Can SMCI's Cooling Platforms Emerge as the Next Revenue Pillar?

Super Micro Computer’s SMCI next-generation air-cooled and liquid-cooled GPU and AI platforms are experiencing massive growth in traction, leading to more than 70% contribution to its top line in the fourth quarter of fiscal 2025. Both the enterprise and cloud service providers are adopting SMCI’s cooling technology.

SMCI’s cooling technologies are also part of its Data Center Building Block Solutions (DCBBS). As the demand for modular DCBBS solutions is on the rise, a new direction for SMCI’s air-cooled and liquid-cooling products has also been unlocked in this space. Moreover, DCBBS has also reduced the installation time to three to six months from 12-18 months, making the revenue recognition period shorter for SMCI.

Super Micro Computer’s newly introduced DLC-2 system is also a hit among customers as it reduces power and water consumption by up to 40%, reducing the total cost of ownership, coupled with performance enhancements for modern data centers that serve AI, hyperscale and high-performance computing customers.

The strong adoption of liquid cooling technology has been a trend in the previous quarters as well. For instance, SMCI was executing high-volume shipments of liquid-cooled 4U NVIDIA B200 HGX systems and GB200 NVL72 racks as reported in the third quarter of fiscal 2025. The company had reached a milestone of producing 2000 DLC racks per month.

The rising adoption of SMCI’s air and direct liquid cooling offerings has prompted it to release a strong revenue guidance of $33 billion for fiscal 2026. The Zacks Consensus Estimate for SMCI’s fiscal 2026 revenues is pegged at $32.54 billion, indicating growth of 48% year over year.

How Competitors Fare Against SMCI

Vertiv VRT has a robust thermal management portfolio covering coolant distribution units, chillers, rear-door heat exchangers, and immersion cooling systems to optimize performance, power utilization, control, and heat reuse. VRT is expanding its storage and server cooling expertise organically and inorganically. Vertiv is working closely with NVIDIA to offer cooling systems to AI factories and has previously deepened its portfolio with the Cooltera acquisition.

Dell Technologies’ DELL liquid cooling architectures consist of its Apex and PowerEdge platforms designed for AI server solutions. DELL’s cooling solutions are modular, customizable, and allow the integration of both air and liquid cooling features with 24-hour rack deployment turnaround and end-to-end deployment services. These key differentiators make DELL’s server easy to deploy, hence encouraging smoother adoption.

SMCI’s Price Performance, Valuation and Estimates

Shares of SMCI have gained 31.6% year to date against the Zacks Computer- Storage Devices industry’s growth of 21.4%.

From a valuation standpoint, SMCI trades at a forward price-to-sales ratio of 0.75X, lower than the industry’s average of 1.52X.

The Zacks Consensus Estimate for SMCI’s fiscal 2025 earnings implies a year-over-year growth of 23%, while the estimate for 2026 earnings indicates growth of 29% year over year. The estimates for fiscal 2025 and 2026 have been revised downward in the past 30 days.

SMCI currently carries a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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