Super Micro Computer (NASDAQ: SMCI) just roared back with its latest post-earnings pop. The artificial intelligence (AI) server company rose more than 24% after reporting.
This marks the stock’s second consecutive up move after earnings, as shares rose 14% following its February release.
Despite these large moves, Super Micro shares are only up 16% overall in 2026. This comes as the U.S. government laid out charges against Super Micro co-founder Yih-Shyan “Wally” Liaw, causing SMCI to plummet 33% in one day during March.
Overall, Super Micro showed some positive signs in its latest quarter, but its outlook remains highly uncertain. Here’s what investors need to know.
Super Micro Falters on Sales, Storms Past EPS Estimates
In its fiscal Q3 2026, Super Micro posted revenue of $10.24 billion, a massive 123% increase year over year (YOY). (Note that Super Micro’s fiscal reporting period is approximately two quarters ahead of the standard calendar year reporting period.)
Although this growth rate is extremely high, it was far less than the markets and the company was expecting. Super Micro itself had forecasted net revenue to be “at least $12.3 billion." Thus, the firm missed its guidance by over $2 billion. It also fell very short of Wall Street expectations, with analysts forecasting sales of $12.39 billion.
On the other hand, the company beat big on adjusted earnings per share (EPS). Adjusted EPS rose by 171% YOY to 84 cents. This crushed estimates of 63 cents and the company’s guidance of “at least 60 cents.”
This dichotomy comes as Super Micro’s gross margin improved drastically in just one quarter. In Q2 of fiscal 2026 (FY2026), the firm’s revenue was $12.68 billion, but adjusted gross margin fell to 6.4%. This led to an adjusted gross profit of $812 million. In Q3 FY2026, by contrast, adjusted gross margin surged by 370 basis points to 10.1%.
Despite revenues being much lower at $10.24 billion, adjusted gross profit rose significantly to $1.03 billion. This was one of the key factors that allowed Super Micro to miss revenue expectations by a wide margin, yet exceed adjusted EPS estimates by a wide margin.
Gross Margin Improves, But at the Cost of Revenue
Super Micro’s very low gross margin was a top concern coming out of its previous earnings report. Thus, it makes some sense that the market reacted positively to the improved margin in its latest results. Still, looking under the surface, it's hard to say Super Micro showed a significant improvement. Its gross margin increase came as sales missed by over $2 billion, with certain customers delaying deployments. If the company had brought in these sales, it's fully possible that gross margin would have been much lower than 10.1%.
Super Micro’s guidance provides evidence of this. The firm expects to recover some of the revenue it did not receive in Q3 next quarter. Using midpoint figures, it sees sales rising to $11.8 billion, but gross margin falling to 8.3%. This shows that the company’s sales and gross margins are moving in opposite directions.
While this is not a negative in every circumstance, Super Micro’s already very thin gross margin makes it a concern. Companies that are in a strong position are often able to increase revenue and margins at the same time. This is not proving to be the case for Super Micro.
However, the company continues to have confidence in its Data Center Building Blocks Solutions (DCBBS). DCBBS comes with higher gross margins, typically above 20%. The company’s goal is to scale DCBBS to over 20% of net income over the next two years, helping improve its overall margin profile. Still, Super Micro did not disclose DCBBS’s revenue contribution, making progress toward its goal difficult to assess.
Super Micro: Reputational Risk Up, Price Targets Down
The Department of Justice has charged Liaw for allegedly conspiring to sell servers made in the U.S. to China, violating export controls. Authorities arrested Liaw, and he resigned from Super Micro. While Super Micro says it is not a target of the investigation, its co-founder being a target could bring significant reputational damage.
Notably, multiple analysts asked the company if it would need to restate past financials due to this. Super Micro remarked, “we do not believe we will need to restate," but did not unequivocally say no.
This isn’t the first time accounting or legal issues have surrounded Super Micro. In 2024, the Big Four accounting company EY resigned as Super Micro’s auditor. EY noted that it was “unwilling to be associated with the financial statements” prepared by Super Micro’s management.
Super Micro’s sales and gross margin trade-off, as well as the indictment, highlight the significant uncertainty around this stock.
The reaction from Wall Street analysts following the report mirrors this. Despite shares surging, JPMorgan Chase & Co. and Wedbush both significantly lowered their SMCI price targets. However, Needham & Company reiterated its Buy rating, and issued a solid $40 price target.
The MarketBeat consensus price target on Super Micro sits near $36, implying around 5% upside in shares. The average of targets updated after the company’s report is slightly lower, near $35.30. Overall, the firm’s profitability concerns have not gone away, and Super Micro now has a new reputational issue hanging over its head.
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The article "Super Micro Surges Over 20% as Margins Soar, Sales Fall Short" first appeared on MarketBeat.
