What Happened?
Shares of server solutions provider Super Micro (NASDAQ:SMCI) fell 21.4% in the afternoon session after the company reported weaker-than-expected fourth-quarter results and provided a disappointing financial outlook. The AI server maker posted fourth-quarter revenue of $5.76 billion and earnings per share of 41 cents, both of which missed analyst estimates. Investors also noted a drop in the company's gross margin to 9.6%. Compounding these concerns, Super Micro provided full-year sales forecast for fiscal 2026 of at least $33 billion below previous target. The weak results and lowered guidance sparked fears that increasing competition hindered the company's ability to fully capitalize on the boom in AI-related demand.
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What Is The Market Telling Us
Super Micro’s shares are extremely volatile and have had 86 moves greater than 5% over the last year. But moves this big are rare even for Super Micro and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 5 days ago when the stock dropped 3.3% on the news that a surprisingly weak U.S. jobs report was released, fueling concerns about a slowing economy. The U.S. economy added only 73,000 jobs, falling significantly short of economists' expectations, while figures for May and June were revised down, erasing 258,000 previously reported jobs. The professional and business services industry itself shed 14,000 jobs. This data points to a cooling labor market, fueling concerns of a slowing economy. A weaker economic outlook often leads to reduced corporate spending on key services like IT consulting and professional staffing, which directly impacts the sector's revenue and growth prospects. The report immediately increased investor expectations of an interest rate cut by the Federal Reserve.
Super Micro is up 50.6% since the beginning of the year, but at $45.27 per share, it is still trading 28% below its 52-week high of $62.88 from August 2024. Investors who bought $1,000 worth of Super Micro’s shares 5 years ago would now be looking at an investment worth $15,045.
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