated adjusted EPS for the third quarter is $6.69 to $8.27, and the analyst expects EPS to be $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.
The revenue of Q2 exceeded expectations and increased by more than 140%, while the 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 $14.94 billion, roughly in line with the midpoint of the company's guidance range of $14.7 billion to $15.1 billion, an increase of about 110% compared to the previous fiscal year, reflecting strong demand for AI chip infrastructure servers. Among them, the growth in the second quarter slowed down compared to the first quarter of this year, but still maintained a three-digit growth rate.
The slowdown in EPS growth in the second quarter was even greater, with earnings 23% lower than expected by analysts. The FactSet data showed that this is the largest gap between Super Micro Computer's earnings and market expectations in at least five years. At the same time, gross margin accelerated its decline in the second quarter, hitting a new low since the company began publishing quarterly financial reports in May 2007.
Charles Liang, CEO of Super Micro Computer, said that Super Micro is continuing to experience record demand for new AI infrastructure, driving the company's revenue growth of 110% for 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 block solutions.
Revenue guidance for the third quarter will double, far exceeding expectations, and EPS guidance will increase by more than 110%, but still lower than expected.
In terms of its performance guidance, Super Micro Computer's revenue and profit are more different from Wall Street's expectations. Calculated based on the midpoint of its guidance range, Super Micro expects its revenue for the third quarter to be $6.5 billion, an increase of about double, which is far higher than analyst expectations of an increase of about 250%.
The guidance range shows that in fiscal year 2025, Super Micro expects its revenue to increase between 74% and 101% annually, a slower growth rate than fiscal year 2024, but the slowdown is not as severe as analyst expected, and it is still stronger than analyst expectations for a growth rate of about 58%.
Super Micro's profit guidance is still lackluster. The midpoint of Super Micro's expected EPS for the third quarter is $7.48, a YoY increase of 113%, while analysts expected an increase of 122%.
Starting from October 1, one share will be split into ten shares.
At the same time as the financial report was released, Super Micro Computer announced that the board of directors had approved a 1-for-10 split of the company's common stock, which is expected to begin trading on the adjusted stock after October 1, 2024.
Commentators say that investors have previously hoped that Super Micro Computer would follow in the footsteps of NVIDIA and split its stock, so Super Micro's action was expected.
Some market analysts and investors expect to gain insight into Nvidia's performance and the overall investment situation in the AI field by viewing Super Micro Computer's financial report as a window. Prior to the release of Super Micro's financial report, Nvidia had just announced a delay in the release of its strongest AI chip, which cast a shadow over the performance prospects of AI concept stocks.
Nvidia's delay in shipping Blackwell chips may affect Super Micro's performance.
Last week, media reported that due to design issues with the Blackwell architecture chips in recent weeks, engineers at Taiwan Semiconductor discovered defects when preparing for mass chip production. Nvidia informed major customers Microsoft and another large cloud computing service provider last week that the most advanced AI chip in its new Blackwell series chips would be delayed for three months or longer, and mass shipments of Blackwell chips may be delayed until the first quarter of next year.
Subsequently, Lynx Equity Strategies released a research report stating that due to the addition of Nvidia's new products, Super Micro's management recently expects strong growth in both the September and December financial quarters. Reports of the delay in the release of Nvidia's aforementioned products may lead Super Micro to adjust its growth expectations. The report predicts that Super Micro may reduce its guidance for the 2025 fiscal year, not only due to the delayed shipment of the Blackwell chip, but also due to the slowing growth in the shipment of the H200 chip.
In addition, Microsoft's performance conference call during the release of its second quarter financial report last week made the situation more complex. Microsoft hinted at AI production capacity shortages at the time, but Lynx Equity Strategies believes that this is more of an issue of data center enclosure space and is not related to the supply of AI servers.
Editor/Somer