Super Micro Computer Faces Margin Pressure Despite Strong Earnings
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Feb 09 2026
0mins
Should l Buy SMCI?
Source: Fool
Super Micro Computer Inc (SMCI) saw its stock price drop by 5.01% as it crossed below the 5-day SMA, reflecting investor concerns despite a strong earnings report.
The company reported a significant revenue increase of 123% year-over-year for Q4 2025, reaching $12.7 billion, driven by demand in the AI sector. However, gross profit only increased by 19%, resulting in a low gross margin of 8.02%. This raises concerns about the sustainability of growth and profitability, especially amid a potential slowdown in tech spending. Analysts have also lowered their price targets, indicating cautious sentiment in the market.
The implications of these results suggest that while Super Micro is experiencing strong demand, the pressure on margins and the need for sustainable profitability could pose risks for investors moving forward.
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Analyst Views on SMCI
Wall Street analysts forecast SMCI stock price to rise
12 Analyst Rating
5 Buy
5 Hold
2 Sell
Hold
Current: 30.110
Low
34.00
Averages
46.82
High
63.00
Current: 30.110
Low
34.00
Averages
46.82
High
63.00
About SMCI
Super Micro Computer, Inc. provides application-optimized Total IT solutions. It delivers rack-scale solutions optimized for various workloads, including artificial intelligence and high-performance computing, where acceleration is critical. It produces a portfolio of server and storage solutions for enterprise data centers, cloud service providers and edge computing (5G Telco, Retail and embedded). Total IT Solutions include complete servers, storage systems, modular blade servers, workstations, full-rack scale solutions, networking devices, server sub-systems, server management and security software. It provides global support and services to help its customers install, upgrade and maintain their computing infrastructure, including liquid-cooling operations. It offers platforms in rackmount, blade, multi-node and embedded form factors, which support single, dual and multiprocessor architectures. Its key product lines include SuperBlade and MicroBlade, SuperStorage, Twin and others.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Stock Risk Assessment: Supermicro's stock trades at 25 times earnings, which may seem cheap; however, given its low margins and uncertainties surrounding future growth, the investment carries significant risks, especially amid a potential slowdown in tech spending.
See More
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- Buy Rating and Price Target: Goldman Sachs initiates coverage on Credo with a buy rating and sets a 12-month price target of $165, indicating a 29% upside from Wednesday's close, reflecting the analyst's confidence in the company's future performance.
- Significant Technological Advantage: Credo's Active Electrical Cables (AECs) technology offers low-cost, high-bandwidth, and highly reliable connectivity solutions, and Schneider believes this technology will remain mainstream for at least the next five years, further solidifying the company's market position.
- Diversification Strategy: Schneider commends Credo's diversification efforts into optical solutions, which he believes will support long-term growth, while also appreciating the company's carefully managed guidance and investor messaging.
See More
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- Competitive Landscape Shift: With Meta's investment, Nvidia is likely to regain investor attention, prompting a reassessment of its core position in the AI sector, especially in light of competitive threats from companies like Google.
- Product Portfolio Advantage: Meta plans to utilize not only Nvidia's GPUs but also deploy its CPUs independently, indicating the significant value of Nvidia's product portfolio in meeting Meta's growing computational demands.
- Long-Term Value Consideration: CEO Mark Zuckerberg emphasizes the importance of evaluating the
See More
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- Earnings Beat: The company reported adjusted earnings of $0.69 per share and revenue of $12.68 billion for Q2, surpassing consensus estimates, yet the stock's momentum score plummeted from 16.26 to 6.35, indicating that market focus is shifting from operational success to technical weaknesses.
- Muted Market Reaction: Despite raising full-year revenue guidance to $40 billion, the muted investor response, influenced by ongoing volatility and price target reductions from analysts, has placed the company in the bottom 10% for relative strength.
- Technical Erosion: While Super Micro maintains strong fundamental scores with a quality rank of 98.52 and a growth rank of 82.57, its price-driven metrics have turned sharply negative, trading 34.11% below its 200-day simple moving average, reflecting a bearish technical outlook.
- Investor Outlook Uncertain: With a neutral Relative Strength Index of 45.40 and a momentum score nearing zero, significant uncertainty looms over the stock's short-term trajectory, although a value rank of 80.49 suggests it may be undervalued relative to its assets and earnings, raising caution for short-term traders.
See More
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- Expanded Collaboration: Meta has announced a new deal with Nvidia to deploy millions of AI chips across U.S. data centers, marking a significant upgrade in their technology partnership and is expected to further propel Meta's advancements in AI.
- Investment Commitment: Meta plans to invest $600 billion in the U.S. by 2028 for data centers and infrastructure, including the construction of its two largest AI data centers, Prometheus and Hyperion, demonstrating a long-term commitment to AI technology.
- New Technology Deployment: The partnership will see Meta independently deploy Nvidia's Grace CPUs for the first time, aimed at optimizing AI inference workloads, thereby enhancing its data processing capabilities and strengthening its competitive position in the market.
- Supply Chain Assurance: By collaborating closely with Nvidia, Meta secures a stable supply of Blackwell and Rubin GPUs, alleviating current chip shortages while also developing next-generation AI models to enhance its technological prowess.
See More
Super Micro Computer to Attend Investor Conferences
- Investor Conference Schedule: Super Micro Computer will participate in the Morgan Stanley Technology, Media & Telecom Conference on March 2, 2026, the Keybanc Emerging Technology Summit on March 3, 2026, and the Loop Capital Markets 7th Annual Investor Conference on March 10, 2026, all featuring one-on-one meetings to showcase its leadership in AI, cloud computing, and 5G.
- Market Leadership: As a global leader in application-optimized IT solutions, Super Micro Computer is committed to delivering first-to-market innovations for enterprise, cloud, AI, and 5G telecom infrastructure, further solidifying its competitive edge in the rapidly evolving tech market.
- Product Design and Manufacturing: Super Micro's products are designed and manufactured in the US, Taiwan, and the Netherlands, leveraging global operations for scale and efficiency, aimed at reducing total cost of ownership and environmental impact, reflecting its commitment to green computing.
- Flexible Solution Portfolio: The Server Building Block Solutions from Super Micro allow customers to select flexible systems based on specific workloads and applications, supporting a wide range of form factors, processors, memory, and cooling solutions to meet diverse customer needs.
See More
Concerns Behind Supermicro's Growth
- Significant Revenue Growth: Super Micro Computer (SMCI) reported a 123% year-over-year increase in net sales for Q4 2025, reaching $12.7 billion, driven by strong demand in the AI sector; however, investors should remain cautious about sustainability.
- Low Profit Margins: Despite impressive sales growth, gross profit only increased by 19% to $798.6 million, resulting in a gross margin of just 8.02%, indicating substantial pressure on the company to cover operating expenses, which could hinder future profitability.
- Limited Operating Income Growth: The overall operating income rose by 29% to $474.3 million, which, while positive, appears relatively weak compared to sales growth, highlighting challenges in enhancing profitability.
- Stock Risk Assessment: Supermicro's stock trades at 25 times earnings, which may seem cheap; however, given its low margins and uncertainties surrounding future growth, the investment carries significant risks, especially amid a potential slowdown in tech spending.
See More
