I'm LongbridgeAI, I can summarize articles.Super Micro Computer shares rose 10% after reporting Q1 sales guidance of $18.5B-$19.5B, significantly exceeding prior estimates. Despite the upbeat numbers, Bank of America analyst Bhattacharya maintains an 'Underperform' rating, citing caution over margin normalization and pricing pressures. While revenue forecasts were raised to $79.6B for fiscal 2027 with a price target of $38, the analyst remains wary of profitability trends despite strong AI server demand.
Super Micro Computer (NASDAQ:SMCI) shares are climbing in Wednesday’s trading, up by 10% as of writing, after the AI server maker gave investors an early look at its fiscal first quarter, and the numbers came in far ahead of its prior outlook. The company now expects sales of roughly $18.5 billion to $19.5 billion, versus its earlier target of $14.5 billion to $15.5 billion. In short, a beat of around $4 billion at the midpoint.
Profitability also looks better than feared. Super Micro now sees gross margin landing between 12% and 12.5%, above the 10.4% to 10.8% it had guided, helped by a more favorable blend of customers and products. For a stock that has been weighed down by concerns about thin margins, that combination is giving buyers a reason to step in.
Not everyone is convinced, though. BofA analyst Bhattacharya does see the update as clear evidence that appetite for AI servers remains robust. He points to Dell, which last month booked $61 billion in AI server orders in a single quarter and is sitting on a $95 billion backlog. He suspects SpaceX was behind part of Super Micro’s upside. The rocket company, which reported results last night, is on pace to bring 2.5 to 3 gigawatts of new computing capacity online by the end of 2026. With SpaceX still spending heavily, the analyst now assumes Super Micro will generate $20 billion in each of the next three quarters. That works out to about $80 billion in fiscal 2027 and $89 billion in fiscal 2028.
Still, Bhattacharya is wary of reading too much into the margin improvement. Even at the midpoint of the new range, gross margin would be down more than five percentage points from the 17.6% posted last quarter. “We remain cautious on margins as mix normalizes and given pricing pressure in the AI server/rack space, component cost increases & large deals typically have lower margins,” the analyst explained.
On the other hand, Bhattacharya sees the strong preannouncement as encouraging for Dell and HPE.
There is a possible bright spot. Super Micro recently showcased its modular data center building block offerings (DCBBS) at OCP 2026. The analyst notes these products carry richer margins and could lift profitability as they make up a bigger share of earnings.
He also highlights the arrival of Mark Long, the former Western Digital finance chief, as Super Micro’s new CFO. Long will need to fix the gaps in internal financial controls that were still flagged as of June.
Bhattacharya has raised his fiscal 2027 forecasts to $79.6 billion in revenue and $5.31 in EPS, up from $68 billion and $3.98 previously.
That results in a new price objective of $38, up from $33, a figure suggesting shares will gain 5.5% in the months ahead. However, there’s no change to Bhattacharya’s rating, which stays at Underperform (i.e., Sell). (To watch Bhattacharya’s track record, click here)
Elsewhere on the Street, 2 other analysts are also bears, while an additional 11 Holds and 2 Buys all coalesce to a Hold consensus rating. At $40.23, the average price target suggests shares will gain 13% over the next year. (See SMCI stock forecast)