2 Analysts Sour On Super Micro: Can SMCI Recover Amid +40% Fall?

Key Points

• After seeing its share price nearly double during the year, Super Micro Computer closed 2025 in the red.
• While the firm sees massive growth ahead in 2026, profitability concerns are weighing on recent Wall Street targets.
• Super Micro's new DCBBS business line could provide a much-needed avenue for profitable growth in the future.

Shares of artificial intelligence (AI) server stock Super Micro Computer NASDAQ: SMCI went on a wild ride in 2025. The stock was up as much as 99% through late July, but ultimately closed down 4% on the year. Now, in 2026, two Wall Street analysts have poured gas on the fire, setting pessimistic price targets on Super Micro.

Trading near $33 per share at the Jan. 16 close, SMCI is down 46% from its 52-week high. Having fallen so significantly, could SMCI shares see a big recovery, or should investors take recent price targets as a stern warning? 

SMCI’s Tug-of-War: Explosive Growth vs. Weakening Profitability

Super Micro shares really started to turn for the worse when the company released its Q1 earnings for fiscal year 2026 (FY2026) on Nov. 4, 2025. (Note that SMCI’s fiscal year is offset from the calendar year by about six months.) The report showed a clear give-and-take between two key metrics: growth and profitability. 

That trade-off landed poorly with the market, with SMCI sliding about 6% in regular trading and roughly another 4% after hours around the release.

Despite being down over 40% from its February highs, Super Micro's outlook could be getting brighter.

The firm expects to generate at least $36 billion in sales in FY2026. This would represent a growth rate of at least 64%, a huge acceleration over the company’s already strong FY2025 growth of 47%. 

The company said it has over $13 billion in back orders connected to NVIDIA’s NASDAQ: NVDA Blackwell servers, and it recently signed the largest deal in its history.

However, to support this growth, Super Micro will likely make some serious concessions. The company notes that its new Blackwell-optimized platform will entail higher costs and lower margins. 

Notably, the company expects its gross margin to fall 300 basis points from Q1 FY2026 to Q2 FY2026. This would put the already low figure down to approximately 6.5%. While the company expects its gross margin to recover over time, such a low figure leaves little meat on the bone for SMCI to turn its massive sales into profits.

Goldman and Mizuho Eye Downside Ahead for SMCI

Profitability is among the biggest concerns expressed by analysts. The teams at Goldman Sachs and Mizuho recently placed $26 and $31 price targets on SMCI, respectively. These figures imply that shares could drop by between 20% and 5%.

Goldman notes that while it expects Super Micro to remain an AI server leader in the medium term, it has limited visibility into profitability improvements. It is difficult to argue with this, given that margins have only fallen since peaking in late 2022. Margin trends suggest its competitive advantage is weakening, an uninspiring signal for the stock’s outlook.

Despite expectations for massive topline growth, consensus forecasts see SMCI’s operating income growing by just 8% in FY2026, and adjusted earnings per share (EPS) being essentially flat. Buying chips from NVIDIA that it integrates into servers puts Super Micro in a difficult position. Growing revenue all but requires them to accept NVIDIA’s pricing, due to Big Green’s strong competitive advantages, putting significant strain on SMCI’s margins.

It is worth pointing out that Super Micro is attempting to find higher-margin growth pathways. This includes its data center building block solutions, or DCBBS. DCBBS offers solutions far more expansive than Super Micro’s traditional product lines. Instead of just supplying server racks, the company wants to supply much larger pre-built systems. SMCI believes that this increased complexity and deployment speed will translate into higher margins. While DCBBS sales are still in their early stages, the company says its gross margins are greater than 20% in this area.

Average Targets See Big Upside, DCBBS Is Key to Shifting Outlook

Despite bearish targets from Goldman and Mizuho, many analysts remain confident in Super Micro. The consensus target of $47 implies 44% upside in the stock. The average of targets updated after the company’s latest earnings report remains essentially the same.

While this provides hope that Super Micro shares could experience a significant near-term recovery, the stock’s longer-term outlook still looks shaky. Super Micro has not shown an ability to convert its revenue into free cash flow, the most important measurement of value creation. It is possible this could change, but at this point it's hard to have much confidence in SMCI.

The progression of DCBBS will be key to watch. If it becomes a significant business line going forward and maintains its solid margin, DCBBS could be exactly what Super Micro needs.