Shares of The Super Micro Computer(NASDAQ: SMCI) rose more than 10% on Thursday, closing at around $31 after starting the day near $28. There was no big company news behind the move — no salary, no new contract — a sharp jump in a stock that has been struggling with the rest of the artificial intelligence (AI) hardware group. Even after the jump, however, the stock is down about 31% over the past year and is moving forward from a 52-week high.
So, what gives?
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Super Micro has never had a hard time selling servers. What has been difficult is convincing investors that the growth is worth the thin margins and associated burdens. That said, the underlying business has shown significant improvement.
Image source: Getty Images.
The need is not the problem
In its third fiscal quarter of 2026 (the period ended March 31, 2026), Super Micro’s revenue doubled from the previous year to $10.2 billion, driven by AI servers built around chips. Nvidia.
And this advanced design surpasses the Super Micro Computer. Competitors Dell Technologies again Hewlett Packard Enterprise both have reported an increase in AI server demand in recent weeks.
A clear sign that demand is outstripping what the company can support came this month. Super Micro said it has taken about $39 billion in AI server orders in recent weeks from more than 20 customers, and to buy stuff to fill them, it has raised $7 billion in new financing and equity.
But here’s what’s especially encouraging. After falling to 6.3% last quarter, its margin is back to 9.9% — still slim, but the real jump is from the bottom. Management said the rebound came from selling complete, ready-to-run systems instead of bare-bones servers, as well as lower costs and costs associated with freight, shipping, and logistics.
“We’re a fast-growing company. We can grow very fast, but we also care about margins,” CEO Charles Liang said on the company’s third-quarter earnings call, when asked how its order backlog will grow.
What should hold from here
The stock trades at about 16 times earnings — hardly a bargain for a company growing revenue at triple-digit rates.
But there’s a good reason for the stock’s low valuation multiple.
The balance sheet is one of them. To finance its growth, the company has relied on debt and, more recently, dilution. Total bank loans and convertible notes totaled $8.8 billion at the end of the quarter, nearly double what they were six months earlier, while $7 billion in financing added new shares to the tally.
Then there is the question hanging over the numbers themselves.
Super Micro’s board is still conducting an independent review of other actions related to export control issues, and the company cautioned that its latest results were preliminary and untested, and could change once that review is complete. It comes on the heels of the 2024 accounting crisis that cost the company its auditor and its Nasdaq listing — a history that helps explain why Super Micro Computer’s investors remain cautious even when the business looks healthy.
So, what would it take for stock refinancing to catch on?
Above all, that 9.9% gross margin should hold and build rather than slip back to the low single-digit rates of recent quarters. And a clean fix in the export control review would help. Finally, investors should watch to see if the company’s $39 billion in orders can turn into profitable revenue without debt and inventory write-downs stretching too far.
The real test will come when Super Micro reports its fourth fiscal quarter — likely in August.
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Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Hewlett Packard Enterprise and Nvidia. The Motley Fool has a policy of disclosure.
Super Micro Jumped Over 10%. Is The AI Server Maker Finally Turning Around? was first published by The Motley Fool
