Shares of Super Micro Computer (NASDAQ:SMCI) are up 15% after the maker of artificial intelligence (A.I.) servers said that its second-quarter gross margins will nearly double.
For the quarter ending June 30, Super Micro Computer says that its gross margins will be in a range of 15% to 17%, double the 8.2% to 8.4% from its previous guidance.
The company said that a “favorable customer and product mix” has led to the raised outlook.
SMCI stock was up as much as 21% shortly after the announcement, before paring the gains.
While news of the increased profit margins was positive, Super Micro Computer actually preannounced its second-quarter financial results due to several issues.
The company said that its revenue for Q2 will be near the lower end of its previous guidance of $11 billion U.S. to $12.5 billion U.S.
However, news of the gross margin expansion appears to have overwhelmed the lower revenue for the April through June quarter.
Management at Super Micro Computer also said that the company’s backlog rose to record levels in the second quarter. Total new orders were in excess of $60 billion U.S.
The company has faced several problems over the past year.
In March, the U.S. Department of Justice charged the company’s co-founder Wally Liaw with an alleged plan to smuggle U.S.-assembled A.I. servers into China.
Then in June, two employees were detained in Taiwan as part of an investigation into alleged smuggling of Nvidia (NVDA) microchips into China.
Super Micro Computer next reports earnings on Aug. 11 after the stock market closes.
Prior to today (July 22), SMCI stock had declined 49% over the past 12 months to trade at $25.50 U.S. per share.
