Super Micro Shares Fall on Financial Control Weaknesses
Firm discloses material weaknesses in SEC filing, raising concerns over its ability to produce timely and accurate results.
Super Micro Computer (SMCI) shares fell 1.5% in pre-market trading after the AI server manufacturer disclosed “material weaknesses” in its internal controls over financial reporting. In its annual SEC filing, the company warned the issues could impede its ability to produce timely and accurate financial results, compounding investor concerns that have mounted over the past several months.
The disclosure is the latest in a series of setbacks for the high-flying stock. Super Micro missed its annual financial report deadline in August 2024, which was followed by the resignation of its auditor, Ernst & Young, in October over concerns about the company's governance and transparency. While Super Micro has since submitted the required statements, it acknowledged in the filing that it has begun remediation efforts but offered no guarantee the measures would fully resolve the control issues.
These governance challenges cast a shadow over the company's recent performance. Super Micro shares plunged 21% on August 6 after it posted weaker-than-expected fourth-quarter results and cut its fiscal 2026 revenue outlook from $40 billion to at least $33 billion. The company’s gross margin also declined to 11.1% in fiscal 2025 from 13.8% the prior year, signaling tighter profitability despite surging revenue.
Despite the recent turmoil, the stock remains up over 44% year-to-date, buoyed by relentless demand for AI hardware. Super Micro is a key partner for Nvidia, supplying servers for large-scale AI data centers. However, this latest disclosure regarding its internal financial controls introduces a significant new risk for investors betting on the company's central role in the AI infrastructure boom.