Shares of Super Micro Computer Inc. fell more than 10% in extended trading today, after the company posted mixed financial results, beating Wall Street’s forecasts on earnings but falling short on revenue.

However, the after-hours drop may well have been more about investors taking profits, rather than any long-term concerns over the company’s prospects.

The company reported third-quarter earnings before certain costs such as stock compensation of $6.65 per share, beating its own forecast range of between $5.20 and $6.01, and also coming in well ahead of the analysts’ consensus estimate of $5.80. However, the company’s revenue fell short of expectations. It delivered sales of $3.85 billion, up by an astonishing 200% from the year ago quarter, but still short of Wall Street’s target of $3.99 billion.

Super Micro’s stock has been one of the best-performing in the technology industry lately, rallying by more than 700% in the past 12 months. That enormous gain reflects the company’s status as a pure-play AI server maker, and it’s one of only a handful of players capable of making customized servers powered by Nvidia Corp.’s graphics processing units for AI workloads. Its chief competitors are Dell Technologies Inc., Hewlett Packard Enterprise Co. and Lenovo Group Ltd., and each of those have also benefited from the AI trend. However, Super Micro’s stock has seen by far the biggest gains due to its laser focus on servers.

The stunning rise of Super Micro’s stock saw it replace Whirlpool Corp. in the S&P 500 Index last month, and the company believes it will not stop growing any time soon. “We are growing our customer base strongly now,” Chief Executive Charles Liang (pictured) said on a conference call with analysts.

According to Liang, Super Micro would have sold even more servers if not for a key component shortage it faced during the quarter. He added that AI is going to drive yet more growth for the company for “many quarters, if not years to come.” The incredible growth is what prompted Super Micro to seek additional capital through a secondary stock offering earlier this year, the CEO added.

Despite the impressive rally over the last year, the company’s stock had been sputtering over the last week on concerns that arose when executives declined to issue a positive pre-earnings announcement, as it has done in seven of the last eight quarters. The company also neglected to comment why that was the case, leading to speculation that its financial results may disappoint.

The results were indeed mixed, but there is still lots of reason for optimism over Super Micro’s future prospects. Last week, both Microsoft Corp. and Alphabet Inc., the parent company of Google LLC, delivered stronger-than-expected cloud growth driven by AI demand. What’s more, they both announced their intentions to boost AI infrastructure spending, and that’s a promising sign for Super Micro, as they are among its biggest customers.

That may explain why Super Micro is so optimistic about the current quarter. In its fourth-quarter guidance, the company is expecting to generate sales of between $5.1 billion and $5.5 billion, with earnings between $7.62 and $8.42 per share. Both of those forecasts are streets ahead of Wall Street’s guidance, with analysts projecting sales of just $4.9 billion and profit of $7.18 per share.

Holger Mueller of Constellation Research Inc. said it’s easy to forget that it’s not only the AI model makers that are benefiting from the great generative AI gold rush, as the infrastructure providers are also feeding on the frenzy.

“Super Micro is doing really well, basically doubling all of its key performance indicators, from revenue to profit to earnings per share,” the analyst said. “But today’s investor reaction is a sharp reminder that even in the middle of a boom, you need to manage to guidance. Charles Liang and team will want to improve on that in the next quarter, just as much as the company’s shareholders do.”

Super Micro also raised its full-year guidance for fiscal 2024. It now sees total revenue in a range of between $14.7 billion and $15.1 billion, with earnings at $23.29 to $24.09 per share. Previously, it had been targeting revenue of $14.3 billion to $14.7 billion and lower earnings per share.

Wall Street’s consensus estimate calls for full-year revenue of $14.6 billion and earnings of $21.95 per share.

Photo: Super Micro/YouTube