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Wedbush said that “significantly stronger” gross margins highlighted Super Micro Computer's (SMCI) preliminary update for its fiscal fourth quarter results and also indicated positives for Dell (DELL), Hewlett Packard Enterprise (HPE), and Nvidia (NVDA).
Shares of Super Micro surged about 16% premarket on Wednesday after the company said GAAP and non-GAAP gross margins are estimated to be in the range of 15% to 17%, higher than its guidance of 8.2% to 8.4%, mainly due to a favorable customer and product mix. The AI infrastructure solutions provider also said that revenues for the fourth quarter of fiscal year 2026 are estimated to be near the low end of its guidance range of $11B to $12.5B (midpoint at $11.75B). The consensus revenue estimate is $11.68B.
"If we are correct in our assumptions and system shortages (driven by a lack of component availability) are allowing for more favorable pricing, we would not be surprised if this dynamic persists and SMCI proves able to produce meaningfully better GMs (and EPS) than had been previously anticipated in CQ3'26 as well, and possibly/probably for several quarters. On the order front, we can't but see the magnitude of new orders as being positive for SMCI, even if we are somewhat concerned around the possibility/probability of some broader double ordering throughout the industry (given the rush to secure component supply)," said analyst Matt Bryson.
The analyst noted that they did not expect Super Micro's gross margin upside. However, their guess as to the drivers of the beat were the following:
Firstly, the analyst said that throughout June and into July, they saw consistent commentary indicating demand for AI boards (Nvidia's Grace Blackwell, Blackwell, and even Hopper), compute, and memory, among other things, trailing demand, with the net result being that lucrative AI server shipments are falling shy of demand.
Secondly, Bryson believes that Super Micro likely was able to take advantage of scarcity to more favorably price products and/or shift customers to a richer mix of servers (such as solutions that use more of SMCI's proprietary solutions). Lastly, the analyst said that they would not be surprised if the revenue shortfall can be traced to some of Super Micro's larger customer datacenter builds seeing delays (another factor that would have benefited the company's mix).
In addition, the analyst said that Super Micro's sharp increase in order backlog fits with some feedback they have seen suggesting large future data center orders that are driving substantial increases in industry commodity requirements into next year.
Bryson said that if their hypothesis around the basis for Super Micro's preannouncement is correct, they believe Dell, HPE, and Gigabyte, among others, should all benefit from similar dynamics.
Shortages of server components can only be seen as positive for the broader supply chain (CPUs, GPUs, memory, etc.), the analyst added.
"Arguably the largest single beneficiary of the constrained backdrop today, and increased order-flow tomorrow is NVDA, given: 1) We believe the vast bulk of OEM (and SMCI) AI server builds (both currently and moving forward) rely on NVDA GPUs and 2) NVDA in our view has done the best job of any component vendor in securing its supply chain," said Bryson.
Wedbush maintained its Neutral rating and $34 price target on Super Micro's stock.
