Super Micro's $40B revenue forecast overshadowed by AI chip smuggling indictment
Super Micro Computer (SMCI) has raised its revenue forecasts for fiscal 2026, even as its stock plunged following a federal indictment. The company now expects at least $40 billion in annual revenue and $12.3 billion in the third quarter alone. However, shares fell 33% after three individuals linked to the firm were accused of illegally exporting AI chips to China. The indictment names Yih-Shyan 'Wally' Liaw, a senior vice president and board member, Ruei-Tsang 'Steven' Chang, a Taiwan-based sales manager, and Ting-Wei 'Willy' Sun, a contractor. They allegedly conspired to violate U.S. export controls by smuggling servers with Nvidia GPUs to China without proper licences. The scheme reportedly generated around $2.5 billion in sales for SMCI since 2024.
SMCI has taken swift action, placing Liaw and Chang on administrative leave while cutting ties with Sun. Despite the legal troubles, the company reported $12.7 billion in revenue for the fiscal second quarter of 2026—a 123% jump from the same period last year. However, non-GAAP gross margins slipped to 6.4% in the December quarter, down from 9.5% previously, due to higher shipping costs, component shortages, and pressure from large data centre clients.
CEO Charles Liang remains optimistic, pointing to the Data Center Building Block Solutions (DCBBS) line as a key driver for margin recovery. Yet, analysts have grown cautious. Citigroup slashed its price target for SMCI stock by 35%, from $39 to $25, while keeping a 'Neutral' rating. Out of 19 analysts covering the stock, 13 now recommend 'Hold' or lower, with an average target of $37.47. The indictment has added to SMCI's challenges, following earlier volatility tied to accounting concerns and a Department of Justice probe in late 2024. While the company's revenue growth remains strong, its stock performance reflects investor unease. The outcome of the legal case and margin recovery efforts will likely shape its near-term trajectory.
