Super Micro Is the Next Large Cap to Split Its Stock: What to Know
Super Micro Computer fell short of Q2 earnings estimates and announced a 10-for-1 stock split. Here's what that means for the stock.
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Super Micro Computer (SMCI) stock is spiraling Wednesday after the artificial intelligence (AI) server, software and infrastructure company came up short of earnings expectations for its fiscal fourth quarter. The company also announced a 10-for-1 stock split.
In the three months ended June 30, SMCI's revenue increased 143% year-over-year to $5.31 billion. Its earnings per share (EPS) rose 78.1% from the year-ago period to $6.25.
"Super Micro continues to experience record demand of new AI infrastructures," said CEO Charles Liang in a statement. "We are well positioned to become the largest IT infrastructure company, driven by our technology leadership including rack-scale direct liquid cooling (DLC) and business values of our new data center building block solutions."
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The results were mixed compared with analysts' expectations. Wall Street was anticipating revenue of $5.3 billion and earnings of $8.07 per share, according to Yahoo Finance.
For the first quarter of its new fiscal year, SMCI said it anticipates revenue to arrive between $6 billion to $7 billion and EPS in the range of $6.69 to $8.27. The midpoints of these ranges are mixed compared with the $5.5 billion in revenue and $7.58 per share in earnings that Wall Street is calling for.
For all of fiscal 2025, Super Micro Computer said it expects revenue in the range of $26 billion to $30 billion, which is well ahead of analysts' expectations for revenue of $23.6 billion.
Super Micro will split its stock
SMCI also announced a 10-for-1 stock split.
What does a stock split mean for investors? As Kiplinger contributor Charles Lewis Sizemore, CFA, explains: "As a practical matter, stock splits really don't matter all that much. Sure, they make it easier for prospective investors to start a new position, and they make it easier for existing investors to rebalance or sell part of their holdings. But nothing fundamentally changes."
Based on SMCI's current price of roughly $515, shares will be trading closer to around $51.50 once the split goes into effect on October 1.
Super Micro Computer's decision to split its stock follows in the footsteps of several large-cap firms that have made similar moves this year. Nvidia (NVDA), for one, underwent a 10-for-1 stock split in early June, while Chipotle Mexican Grill (CMG) split its stock 50-to-1 in late June.
Is SMCI stock a buy, sell or hold?
Super Micro Computer was up more than 300% for the year to date back in mid-March, but the stock has since pared this lead to 84%. Still, Wall Street remains bullish on the AI stock.
According to S&P Global Market Intelligence, the average analyst target price for SMCI is $905.18, representing implied upside of nearly 75% to current levels. Additionally, the consensus recommendation is a Buy.
Still, there are skeptics to be found, including in financial services firm Susquehanna Financial Group. The group is one of the more bearish outfits on SMCI stock with a Negative rating (equivalent to a Sell) and a $325 price target.
The company's June report signaled an "intensifying" cash burn, said Susquehanna analyst Mehdi Hosseini in a note. "SCMI is indeed executing to the plan of 'mass customizing' AI server and rack solution, though the business model requires significant working capital commitment while the company is also committing capex to further expand capacity."
Susquehanna's $325 price target represents a discount of nearly 40% to current levels.
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