11:25 AM EDT, 08/06/2025 (MT Newswires) -- Super Micro Computer's ( SMCI ) fiscal Q4 results were weaker than expected, and while free cash flow was strong this quarter, it's expected to turn negative in the coming years due to working capital demands, BofA Securities said in a note Wednesday.

The analysts said that the outlook for fiscal Q1 also disappointed, with revenue and earnings per share guidance at the midpoint falling short of expectations. Despite an anticipated sequential revenue increase of $740 million, the company guided gross margin to remain flat compared to the prior quarter.

While sales to sovereign customers remain a long-term growth opportunity, the impact on margins is still unclear, the analysts said, adding that if Super Micro can increase service-related sales, that could help improve margins over time. Meanwhile, competitor Dell Technologies ( DELL ) seems to be gaining market share in the artificial intelligence server market.

The analysts said that this quarter was also affected by changes in customer specifications and delays. Gross margins dropped due to write-downs on older products, as some customers waited for newer Nvidia ( NVDA ) chips, a trend that may continue. Revenue was also delayed because a major customer changed its order late in the quarter. Management also pointed out that limited access to capital constrained their ability to scale production during the quarter.

The analysts added that they have raised their revenue forecast for fiscal 2026 to $33.1 billion, in line with company guidance, up from their previous estimate of $31.5 billion. As a result, their price objective on Super Micro Computer ( SMCI ) has increased slightly to $37 per share, from $35. The firm reiterated its underperform rating on the stock.

Shares of the company fell past 20% in recent trading activity.

Price: 45.62, Change: -11.64, Percent Change: -20.33