Super Micro Computer heads into its fiscal third-quarter results with its stock up 35% since bottoming on March 20, but one analyst says the rebound has not erased the worries hanging over the company. Louis Gerard said he remained skeptical of the firm’s prospects and kept a Sell rating on the stock ahead of earnings.
Gerard said Super Micro has faced governance issues over the past few years and that a federal criminal case involving co-founder Wally Liaw and others remains a critical overhang on the stock price. He also said the company’s story has changed from a pure-play AI growth story into a high-stakes corporate turnaround, which brings a cloud of risks.
The warning lands at a sensitive moment for smci because investors are looking for proof that the business can keep growing without sacrificing profitability. Last quarter, gross margin fell to a record low of 6.4%, and management has guided for it to rebound to around 6.7% in the current quarter. That leaves a narrow gap between a company trying to show momentum and a market still asking whether the numbers can stabilize.
The biggest new concern is a report from Bluefin Research that Oracle scrapped plans to buy 300 to 400 high-performance AI server racks from SMCI. Each rack was said to be priced at about $3.5 million, which would imply a revenue hit of up to $1.4 billion if the cancellation proved accurate. Gerard said the Oracle decision could be tied to compliance concerns stemming from the Liaw indictment, but he also said that had not been verified yet and added that it would matter only “if true.”
That report matters because Oracle had been one of the more closely watched customers in the AI server buildout, and any pullback would feed doubts about how durable demand really is. Gerard said xAI had also been moving some of its business over to Dell and Hewlett Packard, adding another sign that the competitive landscape may be shifting even as Super Micro tries to reassure investors that the growth story is intact. The company said any update on xAI would come with the earnings release.
The stock still has supporters, even if they are outnumbered. Gerard is one of two analysts in the bear camp, while eight analysts rate the shares Hold and three call them Buy. That leaves SMCI with a Hold consensus rating, an average price target of $30.53 and implied 12-month returns of 10% — a setup that suggests Wall Street sees limited room for error as the earnings report arrives.
For investors who bought into the AI server boom, the question now is less about whether demand exists than whether Super Micro can turn that demand into cleaner execution, steadier margins and fewer surprises. The rebound in the shares has bought the company time, but the next set of numbers will decide whether it has bought enough.
