Artificial intelligence (AI) may grab the headlines, but the quieter money in this cycle has been flowing into the infrastructure that keeps AI running. Models can only scale if data can be stored, accessed, protected, and moved efficiently. In 2025, that reality showed up clearly in market performance, as data storage emerged as one of the strongest themes tied to the global data center buildout. Well-known names set the pace. Sandisk (SNDK) delivered a historic run, turning into the S&P 500 Index’s ($S ...

Core Viewpoint - Super Micro Computer (SMCI) has experienced an 8.9% decline in share price over the past year, significantly underperforming the Zacks Computer-Storage Devices industry's return of 53.5%, raising questions about whether investors should hold or exit the stock [1] Financial Performance - SMCI's first-quarter revenues and earnings fell by 15.5% and 56%, respectively, primarily due to a revenue shift from the September quarter to the December quarter, not due to demand weakness [4] - The company reported a negative free cash flow of $950 million for the first quarter of fiscal 2026, attributed to higher receivables from new deals with larger customers [5] - SMCI's first-quarter fiscal 2026 closing inventory increased to $5.7 billion from $4.7 billion in the previous quarter, leading to an increase in the cash conversion cycle from 96 days to 123 days [7] - The Zacks Consensus Estimate for SMCI's second-quarter fiscal 2026 earnings is projected at 49 cents per share, indicating a year-over-year decline of 19.7% [8] Operational Challenges - SMCI is facing operational challenges due to a massive scale-up required to meet unprecedented AI rack demand, planning to roll out 6,000 racks per month [6] - The company is grappling with customer concentration issues and margin pressure from mega deals with larger customers [5][9] Competitive Landscape - Rising competition from major players like Pure Storage, Dell Technologies, and Hewlett Packard Enterprise poses a concern for SMCI, particularly in the storage and AI-optimized server markets [10][12] - Price competition and adjustments are increasing as competition intensifies [12] Growth Opportunities - SMCI's high-performance and energy-efficient servers are gaining traction among AI data centers and hyperscalers, supported by partnerships with NVIDIA and AMD [13] - The Data Center Building Block Solutions (DCBBS) is expected to carry more than 20% margins and become a significant long-term profit contributor [14] - The company aims for $36 billion in fiscal 2026 revenues, driven by new product launches and innovations [16] Valuation - SMCI is currently trading at a discounted valuation, with a forward 12-month price-to-earnings (P/S) ratio of 0.52X, lower than the sector average of 1.89X [17]

Core Viewpoint - Super Micro Computer (SMCI) shares have declined by 18.4% over the past six months, significantly underperforming the Zacks Computer-Storage Devices industry's return of 77.5, raising questions about whether investors should buy, hold, or sell the stock [1][10]. Group 1: Operational Challenges - SMCI is facing significant operational challenges despite strong demand driven by AI, with gross margins expected to drop sharply due to the ramp-up of mega-scale GB300 Blackwell clusters [4]. - The company is experiencing margin pressure due to customer concentration and the need to retain larger customers, leading to higher receivables and a negative free cash flow of $950 million for the first quarter of fiscal 2026 [5]. - SMCI's working capital issues are exacerbated by the operational scale-up required to meet unprecedented AI rack demand, with plans to roll out 6,000 racks per month, including 3,000 liquid-cooled racks, and expand facilities in multiple regions [6]. Group 2: Financial Metrics - SMCI's first-quarter fiscal 2026 closing inventory was $5.7 billion, an increase from $4.7 billion in the previous quarter, causing the cash conversion cycle to spike from 96 days to 123 days [7]. - The company projects a sequential decline of 300 basis points in gross margin for the second quarter of fiscal 2026, with the Zacks Consensus Estimate for earnings at 49 cents per share, indicating a year-over-year decline of 19.7% [12]. Group 3: Competitive Landscape - Rising competition from major players in the storage and server space, such as Pure Storage, Dell Technologies, and Hewlett Packard Enterprise, poses a significant concern for SMCI, impacting pricing and execution [8][11]. - Pure Storage offers modern storage solutions that enhance performance and cloud integration, while Dell and HPE provide a range of server services, intensifying price competition in the market [9][11]. Group 4: Market Sentiment - SMCI shares are currently trading below both the 200-day and 50-day moving averages, indicating a bearish trend in the stock [15]. - Despite the long-term AI opportunities, the company's near-term challenges, including margin pressure and heavy working-capital needs, make it highly volatile, leading to a Zacks Rank 5 (Strong Sell) [16].

Core Insights - Super Micro Computer (SMCI) is currently trading at a discounted valuation with a forward 12-month price-to-earnings (P/E) ratio of 23.39X, lower than the Zacks Computer and Technology sector average of 29.07X, reflected in its Value Score of B [1][5] - The stock has increased by 80.5% year-to-date, outperforming the sector's return of 23% during the same period [4] - AI server and cooling solutions contribute over 70% to SMCI's revenue, driven by rising enterprise demand [5][11] Valuation and Performance - SMCI's forward P/E ratio stands at 23.39X, which is below the sector average of 29.07X [5] - The stock's significant year-to-date increase of 80.5% indicates strong market performance compared to the sector [4] Growth Drivers - The company is capitalizing on momentum in server and cooling platforms, with next-generation AI systems like NVIDIA B300 and GB300 leading the way [7][8] - New product families such as SuperBlade and MicroBlade are focused on AI inference and high-performance computing [9][10] - SMCI's Data Center Building Block Solutions are gaining traction among customers in AI and hyperscale computing [10] Competitive Landscape - SMCI faces rising competition from major players like Pure Storage, Dell Technologies, and Hewlett Packard Enterprise, which could impact its market position [12][15] - Price competition is leading to margin compression, with Zacks projecting a decline in bottom-line estimates for the upcoming quarters [16][17] Financial Projections - Zacks Consensus Estimates indicate a decline of 37% and 5% for SMCI's earnings in the first and second quarters of fiscal 2026, respectively [16][17] - Year-over-year growth estimates show a projected increase of 23.30% for the current year and 29.21% for the next year [17] Conclusion - Despite favorable valuation and strong year-to-date performance, SMCI is advised to be held due to near-term challenges and margin compression [18]

Core Insights - Super Micro Computer (SMCI) has launched a series of AI-centric products aimed at hyperscale data centers and edge computing, including new edge systems and high-density server systems [1][8] - The company reported a 47% year-over-year revenue growth for fiscal 2025, reaching $22 billion, driven by strong demand for AI and green computing solutions [3][8] Product Launches - SMCI introduced new edge systems such as ARS-111L-FR, ARS-E103-JONX, and SYS-212D-64C-FN8P, along with new product families like SuperBlade and MicroBlade [1] - Additional edge systems, SYS-112D-42C-FN8P and ARS-E103-JONX, feature the NVIDIA Jetson Orin NX AI computer [2] - A data center building block solution was introduced, integrating NVIDIA and AMD's high-performance chipsets [2] Competitive Landscape - The global storage and server market is led by companies like Pure Storage and Hewlett Packard Enterprise (HPE), with Pure Storage offering modern storage solutions and HPE providing a range of server services [4][5] - HPE's server segment sales grew by 6% year-over-year in Q2 fiscal 2025, driven by demand for AI servers [5] Market Outlook - The enterprise server market is projected to grow at a CAGR of 8.03% from 2025 to 2030, reaching $139.81 billion, indicating significant growth opportunities for players like SMCI, Pure Storage, and HPE [6] Financial Performance - SMCI's shares have increased by 92.6% year-to-date, outperforming the Zacks Computer-Storage Devices industry's growth of 56.3% [7] - The company trades at a forward price-to-sales ratio of 1.08X, below the industry's average of 1.92X [9] - The Zacks Consensus Estimate for SMCI's fiscal 2026 earnings indicates a year-over-year growth of 23%, with a 29% growth forecast for fiscal 2027 [10]

Core Insights - Pure Storage has announced innovations in its platform to enhance cyber resilience, enabling organizations to proactively detect threats, protect against attacks, and recover effectively [1][4] - The traditional multi-vendor approach to cyber defense is inadequate, as it leaves organizations vulnerable by missing critical threat signals within their data [2] - The introduction of the Enterprise Data Cloud (EDC) allows for centralized management of data across various environments, facilitating intelligent data governance [3] Cyber Resilience Enhancements - Pure Storage's platform now includes built-in threat detection capabilities, allowing for rapid response and recovery from attacks [2][4] - The company is developing an extended threat detection network to share threat signals with partners, integrating these capabilities into existing security tools [4] - New partnerships with CrowdStrike and Superna enhance security measures, providing real-time visibility and automated responses to threats [5][12] Recovery Solutions - Pure Storage offers proactive adaptive recovery solutions to ensure faster data recovery during attacks, emphasizing the importance of trusted backup data [6][12] - The introduction of Pure Protect Recovery Zones allows for isolated recovery environments, enabling businesses to test and validate applications without disrupting production [12] Market Position and Strategy - Pure Storage positions itself as a leader in the data storage industry, focusing on delivering advanced technology and services that simplify data management and enhance security [8][14] - The company's Evergreen architecture ensures continuous improvement and scalability, aligning with the evolving needs of businesses [8]

Core Insights - Super Micro Computer (SMCI) stock has increased by 6.4% over the past month, which is lower than the Zacks Computer-Storage Devices industry's return of 23.6% [1][5] - Despite the stock's rise, it is trading at a forward P/E ratio of 20.45X, which is below the industry average of 21.76X, raising questions about whether to hold or exercise caution [4] Financial Performance - In fiscal 2025, SMCI reported a 47% year-over-year revenue growth, reaching $22 billion, with expectations to increase revenues to $33 billion in fiscal 2026 [5][7] - The company's next-generation air-cooled and liquid-cooled GPU and AI platforms contributed over 70% to its top line in Q4 of fiscal 2025 [8] Market Position and Growth Drivers - SMCI is becoming a significant player in the AI server market, leveraging the latest NVIDIA and AMD platforms to drive growth [6][7] - The company's direct liquid cooling technology is in high demand, particularly among hyperscalers and AI data centers, due to its efficiency in reducing heat and electricity consumption by 40% [9] Competitive Landscape - SMCI faces rising competition from major players like Pure Storage, Dell Technologies, and Hewlett Packard Enterprise, which could impact its market share [10][11] - The company is experiencing challenges such as delayed purchasing decisions from customers evaluating next-generation AI platforms and margin contraction due to price competition [13][14] Earnings Estimates - The Zacks Consensus Estimate for SMCI's earnings per share (EPS) shows a decline of 37% and 5% for the first and second quarters of fiscal 2026, respectively [14][15] - Year-over-year growth estimates for fiscal 2026 indicate a 23.3% increase, followed by a 29.2% increase in fiscal 2027 [15] Conclusion - Given the mixed challenges and long-term growth potential in server, storage, and cooling products, the recommendation is to hold SMCI stock at this time [16]

Company Overview - Pure Storage (PSTG) is valued at $28.4 billion and specializes in software-defined all-flash solutions that are fast and cloud-capable for customers [1] - The company is a pioneer in a data storage business model that focuses on evolving with clients to simplify costs, data management, and complexity [1] Product Offerings - Primary offerings include FlashArray and FlashBlade products, along with Purity Operating Environment (Purity OE) software, Pure1 cloud-based software, and FlashStack, a joint solution with Cisco [2] Stock Performance - PSTG stock gained 46.04% since the Trend Seeker buy signal on August 12 [3] - The stock hit a new all-time high of $87.96 on September 16 and is up more than 75% over the past year [6][5] - In the last month, the stock made 10 new highs and gained 50.01% [8] Technical Indicators - Pure Storage has a Weighted Alpha of +69.52 and a 100% "Buy" opinion from Barchart [7] - The Relative Strength Index (RSI) is at 83.32%, indicating strong momentum [8] - The stock is trading above its 20-, 50-, and 100-day moving averages, with a technical support level around $83.85 [7][8]

Financial Data and Key Metrics Changes - Revenue for Q2 FY 2026 was $861 million, representing a 13% year-over-year growth, while operating profit was $130 million with an operating margin of 15.1% [22][28] - Subscription services revenue reached $415 million, up 15% year-over-year, accounting for 48% of total revenue [26] - Total remaining performance obligations (RPO) grew 22% to $2.8 billion, reflecting robust renewals and new commitments [26] - Total gross margin remained strong at 72.1%, with subscription services gross margin at 76.5% [27] Business Line Data and Key Metrics Changes - Strong performance was noted across the entire portfolio, particularly in FlashBlade and core software and services offerings like Evergreen One, Cloud Block Store, and Portworx [22][24] - Total contract value (TCV) sales for Storage as a Service offerings grew 24% year-over-year to $125 million [24] - The FlashBlade E family showed strength, contributing to overall product gross margin improvement [88] Market Data and Key Metrics Changes - U.S. revenue was $577 million, growing 7%, while international revenue was $284 million, growing 26% year-over-year [27] - More than 300 new customers were added, maintaining a 62% penetration rate in the Fortune 500 [27] Company Strategy and Development Direction - The company is focused on the enterprise data cloud architecture, which is transforming how organizations manage data, emphasizing the shift from traditional siloed storage to a software-defined model [9][11] - Continued investment in partnerships with hyperscalers, including Meta, to enhance direct flash technology and expand market presence [25][17] - The introduction of a guidance range for financial metrics aims to align with industry practices and provide flexibility for growth opportunities [30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to extend industry leadership despite a variable macro environment, citing strong execution and planning [20] - Positive momentum is expected in the second half of the fiscal year, driven by strong demand signals and an increasing pipeline of large deals [110] - The company anticipates revenue for FY 2026 to be in the range of $3.6 billion to $3.63 billion, representing a 14% year-over-year growth at the midpoint [31] Other Important Information - The company reported a strong free cash flow performance of $150 million, with a free cash flow margin of 17.4% [29] - A new partnership with Nutanix is expected to enhance customer interest and scalability in virtualization environments [58] Q&A Session Summary Question: What is driving the acceleration of growth in the back half of the fiscal year? - Management noted broad-based strength in product lines and improved visibility into the pipeline, contributing to confidence in growth forecasts [36] Question: How has the relationship with Meta evolved? - The relationship is progressing as expected, with deployments on track and revenue recognition beginning [42] Question: What factors contributed to the sequential gross margin improvement? - Management attributed the improvement to revenue mix, product mix, and pricing discipline, with Meta's contribution being less material than anticipated [48] Question: How is the engagement with other hyperscalers progressing? - Early-stage engagements are ongoing, with technology assessments and proofs of concept underway, but still in the initial phases [64] Question: What are the long-term expectations for Meta's contribution? - Management expects to achieve one to two exabytes of deployment this fiscal year, with potential for double-digit contributions in the next fiscal year [70] Question: How should the split between product versus subscriptions be viewed? - Management indicated that both product and subscription revenues are expected to grow, with subscription gross margins being higher than product gross margins [98]

Core Insights - Western Digital Corporation (WDC) has achieved a significant turnaround in profitability, with non-GAAP gross margin increasing from 28.7% in fiscal 2024 to 39.4% in fiscal 2025, and operating income rising 578% to $2,326 million from $343 million [1][7] - The recovery is attributed to cyclical cloud demand, cost control, and strategic decisions such as spinning off the SanDisk flash business, enhancing margins and cash flow [1][7] - The company anticipates continued revenue growth, projecting non-GAAP revenues of $2.7 billion, a 22% increase year over year, and non-GAAP earnings of $1.54 for the next quarter [4][7] Financial Performance - In the fiscal fourth quarter, WDC reported a non-GAAP gross margin of 41.3%, up 610 basis points year over year, exceeding guidance [3] - Non-GAAP operating expenses decreased by 16% year over year to $345 million, while non-GAAP operating income rose 147% year over year to $732 million [3] - The company shipped 190 exabytes in the fourth quarter, a 32% year-over-year increase, driven by demand for nearline drives and high-capacity products [2] Market Position and Technology - WDC maintains a strong position in the global HDD market, with its ePMR and UltraSMR technologies offering reliability and low total cost of ownership [2] - The company is advancing next-generation HAMR drives, expected to qualify in 2027, and anticipates continued demand for high-capacity drives [2] - The competitive landscape includes major players like Seagate, Pure Storage, and others, with pricing pressure being a persistent concern [5] Competitive Analysis - Seagate reported a 32% year-over-year increase in HDD revenues, with a non-GAAP gross margin of 37.9% [6] - Pure Storage, focusing on all-flash storage solutions, expects a revenue increase of 10.6% year over year for the fiscal second quarter [8] Stock Performance and Valuation - WDC shares have gained 26.1% over the past year, outperforming the Zacks Computer-Storage Devices industry, which fell by 7.1% [9] - The forward price/earnings ratio for WDC is 12.89X, lower than the industry average of 17.86X [10] - The Zacks Consensus Estimate for WDC's earnings for fiscal 2026 has been revised up 14% to $6.50 [11]