Super Micro Computer’s Preliminary Update: A Mixed Bag for Investors?

Investors are always on the lookout for companies that can capitalize on the growing demand for AI infrastructure. One such company is Dell Technologies, which has consistently disclosed its AI backlog figures, providing a clear picture of its performance. In contrast, Super Micro Computer’s (SMCI) recent preliminary update has left investors with more questions than answers.

According to Super Micro’s update, the company’s revenue is estimated to be near the low end of its $11 billion to $12.5 billion guidance range. While this may seem disappointing, the company’s gross margin is estimated to be around 15% to 17%, nearly double the 8.2% to 8.4% it had guided. This margin beat is a rare occurrence, and Super Micro attributed it to a ‘favorable customer and product mix’ without naming specific customers or products.

However, the real issue lies in the company’s backlog. Dell discloses its actual AI backlog dollar figure every quarter, providing a clear picture of its performance. In contrast, Super Micro withholds its backlog balance, only providing the inflow of $60 billion in new orders. This lack of transparency is a major concern for investors, as it makes it difficult to gauge the company’s true performance.

Furthermore, Super Micro’s forward-looking disclaimer adds another layer of complexity to the issue. The company acknowledges that some of the $60 billion ‘may not constitute firm commitments and may be subject to cancellation or delays.’ This is a significant risk, especially when compared to Dell’s backlog figures, which carry the same general execution risk.

The company’s credibility deficit is also a major concern. Super Micro has been dealing with the aftermath of a scandal surrounding its company founder and two others shipping restricted Nvidia chips to China. Additionally, Ernst & Young resigned as auditor in October 2024 after a short-seller report alleged accounting irregularities, triggering a delayed 10-K and a stock collapse from a March 2024 high of $118.81 to the $20s.

In conclusion, while Super Micro’s preliminary update may seem promising at first glance, the lack of transparency and the company’s credibility deficit make it difficult to trust the numbers. Investors should wait for audited numbers, a quantified backlog, and a resolution of the chip scandal before treating this preannouncement as confirmation of the turnaround.

A Closer Look at Super Micro’s Numbers

Here are the key data points from Super Micro’s preliminary update:

• Revenue is estimated near the low end of its $11 billion to $12.5 billion guidance range.
• GAAP and non-GAAP gross margin is estimated at 15% to 17%, nearly double the 8.2% to 8.4% the company had guided.
• New orders exceeded $60 billion in the quarter, pushing backlog to a record.

Why Transparency Matters

Transparency is key to building trust with investors. By disclosing its actual AI backlog dollar figure, Dell provides a clear picture of its performance. In contrast, Super Micro’s lack of transparency makes it difficult to gauge the company’s true performance.