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Luke Kawa

Super Micro jumps on big Q3 earnings beat, strong profit guidance

Super Micro Computer is jumping on Wednesday after posting a big earnings beat along with a the signal that this improved profitability is poised to last after the bell on Tuesday.

In Q3, the embattled AI server company reported:

  • Net sales of $10.24 billion (compared to analyst estimates of $12.45 billion and guidance for more than $12.3 billion).

  • Adjusted earnings per share of $0.84 (estimate: $0.63, guidance for more than $0.60).

“Our margin recovery and the rapid growth of our data center building block solutions business demonstrate that our business remains robust,” said founder, CEO, and President Charles Liang.

For Q4, management anticipates net sales of $11 billion to $12.5 billion (estimate: $11.2 billion) with adjusted earnings per share of $0.65 to $0.79 (estimate: $0.57).

“Importantly, management indicated that orders and backlog remain strong, with backlog reaching another record high,” wrote Needham analyst Quinn Bolton, who expects that the supply constraints that weighed on Q3 sales to be made up for in Q4.

Last quarter, the company was able to snap a long streak of disappointing sales and allayed fears of margin pressure with a report that beat on both the top and bottom lines and included better-than-expected guidance for this quarter.

But afterwards the stock was rocked by allegations that threatened to impact the company’s operations. In March, the company’s cofounder was charged with conspiring to sell AI servers with Nvidia chips to China in violation of US export controls. The company itself was not named in this indictment. However, Oracle was said to have canceled a contract with Super Micro in excess of $1 billion following this news, according to BlueFin Research, a move that “is believed to be related” to these charges.

“When asked whether the DOJ indictment of former employees is impacting the business, management indicated that vendor relationships remain strong and that it has seen no change in customer allocations,” added Bolton.

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SpaceX went public on June 12 at a $2.2 trillion valuation, the largest debut in history. While the company hasn’t yet posted a profit, it seems to have convinced Wall Street that it will get there and grow its valuation on the way.

Of the at least 17 analysts that gave a rating on Tuesday, all but one gave it a “buy” or “outperform” rating. MoffettNathanson was "neutral."

The ratings come as SpaceX joined the Nasdaq 100 index, a benchmark tech-heavy basket of companies that underpins millions of portfolios. The inclusion adds built-in demand for the stock from index funds and ETFs.

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