SMCI Stock Under Pressure After Goldman Sell Call
SMCI stock fell after Goldman Sachs began coverage with a sell rating, triggering a 5.6% share drop and heightening margin-compression concerns.
KEY TAKEAWAYS
- Goldman Sachs initiated coverage with a sell rating and a $26 price target.
- Fiscal 2025 revenue was $22.0 billion while gross margins compressed to 11.2%.
- The firm holds a $13.0 billion backlog and a $2.0 billion revolver, raising execution risk.
HIGH POTENTIAL TRADES SENT DIRECTLY TO YOUR INBOX
Add your email to receive our free daily newsletter. No spam, unsubscribe anytime.
Super Micro Computer (SMCI) stock faced investor scrutiny after Goldman Sachs initiated coverage with a "sell" rating and a $26 price target on Jan. 13, 2026, citing margin compression as the company scaled AI-server production and expanded manufacturing.
Goldman Sachs Sell Call and Profitability Concerns
Goldman Sachs flagged margin compression driven by Supermicro’s focus on AI GPU-server production, initiating coverage with a sell rating. This call intensified debate over whether the company’s rapid revenue growth can sustain profit margins.
In fiscal 2025, Supermicro reported revenue of $22 billion, about 50% higher than the prior year, while gross margins compressed to roughly 11.2% as the company prioritized GPU-server volumes for AI. The previous fiscal year saw revenue of $14.9 billion and net income of $1.2 billion, with gross margins declining to 14.2% from 18.1% in fiscal 2023.
Early fiscal 2026 results showed strain: first-quarter revenue fell about 15% year-over-year, and earnings declined roughly 60%, attributed to one-time factors. The ongoing margin compression highlights the tension between growth and profitability.
Backlog, Market Position, and Execution Risks
Supermicro holds an order backlog near $13 billion that requires substantial working capital to fulfill. To support operations, the company secured a $2 billion revolving credit facility with JPMorgan. Management targets roughly $40 billion in revenue for fiscal 2026, implying significant execution demands.
More than 75% of revenue now comes from GPU-based server solutions for AI. Supermicro leads the direct liquid-cooling (DLC) server rack market with about 70% share. Analysts estimate the DLC market will grow from $5 billion in 2024 to $21 billion by 2029.
The company has expanded manufacturing capacity in the U.S., Taiwan, and Europe and collaborates with Ericsson and Nvidia’s Blackwell and Vera Rubin platforms. Its segment market share was 9.98% in the third quarter of 2025, while about 17% of shares were held short, reflecting investor skepticism.
Analyst consensus shows a median one-year price target of $47.71 with a Hold rating among 19 analysts, including eight Buys. This contrasts with Goldman Sachs’ sell initiation, underscoring division over Supermicro’s growth prospects versus margin pressures.
