Super Micro Computer ( SMCI ) The stock price rose by about 12% on Wednesday, October 21st, following a significant upward revision by this AI server manufacturer of its quarterly revenue and profit margin forecasts, indicating that demand for artificial intelligence infrastructure remains strong.
After the company raised its median revenue forecast for the first fiscal quarter by $4 billion, the stock price briefly rose to around $36.25 during trading. This announcement also drove up the stock prices of competing server manufacturers Dell Technologies and Hewlett Packard Enterprise.
According to the official update from Super Micro, the quarterly revenue as of September 30 is now estimated to be between $18.5 billion and $19.5 billion, which is a significant upward revision from the previous forecast range of $14.5 billion to $15.5 billion.
The expected $19.5 billion figure came as a surprise to Wall Street.
The revised guidelines mean that, based on the median calculation, revenue expectations have increased by 26.7%, from $15 billion to $19 billion.
More importantly, Super Micro has raised its projected gross margin to 12% to 12.5%, which is higher than the previous estimate of 10.4% to 10.8%. Management attributes this improvement to stronger demand for the AI platform, as well as a more favorable customer and product mix.
Improving profit margins is particularly important, as Super Micro has previously struggled to convert the explosively growing AI server orders into stronger profitability.
Previous updates from the company indicated that new orders exceeded $60 billion, but investors are still concerned about component costs, working capital requirements, and competitive pressures.
The latest preliminary data indicates that higher sales volumes may now be accompanied by improved profitability, rather than just an increase in hardware shipments.
Dell and HPE rise due to enhanced requirements on the AI server
This announcement also boosted market sentiment towards other AI infrastructure providers. After investors interpreted the results of Super Micro as a sign of continued spending by corporate clients and hyperscale cloud vendors, the stock prices of Dell and HPE rose.
This reaction contrasts with the recent concerns surrounding the Dell AI business. Previously, Barclays warned that rising memory prices might be contributing to the increase in disclosed hardware revenue.
Dell Previously disclosed backlogged order volumes amounted to 95 billion US dollars, indicating that demand remains substantial, but this has also raised questions in the market regarding the efficiency of converting these orders into revenue.
Therefore, the stronger profit margin expectation of Super Micro is of great significance, as it indicates that what is improving is not just revenue growth.
However, the rising prices of AI servers may still pose challenges for customers seeking to expand their capacity.
SMCI What will happen to the stock price next?
At the time of this increase, the market is still discussing how much additional AI infrastructure spending tech companies can continue to invest.
The update of Super Micro provides positive signals, but its financial data is still preliminary and unaudited. The company will announce its full quarterly results on November 3rd, by which time investors will be able to assess the actual revenue, profits, and cash flow.
A more optimistic outlook has driven a broader rebound in tech stocks, echoing the market's renewed enthusiasm for the computing power of AI.
