Supermicro (SMCI) shares sank 8% during early Wednesday market action due to a mixed bag of first quarter fiscal 2026 financial results that featured a big revenue miss, a soaring outlook and shrinking margins.
“SMCI’s F1Q26 EPS of $0.35 missed guidance for $0.40-$0.52 on a previously announced revenue miss driven by deliveries pushed from F1Q to F2Q as customers upgrade their designs,” said Goldman Sachs analysts in an investor note. “F2Q26 guidance mixed, with a doubling of revenue qoq offset by a ~300 bps sequential decline in gross margins.”
Goldman Sachs reiterated its Sell rating on the stock due to concerns of its long-term profitability in an extremely competitive artificial intelligence server market.
Meanwhile, Bank of America reiterated its Underperform rating and lowered its price target to $34 from $37.
“Super Micro’s competitive advantage remains its large manufacturing capacity and ability to ship thousands of liquid-cooled racks per month,” said BofA analysts, led by Ruplu Bhattacharya, in an investor note. “However, as we have highlighted in the past, the AI server market is very competitive and large deals typically come with lower margins as it’s a competitive bidding process.”
“Super Micro’s guide for Dec quarter gross margin (6.5%, -300bps q/q) is meaningfully lower than we expected and is impacted by engineering costs, expedite costs and overtime costs as Super Micro scales production of the new Nvidia (NVDA) GPU racks (Blackwell Ultra),” BofA added. “In our opinion, such costs can occur again when subsequent generations of GPUs are launched (Rubin) where the rack structure is undergoing a meaningful change (Kyber vs. Oberon).”
However, Needham reiterated its Buy rating on the stock but lowered its price target to $51 from $60.
“In the near-term, margins are expected to be compressed as the company brings new facilities online to support demand,” said Needham analysts, led by N. Quinn Bolton, in a note. “Internationally, new production facilities in Taiwan, the Netherlands, Malaysia, and soon the Middle East are coming online to expand the company’s production capacity, enhance cost competitiveness and meet sovereign AI requirements.”
Supermicro competitors such as Dell Technologies (DELL) and Hewlett Packard Enterprise (HPE) were down 2.2% and 0.3%, respectively, during early Wednesday market action.