Key Takeaways
- Super Micro Computer stock is down 28% over the past year, even though first-quarter revenue nearly quadrupled to $19.9 billion and management raised its fiscal 2027 sales outlook to $72 billion to $82 billion.
- Jim Cramer has said the company has “major structural problems internally,” and thin margins, one dominant customer and an open export case back him up in part.
- Gross margin fell to 12.7% from 17.5% the quarter before, one customer made up 44% of revenue, and operations used $434 million of cash.
- The stock trades at a fraction of its usual forward P/E, so much of that risk looks priced in, which makes it a buy for investors who can handle big swings.
Super Micro Computer (SMCI) just reported a quarter with nearly four times the revenue it had a year ago. Its stock is still down 28% over the past year.
Jim Cramer, host of CNBC’s Mad Money, thinks he knows why. On his Sept. 28 show, he said: “Supermicro is an inexpensive company, it looks like it, but I’d rather tell you I think there’s major structural problems internally in that.”
There’s something to that. But I think the stock already prices in most of what’s wrong.
A record year, and a stock that fell anyway
In March, the Justice Department charged three people tied to Super Micro, a co-founder among them, in an export-control case. In June, the company raised $5.6 billion of common stock and mandatory convertible preferred, and the stock sank on the news.
The business kept growing through all of it. Super Micro booked more than $60 billion of new orders in its June quarter. An Aug. 20 board-led investigation found no sign that today’s senior management knew about the scheme. On Nov. 3, it reported $19.9 billion of first-quarter revenue, against $5.0 billion a year earlier. It also raised its fiscal 2027 outlook to $72 billion to $82 billion, from $65 billion to $72 billion.
The stock is down 32% in the past month anyway, as worries about AI spending and data center politics after the midterms hit AI hardware.
TIKR tracks 18 analysts on Super Micro Computer. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on Super Micro Computer, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Super Micro Computer’s Analyst Ratings
Thin margins and one very big customer
Margins are the first worry. Gross margin fell to 12.7% in the September quarter from 17.5% in the June quarter. Management guided to 11.8% to 12.2% for the full fiscal year. One customer made up 44% of revenue, up from 28.1% of fiscal 2026 sales.
Super Micro is also burning cash to grow. Operations used $434 million in the quarter. Meanwhile, the company ended September with $8.6 billion of bank debt and convertible notes against $6.9 billion of cash. And its second-quarter outlook assumes 753 million fully diluted shares, against 628.4 million diluted shares in fiscal 2025.
Cramer has a point on governance
In October, Ting-Wei Sun, a contractor tied to Super Micro, pleaded guilty to four counts, including conspiring to violate U.S. export controls. Prosecutors say Sun and his two co-defendants conspired to divert about $2.5 billion worth of U.S. AI servers to China. Super Micro itself hasn’t been charged, and it cut ties with the defendants. Still, it’s answering a grand jury subpoena tied to the case. And co-founder Wally Liaw’s trial is set for March 2027.
Priced for a lot of bad news
Wall Street still expects plenty of earnings. Analysts see normalized EPS of $6.34 in fiscal 2027, up from $3.63 in fiscal 2026:
The first quarter’s $1.81 of non-GAAP EPS and the second-quarter guide of $1.66 to $1.90 already add up to more than half of that.
Yet the stock trades at under 5x forward earnings, about a third of its 5-year average of 15x:
Raymond James raised its target to $65 from $48 on Nov. 4, though it named customer concentration as the main risk. BofA (Underperform, $39) and Mizuho (Neutral, cut to $36 from $43) are more cautious, and the consensus target is $44.
So is Cramer right? Partly: the margins swing with one customer’s orders, the company burns cash to grow, and the export case isn’t over. But at under 5x earnings that analysts expect to keep rising, the stock prices in a lot of bad news. For investors who can stomach the swings, it looks like a buy, just an uncomfortable one.
Of course, a charge naming the company would change that fast. And when Super Micro reports its December quarter early next year, watch whether margins hold near 12% and cash from operations turns positive.
So what is Super Micro Computer stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
