Super Micro Computer shares declined almost 5% on Friday after the firm reported weaknesses in its internal controls. In its annual filing with the SEC, the firm identified issues in its financial controls as of June 30, noting that the gaps may affect both the timeliness and accuracy of its disclosures.
The firm stressed that it is working to resolve the issues. Though it noted, “While we have initiated remediation measures to address the identified material weaknesses, we cannot provide assurance that our remediation efforts will be adequate to allow us to conclude that such controls will be worthwhile soon.”
SMC delayed releasing its annual financial report
The San Jose, California-based firm failed to meet its August 2024 annual report filing deadline, leading Ernst & Young LLP to resign as auditor in October over governance and transparency concerns. The firm later submitted the overdue filing in February. This made its shares rise 23% in premarket trading.
However, on Thursday, in its annual filing with the US regulator, it stated that it had concluded that its internal control over financial reporting was ineffective as of June 30, 2025, due to material weaknesses in such controls.
So far, shares of Super Micro had surged 88% in 2025 on AI optimism before dropping 23% after the Aug. 5 revenue forecast revision, leaving them with a year-to-date gain of 44% at Thursday’s close. Moreover, the firm’s shares dropped nearly 5% on Friday, risking more than $1 billion of its $26 billion or so in market value if the decline continues.
The company, however, said in its filing that it was working to address the issues, but added that it can’t assure investors that there won’t be more issues found with its internal control over financial reporting in the future.
On a forward 12-month earnings estimates basis, Super Micro trades at 16.28 times, compared to Dell’s 13.12 times and Hewlett Packard Enterprise’s 10.81 times. Among the 19 brokerages covering the company, seven rate it a “buy,” nine a “hold,” and three a “sell,” with a $49 median price target, LSEG data show.
Dell’s shares also fell about 10% on Friday, with increased manufacturing costs for AI servers and growing competition against its upbeat outlook for AI infrastructure.
Super Micro conducted a probe into its operations
Super Micro reported in December that an independent probe had not identified misconduct. Also, the firm promised leadership changes, including a new chief financial officer. The investigation was led by a board-appointed committee, assisted by attorneys from Cooley LLP and specialists from Secretariat Advisors.
The investigation also examined the resignation of Ernst & Young, the company’s former public accounting firm, concluding that the firm’s statements about its departure were “not supported by the facts” revealed in the review.
In response, Super Micro Computer reaffirmed its commitment to strengthening operations in line with its rapid expansion, especially in the AI sector. Furthermore, the committee emphasized that the firm’s leadership maintained an “appropriate tone at the top,” showing their commitment to compliance and accurate financial reporting.
However, the company still flagged possible risks, including difficulties in winning back business or opportunities lost to reputational setbacks. CEO Charles Liang said earlier this month that the filing delays had somewhat hurt the business.
In March, Super Micro said it began taking steps to improve its internal financial controls. The company said it had made progress, though the rollout was still underway and further time was required to complete and validate the changes.
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Source: https://www.cryptopolitan.com/super-micros-ai-server-maker-shares-drop-5/