Super Micro Computer (NASDAQ: SMCI) faces challenges ahead of its fiscal fourth-quarter earnings report, balancing long-term growth in the AI server space with immediate concerns about market visibility and profit margins.

Analyst Matt Bryson of Wedbush remains Neutral on Super Micro, citing caution over near-term visibility and uncertainty around demand strength despite the company’s position in the AI infrastructure market.

Super Micro stands to benefit from increasing AI infrastructure spending, especially in the server market. Nvidia’s prioritization of deliveries to OEMs over hyperscalers could be a positive for Super Micro, as demonstrated by peer company Gigabyte’s recent sales surge.

Analyst Bryson sees potential for Super Micro to reach $10 billion in quarterly sales, a significant jump from current revenue projections. However, visibility into actual demand trends remains limited, with concerns about component sourcing and manufacturing.

Gross margins are expected to remain under pressure due to Nvidia’s increased presence in Super Micro’s bill of materials. Management guides fiscal fourth-quarter gross margins to stay around 10%, reflecting the challenges in the current market environment.

For the fiscal fourth quarter, Super Micro projects revenue between $5.6 billion to $6.4 billion and adjusted earnings per share of 40-50 cents. Operating expenses are expected to reach $245 million, with an adjusted tax rate of 16.5% and capital expenditures between $45-55 million.

Despite recent share price appreciation, analyst Bryson remains cautious about Super Micro due to ongoing market challenges and margin pressures. SMCI shares were up 3.88% to $58.84 at last check on Monday.

Read more at Yahoo Finance: Can Super Micro’s AI Demand Outpace Profit Margin Fears?