Shares of Super Micro Computer (SMCI 2.65%) jumped 10.5% in after-hours trading on Monday following the computer server specialist's release of a super-strong report for the second quarter of fiscal 2024 (ended Dec. 31, 2023).
The market's positive reaction is largely attributable to Supermicro (as the company refers to itself and is commonly called) issuing third-quarter guidance that crushed Wall Street's consensus revenue and earnings estimates, and significantly raising its full-year fiscal 2024 top-line guidance. The big increase was driven in large part by robust market demand for the company's servers optimized for artificial intelligence (AI) applications.
Supermicro's powerful Q2 results didn't come as much of a surprise because on Jan. 18 it released preliminary revenue and earnings ranges. These metrics crushed Wall Street expectations, which sent shares soaring 36% the following day. That said, the quarter's top and bottom lines both came in slightly above the company's projections in its preliminary release, which likely also provided a tailwind to the stock in Monday's after-hours trading session.
Super Micro Computer's key numbers
| Metric | Fiscal Q2 2023 | Fiscal Q2 2024 | Change |
|---|---|---|---|
| Revenue | $1.80 billion | $3.66 billion | 103% |
| GAAP operating income | $215 million | $371 million | 73% |
| GAAP net income | $176 million | $296 million | 68% |
| Adjusted net income | $187 million | $329 million | 76% |
| GAAP earnings per share (EPS) | $3.14 | $5.10 | 62% |
| Adjusted EPS | $3.26 | $5.59 | 71% |
Data source: Super Micro Computer. Fiscal Q2 2024 ended Dec. 31, 2023. GAAP = generally accepted accounting principles.
In the company's Jan. 18 preliminary release, it projected quarterly sales of $3.6 billion to $3.65 billion and adjusted EPS of $5.40 to $5.55. These preliminary results -- which the company exceeded -- represented a massive increase from its prior guidance, which was for sales of $2.7 billion to $2.9 billion and adjusted EPS of $4.40 to $4.88.
Wall Street had originally been modeling for adjusted EPS of $4.93 on revenue of $3.06 billion. So, Supermicro sprinted by both expectations.
In the first half of fiscal 2024, Supermicro used cash of $325 million running its operations, compared with generating cash of $475 million in the year-ago period. It ended the quarter with cash and cash equivalents of $726 million and total bank debt of $376 million.
What the CEO had to say
Here's what CEO Charles Liang had to say in the earnings release:
We continued to demonstrate our market leadership in fiscal Q2 2024, reporting record revenue results of $3.66B [and] year-over-year growth of 103%. While we continue to win new partners, our current end customers continue to demand more [of] Supermicro's optimized AI computer platforms and rack-scale Total IT [information technology] Solutions. As our innovative solutions continue to gain market share, we are raising our fiscal year 2024 revenue outlook to $14.3 billion to $14.7 billion.
Guidance
For the fiscal Q3 (ending March 31), Supermicro guided for:
- Revenue of $3.7 billion to $4.1 billion, which represents growth of 189% to 220% year over year.
- Adjusted EPS of $5.20 to $6.01, which represents growth of 219% to 269% year over year.
Going into the release, Wall Street had been modeling for Q3 revenue and adjusted EPS of $2.87 billion and $4.55, respectively, so the company's guidance crushed these estimates.
For the full fiscal year 2024 (ending June 30), management raised its guidance as follows: Revenue of $14.3 billion to $14.7 billion, up from the prior outlook of $10 billion to $11 billion. The updated guidance represents annual growth of 101% to 106%.
In short, Super Micro Computer turned in a great quarter. The company has strong long-term growth prospects, thanks largely to the exploding adoption of AI by companies and other entities of all sizes.
Supermicro stock is worth a place on growth investors' watch lists. That said, investors should monitor the company's cash flows. While its reported "earnings" are positive, its operating cash flow was negative for both the second quarter and for the first half of fiscal 2024.
