The SMCI stock price suffered a harsh reversal in the extended hours after the company published its financial results that missed analysts’ estimates. It dropped by as much as 10% to $43.20, down by over 63% from its highest level in 2024 when it was one of the hottest stocks in Wall Street.
Why Super Micro Computer stock is falling
The Supermicro stock price pulled back sharply after the company published relatively weak financial results even as the artificial intelligence (AI) theme continues.
Supermicro is one of the top players in the sector, thanks to the products it makes, which include rack servers, GPU servers, blade servers, BigTwin and ultra systems, and storage units.
The company’s slowdown is mostly because of the rising competition from companies like Dell, HP Enterprise, Lenovo, and Cisco.
Its results showed that its revenue dropped by 15% to $5.0 billion, down from $5.8 billion in Q4’25 and $5.9 billion in Q’25. This progression shows that its business is seeing a robust slowdown at a time when it should be growing.
The company’s margins also declined, with the gross figure falling from 13.1% in Q1’25 to 9.3% in Q1’26. All this led to a sharp decline in its net profit, which moved to $168 million.
On the positive side, the company reported maintaining a high backlog and its forward guidance. Management expects that its net sale will be between $10 billion and $11 billion in the second quarter and annual revenue of $38 billion. It backlog stands at $13 billion.
Supermicro inventory has soared
The SMCI stock also dropped after the company announced a big increase in its inventories. Its inventories soared to over $5.7 billion in the first quarter, up from $4.6 billion in the same period last year.
Rising inventories is often a bad sign for a company as it sends a signal that its products are not selling as fast as anticipated. It also often leads to cash flow issues and leads to lower margins as a company is forced to lower prices.
SMCI stock has other challenges that may drag its performance. One of these is that the share of inventors shorting the company is increasing as evidenced by the jump in short interest, which has move to about 14%.
Read more: Top 4 reasons why Supermicro’s bond offering is a positive for SMCI shares
More investors are shorting the company because of it slow growth and falling margins. Most importantly, other companies like Dell and HPE have boosted competition in the server industry.
Meanwhile, there is the lingering challenge of the bursting of the AI bubble, which will lead to lower orders from its customers.
SMCI stock price technical analysis
The weekly chart shows that the Supermicro stock price has crashed from a high of $122.83 in March last year to the current $47.40.
It has formed a rising wedge pattern, which is one of the most common bearish signs in the market. Also, the company has formed a bearish flag pattern, and the Supertrend has remained in red.
Therefore, the most likely scenario is where the stock stages a strong bearish breakout, potentially to $30 and below.
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