Bank of America raises AMD price target to Starting at $39 Starting at $38 The maker of artificial intelligence servers maintained an “underperform” rating after it reported record quarterly revenue but amid concerns about future margins and cash flow.
Supermicro makes servers, rack systems and cooling equipment for artificial intelligence data centers. First fiscal quarter results released on November 3 showed substantial revenue growth Growth of 298% from the same period last year to US$19.9 billionadjusted earnings per share climbed from $0.35 to $1.81.
The company raised its fiscal 2027 revenue forecast to $72 billion to $72 billion from $65 billion. According to management, approximately $2.3 billion of revenue in the first quarter came from early delayed deployments.
Bank of America analyst Ruplu Bhattacharya raised his fiscal 2027 adjusted profit forecast to $6.34 per share, minimum $5.31citing strong demand and improving profit prospects.
The bank’s price target is $39, which represents about 24% upside from the $31.39 share price used in its report. But its Underperform rating reflects AMD’s relative attractiveness compared to other hardware stocks, which is lower than Bank of America’s coverage.
Super Micro (SMCI) shares fell by approx. 3.76% to $30.21 In afternoon trading on November 4, it gave up its initial after-hours gains after the earnings release.
Why Bank of America questions AMD’s profit prospects
Ultra-slightly adjusted fiscal first-quarter gross margin exceeded previous guidance but was down sharply from the prior quarter.
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The company’s reported margins and full-year outlook show the difference:
- First quarter fiscal 2027: 12.8%, higher than the 9.5% in the same period last year.
- Fourth quarter fiscal 2026: 17.6%.
- Full Year Outlook for Fiscal Year 2027: 11.8% to 12.2%.
During the company’s November 3 earnings call, Chief Financial Officer Mark Long said the sequential decline primarily reflected a shift toward large-scale artificial intelligence data center projects, which typically have lower profit margins than the company’s enterprise and channel businesses.
The time of customer delivery is also a reason. Some of the deferred projects confirmed in the first quarter had low profit margins, making it difficult to maintain the strong profitability of the previous quarter.
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Proportion of AI related systems Accounted for 71% of first quarter revenuehigher than the previous quarter’s 59%. Based on the current backlog, Supermicro expects these products to generate 70% to 80% of full fiscal year revenue.
Bank of America expects the increasing share of large-scale artificial intelligence projects to put pressure on profit margins, especially in the second half of fiscal 2027.
The bank also warned that rising parts costs and competition among AI server makers could squeeze profits. Strong pricing for traditional, non-AI servers has helped boost profits recently, but Bank of America questions how long those prices can stay high.
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Supermicro is expanding its enterprise business with more integrated systems and services available for purchase by customers.
In September, the company announced a partnership with NetApp to integrate its AI servers with NetApp’s storage and data management technology.
Bank of America sees Supermicro’s corporate partnerships and manufacturing scale as strengths, but it remains cautious about profitability as large AI deployments take a larger share of revenue.
Management also expects margins to decline in the second half of fiscal 2027 as the product mix shifts further toward large-scale AI deployments.
Cash flow and customer concentration remain concerns
Supermicro’s quarterly revenue is approaching $20 billion, but its operations still burn through cash.
Its cash flow data for the first fiscal quarter are:
- Operating cash flow: Negative $434 million.
- Capital expenditure: $47 million.
- Free cash flow: Negative $481 million.
Large-scale artificial intelligence server projects require Supermicro to purchase expensive components and build inventory before completing delivery and collection of payments.
Inventory increase approx. $2.5 billion this quarterIt reached $15.1 billion at the end of September. Customer advances have funded much of this growth, Long said.
Bank of America expects these working capital needs to remain significant. Bank’s rough forecast Free cash flow in fiscal 2027 will be negative $2.45 billioneven after raising profit expectations.
Long pointed to improvements in cash management. Supermicro’s cash conversion cycle, which measures the time money is tied up in inventory and customer payments, has shrunk to 149 days to 97 days in the last season.
As of September, the company had about $6.9 billion in cash and $8.6 billion in bank debt and convertible notes. Lang said AMD has no current plans to raise additional equity, but it may consider financing options if attractive growth opportunities arise.
Bank of America also pointed to AMD’s reliance on a few large customers.
A major data center customer accounted for Accounted for 44% of first quarter revenueAccording to management. Delays in deployment or payment from this customer could have a significant impact on Supermicro’s results.
Long said the company often requires margin for major projects and had no major credit losses this quarter.
Financial reporting controls remain another issue. Supermicro disclosed in its latest annual filing with the SEC that as of June 30, 2026, the information technology control vulnerability remained unresolved. However, the company has addressed three other major previously reported vulnerabilities.
Supermicro expects second-quarter revenue of US$19.5 billion to US$21.5 billion. Long also said on the earnings call that the company expects gross profit margin for this quarter to be 12% to 12.5%.
The results will provide the next test of whether AMD can maintain margins close to this level and reduce cash requirements as more large AI server projects come into production.
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