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Super Micro Computer Inc. (SMCI) reported mixed third-quarter results, with revenue of $4.6 billion reflecting a 19.0% sequential decline but a 19.5% year-over-year increase, falling short of its $5.5 billion guidance midpoint. Delays in customer commitments for next-generation AI platforms, including Nvidia's Blackwell GPUs, alongside inventory reserve charges and expedited product development costs, contributed to the shortfall and a lower-than-expected adjusted gross margin of 9.7% (vs. the 10.1% Street estimate). Fourth-quarter guidance was also revised downward, with projected revenue of $6.0 billion and adjusted EPS of $0.45, below analyst expectations. Persistent challenges, including inventory write-downs, tariff uncertainties, and material weaknesses in internal financial controls, have compounded the company’s difficulties, while legal and regulatory risks, such as lawsuits and a Department of Justice investigation, add further uncertainty. Despite these headwinds, Super Micro continues to invest in AI and liquid cooling technologies, with AI revenues now comprising nearly 70% of sales. The company’s new Direct Liquid Cooling (DLC 2.0) capabilities have been highlighted as a competitive advantage in power-constrained data centers. However, analyst sentiment remains divided, with price targets ranging from $32 to $70, reflecting concerns over intensifying competition, customer and supplier concentration, and gross margin pressures. While some see potential in the company’s AI-driven growth strategy, near-term challenges and limited visibility for revenue recovery remain key concerns. Future performance will likely hinge on Super Micro’s ability to address operational and financial risks while capitalizing on emerging market opportunities.
Source content provided by Benzinga.
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