A month has gone by since the last earnings report for Super Micro Computer (SMCI). Shares have added about 36.8% in that time frame, outperforming the S&P 500.
But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is Super Micro due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the latest earnings report in order to get a better handle on the important drivers.
SMCI Q3 Earnings Surpass Expectations, Revenues Rise Y/Y
Super Micro Computer, Inc. posted third-quarter fiscal 2026 non-GAAP earnings of 84 cents per share, which beat the Zacks Consensus Estimate by 33.3%. The bottom line climbed 171% year over year.
SMCI generated net sales of $10.24 billion, which increased 121.7% from the year-ago quarter but missed the Zacks Consensus Estimate by 17.1%. The quarter reflected strong AI infrastructure demand, with AI GPU-related platforms contributing more than 80% of revenues.
SMCI Sees Strong Demand but Faces Timing Headwinds
SMCI’s management attributed the revenue shortfall largely to customer site readiness delays, noting that several deployments were not yet prepared with the needed power and networking. The company also flagged an industry-wide shortage of key components, including CPU, GPU and memory, which continued to constrain shipments.
Despite the timing impact, orders and backlog were described as strong, supported by AI infrastructure demand across NeoCloud, sovereign AI and agentic AI opportunities. SMCI also emphasized efforts to expand its traditional enterprise and storage footprint, alongside broader adoption of its Data Center Building Block Solutions (DCBBS) approach.
Super Micro Computer’s Mix Shift Lifts Profitability Profile
Super Micro Computer’s non-GAAP gross margin expanded to 10.1% from 6.4% in the prior quarter, aided by customer and product mix improvements, along with lower tariffs, fewer expedite charges and reduced inventory reserve charges.
Operating expenses increased as the company invested in headcount and growth initiatives. On a non-GAAP basis, operating expenses were $278 million. Non-GAAP operating margin improved to 7.3% from 4.5% in the previous quarter, reflecting the stronger gross margin performance.
SMCI’s Working Capital Swings Pressure Cash Flow
Cash and cash equivalents were $1.29 billion at the end of March 31 compared with $4.1 billion at the end of Dec. 31, 2025. Total bank debt and convertible notes were $8.8 billion, resulting in a net debt position of $7.5 billion.
SMCI reported cash flow used in operations of $6.6 billion, driven primarily by a $10 billion reduction in accounts payable and higher inventory levels. Inventory ended the quarter at $11.1 billion, up from $10.6 billion in the prior quarter, as the company managed supply dynamics and prepared for ongoing platform demand.
The cash conversion cycle lengthened to 106 days, reflecting higher days of inventory and higher days sales outstanding, underscoring the working-capital intensity tied to large-scale AI deployments.
SMCI Expands DCBBS and Capacity for AI Factories
Super Micro Computer continued to position DCBBS as a key differentiator, describing the model as a one-stop shop that combines rack-scale systems, liquid cooling infrastructure, networking and software tools. Management highlighted growing traction in data center management software and services, including subscription-based offerings bundled with hardware to deepen customer relationships and support longer-term profitability.
The company also outlined manufacturing expansion plans to support next-generation AI infrastructure builds. Updates included additional production ramp across international sites and a larger Bay Area footprint, along with plans to support higher-density rack deployments and broader liquid-cooling adoption as AI factories scale.
SMCI Guides for Higher Revenues on Deferred Shipments
For the fourth quarter of fiscal 2026, SMCI expects net sales between $11 billion and $12.5 billion. The company guided non-GAAP diluted earnings per share of 65 cents to 79 cents, reflecting expected customer mix and ongoing execution on large programs.
For full-year fiscal 2026, SMCI raised its revenue outlook to a range of $38.9 billion to $40.4 billion. Management’s outlook assumes a non-GAAP tax rate of 20.4%, with fully diluted share counts of 695 million shares for GAAP and 712 million shares for non-GAAP results.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
The consensus estimate has shifted 15.12% due to these changes.
VGM Scores
At this time, Super Micro has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a score of C on the value side, putting it in the middle 20% for value investors.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Super Micro has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Super Micro is part of the Zacks Computer- Storage Devices industry. Over the past month, Western Digital (WDC), a stock from the same industry, has gained 23%. The company reported its results for the quarter ended March 2026 more than a month ago.
Western Digital reported revenues of $3.34 billion in the last reported quarter, representing a year-over-year change of +45.5%. EPS of $2.72 for the same period compares with $1.36 a year ago.
For the current quarter, Western Digital is expected to post earnings of $3.28 per share, indicating a change of +97.6% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #1 (Strong Buy) for Western Digital. Also, the stock has a VGM Score of F.
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The AI revolution has already minted millionaires. But the stocks everyone knows about aren't likely to keep delivering the biggest profits. AI’s second wave is moving from infrastructure to implementation and these companies are at the forefront of this transition, positioned to become what Amazon and Google were to the internet era.
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This article originally published on Zacks Investment Research (zacks.com).