This Metric Is a Warning Sign Not to Buy Super Micro Computer Stock

back super microcomputer (NASDAQ: SMCI) Its second-quarter fiscal 2026 results were announced after the close on February 3, and its shares immediately climbed as the report showed strong revenue growth and management raised its revenue guidance for the current fiscal year. However, the stock gave back most of its gains later in the week. Then it resumed and is still unstable.

For those unfamiliar with Supermicro, the company designs and assembles server and rack solutions for data centers, providing customers with everything they need to get up and running. it is an important partner NVIDIAand often tailor their systems around the chipmaker’s graphics processing unit (GPU).

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While AMD’s revenue has been growing rapidly, the company has faced significant gross margin pressure over the past few years. This pattern began in the June 2024 quarter, when its gross margin plummeted to 11.2% from 17% in the same period last year. Since then, its gross profit margin has been spiraling and hit a new low of 6.3% last quarter, down from 11.8% in the same period last year and 9.3% in the first fiscal quarter.

On the bright side, management believes its gross margins have reached the bottom of this downcycle and expects gross margins to improve. This improvement is expected in part to be driven by increasing adoption of its Data Center Building Block Solutions (DCBBS) products, which include management software and liquid cooling infrastructure. These products have higher profit margins.

Additionally, AMD’s revenue and earnings grew strongly despite gross margin pressure. In the fiscal second quarter, its revenue more than doubled year over year to $12.7 billion, beating analysts’ consensus estimate of $10.4 billion. fact set. Adjusted earnings per share (EPS) rose 17% to $0.69, beating the consensus estimate of $0.49.

Looking ahead, management expects Supermicro’s third-quarter revenue to be at least $12.3 billion, and raised its full-year revenue forecast to at least $40 billion from the previous forecast of at least $36 billion. It expects adjusted earnings per share in the third fiscal quarter to be at least US$0.60, and adjusted gross profit margin to increase by 30 basis points quarter-on-quarter.

The world is in the midst of the largest data center expansion in history. However, even as AMD’s revenue soared, its gross margins shrank. The reason is that it’s essentially a middleman squeezed between Nvidia and customers trying to control costs. Meanwhile, until recently, Supermicro’s products differed relatively little from those of its competitors, and the data center server business was highly commoditized. Management hoped DCBBS, launched to customers late last year, would change that, but other innovations it introduced, such as direct liquid-cooled servers, generally didn’t have much of a lasting impact.