Super Micro Computer stock faces margin test after BofA target hike

Published on 11/05/2026 at 14:13 | Editorial responsibility: Rafael Müller, Editor-in-Chief AD HOC NEWS

Super Micro Computer stock faces a margin test after record AI-server growth. Bank of America raised its target but kept an Underperform rating.

Margins temper Supermicro growth

Bank of America raised its price target while retaining an Underperform rating.
Large AI deployments are lifting revenue but increasing margin and cash-flow pressure.
Second-quarter guidance sets the next test for execution and profitability.

SMCI, US86800U3023, Illustration mit AI erstellt.

Super Micro Computer reported record fiscal first-quarter revenue, but Bank of America continues to question whether the AI-server maker can convert rapid growth into durable margins and cash flow. In an analysis published on Thursday, November 5, Yahoo Finance said the bank raised its price target to 39 US dollars from 38 US dollars while retaining an Underperform rating.

The company released its fiscal first-quarter results on Tuesday, November 3. Revenue reached 19.9 billion US dollars, up 298 percent from the year-earlier period, while adjusted earnings came to 1.81 US dollars per share. Super Micro also lifted its fiscal 2027 revenue outlook to 72 billion to 82 billion US dollars from 65 billion to 72 billion US dollars.

AI demand raises execution risks

Bank of America highlighted the trade-off behind the stronger outlook. AI-related systems represented 71 percent of first-quarter revenue, and management expects that mix to remain between 70 percent and 80 percent for the full fiscal year. Large deployments can accelerate sales, but they generally carry lower margins than parts of the enterprise and channel business.

Adjusted gross margin reached 12.8 percent in the first quarter, compared with 9.5 percent a year earlier and 17.6 percent in the preceding quarter. Management expects second-quarter gross margin of 12 percent to 12.5 percent, while the full-year outlook stands at 11.8 percent to 12.2 percent.

Cash conversion remains central

Operating cash flow was negative 434 million US dollars in the quarter, while free cash flow was negative 481 million US dollars. Inventory increased by 2.5 billion US dollars to 15.1 billion US dollars at the end of September, reflecting the financing demands of large server deployments.

Super Micro Computer stock traded at 25.30 euros on Lang & Schwarz at 14:05 CET on Thursday, November 5, 2026.

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For investors, the next test is whether Super Micro can sustain elevated AI-server volumes while protecting margins, controlling inventory and reducing cash consumption. The company's second-quarter outlook calls for revenue of 19.5 billion to 21.5 billion US dollars and adjusted earnings of 1.66 to 1.90 US dollars per share.

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