SMCI Reinstates Revenue Guidance but Faces New Supply Chain Risks to Margin Recovery

What happened

Super Micro Computer reinstated its $40 billion FY 2026 revenue guidance after strong Q2 results, but margin compression risks persist as highlighted in a new article. The company aims to improve margins by pivoting towards more profitable enterprise opportunities and ramping up Data Center Building Block Solutions (DCBBS). However, this strategy is now threatened by intensifying server CPU supply constraints, most acutely at Intel, adding execution risks. The DeepValue report corroborates margin woes with gross margin at 6.3%, $132.9M in inventory write-downs, and negative operating cash flow, driven by extreme customer concentration and governance issues. Together, this paints a picture of robust revenue growth overshadowed by fragile profitability and new supply chain vulnerabilities.

Implication

The reinstated $40 billion revenue guidance reinforces the AI-demand narrative but does not alleviate core profitability issues highlighted in filings. Margin compression from supply constraints could undermine gains from the enterprise shift, keeping gross margin depressed near recent lows of 6.3%. Inventory write-downs and negative cash flow signal operational inefficiencies that supply shocks might worsen, especially with customer concentration at 62.6%. Governance weaknesses add credibility risks, making it harder to trust margin recovery claims. Therefore, investors should maintain a wait-and-see stance until Q3 results show margin stabilization and supply chain resilience, aligning with the DeepValue report's WAIT rating.

Thesis delta

The new article introduces server CPU supply constraints as a specific external risk to SMCI's margin recovery strategy, reinforcing the DeepValue report's caution on profitability. This does not shift the core thesis—which already emphasizes margin and cash conversion challenges—but adds a layer of execution risk that could delay improvement. Thus, the WAIT rating is strengthened, with increased focus on monitoring supply chain dynamics alongside financial metrics like Q3 revenue ≥$12.3B and gross margin trends.