Supermicro Stock Is Down 30% in Days. Investor Skepticism Is Justified.

The underwritten offer will result in 45.45 million shares of common stock at a public offering price of $27.50 per share and 75 million depositary shares, each representing a 1/20th interest in a share of newly issued 7% series A mandatory convertible preferred stock at a public offering price of $50 per share.

But the dilution in shares isn’t being received well by investors. SMCI stock, which was trading at $44.90 before the company’s announcement, fell 30.6% in just five days as the company rolled out the details of the offering in announcements on June 9 and June 11.

Supermicro Beats on Earnings

Supermicro reported solid earnings for its fiscal third quarter (ending March 31). Revenue of $10.2 billion was up from $4.6 billion a year ago, and net income was $483 million versus $109 million in the fiscal third quarter of 2025. Earnings per share were $0.72, which soundly beat analysts’ expectations for EPS of $0.55.

Notably, SCMI’s revenue dropped 19% on a sequential basis, which management attributed to component shortages and customer site readiness delays.

“Despite the industry-wide shortage of key components, including CPU, GPU, and memory, our business continues to grow and expand. Indeed, our backlog is now at another record high,” CEO Charles Liang said.

The company is also expanding its production by ramping up facilities in Taiwan and Malaysia and plans to build a new facility in Silicon Valley that will bring Supermicro’s footprint in the San Francisco to nearly 4 million square feet.

Supermicro issued fourth-quarter and full-year guidance that calls for net sales of $11 billion to $12.5 billion in Q4 and $38.9 billion and $40.4 billion for fiscal 2026.

Supermicro Addresses Legal Issues

The company also distanced itself in the earnings call from co-founder and board member Yih-Shyan “Wally” Liaw, sales manager Ruei-Tsang “Steven” Chang, and contractor Ting-Wei “Willy” Sun, who were indicted by the U.S. government in March on charges that they allegedly attempted to divert $2.5 billion in Nvidia (NVDA)-powered AI servers to China, which would be a violation of U.S. export controls.

Liang said all three were terminated, and the company is cooperating with the Justice Department. “The alleged actions of a few individuals do not define us,” he said.

Liang said the company is not under indictment and is not a target of the investigation, and he believes that the company will not need to restate its earnings. The company also retained an outside law firm and a forensic firm to conduct an independent investigation.

“We will take to heart the results of the independent investigation and look at that as an opportunity to grow and strengthen,” he said.

What Do Analysts Think of SMCI Stock?

Considering the legal issues and the upcoming dilution of shares, analysts are understandably reserved. Twenty analysts who cover the stock have a consensus “Hold” rating on the stock, down from “Moderate Buy” three months ago. Only five have “Buy” ratings and three have “Sell” ratings.

However, the mean price target of $38.87 represents a potential upside of nearly 25%, which plays into the idea that SMCI stock is somewhat undervalued right now.

As said before, buying Supermicro’s stock today is a contrarian play. While hyperscalers like Alphabet are making similar moves to raise money—the owner of Google is selling $80 billion in shares to pay for its AI ambitions—Supermicro comes with a lot more baggage. The company was also delisted from the Nasdaq in 2018 for not filing financial reports in a timely manner and then was fined in 2020 by the Securities and Exchange Commission for accounting violations.

So, it’s no solid bet that Supermicro will be able to follow the Alphabet playbook. A measured stance by investors—and a skeptical eye—is more appropriate.

On the date of publication, Patrick Sanders had a position in: NVDA. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com