Intense competition, Super Micro Computer's revenue falls short of expectations, this quarter's guidance better than expected, stock price plunges 15% after hours | Financial Report Insights

On Tuesday, April 30th, after the U.S. stock market closed, "AI star stock" AMD released slightly lower than expected financial results for the third quarter of fiscal year 2024 and better than expected financial guidance for the fourth quarter.

The stock price of AMD also experienced a dramatic turnaround. Thanks to stable demand for its AI servers, the company remained optimistic about its performance in the fourth quarter. The better-than-expected financial guidance for the fourth quarter drove AMD's stock price to surge more than 7.12% after Tuesday's market close. However, due to intense competition in the server manufacturing industry, the actual revenue for the third quarter did not meet market expectations, leading to another 15% drop in the company's stock price, currently stabilizing at around a 10% decline.

AMD plunged in the final trading session on Tuesday and closed down by 3.54%. It has risen by 200.86% year-to-date and by 717.05% in the past year, significantly outperforming major market indices such as the S&P 500, Nasdaq, and Dow Jones. However, it has fallen over 24% from its historical closing high of $1140.01 per share on March 8th.

AMD's Revenue Falls Short of Investors' High Expectations

According to the financial report, in the third quarter of fiscal year 2024, AMD's total revenue was $3.85 billion, a year-on-year increase of 200.8%, lower than analysts' expected $3.95 billion. The gross profit margin was 15.5%, higher than the 15.4% in the second quarter of fiscal year 2024, but lower than the 17.6% in the same period last year, meeting analysts' expectations. The adjusted EPS was $6.65, a 308% increase year-on-year, higher than analysts' expected $5.78.

In terms of financial guidance, AMD expects revenue for the fourth quarter to be between $5.1 billion and $5.5 billion, higher than analysts' expected $4.73 billion; the adjusted EPS range is $7.62 to $8.42. For the full fiscal year 2024 (ending June 30th this year), the company expects total annual revenue to be between $14.7 billion and $15.1 billion, higher than the original estimate of $14.3 billion to $14.7 billion. Analysts had previously expected $14.6 billion. At the same time, the company expects adjusted EPS for the full fiscal year to be between $23.29 and $24.09, about 8-10% higher than analysts' expectations.

AMD's CFO David Weigand also stated that the company's supply chain situation is continuously improving. AMD's President and CEO Charles Liang said:

"The company's revenue grew by 200%, and the adjusted EPS grew by 308%, a growth rate far exceeding that of other industry peers."

"Thanks to the strong demand for AI rack-scale plug-and-play (PnP) solutions and our team's ability to develop innovative DLC designs, the company's leadership position in the AI infrastructure market has been expanded." The company's current customer base is growing strongly. "If it weren't for the shortage of key components, Super Micro's delivery volume this quarter would be even higher."

"Looking ahead, the company will continue to focus on developing advanced solutions, including fully mass-produced DLC. We expect Super Micro to continue to gain market share. And we anticipate that AI will maintain strong growth in many quarters (even years) to come."

However, some netizens believe that this is the cost of over-hyping expectations. Now we know why Super Micro's executives didn't want to announce guidance in advance. We are not satisfied with Super Micro's revenue.

Previously, in a brief press release on Friday, April 19, Super Micro Computers stated that it would announce its third-quarter results on April 30. However, the company broke its tradition of providing preliminary results, causing investors to worry and frantically sell the stock. It is also worth noting that Super Micro did not respond to media inquiries on Friday. This led to a more than 23% plunge in Super Micro's stock price, hitting a two-month low.

Super Micro also dragged down a number of tech stocks including Nvidia, with chip and AI concept stocks plummeting on Friday. Nvidia fell by 10%, marking its largest single-day drop since the early days of the 2020 COVID-19 outbreak, while Arm fell nearly 17%. These tech companies did not release any news that could have caused the stock price to plummet.

Super Micro Computers replaced HP as a component stock of the S&P 500 Index

Super Micro Computers' industry competitors include Dell Technologies, HP Inc., and others. In March of this year, Super Micro Computers replaced HP Inc. as a component stock of the S&P 500 Index.

Super Micro manufactures computers and sells them to enterprises for use in website servers, data storage, AI training, and other businesses. Nvidia, NASA, and Japan Electronics are among its partners. The recent surge in Super Micro's stock price is mainly due to the strong demand for its servers (the infrastructure for AI chips) in the market. For Super Micro, it is not important who wins the AI race. Because if you buy AI chips, whether from Nvidia or other companies, you need to connect and cool the chips—this is where Super Micro comes in Supermicro's internally developed server liquid cooling solution helps the company bring products to market faster than competitors who rely on some third-party suppliers. In addition, Supermicro's close relationships with chip giants NVIDIA and AMD provide additional competitive advantages. As these chip giants are headquartered less than 10 miles from Supermicro's headquarters, Supermicro is able to obtain chip samples earlier to test its server prototypes