Artificial intelligence server maker Super Micro Computer Inc. posted a declining profit today as it missed expectations on both earnings and revenue, sending its stock south in extended trading.

The company reported fourth-quarter earnings before certain costs such as stock compensation of 41 cents per share, trailing Wall Street’s estimate of 45 cents. Revenue for the period came to $5.8 billion, up 8% compared to the previous year, but below the $6 billion analyst forecast.

All told, Supermicro posted net income of $195.2 million in the quarter, down from the $297.2 million profit it posted in the year-ago quarter. The company said the lower profit was partly due to the impact of U.S. President Donald Trump’s tariffs on goods imported into the country.

“We have taken measures to reduce the impact and we will see results,” Supermicro Chief Executive Charles Liang (pictured) told analysts on a conference call.

That may be so, but investors were likely disappointed to see Supermicro also fell short of targets on its adjusted gross margin. It reported 9.6%, versus the 10% hoped for by analysts.

On the call, Liang told analysts that the company lacked the working capital it needed to ramp up production as quickly as he would have liked. He said that’s why the company took the unusual step of issuing convertible note offering worth $2 billion, following a similar $700 million funding initiative in February.

For the current quarter, Supermicro is calling for earnings of between 40 cents and 52 cents per share on revenue of between $6 billion and $7 billion. That compares poorly with the Street’s forecast, which calls for earnings of 59 cents per share on $6.6 billion in sales.

Supermicro’s revenue guidance for fiscal 2026 was better, with the company saying it’s targeting $33 billion in total sales at the midpoint of its range. Wall Street is looking for just $20 billion. However, it’s notable that Supermicro’s forecast falls someway short of a lofty target of $40 billion that was given by Liang in February.

Holger Mueller of Constellation Research Inc. told SiliconANGLE that investors have a lot to take in, with a slow quarter capping off an overall very strong year for Supermicro, albeit with lower profit compared to the previous year. “Supermicro notably fell short of its own guidance in the previous quarter, so its forecast of a 50% revenue growth rate for the new fiscal year must be met with some caution, and it’s up to Liang and his team to deliver,” the analyst said.

After digesting the results, investors decided that things aren’t looking so great for Supermicro, and the company’s stock took a nosedive in the extended trading session, falling more than 16%.

Supermicro has had a topsy-turvy ride of late. Latching onto the coattails of the artificial intelligence boom, its server sales have exploded over the last two years as enterprises race to build out their data center infrastructure. The company takes the very expensive components of AI servers, such as Nvidia Corp.’s graphics processing units, and then assembles them into complete servers that are ready to roll. It saw sales increase by 110% in fiscal 2024, and then by 47% in fiscal 2025.

However, Supermicro now faces challenges, for the AI server industry is becoming more commoditized and it’s being forced to compete for business on price. That explains why its gross profit margin fell from just 18% at the end of fiscal 2023 to under 10% in the prior quarter.

D.A. Davison & Co. analyst Gil Luria said the company’s profit struggles aren’t going away anytime soon. “Since we know the market for AI servers is very strong right now, it is safe to assume the disappointing results for Supermicro are due to [market] share losses,” he told Reuters. “Customers are very discerning right now and are choosing servers from Dell, HP and others.”

Bank of America analyst Ruplu Bhattacharya told Barron’s that while he believes Supermicro has the ability to regain lost market share, it can only do this at the cost of margin.

Bhattacharya currently has an “underperform” rating on Supermicro’s stock, and warned that its shareholders face a long list of risks. These include the fact that just two of its customers represented 64% of its accounts receivable at the end of March. He also pointed to it doing a significant amount of business with two companies owned by Liang’s brother, which hints at the possibility of “self-dealing.”

Moreover, Bhattacharya warned that it still has accounting control weaknesses that linger from the last fiscal year, which saw it file its annual report late after its independent auditor walked away. The company narrowly avoided being delisted from the Nasdaq stock exchange by filing its annual report just before a deadline set by regulators.

Despite all of these issues and today’s after-hours slump, Supermicro’s stock continues to be one of the better performers in the technology world, and is up 88% in the year to date. In contrast, the broader S&P 500 Index is up just 7%.

Photo: Supermicro