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SMCI's Server Demand Rising: Will Innovation Keep the Momentum?
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Key Takeaways
SMCI's server and storage system revenues hit $4.5B in Q3 FY25, up 19% year over year.
Growth is driven by demand for DLC racks, new DCBBS modules and AI-optimized storage systems.
Global manufacturing expansion aims to boost deployment and bypass geopolitical trade barriers.
Super Micro Computer’s (SMCI - Free Report) server and storage system segmental revenues grew 19% year over year in the third quarter of fiscal 2025, crossing the $4.5 billion milestone. The server and storage system segment, which accounted for a whopping 97% of the company’s top line, is getting propelled by the rising traction of its innovative products among hyperscalers and AI clients.
At present, the server and storage system revenues are mainly driven by SMCI’s direct liquid cooling products for data-center applications, which reached a production volume of more than 2000 DLC racks per month. The future of this segment is bright due to several recent product launches, including SMCI’s Data Center Building Block Solutions ("DCBBS”) and petascale storage systems for AI workloads.
SMCI recently launched DCBBS, bringing down the barrier to entry that many companies face by simplifying deployment. This modular solution integrates networking, power and cooling to optimize space and reduce power/water consumption. SMCI also launched the Petascale All-Flash Storage Server, integrated with NVIDIA Grace CPU Superchip for heavy workload software-defined networking and AI-storage workloads.
The company is also expanding the reach of its server and storage solutions through global manufacturing expansion across Malaysia, Taiwan and Europe to ramp up the deployment of these solutions while mitigating geopolitical and tariff barriers of local governments.
Super Micro’s sustained focus on enhancing its server and storage product portfolio is likely to continue driving the top-line performance. The Zacks Consensus Estimate for SMCI’s fiscal 2025 revenues is pegged at $22.12 billion, indicating growth of 48% year over year.
How Competitors Fare Against SMCI
The global storage and server market is dominated by players like Pure Storage (PSTG - Free Report) and Hewlett Packard Enterprise (HPE - Free Report) . Pure Storage provides a range of modern storage solutions through its offerings like FlashArray, FlashBlade and Pure Cloud Block Store to serve the purpose of providing All-Flash performance, cloud integration, AI and simplified management.
Hewlett Packard Enterprise offers a range of server services, including HPE ProLiant, HPE Synergy, HPE BladeSystem and HPE Moonshot servers. In the second quarter of fiscal 2025, Hewlett Packard Enterprise’s server segment sales grew 6% year over year due to strong demand for its AI servers.
Per a report by the Mordor Intelligence, the enterprise server market is expected to grow at a CAGR of 8.03% from 2025 to 2030 and reach $139.81 billion. Given the huge opportunity in the space, players like Super Micro, Pure Storage and Hewlett Packard Enterprise, are poised to witness tremendous growth.
SMCI’s Price Performance, Valuation and Estimates
Shares of SMCI have gained 43.3% year to date against the Zacks Computer- Storage Devices industry’s decline of 3.2%.
SMCI YTD Price Performance Chart
Image Source: Zacks Investment Research
From a valuation standpoint, SMCI trades at a forward price-to-sales ratio of 0.87X, down from the industry’s average of 1.61X.
SMCI Forward 12-Month P/S Valuation Chart
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for SMCI’s fiscal 2025 earnings implies a year-over-year decline of 6.33%, while the same for fiscal 2026 indicates growth of 35.75%. The estimates for fiscal 2025 and 2026 have been revised downward in the past 60 days.
Image: Bigstock
SMCI's Server Demand Rising: Will Innovation Keep the Momentum?
Key Takeaways
Super Micro Computer’s (SMCI - Free Report) server and storage system segmental revenues grew 19% year over year in the third quarter of fiscal 2025, crossing the $4.5 billion milestone. The server and storage system segment, which accounted for a whopping 97% of the company’s top line, is getting propelled by the rising traction of its innovative products among hyperscalers and AI clients.
At present, the server and storage system revenues are mainly driven by SMCI’s direct liquid cooling products for data-center applications, which reached a production volume of more than 2000 DLC racks per month. The future of this segment is bright due to several recent product launches, including SMCI’s Data Center Building Block Solutions ("DCBBS”) and petascale storage systems for AI workloads.
SMCI recently launched DCBBS, bringing down the barrier to entry that many companies face by simplifying deployment. This modular solution integrates networking, power and cooling to optimize space and reduce power/water consumption. SMCI also launched the Petascale All-Flash Storage Server, integrated with NVIDIA Grace CPU Superchip for heavy workload software-defined networking and AI-storage workloads.
The company is also expanding the reach of its server and storage solutions through global manufacturing expansion across Malaysia, Taiwan and Europe to ramp up the deployment of these solutions while mitigating geopolitical and tariff barriers of local governments.
Super Micro’s sustained focus on enhancing its server and storage product portfolio is likely to continue driving the top-line performance. The Zacks Consensus Estimate for SMCI’s fiscal 2025 revenues is pegged at $22.12 billion, indicating growth of 48% year over year.
How Competitors Fare Against SMCI
The global storage and server market is dominated by players like Pure Storage (PSTG - Free Report) and Hewlett Packard Enterprise (HPE - Free Report) . Pure Storage provides a range of modern storage solutions through its offerings like FlashArray, FlashBlade and Pure Cloud Block Store to serve the purpose of providing All-Flash performance, cloud integration, AI and simplified management.
Hewlett Packard Enterprise offers a range of server services, including HPE ProLiant, HPE Synergy, HPE BladeSystem and HPE Moonshot servers. In the second quarter of fiscal 2025, Hewlett Packard Enterprise’s server segment sales grew 6% year over year due to strong demand for its AI servers.
Per a report by the Mordor Intelligence, the enterprise server market is expected to grow at a CAGR of 8.03% from 2025 to 2030 and reach $139.81 billion. Given the huge opportunity in the space, players like Super Micro, Pure Storage and Hewlett Packard Enterprise, are poised to witness tremendous growth.
SMCI’s Price Performance, Valuation and Estimates
Shares of SMCI have gained 43.3% year to date against the Zacks Computer- Storage Devices industry’s decline of 3.2%.
SMCI YTD Price Performance Chart
Image Source: Zacks Investment Research
From a valuation standpoint, SMCI trades at a forward price-to-sales ratio of 0.87X, down from the industry’s average of 1.61X.
SMCI Forward 12-Month P/S Valuation Chart
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for SMCI’s fiscal 2025 earnings implies a year-over-year decline of 6.33%, while the same for fiscal 2026 indicates growth of 35.75%. The estimates for fiscal 2025 and 2026 have been revised downward in the past 60 days.
Image Source: Zacks Investment Research
SMCI currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here