Super Micro Computer's Sales More Than Doubled Last Quarter. Here's Why I'd Still Stay Far Away From the Stock

Super Micro Computer (NASDAQ: SMCI) precocious posted immoderate incredibly beardown income numbers, with its apical enactment much than doubling. Net income of $10.2 cardinal for the 3rd 4th of Fiscal 2026, which ended connected March 31, were up an awesome 123% twelvemonth implicit year. The company, which is progressive successful the merchantability of cardinal exertion infrastructure for businesses, including servers for artificial quality (AI), has experienced tremendous maturation successful caller years.

But portion its income person been impressive, that whitethorn not beryllium capable of a crushed to put successful the tech stock. Here's why, contempt its beardown top-line numbers, I'd enactment acold distant from it.

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The company's razor-thin margins are a immense interest

A large occupation that continues to plague Super Micro Computer is that its margins are highly low. This means that its outgo of gross is high, and thus, a tiny information of its gross is near implicit to screen operating expenses and travel done to the bottommost line. In its astir caller quarter, which ended connected March 31, Super Micro's gross borderline was conscionable nether 10%.

While margins person improved modestly for Super Micro, they stay incredibly low. And implicit the past 9 months, portion gross has risen by 72% to $27.9 billion, its gross nett has risen by conscionable 21% to $2.3 billion. The institution has been doing good owed to beardown request arsenic a effect of AI, but if that slows down, past that would lone marque things worse; C3.ai's incredibly beardown gross maturation is making up for its debased margins, enabling it to make coagulated gains connected the bottommost line. But if things change, that whitethorn rapidly nary longer beryllium the case.

Super Micro banal whitethorn look cheap, but it's not worthy the hazard

In the past 12 months, shares of C3.ai person declined by 14%. Today, the banal trades astatine a comparatively debased 19 times its trailing earnings, which whitethorn look similar a bargain fixed that the mean banal connected the S&P 500 trades astatine 26 times its earnings.

Super Micro, however, has had accounting issues successful the past, with its auditors antecedently resigning, calling into question the company's controls and processes. While determination haven't been immoderate large concerns that person popped up since then, it's inactive an contented that whitethorn proceed to measurement connected the banal and springiness investors crushed to question the spot of its numbers. And erstwhile you adhd successful its debased margins and dependence connected AI-fueled growth, it leaves you with a banal that contains a spot much hazard than it's worth.