Super Micro Computer Inc. (SMCI) shares surged over 30% to a new all-time high on Tuesday after the company reported better-than-expected fiscal second quarter 2023 results and raised its full-year guidance.
Super Micro Smashes Q2 Expectations
The server and storage solutions provider posted Q2 non-GAAP earnings per share (EPS) of $5.59 on revenue of $3.66 billion, handily beating Wall Street estimates. [1] This compares very favorably to the year-ago quarter, when Super Micro earned $1.17 per share on $1.24 billion in sales.
“Super Micro is firing on all cylinders right now with minimal inventory on hand to meet surging demand for our new products,” said President and CEO Charles Liang. [2]
Management credited strong growth across all product lines and geographies, driven by robust enterprise and cloud data center deployments using the latest CPUs and GPUs. Orders remain very healthy heading into the fiscal third quarter.
Increased Demand for AI Hardware Boosts Results
Super Micro has become a leading provider of high-performance servers optimized for artificial intelligence workloads. With AI adoption growing very rapidly, demand has outpaced supply.
| Q2 2023 Shipments | Growth vs. Prior Year |
|---|---|
| GPU Servers | Up 273% |
| Total Servers | Up 55% |
Customers are refreshing older systems with Super Micro’s latest generation of hardware to improve AI model performance. This trend should continue over the next several years. [3]
“Our early investments in energy efficient system architectures optimized for AI training and inference applications are paying off handsomely,” Liang stated.
Strong Growth Forecasted Through Fiscal 2024
Based on the ongoing exceptional business momentum and record backlog of $2.9 billion, Super Micro lifted its net sales guidance for fiscal 2024 to a range of $6.0 billion to $7.0 billion, up from $5.0 billion to $6.0 billion previously. [4]
This implies year-over-year growth of at least 44% at the midpoint, surpassing the company’s total revenue over the past four years combined. Non-GAAP EPS is now expected between $9 and $12 for FY2024.
“Super Micro is poised for sustainable long-term growth driven by strong AI demand and continued market share gains from leading OEM brands,” said Chief Financial Officer David Weigand.
SMCI Stock Price Hits New High
Super Micro shares exploded higher by 36% on Tuesday to reach $153 per share, elevating the company’s market capitalization over $8 billion for the first time. [5] This adds to massive 202% gains in 2023.
Founder and CEO Charles Liang’s net worth has now crossed $4.5 billion, cementing his status as one of the wealthiest engineers and entrepreneurs in Silicon Valley. [6]
Analysts widely raised their SMCI price targets following the earnings beat. Wedbush boosted its target from $70 to $130 per share. MKM Partners increased from $92 to $182. BofA Securities went from $85 to $165. [7]
With Super Micro’s growth story just getting started, more upside could be in store for this AI infrastructure leader.
Long-Term Tailwinds for Continued Expansion
Multiple secular trends position Super Micro for sustainable rapid growth over the next 5-10 years.
Enterprise spending to bolster AI capabilities and optimize data center infrastructure remains in early innings. Super Micro is at the forefront of key industry shifts:
- Acceleration of AI/ML adoption and exponentially growing model complexity
- Massive growth in data and need to glean value from it
- Sustainability demands driving next-gen power efficient hardware
- Shift towards flexible architectures using industry standard components
“We expect the AI hardware TAM to quintuple over the next decade,” said Liang. “With our first-mover advantage in optimized system design, Super Micro has an open runway for leading this transformation.”
If executed well, 30-40% yearly revenue growth could become the norm.
Key Takeaways
In summary, Super Micro’s record Q2 results and increased guidance demonstrate rapidly expanding business momentum. Surging product demand has led to supply shortages, record backlog, and years of visible growth potential.
With its early focus on AI-optimized systems, Super Micro finds itself at the right place at the right time to ride booming enterprise AI adoption. SMCI stock has plenty of open road ahead if execution remains world-class.
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