Why Ubiquiti Inventory Simply Crashed

At 48 times earnings, Ubiquiti stock simply costs too much.

Investors pulled the plug on Ubiquiti (UI 16.77%) stock this morning. The computer networking equipment stock fell 16.8% through 10:30 a.m. ET despite beating on earnings.

Heading into the report, analysts forecast Ubiquiti would earn only $2.92 per share, but this morning Ubiquiti reported a fiscal first-quarter 2026 profit of $3.43 per share instead ($3.46 non-GAAP).

Image source: Getty Images.

Ubiquiti Q1 earnings

Revenue surged 33% year over year to $733.8 million in the quarter ended Sept. 30. Growth was strongest in the lucrative North America market, where sales climbed 41%. Gross profit margin grew nearly 4 full percentage points to 46%, and operating margin was a strong 35.6%, driving net profit up nearly 62% to the reported $3.43 per share.

Sales did decline sequentially, quarter over quarter, however — and that may be what’s upsetting investors today.

Today’s Change

(-16.77%) $-127.37

Current Price

$632.20

Key Data Points

Market Cap

$46B

Day’s Range

$621.47 – $701.71

52wk Range

$255.00 – $803.60

Volume

157K

Avg Vol

195K

Gross Margin

43.42%

Dividend Yield

0.00%

Is Ubiquiti stock a sell?

But is that a good enough reason to sell Ubiquiti — worrying about a barely 3%, and perhaps seasonal, revenue decline, when year-over-year growth is so patently obvious? Perhaps. After all, Ubiquiti is a very richly priced stock, and when a stock’s priced for perfection, any hiccup at all can seem unforgivable in investors’ eyes.

Valued at $38 billion today, Ubiquiti trades for a hefty 48 times trailing earnings — and more than 64 times trailing free cash flow. Relative to the 62% earnings growth Ubiquiti just demonstrated, these may be acceptable multiples to pay, but analysts on average forecast a steep slide in Ubiquiti’s growth rate next year, to as little as 26%. That’s still a fantastic number, don’t get me wrong. But relative to a P/E ratio of 48 — much less a price-to-free-cash-flow ratio of 64, it’s probably too much to pay for Ubiquiti.

Earnings beat notwithstanding, this stock is a sell for me.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Ubiquiti. The Motley Fool has a disclosure policy.

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