Supermicro, a major provider of AI-optimized servers, reported preliminary fiscal third-quarter 2025 results that fell short of expectations, raising concerns about a potential slowdown in AI infrastructure investments by major cloud service providers (CSPs). The company's delayed shipments, driven by cautious customer platform decisions, come amid reports of a more measured approach to AI spending among tech giants like Microsoft and Amazon.
Supermicro has reported preliminary fiscal third-quarter results that missed earlier expectations, with adjusted earnings per share projected between US$0.29 and US$0.31 and revenue expected to range from US$4.5 billion to US$4.6 billion.
The company said that while demand for its new generation of product designs remains strong, some customer platform decisions were delayed during the quarter, pushing related sales into the fiscal fourth quarter. Gross margins declined by 220 basis points from the previous quarter on both a GAAP and non-GAAP basis, largely due to higher inventory reserves for older-generation products and increased expedited costs aimed at accelerating time-to-market for newer offerings.
Analyst perspectives
Despite the disappointing results, industry analysts offered nuanced views on Super Micro's position in the AI market. Bloomberg Intelligence noted that the sales miss highlights Super Micro's reliance on large-scale AI deals. However, analyst Woo Jin Ho emphasized that "sustained product-design wins suggest AI-server activity could still be intact, despite economic concerns," pointing to the company's robust pipeline of new-generation products.
According to Bloomberg, Citi underscored the gross margin contraction, which fell below Wall Street's expectation of 12.0%, but highlighted that the deferral of sales to the fiscal fourth quarter suggests temporary timing issues rather than a collapse in demand.
Lynx Equity Strategies addressed investor fears about potential cuts in AI capex, stating, "We do not think there has been a fundamental change in end market dynamics." Analyst Ben Soff added that while there may be "some churn in orders from data centers," Super Micro's US-based manufacturing provides a competitive edge, making shipments to domestic customers "relatively safe" amid global supply chain uncertainties.
Slower AI investments?
Reports emerging since the start of 2025 indicate a cautious shift in investment strategies among major cloud service providers (CSPs) regarding their AI infrastructure build-out. Global economic uncertainties, persistent trade tensions, and the dynamic evolution of market demands appear to be key factors influencing these adjustments.
While tech behemoths Alphabet and Microsoft have publicly committed to significant capex plans for the year, totaling a substantial US$155 billion – nearly half of the estimated US$320 billion earmarked for overall AI investment – subtle signs of a more measured approach are surfacing. Sources suggest that some technology firms are opting to pause or even abandon data center projects, citing concerns over potential oversupply and escalating operational costs.
Adding weight to this trend, Microsoft has reportedly announced a slowdown or outright pause on specific AI data center initiatives. This includes a notable US$1 billion project planned for Licking County, Ohio. This decision underscores a recalibration of expectations concerning the sheer scale of infrastructure required to effectively support burgeoning AI technologies.
Further evidence of this cautious stance comes from a Reuters report citing analysts at Wells Fargo. The report indicates that Amazon, a leading player in the cloud services sector, has temporarily halted certain data center lease negotiations, particularly within international markets. This move signals a temporary deceleration in the previously rapid pace of large-scale facility leasing by the company's cloud division.
These developments suggest that while the long-term commitment to AI remains strong among major CSPs, a more pragmatic and adaptable approach to infrastructure investment is taking hold in response to the current global landscape. The industry will be closely watching how these adjustments impact the future trajectory of AI development and deployment.
Super Micro Computer preliminary results for 3QFY25 (US$) | ||
Financial | Prior guidance | Expected range |
Sales | 5B-6B | 4.5B-4.6B |
GAAP diluted net income per common share | 0.36-0.53 | 0.16-0.17 |
Non-GAAP diluted net income per common share | 0.46-0.62 | 0.29-0.31 |
Source: Supermicro Computer, April 2025
Article edited by Jack Wu
