Why Super Micro Computer Stock Plummeted Last Week

Key Points

• Super Micro Computer's sales and earnings performance in fiscal Q4 fell short of Wall Street's targets.

• The company's gross margin declined year over year and on a sequential quarterly basis.

• Supermicro is guiding for sales of at least $33 billion this fiscal year, but the outlook on gross margins has investors feeling cautious.

• 10 stocks we like better than Super Micro Computer ›

Super Micro Computer (NASDAQ: SMCI) stock got hit with a wave of selloffs last week in response to the company's latest quarterly report. The server specialist's share price fell 21.3% over the stretch, which saw the S&P 500 climb 2.4% and the Nasdaq Composite rise 3.9%.

Artificial intelligence (AI) stocks generally saw very strong performance over the past week, but Supermicro's valuation took a big hit after the server provider published results for the fourth quarter of its last fiscal year, which ended June 30. While the company issued encouraging forward guidance, sales and earnings in fiscal Q4 fell short of the market's targets.

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Supermicro stock sank on Q2 sales, earnings, and gross margin performance

Supermicro reported its fiscal Q4 results after the market closed on Aug. 5, and the print spurred big selloffs for the stock. The tech specialist reported non-GAAP (adjusted) earnings per share of $0.41 on sales of $5.8 billion in fiscal Q4. For reference, the average analyst estimate had called for the company to post an adjusted profit of $0.44 per share on sales of roughly $5.9 billion. Revenue was still up roughly 9% year over year, but the company's gross margin dipped to 9.5%, down from 9.6% in the previous quarter and 10.2% in the fourth quarter of the previous fiscal year.

What's next for Supermicro?

For the first quarter of the company's current fiscal year, management is guiding for sales to be between $6 billion and $7 billion. Meanwhile, sales for the full-year period are projected to come in at least at $33 billion.

Supermicro looks poised to see some strong sales momentum this fiscal year in conjunction with continued ramp-ups for AI infrastructure spending, but there are still some big questions about whether the company can stabilize and improve its gross margins. While the company's liquid-cooling technologies for servers could help support margins, the impact of current iterations of the tech has been relatively minimal so far.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.