Supermicro (SMCI) has had a good past few days. SMCI stock surged after the company reported that it now expects gross margins to land between 15% and 17% instead of the previous guidance of 8.2% and 8.4%. Just last month, CEO Charles Liang also pointed to a partnership with SpaceX (SPCX) for an AI data center within a year. These developments seem to suggest improving fundamentals. But once bitten, twice shy. Investors need to look at things from a different lens, as this isn’t just another AI infrastructure story.
To begin, Supermicro’s revenue guidance hasn’t changed, and revenue is expected to land at the lower end of guidance. At the same time, the backlog has increased, suggesting the company is taking orders much faster than it can serve them. If the margins are doubling, it certainly isn’t happening because of increasing revenue. So, where is the gross margin improvement coming from? It probably isn’t coming from a durable shift in pricing power — and could therefore reverse just as quickly.
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While Supermicro's $60 billion backlog is attractive, investors may be wrongly associating it with the SpaceX hype. Neither company has confirmed the size of the partnership, so the SpaceX connection is pretty much inferred, driving the bull thesis without much substance behind it. The reason this needs to be looked at carefully is because of Supermicro's history. Two years ago, Hindenburg Research published a short report on the company alleging accounting manipulation, resulting in a delayed annual filing, a U.S. Department of Justice (DOJ) investigation, the resignation of an auditor, and ensuing class-action lawsuits.
Most recently, the firm was accused of illegally exporting chips to China, with three people associated with the company indicted. Considering this history, investors would be much better off waiting for the upcoming earnings report rather than jumping in on SpaceX and margin-improvement hype.
About Supermicro Stock
Supermicro is a technology company that designs and manufactures servers and storage systems for AI data centers, cloud computing, and enterprises. Its product portfolio includes AI servers, GPU platforms, storage systems, and networking solutions. Founded in 1993, the company is headquartered in San Jose, California.
Over the last 12 months, SMCI stock has lost more than 40% of its value, significantly underperforming the S&P 500’s ($SPX) 17% gain during the same period. The decline has been driven by a combination of lower-than-expected revenue and gross margins, ongoing legal concerns, and a $7 billion equity offering in June 2026. Despite these issues, a recent GF Securities upgrade has given some analysts reason to believe that Supermicro is being undervalued. SMCI stock has gained 27% in the last five days alone, prompting many investors to jump back in.
www.barchart.com The valuation isn’t straightforward to assess. The forward price-to-earnings (P/E) ratio of 11.3 times sits well below the sector median as well as the company’s own five-year average, while the forward price-to-sales (P/S) ratio of 0.6 times is also considerably cheaper. Both metrics suggest SMCI stock is currently trading at a meaningful discount from its historical norms.
The company looks further undervalued when considering the $60 billion order backlog. However, the capital structure explains why investors should remain cautious. Supermicro has a debt of $9.1 billion against just $1.3 billion in cash. Meanhwile, the EPS growth trajectory looks healthy for the next few years before turning negative in 2029.
Overall, Supermicro's valuation looks exciting based on the forward P/E and P/S multiples, but with the debt burden, legal concerns, and declining earnings growth, the discount is fully justified.
Supermicro Reports Earnings
Supermicro reported its third-quarter fiscal 2026 earnings on May 5. The company achieved exceptional growth for both key metrics. Revenue and EPS more than doubled year-over-year (YOY), with revenue increasing from $4.6 billion to $10.2 billion and EPS increasing from $0.31 to $0.84. Supermicro also improved its gross margin from 9.7% to 10.1%. CEO Charles Liang stated that the firm is rapidly evolving into a complete data-center solutions provider, pointing to improving margins and the growing DCBBS business as signs of underlying strength. Liang also mentioned that newly built U.S. production facilities in Silicon Valley have boosted Supermicro’s ability to keep up with accelerating AI demand.
For the next quarter, management expects revenue of $11 billion to $12.5 billion, and non-GAAP EPS of $0.65 to $0.79. For the full year, Supermicro guided revenue of $38.9 billion to $40.4 billion. Liang noted that component costs have increased considerably, contributing to the expected margin pressure in Q4. However, the updated guidance now confirms that gross margins are expected to land between 15% and 17%.
What Are Analysts Saying About SMCI Stock?
Based on 20 Wall Street analysts with coverage, SMCI stock has a consensus “Hold” rating. The mean price target of $35.56 indicates potential upside of 19% from current levels.
Analysts remain divided on Supermicro stock. Bulls value it highly due to the company's $60 billion order backlog and strengthened SpaceX relationship. The bears, however, remain cautious due to the firm's ongoing legal issues and questionable track record.
www.barchart.com On the date of publication, Jabran Kundi did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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