Why Super Micro Computer Is Sinking This Week

Super Micro Computer (NASDAQ: SMCI) is having a brutal week.

The IT solutions provider's share price has done well this year due to the company's ability to deliver full artificial intelligence racks, which are a one-stop model that cut integration time significantly. The stock is up 37% year to date (since January 1, 2025)

But this week the share price plummeted – it's down 20% in the last week. The drop is due to weak fiscal fiscal 2026 first quarter results the company reported on Tuesday morning.

Sales fell 15% from a year ago, to $5 billion. Net income was down a whopping 60%, to $168 million, from $424 million in the same quarter last year.

Earnings halved

And diluted earnings per share were also cut to $0.26, from $0.67 a year ago. Analysts had expected earnings of $0.40 a share, so the company even missed that pared-back forecast.

Source: Getty Images.

Perhaps just as concerning, the company's gross margin, 13.1% just one year ago, dwindled to 9.3%. And management said it expects margins to fall further this quarter due to a large design win that will drive costs higher.

The San Jose, California-based firm benefited from the AI boom, as it can deliver servers with popular processing units made by Nvidia. But intense competition and market share losses have weighed on recent results.

Matthew Benjamin has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.