(Bloomberg) — Super Micro Computer Inc. fell more than 10% in extended trading after it reported quarterly revenue and profit that missed analysts’ estimates, beating annual revenue expectations that were billions higher than Wall Street forecasts.
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Earnings, excluding some items, were $6.25 per share in the period ended June 30, the company said in a statement Tuesday. That was lower than Super Micro’s previous forecast and the average analyst estimate of $8.25. Revenue was $5.31 billion, compared with an average forecast of $5.32 billion, according to data compiled by Bloomberg.
A jump in demand for the equipment that powers artificial intelligence software has boosted sales at San Jose, Calif.-based Super Micro, which makes data center servers. The company forecast revenue of $26 billion to $30 billion in the fiscal year ending June 30, 2025. Analysts on average estimated $23.6 billion.
Still, investors are concerned about the long-term profitability of AI-optimized servers sold by companies including Super Micro, Dell Technologies Inc. and Hewlett Packard Enterprise Co., said Woo Jin Ho, an analyst at Bloomberg Intelligence. Super Micro’s failure to meet its own profitability targets in the recent quarter is likely to fuel those concerns, he said.
Executives on a conference call following the results outlined a plan to achieve the company’s traditional gross margin target of 14% to 17% as it expands its supply chain for new products and manufacturing capacity in Taiwan and Malaysia.
Gross margin, or the percentage of revenue left after deducting production costs, was above 11% in the fourth quarter. Executives said margins were hurt by the company’s business with a large cloud service provider and a higher mix of new liquid-cooled servers, which required investments in the supply chain. Large customers can often get favorable prices in exchange for large orders.
“We are well positioned to become the largest IT infrastructure company,” CEO Charles Liang said in the statement.
Shares initially rose as much as 18% in extended trading on the forecast, before reversing and falling about 13% by 6 p.m. in New York. The stock previously closed at $616.94.
Super Micro also announced a 10-for-1 stock split, with trading beginning Oct. 1. Shares have more than doubled in value this year and were added to the S&P 500 and Nasdaq 100 indexes on increased demand for servers. Still, the stock is down about 48% from a peak in March.
(Updated with gross margin in the fifth and sixth paragraphs.)
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