Supermicro's AI Boom, Liquid Cooling Edge Spark Analyst Confidence In Growth Potential

Rosenblatt analyst Kevin Cassidy reinstated coverage on Super Micro Computer SMCI with a Buy and a $60 price target.

Supermicro is a leading provider of customizable, high-performance, energy-efficient server and storage solutions, catering to the rapidly growing demands of AI, cloud, enterprise, and edge computing. Focusing on innovation, security, and global manufacturing expansion, the company is well-positioned to capitalize on industry trends.

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By investing in cutting-edge technologies, supply chain diversification, and cost optimization, Supermicro strengthens its competitive edge in the evolving IT infrastructure landscape.

Supermicro has benefited from the emerging importance of generative AI themes as investors have started to appreciate the company’s inherent innovation, design, deployment, and manufacturing scale capabilities, the analyst says.

AI revenues are now nearly 70% of sales and are accelerating, with visibility increasing to 1-2 years.

Supermicro’s long history in “Green” computing, building block architecture (BBA), plug-and-play, Twin architecture, rack-scale integration, and S/W platform optimization has resulted in a formidable business model aligned with the critical factors for success in an AI-driven world where time-to-market, TCO optimization, scale, and reliability are of the utmost importance, according to the analyst.

Cassidy noted the company’s ability to deliver liquid cooling at scale as a competitive advantage. Given the complexity, expense, and reliability concerns (leaks or droplets), liquid cooling at scale has been quite difficult to deploy.

At scale, Supermicro’s liquid cooling technology can increase rack compute power by over 2 times, which the analyst noted as a disruptive dynamic in a power-constrained data center.

Cassidy modeled fiscal 2025 sales of $24.3 billion (+62% Y/Y), adjusted gross margins of 12.3%, and adjusted EPS of $2.63. This is versus the consensus of $24.1 billion (+61% Y/Y), 12.3%, and $2.63.

The analyst modeled fiscal 2026 sales of $33.0 billion (+36% Y/Y), adjusted gross margins of 12.6%, and adjusted EPS of $3.82. This is versus the consensus of $33.2 billion (+38% Y/Y), 12.2%, and $3.68. He modeled fiscal 2027 sales of $39.0 billion (+18% Y/Y), adjusted gross margins of 14.3%, and adjusted EPS of $5.02. This is versus the consensus of $39.3 billion (+18% Y/Y), 15.5%, and $4.52.

With server sales typically a 15%-30% gross margin business, Cassidy noted that Supermicro could improve its gross margins as it ships solutions to more Enterprise customers.

Price Action: SMCI stock is down 1.39% at $37.71 at last check Monday.

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