Super Micro Computer vs. NetApp: Which IaaS Stock is a Better Buy?

Super Micro Computer SMCI and NetApp NTAP are both leading the Infrastructure as a Service (IaaS) space, providing organizations with essential building blocks to run their operations, but in very different ways. While Super Micro Computer provides server-based solutions and enables organizations with high computing capability, NetApp equips organizations with storage infrastructure.

Per a report by Fortune Business Insights, the IaaS market, which accounts for computing, network and storage verticals, is expected to reach $712.46 billion from $190.32 billion between 2025 and 2032, with a CAGR of 20.8%. Industries like healthcare, retail, BFSI, healthcare, manufacturing, education and others will drive the IaaS space.

With this strong industry growth forecast, the question remains: Which stock has more upside potential? Let’s break down their fundamentals, growth prospects, market challenges and valuation to determine which offers a more compelling investment case.

The Case for SMCI Stock

Super Micro Computer’s growth is driven by the growing need for artificial intelligence (AI) workloads. As a growing number of data centers are proliferating and existing ones are expanding their capacity, the need for SMCI’s high-performance and energy-efficient servers is rising. 

SMCI’s liquid-cooled and modular servers are a hit among cloud service providers, government customers and enterprises as these servers possess the capacity to handle AI at scale. Super Micro Computer has further strengthened its AI expertise by collaborating with NVIDIA and integrating its Blackwell GPUs for high compute power.

SMCI is also leading the Direct Liquid Cooling (DLC) market and has shipped more than 3,000 DLC racks in 2024, which is estimated to be approximately 70% of the global DLC market. To expand its capacity, Super Micro Computer is rapidly ramping up its production facilities across Malaysia, Taiwan, Europe and the United States.

With all these factors at play, Super Micro Computer has forecasted of achieving $40 billion in annual sales by fiscal 2026. The company is expecting a 168% increase from its fiscal 2024 net sales of $14.94 billion, signaling a clear path for accelerated revenue growth.

The Zacks Consensus Estimate of its fiscal 2025 revenues is pegged at $23.8 billion, indicating year-over-year growth of 59.2%.

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The Case for NTAP Stock

NetApp is also gaining from the AI proliferation as the demand for enterprise-grade GenAI deployments are rising. The company is gaining larger deals related to AI infrastructure and data lake modernization. NTAP reported that it gained more than 100 AI-related wins in the third quarter of fiscal 2025.

Despite growth opportunities, NetApp is dealing with key operational and product-specific challenges. NTAP’s inconsistent execution related to inefficient deal closure procedures toward the end of the third quarter of fiscal 2025 caused several large deals to slip into the fourth quarter.

The disinvestment of its Spot business will also affect its revenues in the near term. Furthermore, as the U.S. and European public sector spending is slowing due to political instability and budgetary constraints, NetApp’s top-line growth could be affected.

The Zacks Consensus Estimate for its fiscal 2025 revenues is pegged at $6.75 billion, indicating year-over-year growth of 4.8%.

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Stock Price Performance and Valuation of SMCI & NTAP

Due to broader market volatility, both stocks have declined in the past year. Shares of SMCI and NTAP have plunged 64.1% and 21.5%, respectively, in the past year.

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The decline in share price has brought down valuation multiples of both stocks. SMCI and NTAP are trading at a forward sales multiple of 0.62X and 2.46X, respectively.

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Conclusion: SMCI vs. NTAP Stock

While both SMCI and NTAP stocks are undervalued after a decline in stock price over the past year, SMCI wins over NTAP in other dimensions. SMCI is strongly driven by the traction in its server and DLC business, while NTAP faces some operational challenges, making it less attractive among the two.

Furthermore, SMCI carries a Zacks Rank #2 (Buy) at present, making the stock a stronger pick compared with NTAP, which has a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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