Super-microcomputer (NASDAQ:SMCI) shares fall nearly 20% after reporting fourth-quarter results.

The server and storage company’s revenue rose 143.6% to $5.31 billionjust beatenexceeded analyst estimates of $5.30 billion. Adjusted earnings per share of $6.25 were below estimates of $8.07.

In addition, Super Micro exceeded all expectations with its forecasts. The company forecast revenue between $6 billion and $7 billion for the first quarter, while analysts’ estimates were $5.46 billion. For the fiscal year ending June 30, 2025, the company expects revenue between $26 billion and $30 billion, significantly higher than the estimate of $23.4 billion.

In addition, Super Micro announced a 1:10 stock split.

“We are well positioned to become the largest IT infrastructure company, driven by our technology leadership, including rack-scale DLC liquid cooling, and the business values ​​of our new Datacenter Building Block Solutions,” said CEO Charles Liang.

SMCI shares: Analysts lower price targets due to margin concerns

However, a major factor holding SMCI back today is its declining margins. During the quarter, Super Micro had a gross margin of 11.2% compared to 17% last year and 15.5% in the previous quarter. This is due to increased selling expenses to $4.71 billion compared to $1.81 billion in the year-ago period as competition increases. Dell (NYSE:dELL) And Hewlett-Packard (NYSE:HPE). In fact, sales expense growth of 159.8% exceeded revenue growth of 143.6%.

Following the results, Bank of America analyst Ruplu Bhattacharya lowered his price target to $700 from $1,090 and downgraded his rating to “neutral” from “buy.”

“We expect margin challenges to continue for the next few quarters as Super Micro navigates a competitive pricing environment, delayed shipments of Nvidia’s Blackwell GPU systems that require liquid-cooled racks, and ongoing component availability issues,” Bhattacharya said. The analyst expects Super Micro’s margins to recover by the end of 2025.

Bhattacharya was not alone, as several other analysts also lowered their price targets:

1. Barclays lowered its target from $1,000 to $693.
2. Goldman Sachs lowered its target from $775 to $675.
3. Wells Fargo lowered its target from $890 to $650.
4. Wedbush lowered its target from $800 to $620.

At the time of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com Publishing guidelines.

At the time of publication, the responsible editor held a LONG position in NVDA.