Bernstein is cautiously optimistic about Super Micro Computer, Inc. (SMCI.US) as strong demand for AI servers sends positive signals for Dell Technologies, Inc. Class C and Hewlett Packard Enterprise Co.

After AI server manufacturer Super Micro Computer, Inc. (SMCI.US) released results and guidance that exceeded expectations, Bernstein raised its target price for the stock from $37 to $42, maintaining a "Market Perform" rating. Bernstein analyst Mark Newman noted in a report that Super Micro Computer, Inc. projects fiscal year 2027 revenues starting in July to be between $65 billion and $72 billion, well above the market consensus of $54.4 billion. Additionally, the expected revenue for the first quarter of fiscal year 2027 is between $14.5 billion and $15.5 billion, also surpassing the market expectation of $12 billion; the earnings per share (EPS) guidance is set at $1.01 to $1.10, higher than the market estimate of $0.74; and the gross margin guidance is between 10.4% and 10.8%, better than the market expectation of 9.0%. Newman stated, "Overall, we have slightly adjusted our projections upward, primarily due to revenue increase and product mix optimization driving gross margin improvement, although equity dilution in the coming quarters will partially offset this effect." Despite Super Micro Computer, Inc. having missed EPS estimates in 7 of the last 10 quarters and occasionally falling short of revenue expectations, "we still hold a certain level of confidence in the company." Newman further analyzed that Super Micro Computer, Inc.'s strong performance provides "favorable reference" for Dell Technologies, Inc. Class C (DELL.US) and Hewlett Packard Enterprise Co. (HPE.US). However, he also pointed out that the situation for Hewlett Packard Enterprise Co. is more complicated. "The exceptional growth of Super Micro Computer, Inc. may reflect an expanded market share, possibly at the expense of Hewlett Packard Enterprise Co.," Newman added. He noted that compared to Dell Technologies, Inc. Class C, Hewlett Packard Enterprise Co. experienced slower growth in the traditional server sector last quarter, and has a relatively weaker AI server business. With target prices ranging from a high of $46 to a low of $15, Wall Street analysts hold polarized views on Super Micro Computer, Inc. Overall, opinions among Wall Street analysts on Super Micro Computer, Inc. remain divided. Some analysts are optimistic about the growth potential from AI infrastructure demand, while others caution that the high proportion of GPU server business may continue to suppress margins and free cash flow. Needham maintains a "Buy" rating for Super Micro Computer, Inc. with a target price of $46. The firm points out that the company's fourth-quarter revenue fell short of expectations, mainly due to temporary delays in client power, cooling, and networking infrastructure, rather than a significant deterioration in AI server end demand. The company's gross margin is expected to gradually improve from around 10.6% in the first quarter of fiscal year 2027. Wedbush raised its target price for Super Micro Computer, Inc. from $34 to $40, while maintaining a "Neutral" rating. The firm's current growth expectations for Super Micro Computer, Inc. appear reasonable, and management anticipates that gross margins will fall back to around 10%, a target that is relatively attainable. The firm also believes that Super Micro Computer, Inc.'s strong order backlog and outlook indicate that demand for AI servers and related infrastructure remains robust, which sends a positive signal for Dell Technologies, Inc. Class C and Hewlett Packard Enterprise Co. Susquehanna, on the other hand, holds a "Negative" rating for Super Micro Computer, Inc. with a target price of $15. The firm believes that the increased contribution from CPU servers and traditional enterprise systems to revenues could help improve profitability, as these products typically have higher gross margins than GPU servers. However, to sustain its current high growth, Super Micro Computer, Inc. still needs to maintain a high exposure to GPU-driven AI infrastructure deployments, which will continue to suppress the companys overall gross margin and may lead to continued outflows in free cash flow. Tipranks data shows that among the 14 analysts covering Super Micro Computer, Inc., 3 have given a "Buy" rating, 9 have rated it as "Hold," and 2 have issued "Sell" ratings, with a consensus rating of "Hold" and an average target price of $40.5, which is 3.4% higher than the latest closing price.