Ultra Micro Computer (SMCI.US)'s earnings report surpassed expectations and reflected the industry boom! Wall Street: AI server demand is secure, GPU supply bottleneck

The Zhitong Finance App learned that after Ultra Micro Computer (SMCI.US) announced results and guidelines for the first quarter of fiscal year 2027 that exceeded expectations, several Wall Street investment banks updated their bullish views on this artificial intelligence (AI) server supplier and industry. Agencies generally believe that demand for AI servers is still strong, and that component supply (including GPUs) and customer data center readiness rather than demand constitute a key constraint on growth; at the same time, institutions remain cautious about the valuation, execution trustworthiness, backlog cancellability, and litigation progress of ultra-microcomputers. The overall view is positive but divided.

According to financial reports, Ultra Micro Computer's Q1 revenue was US$19.95 billion, up 298% year on year, up 79% month on month, 33% higher than market consensus; gross margin was 12.8%, 198 basis points higher than market consensus; operating profit was US$2.65 billion, with earnings per share of US$1.81, 70% higher than the market consensus of US$1.06.

Looking ahead, the company gave revenue guidance of US$19.5 billion to US$21.5 billion for Q2, with a median value of US$20.5 billion, which is 24% higher than market expectations of US$16.53 billion; the median earnings per share guidance was US$1.78, which is 65% higher than the agreed US$1.08 billion. Revenue guidance for fiscal year 2027 is $72 billion to $82 billion, and gross margin guidance is 11.8% to 12.2%. Bernstein believes that this guideline means that the company's revenue will remain close to the Q1 operating level, while its profitability is stronger than Wall Street's previous expectations.

However, Bernstein is still cautious about the valuation and execution aspects of ultra-microcomputers. The bank obtained a target price of $42 with 12 times FY28 earnings of $3.53 per share, maintaining the “same level as the market” rating, and pointed out that the boom in AI infrastructure demand continues to benefit the industrial chain, but concerns surrounding management's trustworthiness and the cancellability of backlog orders may limit the full realization of revenue.

The bank's team of analysts, led by Mark C. Newman, believes that the appointment of Mark Long, the former CFO of Western Digital (WDC.US), as CFO is a positive development, but the company still needs to show more and more extensive evidence of implementation before the market can shift to a more constructive view.

Bernstein also said that the strong performance of ultra-microcomputers is a positive reflection of Dell (DELL.US) and HPE (HPE.US), and favors Dell in this group of stocks; the bank gave Dell an “outperforming the market” rating and a target price of $650.

Wedbush analyst Matt Bryson said in an investor report that ultra-microcomputer's strong performance and prospects for improvement have strengthened the positive background of the AI server industry and should at least partially ease market concerns that “financing frictions may drag down AI server spending”. In particular, ultra-microcomputers have released signals that the key restraint in the guidelines comes from component supply rather than customer demand.

Bryson pointed out that management mentioned the shortage of key components (even GPUs) and rising costs. This statement should provide some relief for component stocks that have been pressured by demand concerns over the past few weeks, benefiting Dell, HPE, and memory and other server component vendors. Wedbush maintained a “neutral” rating for ultra-microcomputers and a target price of $40, while raising the FY27 adjusted earnings forecast per share from $4.45 to $6.43, and raised the FY28 forecast from $4.48 to $5.64.

The bank also said it is awaiting the conclusion of all lawsuits relating to the shipment of ultra-microcomputers and GPU systems, and believes that the matter will still be a hanging factor in the stock price until co-founder Wally Liaw's sentence is over. According to information, in March of this year, the US Department of Justice charged three people, including Wally Liaw, with helping to smuggle at least 2.5 billion US dollars of US AI technology in violation of export laws; Willy Sun has pleaded guilty and is awaiting sentencing; Wally Liaw has pleaded not guilty; Steven Chang is still at large.

Needham analyst N. Quinn Bolton, on the other hand, was more aggressive, reaffirming the ultra-micro computer's “buy” rating and a target price of $46. He pointed out that the median Q2 revenue guide for ultra-microcomputers was 20.5 billion US dollars, an increase of only about 2.8% month-on-month compared to the Q1 reporting base, but if we take the basic revenue of about 17.6 billion US dollars as a reference, the month-on-month increase was about 16.5%. Citing management, the bank emphasized that the key factors limiting the pace of growth are component availability (including GPUs) and customer data center readiness rather than demand.