Super Micro, a major player in the server industry facing scrutiny, has experienced a 17% decline in share value during extended trading. This sharp drop followed the company’s release of unaudited quarterly results, which included weaker-than-anticipated revenue and guidance. Notably, Super Micro did not provide a timetable for the filing of its delayed annual financial results.
Concerns have mounted as the company risks delisting from the Nasdaq if it fails to file its annual report with the SEC by mid-November. The last time Super Micro reported audited results was in May. CEO Charles Liang, speaking on a call with analysts, emphasized the urgency of resolving financial reporting delays, stating, “We are working with urgency to become current again with our financial reporting.” However, he declined to answer questions related to Ernst & Young’s recent resignation as the company’s auditor. Liang confirmed that Super Micro is actively seeking a replacement auditor.
The departure of Ernst & Young added to the turmoil, with allegations from an activist raising concerns about accounting irregularities and the company’s potential violations of export controls by allegedly shipping sensitive chips to sanctioned countries and entities.
Super Micro’s latest financial figures for the quarter ending September 30 revealed net sales ranging between $5.9 billion and $6 billion. This missed analysts’ expectations of $6.45 billion but still marked a significant 181% year-over-year increase. The company’s recent growth has been driven by servers equipped with Nvidia’s GPUs for artificial intelligence applications.
During the analyst call, questions arose about Super Micro’s revenue prospects and potential changes to senior management to enhance financial reporting. Liang shifted the conversation to the Nvidia GPU, Blackwell, which recently began shipping. Despite persistent inquiries from analysts about Blackwell’s revenue impact, Liang acknowledged that availability remains constrained. “Our capacity is ready, but not enough new chips,” he said, indicating ongoing collaboration with Nvidia to address supply shortages.
CFO David Weigand reassured analysts regarding the Nvidia partnership, emphasizing the “deepest of relationships” between the two companies. He stated that Nvidia had not altered its GPU allocation plans, adding, “We maintain a strong relationship with them, and don’t expect that to change.”
Financial guidance for the December quarter also disappointed investors. Super Micro projected revenue between $5.5 billion and $6.1 billion, falling short of the $6.86 billion average estimate from analysts. The company forecasted adjusted earnings per share of 56 to 65 cents, below the 83-cent expectation from LSEG analysts.
Amid these issues, Super Micro disclosed that its board had established a special committee to investigate Ernst & Young’s concerns. The committee’s three-month inquiry concluded there was “no evidence of fraud or misconduct” by management. Nevertheless, it recommended several measures to bolster governance and oversight. The company committed to implementing these changes and reiterated its efforts to maintain its Nasdaq listing.
Super Micro has experienced substantial market volatility. While its shares soared 246% in the previous year, the stock surged 87% in 2023, peaking at $118.81 in March, soon after being added to the S&P 500. However, the company has since suffered an almost 80% decline, erasing over $55 billion in market capitalization.
Featured image courtesy of Barchart.com
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