Q1 FY2026 Earnings Call
SMCI · Preprocessing Report
2025-11-04
Quality
100%
65
Turns
13
Speakers
5
Sections
9
Exchanges
409
Claims

Entities by group 23

company executives 2
David WeigandpersonCharles Liangperson
analysts 8
Ananda BaruahpersonMark NewmanpersonRuplu BhattacharyapersonAsiya MerchantpersonShadi MitwallipersonJon TanwantengpersonBrandon NispelpersonNehal Chokshiperson
data center infrastructure 1
Data Center Building Block Solutionproduct
chip vendors 2
NVIDIAcompanyAMDcompany
investment firms 2
Needham & CompanycompanyKeyBanccompany
artificial intelligence labs 1
xAIcompany
cloud providers 1
NeoCloudscompany
Ungrouped 6
SupermicrocompanyColossuseventSilicon ValleyotherVera RubintechnologyHeliostechnologyUnited Statesother
REPORTING 87PROJECTING 62POSITIONING 123EXPLANATORY 14ANALYST 67

Topics 73

revenue×53gross×43dcbbs×17data center×17customer×17capacity×15order×11market×9operating×8facility×7backlog×6earnings×6cash×6solution×6product×5demand×5shipment×5strategy×5infrastructure×4platform×4

Themes 265

guidance×12growth×6global×5long-term×5federal×5dcbbs×4non-gaap×4working capital efficiency×4gross×4capacity×4ramp×3expansion×3outlook×3quarter-end balance×3ramp-up×3follow-on orders×3demand×2power efficiency×2shipments×2silicon valley×2time to market×2fiscal 2026 guidance×2enterprise channel decline×2customer concentration×2u.s. decline×2asia growth×2drivers×2diluted guidance×2dilution×2future growth×2q2 fiscal 2026 outlook×2stock-based compensation×2eps outlook×2customer adoption×2customer base×2concentration×2product maturity×2forward outlook×2valuation×2strength continuation×2manufacturing footprint×2production ramp×2xai×2new customers×2gaining×2historical×2disclosure×2staying the course×2bottom-line improvement×2market leadership×1industry leading×1gb300 product line×1nvidia blackwell ultra gb300×1b300 traction×1b300 leadership×1quarterly shift×1gpu rack complexity×1integration and validation×1full-year outlook×1industry leadership×1nvidia-based systems×1ai platforms in volume×1ai workload support×1next-generation ai platform launches×1real-time processing adoption×1generative ai training focus×1industry-specific models and edge×1customer demand expansion×1acceleration and optimization×1strategic importance×1planning design and deployment×1building block architecture×1optimization×1shortening cycles×1rack-scale infrastructure×1adoption×1business strategy×1investment×1unprecedented×1american innovation and supply chain resilience×1international expansion×1installed capacity×1production capacity×1upfront investment×1ai and data center infrastructure×1deployment complexity×1competitive position×1company momentum×1ai market share×1near-term pressure×1scale and innovation×1december quarter guidance×1sequential through fiscal 2026×1future opportunity×1q1 fy2026 decline×1record intake×1q2 delay×1ai gpu mix×1enterprise channel mix×1oem appliance and data center mix×1oem appliance and data center growth×1oem appliance and large data center decline×1emerging 5g telco/edge iot contribution×1geographic mix×1europe growth×1rest of world growth×1asia decline×1europe decline×1rest of world decline×1gaap×1other income and expense×1interest income and expense×1provision×1rate×1diluted count×1from operations×1operating performance and working capital×1closing balance×1quarterly spend×1free cash flow×1asset facility×1revenue guidance×1mix pressure×1ai support services×1higher-margin segments×1economies of scale×1margin and scale×1mega cluster buildout×1advanced ai capabilities×1expected improvement×1interest expense×1full-year fiscal 2026 outlook×1blackwell ultra availability×1nvidia allocation and volume ramp×1quarterly guidance×1driving higher revenue×1product solutions×1strategy×1customer feedback×1competition×1large account demand×1customer commitment×1faster deployment×1profit margin outlook×1product availability×1pipeline strength×1cost structure×1revenue contribution×1revenue growth×1end-to-end solutions×1one-stop shopping model×1large-scale ramp×1new line ramp×1future improvement×1below 5%×1increase to strengthen infrastructure×1quarterly level×1operating expansion×1operating efficiency×1product maturation×1chip-set level×1order book×1new large customers×1customer disclosure×1high-value partners×1enhanced support×1full-year model×1gb300 wins×1strong activity ahead×1conservatism×1implied quarterly outlook×1flattening outlook×1quarterly growth×1quarterly milestone×1solution expansion×1fiscal year expectations×1ai customers×1at scale×1technology leadership×1low watermark quarter×1quarterly doubling×1forecast and improvement×1plant expansion×1malaysia operations×1malaysia status×1conservative approach×1new product caution×1quality and reliability×1burn-in testing×1production buildout×1liquid cooling output×1pricing example×1sales potential×1delivery discipline×1cash conversion cycle and free cash flow outlook×1equity financing outlook×1average balance×1funding needs×1factoring program×1future programs×1execution confidence×1cash flow discipline×1lighthouse relationship×1engineering prowess for xai×1customer learning×1selective growth×1advanced dcbbs solutions and ai×1additional wins from successful installations×1timing and impact×1production scale×1quarterly setup×1business scale-up×1government×1customer support×1customer win×1lower pricing for scale×1future expansion×1deal execution×1operating initiatives×1business mix×1geographic expansion×1solution strategy×1profile improvement×1company framing×1customer mix×1order size×1pushouts×1project timing×1component assembly×1readiness logistics×1quarter-end timing×1quarterly volatility×1trend×1annual growth×1plan alignment×1annual plan timing×1ongoing trend×1revenue and profit growth×1quarterly comparison×1peer comparison×1forward impact×1design wins×1question×1target intact×1target pushed out×1target unavailable×1changed conditions×1product shift×1competitive pressure×1margin improvement×1improvement outlook×1double-digit target×1large-scale csp support×1large csp expansion×1pressure×1revenue scale and guidance×1first-to-market execution×1faster growth×1customized solutions profitability×1new cycles×1market cycle upside×1extra quarter expenses×1future quarters×1giga initiative underway×1giga initiative completion×1

Key Metrics 65

revenue×54gross margin×39capacity×7market share×6orders×5operating expenses×5backlog×5diluted eps×4margin×4costs×4deliveries×4shipments×3net income×3free cash flow×3revenue guidance×3new orders×2customers×2tax rate×2share count×2capital expenditures×2accounts receivable×2cash×2net sales×2operating expense×2volume×2profit margin×2customer concentration×2revenue capacity×2backorders×1production capacity×1power capacity×1racks per month×1investment×1time to market×1demand×1operating margin×1other income and expense×1tax provision×1diluted shares outstanding×1cash flow from operations×1operating cash flow×1inventory×1debt×1net debt×1cash conversion cycle×1days inventory outstanding×1days sales outstanding×1days payables outstanding×1stock-based compensation expense×1diluted net income per common share×1net expense×1order pipeline×1order outlook×1order book×1product wins×1profitability×1production×1monthly production capacity×1rack price×1working capital×1cash flow×1spending×1order size×1order backlog×1design wins×1

Entities 642

Supermicro×323David Weigand×100Charles Liang×87Data Center Building Block Solution×39NVIDIA×15Ananda Baruah×12Mark Newman×9Ruplu Bhattacharya×8Asiya Merchant×7xAI×7Shadi Mitwalli×6Needham & Company×6Jon Tanwanteng×6AMD×3Colossus×3Silicon Valley×2Brandon Nispel×2KeyBanc×2Vera Rubin×1Helios×1United States×1Nehal Chokshi×1NeoClouds×1

Business Segments 76

Server And Storage Systems×65Enterprise Channel×3Asia×3Europe×2Rest Of World×2U.S.×1

Sectors 148

computer hardware×45data center×35artificial intelligence×13semiconductor×12cloud computing×9server hardware×8manufacturing×7government×6telecommunications×3it services×3high performance computing×1retail×1automotive×1edge computing×1storage×1internet of things×1software×1

Regions 41

Malaysia×7U.S.×5Asia×5Europe×4U.S.A.×4Taiwan×3rest of world×3global×3San Jose×1North America×1United States×1The Netherlands×1Middle East×1Silicon Valley×1world×1

Metadata Distributions

Sentiment
positive 141negative 37neutral 175
Temporality
backward 77forward 93current 183
Certainty
definitive 91confident 133moderate 81tentative 47speculative 1
Magnitude
major 81moderate 198minor 74
Direction
improvement 35decline 18flat 1mixed 5none 294
Time Horizon
immediate 85near_term 145medium_term 47long_term 12unspecified 64
Verifiability
quantitative 110event 21qualitative 222
Analyst Intent
probing 16challenging 2confirming 6seeking_detail 37seeking_guidance 6

Speakers

Executives
CLCharles LiangCEODWDavid WeigandCFO
Analysts
ABAnanda BaruahanalystAMAsiya MerchantanalystBNBrandon NispelanalystJTJon TanwantenganalystMNMark NewmananalystNCNehal ChokshianalystRBRuplu BhattacharyaanalystSMShadi MitwallianalystMPMPanalyst
Other
MSMichael StaigerirOPOperatoroperator

Sections

TypeLabelSpeaker
preamblePreambleMichael Staiger
prepared_remarksPrepared RemarksCharles Liang, David Weigand
qa_sessionQ&A Session—
closing_remarksClosing RemarksCharles Liang
operator_signoffOperator Sign-offOperator

Q&A Exchanges 9

#AnalystFirmTurns
1
MPMP
JPMorgan5
2
AMAsiya Merchant
Citigroup8
3
ABAnanda Baruah
Loop Capital7
4
RBRuplu Bhattacharya
Bank of America8
5
NCNehal Chokshi
Northland4
6
SMShadi Mitwalli
Needham & Company5
7
JTJon Tanwanteng
CJS Securities7
8
MNMark Newman
Bernstein6
9
BNBrandon Nispel
KeyBanc8

Claim Taxonomy 353

REPORTING87
resultFinancial outcome for a completed period63
metricNon-financial quantitative fact12
operationalDiscrete completed event12
PROJECTING62
guidanceQuantitative expectation with number + time48
commitmentPromise with binary verifiable outcome13
targetLong-term aspirational quantitative goal1
POSITIONING123
strategyPriority, direction, or initiative104
competitiveCompany's position or advantages9
opportunityMarket condition framed as growth driver2
riskHeadwind, constraint, or uncertainty8
EXPLANATORY14
attributionWhy a specific outcome happened5
contextNon-company macro/industry fact9
FRAMING0
thesisFalsifiable belief about how the world works0
ANALYST67
questionInterrogative seeking information47
observationRestates a fact or data point17
concernFlags a risk or challenge2
estimateAnalyst's own projection or calculation0
sentimentOpinion, praise, or critique1

Transcript

Preamble
OP
Operatoroperator
Thank you for standing by.
My name is Matt, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Super Micro Computer, Inc. Business Update Call. With us today are Charles Liang, Founder, President and Chief Executive Officer; David Weigand, CFO; and Michael Staiger, Senior Vice President of Corporate Development. [Operator Instructions]
MS
Michael StaigerirSuper Micro Computer, Inc.
Thank you, Matt. Good afternoon, and thank you for attending Super Micro's call to discuss financial results for the first quarter and full fiscal year 2026, which ended September 30, 2025. With me today are Charles Liang, Founder, Chairman and Chief Executive Officer; and David Weigand, Chief Financial Officer. By now, you should have received a copy of the press release from the company that was distributed at the close of regular trading and is available on the company's website. As a reminder, during today's call, the company will refer to a presentation that is available to participants in the Investor Relations section of the company's website under the Events and Presentations tab. We've also published management's scripted commentary on our website.
Please note that some of the information you'll hear during our discussion today will consist of forward-looking statements, including, without limitation, those regarding revenue, gross margin, operating expenses, other income and expenses, taxes, capital allocation and future business outlook, including guidance for the second quarter of fiscal 2026 and the full fiscal year 2026. These statements and other comments are based on management's current expectations and assumptions and involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated, and you should not place undue reliance on forward-looking statements. You can learn more about these risks and uncertainties in the press release we issued earlier this afternoon, our most recent 10-K filing for fiscal 2025 and other SEC filings. All of these documents are available on the Investor Relations page of our website. We assume no obligation to update any forward-looking statements.
Most of today's presentation will refer to non-GAAP financial results and business outlook. For an explanation of our non-GAAP financial measures, please refer to the accompanying presentation or to our press release published earlier today. The non-GAAP measures are presented as we believe that they provide investors with the means of evaluating and understanding how the company's management evaluates the company's operating performance. These non-GAAP measures should not be considered in isolation from, as substitutes for or superior to financial measures prepared in accordance with U.S. GAAP. In addition, a reconciliation of non-GAAP to most directly comparable GAAP results is contained in today's press release and in supplemental information attached to today's presentation. At the end of today's prepared remarks, we'll have a Q&A session for sell-side analysts. Our second quarter fiscal 2026 quiet period begins at the close of business Friday, December 12, 2025. And with that, I will now turn the call over to Charles.
Prepared Remarks
CL
Charles LiangCEOSuper Micro Computer, Inc.
Thank you, Michael, and thank you all for joining today's call. Fiscal 2026 is off to a strong start as we continue the early phases of the dynamic AI growth trend. Demand for advanced AI compute and infrastructure solutions is evolving rapidly, and Super Micro is uniquely positioned to lead with innovative, high-quality and value-driven solutions, including our Data Center Building Block Solution, DCBBS. The major highlight this quarter continued to be our industry-leading AI portfolio. Our NVIDIA Blackwell Ultra with GB300 product line now have more than $13 billion in back orders, including the largest deal in our 32-year history, reflecting the tremendous growth potential in hyperscale and enterprise deployments. The B300 platforms are also gaining strong traction following the success of our B200 products as we continue to serve as the leading supplier. As noted in our pre-announcement, approximately $1.5 billion in revenue shift from the September quarter to December quarter due to last-minute configuration upgrade from our customers with expanded volume. This shift were largely caused by the complexity of these new GPU racks, which requires intricate integration, testing and validation, making them more time consuming to source and build. With production now quickly ramp up, these adjustments have eventually strengthened our growth trajectory and support an even higher full year outlook. Our product portfolio continues to lead the industry. In addition to NVIDIA GB300 and B300.
We are shipping RTX PRO 6000, B200, [NVL72] and AMD MI350, 355X platforms in volume to power generative AI, large language model, inference and HPC workloads. To continue technology leadership in AI platforms, we are preparing for the NVIDIA Vera Rubin and AMD Helios launches in calendar 2026. Edge AI solutions are also gaining more traction for real-time processing in manufacturing, telecom, retail and autonomous environments. We are deeply focused on training LLM and Generative AI, we also see rapid growth in industry-specific model, agentic AI, broader infancy and AI at the edge. With that, we are seeing accelerating demand across cloud, enterprise and so as they upgrade and expand the data centers for AI.
Our DCBBS helps customers accelerate and optimize customers' transformation. DCBBS is critical to our future success, enabling rapid planning, design and deployment of AI-ready data center and AI factory, while optimizing performance and minimize power consumption through our advanced and DLC and DLC-2 technologies and high efficient subsystem. Super Micro's building block approach now go beyond server system and rack configuration. It's optimizing the entire data center for customers. With product life cycle completion from 18 to 24 months to as short as 12 months, customers need rapid innovation, deployment and time to online. DCBBS delivers rack scale plug-and-play servers, storage, DLC systems, L2A heat exchangers, chilled doors, power shelves, battery backup for water towers, dry towers, network and cabling management software and services. We have begun shipping DCBBS orders to some key customers and expect many more data centers to follow suit. This solution is becoming a critical part of our business strategy, driving future growth and profitability. We are investing now and over the next few quarters. We will share more detail on our expanding DCBBS portfolio and upcoming release. To meet this unprecedented demand. Super Micro is executing an aggressive global expansion.
Our Silicon Valley facility remained a foundation of U.S. operation, delivering time to market, quality and security for customers. We have quickly expanded our footprint in San Jose recently and are soon adding new North America sites to support the growing requirement for major CSP and NCPs. This investment underscores our commitment to American innovation, job creation and supply chain resilience. Internationally, new production facility in Taiwan, the Netherlands, Malaysia and soon the Middle East are coming online to enlarge our production capacity, enhancing cost competitiveness and meet regional serving AI requirements. With 52 megawatts of power capacity in place, we are on track to scale production to 6,000 racks per month, including 3,000 DLC racks within this fiscal year. While this expansion require upfront investment, they are critical to sustain long-term growth and deliver performance TTO time-to-online and cost efficiency at scale.
In summary, Super Micro is developing into a leading AI platform and data center infrastructure total solution company. While we continue to grow our server storage rack and IoT systems, our DCBBS delivers unique advantages that set us apart, a design to reduce customer deployment, complexity, excellent time to market, time to online and lower total cost of ownership. Combined with our broad supply chain, deep customer relationship and expanding partner ecosystem, this capability positions us to become the leading data center infrastructure company. Recent large-scale orders and continued investment in customers, products, people and our processes put us firmly on the [path]. While competition remains intense we are focused on capturing tremendous AI infrastructure market share. Some large-scale deals have pressure margin in the near term. But our scale, innovation and differentiated DCBBS offerings strengthen our market leadership and position us to deliver long-term profitability and shareholder value.
Looking ahead, we expect to ship at least $10.5 billion in the December quarter, depending on the supply and production capability readiness. We anticipate a sequential growth through fiscal 2026, giving us confidence in achieving at least $36 billion in revenue for the year. This is a truly unique time for Super Micro and I am super excited about the opportunity ahead. I look forward to sharing our progress with you next quarter. Thank you. Now I will turn it over to David.
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DW
David WeigandCFOSuper Micro Computer, Inc.
Thank you, Charles. Q1 fiscal year 2026 revenue was $5 billion, down 15% year-over-year and down 13% quarter-over-quarter compared to our guidance, of $6 billion to $7 billion. We had a record level of new orders exceeding $13 billion, but a customer's custom rack platform upgrade for a recent large design win and customer logistics factors delayed some shipments to Q2. We expect customer demand to remain robust for the remainder of fiscal year 2026. AI GPU platforms, which represented over 75% of Q1 revenues continue to be the key growth driver. During Q1, the enterprise channel revenues totaled $1.5 billion representing 31% of revenues versus 36% in the prior quarter. This was down 51% year-over-year and down 25% quarter-over-quarter. The OEM appliance and large data center segment revenues were $3.4 billion, representing 68% of Q1 revenues versus 63% in the last quarter up 25% year-over-year and down 6% quarter-over-quarter. The emerging 5G Telco/Edge IoT segment contributed the remaining 1% of Q1 revenues. For Q1 fiscal year '26, we had 2 10%-plus customers.
By geography, the U.S. represented 37% of Q1 revenues, Asia, 46%; Europe 14%; and the rest of the world 3%. On a year-over-year basis, U.S. revenues decreased 57%, while Asia grew 143%. Europe increased 11% and the rest of the world increased 56%. On a quarter-over-quarter basis, U.S. revenues declined 16%, Asia decreased 4%, Europe decreased 16% and the rest of the world declined 48%. Asia grew significantly on a year-over-year basis as an existing U.S.-based customer opened a large data center in Asia.
Q1 non-GAAP gross margin was 9.5% versus 9.6% in Q4. Q1 GAAP operating expenses were $285 million, down 10% quarter-over-quarter and up 7% year-over-year. On a non-GAAP basis, operating expenses were $203 million, which was down 15% quarter-over-quarter and down 2% year-over-year. Operating expenses were down quarter-over-quarter due to high marketing expense reimbursements and lower discrete R&D expenses. Non-GAAP operating margin for Q1 and was 5.4% compared to 5.3% in Q4. Other income and expense in Q1 totaled a net income of $26.3 million, reflecting $51.2 million in interest income on higher cash balances and FX-related gains, partially offset by $24.9 million in interest expense, primarily related to convertible notes. The tax provision for Q1 was $40 million on a GAAP basis and $59 million on a non-GAAP basis, resulting in a GAAP tax rate of 19.3% and a non-GAAP tax rate of 20%. Q1 GAAP diluted EPS was $0.26 compared to guidance of $0.30 to $0.42 and non-GAAP diluted EPS was 35% versus guidance of $0.40 to $0.52. The GAAP fully diluted share count increased sequentially from 625 million in Q4 to 663 million in Q1. And the non-GAAP share count increased from 638 million to 677 million over the same period. Cash flow used in operations for Q1 was $918 million compared to cash flow generated from operations of $864 million in the prior quarter. Q1 operating cash flow was impacted by lower net income and higher accounts receivable and higher inventory levels as we prepared for a strong Q2 with higher working capital needs. Q1 closing inventory was $5.7 billion, which was up from $4.7 billion in Q4. CapEx for Q1 totaled $32 million, resulting in negative free cash flow of $950 million for the quarter. During the quarter, we executed a $1.8 billion AR facility that enables the nonrecourse sale of certain qualified accounts receivable, providing flexibility to strengthen our working capital on a discretionary basis. At quarter end, our cash position totaled $4.2 billion, while bank and convertible note debt was $4.8 billion, resulting in a net cash — in a net debt position of $575 million, compared to a net cash position of $412 million in the prior quarter. Turning to the balance sheet and working capital metrics.
The Q1 cash conversion cycle was 123 days compared to 96 days in Q4. Days of inventory increased by 30 days to 105 days versus 75 days in the prior quarter. Days sales outstanding increased by 5 days to 43 days versus 38 days in Q4, while days payables outstanding increased by 9 days to 26 days versus 17 in Q4.
Now turning to the outlook for Q2 fiscal year '26. We expect net sales in the range of $10 billion to $11 billion. GAAP diluted net income per share of $0.37 to $0.45 and non-GAAP diluted net income per share of $0.46 to $0.54. We expect gross margins to be down 300 basis points, relative to Q1 fiscal year '26 levels. Given the fast-moving dynamics in the end markets, we wanted to provide the framework of the factors impacting our gross margins. First, customer and product mix, including a strategic Q1 large design win, which includes higher cost and a lower margin as we ramp a new mega-scale GB300 optimized rack platform. And second, we are making greater investments with new customers to ensure their success with additional AI engineering support and services. To drive future growth, we believe that our investment in supporting these customers is leading to other large global design wins. Our long-term goal is to expand revenues in higher-margin segments such as Data Center Building Block Solutions, emerging global CSPs, sovereign mega projects, enterprise data centers, IoT and telco solutions and software service offerings. We do expect to benefit from some economies of scale driven by higher revenue levels, a cost-effective global manufacturing footprint, including our Malaysia facility and continued customer diversification. As we complete this mega cluster, we expect to leverage these investments and are establishing the most advanced AI service capabilities in the market. As we go through this transition, we expect our gross margins to improve.
GAAP operating expenses are expected to be around $326 million in Q2, which includes approximately $76 million and stock-based compensation expenses that are excluded from non-GAAP operating expenses. The outlook for Q2 of fiscal year 2026, fully diluted GAAP EPS includes approximately $64 million in expected stock-based compensation expenses, net of tax effects of $18 million, which are excluded from non-GAAP diluted net income per common share. We expect other income and expenses, including interest expense, to result in a net expense of approximately $27 million. The company's projections for Q2 fiscal year '26 GAAP and non-GAAP diluted net income per common share assume a GAAP tax rate of 15.6%, a non-GAAP tax rate of 16.8% and a fully diluted share count of 666 million for GAAP and 680 million shares for non-GAAP. Capital expenditures for Q2 is expected to be in the range of $60 million to $80 million. For the full fiscal year 2026, we are raising our outlook to a net sales of at least $36 billion versus prior guidance of at least $33 billion. Michael, we're now ready for Q&A.
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Q&A Session
Q&A 1/9
OP
Operatoroperator
[Operator Instructions] First question is from the line of Samik Chatterjee with JPMorgan.
MP
MPanalystJPMorgan
This is MP on for Samik Chatterjee. I just wanted to ask my first question on the revised guidance between like availability of chipsets and market share expansion. What do you think is the more of a driver for increased revenue guidance?
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CL
Charles LiangCEOSuper Micro Computer, Inc.
Yes, NVIDIA Blackwell Ultra is getting available. So we are receiving more and more allocation from them and preparing for a huge volume to ramp up start from this quarter. That's why this quarter, we estimate at least $10.5 billion.
And looking forward, I mean, with our DCBBS, we will focus on both. One is continued move volume, higher revenue. The other direction is move more value to the market including data center product solution with our DCBBS.
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MP
MPanalystJPMorgan
As a follow-up, I just wanted to ask on DCBBS.
Like I think you already started shipping those solutions. And like when do you think the DCBBS will become material enough to actually impact the gross margins? And then my other question is, like, are you — any thoughts on initial feedback from customers? And then also any thoughts on the competition, which you are seeing relative to DCBBS.
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CL
Charles LiangCEOSuper Micro Computer, Inc.
Yes. Thank you for the question. Yes, DCBBS have been very welcome. We have some current large accounts already order some of the key DCBBS components. And we expect more and more customers will commit to our DCBBS.
The idea of like what we share is to speed up customers to deploy, build a data center, save their time to online. And also make power more efficient, save money overall, build a more solid data center. And the profit margin will show a much higher in the industry for data center infrastructure, basically, the business is more than 20% profit margin. And we are very excited for that product line to be getting available. And I believe it will ramp up very soon.
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Q&A 2/9
OP
Operatoroperator
Next question is from the line of Asiya Merchant with Citigroup.
AM
Asiya MerchantanalystCitigroup
Great.
The order pipeline that you guys talked about is pretty strong. And so if you can help us understand what's the components that are contributing to such a strong order outlook that you have embedded into your guidance? And if I may, you guys talked a little bit about — or about this revenue guide that you guys are exceeding sequential growth expected post fiscal 2Q. If you can just also help us understand how we should think about gross margins as we proceed through the year and the OpEx to support such a strong revenue outlook?
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CL
Charles LiangCEOSuper Micro Computer, Inc.
Yes. I mean, GPU, for sure, contributed most revenue kind of like Blackwell Ultra, and kind of like the AMD MI350, 355 and Blackwell B300 and RTX, right? So indeed, a lot of strong product line are driving our revenue. And at the same time, again, for the best interest to our customers, we try to provide data center end-to-end solution, including DCBBS, including management software, on-site deployment and service. So to put in a one-stop shopping for customers' advantage and also grow our profit margin. And David, you may add something for long term.
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David WeigandCFOSuper Micro Computer, Inc.
Sure. Yes. So on the gross margin question, we are — we're going into a quarter where we are ramping one of the largest clusters in the world. We're ramping a new product line at mega scale. And so therefore, we're being a little conservative on the margin because we will have a higher cost as we ramp production and shipment. So we're just giving guidance for 1 quarter out, but we did mention that as we go out throughout future quarters, we're expecting to improve for the reasons that we laid out.
On the OpEx side, you can tell from looking at our — historically, we are that sub-5% OpEx, and we expect that to continue. But we will continue to increase our OpEx in order to strengthen our infrastructure.
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Charles LiangCEOSuper Micro Computer, Inc.
Yes. I'd like add 2 more areas. Yes.
One area is traditionally, our revenue was about $5 billion to $6 billion quarterly. And now we are growing to $10 billion quarterly. So that, for sure, increase short-term challenge.
And that's why we have to leverage U.S.A., Taiwan, Malaysia facility. And that kind of involved hiring lots of new people, train our people and add a facility. But once this much higher capacity facility already in this quarter, December quarter, we will be able to service large customers in U.S.A., in Asia and Europe, truly global major supplier. And by that time, for sure, our resource leverage will become much more efficient. And second is our DCBBS is getting mature and getting ready to service more customers to put in more value to customers, and that I believe we have grown our profitability.
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Asiya MerchantanalystCitigroup
That's great.
If I could just on the orders that you talked about, $13 billion, I know you provided it at chip-set level. I think I was looking for just customers that are constituting that $13 billion? If you can just share some insights into how percentage of customers that are in there that contributed to such a strong order book or $13 billion?
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David WeigandCFOSuper Micro Computer, Inc.
So they constitute some of the best customers in the world, I'll say that. We had 2 10% customers this year. We ended last year with 4 10% customers. We always welcome new large customers. And — but we don't have any — we usually don't talk specifically about individual customers.
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CL
Charles LiangCEOSuper Micro Computer, Inc.
Yes.
But they are really high-profile high-value partner for long term. That's why we do such a big effort to greatly increase our capacity to support them. There are some of them. So we are very happy to enhance the support to those high value partner.
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Q&A 3/9
OP
Operatoroperator
Next question is from the line of Ananda Baruah with Loop Capital.
AB
Ananda BaruahanalystLoop Capital
A couple, if I could.
Charles, the midpoint of the guide for December is $10.5 billion. And the guide for — the updated guide for the fiscal year is at least $36 billion. And so if I model out $10.5 billion for each March and June, I get sort of just over $36 billion. You're talking about a lot of $13 billion in GB300 product wins, a lot of good activity going forward.
So I guess my question, Charles, is — first one is, are you being conservative? Is there conservatism baked in to the implied March and June quarters? Or should we expect some flattening out of revenue in the coming quarters? And then I have a follow-up.
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CL
Charles LiangCEOSuper Micro Computer, Inc.
Yes. Thank you for the question. Yes, this is the first time we grow our revenue to about more than $10 billion a quarter. So we are very excited about it.
So now we already expand our capacity global and train our people and have all our facilities ready. So from now on, we are ready to be really big supplier around the world. And with Blackwell getting mature and [yearly] quality, everything is promising at this moment. And so we feel very excited to have at least $36 billion. And hopefully, it's a very conservative number. And at the same time, we are doing our best to grow our DCBBS total solution because that's the unique data center infrastructure tool to help customers build a data center quicker, better, save energy and save money. So overall, I believe with DCBBS become more mature, our profitability will improve.
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Ananda BaruahanalystLoop Capital
And Charles, do you — I know we're talking fiscal year — we're talking fiscal year expectations.
But do you anticipate the strength to continue through the calendar year? There's been a lot of large deals with neoclouds announced lately with large AI labs and hyperscalers, and that's your sweet spot customer base, the neocloud. So should we anticipate this kind of strength without giving me a guide, but could the strength continue through the balance of the calendar year?
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CL
Charles LiangCEOSuper Micro Computer, Inc.
Yes. Indeed, our capacity is in given scale now, as you know, right? So $36 billion is a very conservative number. So we believe we will continue to grow quickly, continue to lead the market with not just technology, but also market share.
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AB
Ananda BaruahanalystLoop Capital
I appreciate that. Mike, just one quick clarification with David here. David, just to your prior comments about gross margin improvement through the year, is that to say that December quarter is the low watermark gross margin quarter for the fiscal year? That's it.
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David WeigandCFOSuper Micro Computer, Inc.
Yes, that's fair. We are — as I mentioned, this is a quarter of first impression for us on standing up doubling our revenues in 1 quarter. And so we're doing everything we can to improve our margin, but we're not making forecast out beyond December quarter.
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Q&A 4/9
OP
Operatoroperator
Next question is from the line of Ruplu Bhattacharya with Bank of America.
RB
Ruplu BhattacharyaanalystBank of America
David, can you remind us how much total revenue can your manufacturing footprint support today? And when it's fully utilized, what would that number be? And at what point do you decide to add more capacity, such as adding a new plant? And if you can weave in any update to the Malaysia plant, is that now building racks? And what's the status of that plant? And I have a follow-up.
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DW
David WeigandCFOSuper Micro Computer, Inc.
Okay.
So maybe I'll let Charles talk about capacity, but we've mentioned that we have a rack capacity of 6,000 racks per month worldwide. And so I don't think that we have spoken as to what that value is. But I can say that Malaysia, we are starting to stand up more in terms of their production, and we expect it to contribute greatly going forward. Let me see, did I answer — what other questions did I miss there, Ruplu?
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Ruplu BhattacharyaanalystBank of America
And — go ahead.
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Charles LiangCEOSuper Micro Computer, Inc.
Yes. I guess we try to be very, very conservative. Because with Blackwell Ultra is still brand new, right? So we had to make sure we ship exactly the best quality, the most reliable system to customer. And that's why we spend a lot of time to burn in our solution. And that's why we build up such a huge capacity. If you time 3,000 liquid cooling tower per month and time 12 months a year. And each rack, for example, $3 million. So the number is more than $100 billion. So yes, if everything smooths, our capacity is that $100 billion range now. But we try to be conservative and try to design carefully, burning carefully, make sure all the product we deliver to the market is exactly the same in the market.
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RB
Ruplu BhattacharyaanalystBank of America
Right. And as a follow-up, David, can I ask? You have this large project ramping over the next several quarters. How should we think about working capital and cash conversion cycle and free cash flow? And at what point would you need to tap the markets to raise more capital?
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DW
David WeigandCFOSuper Micro Computer, Inc.
Yes.
So we've maintained about $5 billion on average. And obviously, when you double your revenues, that's not going to be enough working capital.
So as we announced, we did put an accounts receivable sales program in place, which allows us to factor our receivables up to $1.8 billion. And we're also — we also have other programs that are being put into place to meet our needs over the upcoming quarters. So we have no doubts about our ability to execute on those programs.
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CL
Charles LiangCEOSuper Micro Computer, Inc.
Yes, to add it — we definitely have a capability to service more customers with a much higher volume, but we will control our revenue based on our cash flow.
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Q&A 5/9
OP
Operatoroperator
Next question is from the line of Nehal Chokshi with Northland.
NC
Nehal ChokshianalystNorthland
Yes. Great demand there and understandable that ramping up a new customer on the B300. But I guess, I think it was maybe a year ago, 1.5 years ago that it became apparent that you guys were helping xAI Colossus [ 8 ] — Colossus 1 ramp up.
And that was dilutive to margins at that point in time. The rationale was to get this lighthouse customer and demonstrate the Super Micro's engineering capabilities. Why is it necessary to basically do a routine repeat of this proof of Super Micro's engineering prowess?
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CL
Charles LiangCEOSuper Micro Computer, Inc.
xAI, for sure, a very good partner. And whenever we have a chance, we try to work with them to learn some things from them and to offer our best service. So yes, xAI will continue to be our important partner for long term. And again, our capacity is huge and capability is much bigger now, but we will be selective to grow our revenue based on our cash flow.
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DW
David WeigandCFOSuper Micro Computer, Inc.
And Nehal, what I would add is that what we are doing is that we are validating each time as we did 1.5 years ago and now that we're the premier provider of advanced DCBBS solutions and AI data centers. So we gladly stepped into that role, and we continue to get additional business each quarter as a result of these successful installations.
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Q&A 6/9
OP
Operatoroperator
Next question is from the line of Quinn Bolton with Needham & Company.
SM
Shadi MitwallianalystNeedham & Company
This is Shadi Mitwalli on for Quinn.
My first question is on gross margins. I know you guys mentioned new facilities coming online and that possibly being a tailwind for gross margin over time. So I was just wondering if we can get some more color here on the timing and maybe just the overall impact of these new facilities would have.
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CL
Charles LiangCEOSuper Micro Computer, Inc.
Yes. As you know, we need to invest in Malaysia and Taiwan in U.S.A. all our location. So make sure we have enough capacity to put in the best quality product, most optimal to the market. So in December quarter, we spent a lot of money to establish the foundation. And going forward, now we have those capacity and capability to grow much larger scale business.
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SM
Shadi MitwallianalystNeedham & Company
Great.
And then my follow-up is on the Super Micro federal program you guys announced intra-quarter. I was just curious if we can get some more color on this program? And maybe what led to the creation of it? And how this initiative could position Super Micro for government contracts going forward?
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CL
Charles LiangCEOSuper Micro Computer, Inc.
Yes.
We are U.S.A. company and have design manufacture service from Silicon Valley. So federal business should be sweet spot for us. And now we have more talent in service, in the customer relationship, in [inaudible] kind of support. So that's why we officially initiated a federal program.
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Q&A 7/9
OP
Operatoroperator
Next question is from the line of Jon Tanwanteng with CJS Securities.
JT
Jon TanwantenganalystCJS Securities
I wanted to expand on the prior question on just the case study with Colossus last year and how you took the margin hit to land that customer and validating new technologies. Apparently you're doing it at this time with the bigger customer and at a lower margin. So I guess the question is, philosophically, I'm not asking for margin guidance, but how do you expect to grow the margin going forward from here? And like how do you prevent that from happening again? Have you seen that stronger margin from follow-on orders from the customers that you have validated your technologies to? Or is that still something that is on the comp or hasn't been possible in this environment for whatever reason?
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DW
David WeigandCFOSuper Micro Computer, Inc.
So there are several different initiatives.
One, Jon, as you know, we get leverage off of the additional business that we have. We also, as we've mentioned, are pursuing manufacturing in other geographies in order to serve local customers, which we believe will also lower costs. We also have added on data center building block solution strategies, which we try to outline on every call and the expansion of business. But it's really, as I mentioned earlier, it's the success and the market share that we're taking that are bringing a lot of emerging, not only existing companies from around the world, but also — and sovereigns, but also new and emerging CSPs and neoclouds and other companies, enterprises coming to us because they recognize the Super Micro name. So we expect that, that will overall raise our margin profile and so we're doing everything we can to raise our margins. But yet, we still want to be the premier provider of DCBBS solutions. And so we think that we have a good strategy in that regard.
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JT
Jon TanwantenganalystCJS Securities
Okay. And just to clarify, have you seen the higher margins from customers where you maybe gave them better pricing or put you on investment into the initial orders as you get follow-on orders and repeat business from them?
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DW
David WeigandCFOSuper Micro Computer, Inc.
Yes.
So every — different customers have different margin profiles based on the amount of design that the Super Micro does for their solution as well as the size of the order that they're placing. So as in any business, customer ordering $1 billion of product is different from a customer ordering $10 billion of product in terms of pricing strategy. So therefore, we're very happy that the customers that we have brought into the Super Micro portfolio of customers is really adding a lot of name value to our brand.
And so that's what we're very pleased about. We're gaining market share. There's no question about that.
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JT
Jon TanwantenganalystCJS Securities
Got it. If I could sneak in one more. Just how are you accounting for the risk of further pushouts in the revenue outlook for the year, just given you've had a couple of high-profile ones already?
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DW
David WeigandCFOSuper Micro Computer, Inc.
Yes. So the timing of it — whenever you're dealing with very large projects, it's not always easy to fit deliveries into 1-, 3-month time frame. And there are all sorts of — I mean if you take a look at the thousands and thousands of parts we have to bring together to build our solutions. And also on the customer side, the things that they're having to do to get their data centers ready, there's a lot of logistics that have to take place. It doesn't always line up perfectly with our quarter ends. So we've said, as we continue to take large customers, it's going to be — there's going to be things beyond our control which includes customer readiness, which includes supply chain issues and et cetera, that will — that may impact quarter-to-quarter results.
But if you look at last quarter, or if you look at the last 2 years, we went from $7.5 billion to $15 billion to $22 billion, okay? So that trend did not stop. We were adding $7 billion for the last 2 years, each year.
Now did those quarters all line up perfectly according to our plan, our annual plan? Not always. But the trend is still there. And we've increased our revenues as well as our profits. And that's what we intend to continue to do.
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Q&A 8/9
OP
Operatoroperator
Next question is from the line of Mark Newman with Bernstein.
MN
Mark NewmananalystBernstein
So very encouraging to hear about the large orders, $13 billion order you mentioned. Just curious, though, there's not a lot of historical data on orders or backlog. And any color you can give on the size of the backlog of orders or how $13 billion compared to previous quarters. Just trying to understand that what's the size of the — which we've got guidance on from some of your competitors in the past. And another follow-up question on gross margins as well.
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DW
David WeigandCFOSuper Micro Computer, Inc.
Okay. So first, I'll answer that, your first question on historical data. We've — it's been our practice not to talk about backlog. We couldn't help but talk about the orders that we receive, the new orders that we received, new design wins because they did have some impacts in both the current quarter as well as the December quarter. And so we're speaking to those. But we're not — we don't talk generally about backlog. So I'll take your second question on gross margin.
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MN
Mark NewmananalystBernstein
So gross margins, I mean I know you're trying to stay away from long-term guide, but previously, I believe you've talked about this 15% to 16% long-term target for gross margins. Is that still intact but pushed out? Or is that now not up for grabs? Just curious what's the thinking on that?
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DW
David WeigandCFOSuper Micro Computer, Inc.
Yes. Back in — I think in 2021, we came out with a 14% to 17% gross margin guide. That's probably what you're referring to as a long-term target. The market has changed. And so we — in fact, we're right in the middle of a change right now as we move on to some new, very new dynamic platforms.
And so we will give margin guidance as we can see it clearly. We're doing our best to raise margins in a very competitive landscape.
Yes, we would love to be back in double digits. But we'll give guidance when we can see it clearly.
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Charles LiangCEOSuper Micro Computer, Inc.
And hopefully, it's not too far away. Indeed, we focus more on DCBBS and enterprise account, then double digital is easy for us. But at the same time, we are very interested to support a large-scale CSP as well. And so far, it looks like it's a great chance for us to service more large CSP customers as well. With large CSP customer and DCBBS enterprise together, our revenue will continue to grow very fast. And double-digit gross margin still in our plan, it just take a little bit longer.
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Q&A 9/9
OP
Operatoroperator
Final question is from the line of Brandon Nispel with KeyBanc.
BN
Brandon NispelanalystKeyBanc
I think echoing the same comments around gross margins that's looking at the guidance, it really implies 0% contribution margin. And so I think revenue growth is great, but was hoping you could really help us understand what's on the other side of this, right, in terms of help us understand what this business looks like from like a free cash flow contribution standpoint, as you guys scale it, because you can't just keep going down the path of lower and lower gross margins, especially when the revenue coming in, is at a 0% contribution margin, again, based on the midpoint of your guys' guidance?
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DW
David WeigandCFOSuper Micro Computer, Inc.
So again, we believe that we can't name all of our customers, but I can tell you that we are bringing in some of the best companies in the world. And we believe that our first-to-market practice of being able to bring reliable and optimize solutions quickly to market will reward us well. And this has been our practice over the last 32 years. And so we've consistently been first to market, we have shown that we can grow quicker than the market at large. And we've also shown that we can bring customized solutions, which bring very good margins and very good returns to the bottom line.
So we're staying with our game plan. Right now, the market is going through some new cycles with new kind of exciting new platforms coming out. We believe that this will pay off. So we're staying the course.
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BN
Brandon NispelanalystKeyBanc
And then just…
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Charles LiangCEOSuper Micro Computer, Inc.
Yes.
For sure, we will keep our bottom line, make sure we continue keep our bottom line, make sure we continue to make more total profit every quarter, every year. With that as the base for sure, when we have a chance to grow more market share, we try to grow more market share as well. But bottom line is make sure every quarter, every year, we make more total profit.
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BN
Brandon NispelanalystKeyBanc
Got it. And David, are there any like onetime costs with the design wins and the upgrade pushouts that fell into this quarter in terms of like onetime costs that you're absorbing in this quarter's gross margin guidance?
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DW
David WeigandCFOSuper Micro Computer, Inc.
So you're — in terms of the December quarter, yes, there are — there's a lot of additional engineering costs and expedite costs and overtime costs that result from delivering kind of what would be twice our normal revenue run rate and scaling a new technology at what we believe would be one of the largest clusters in the world. So yes, there are a lot of extra costs that go into that. And that we don't — that we believe will actually prepare us for the upcoming quarters?
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Charles LiangCEOSuper Micro Computer, Inc.
Yes. It's basically our first GIGA project. And hopefully, we can make it perfectly complete.
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Closing Remarks
OP
Operatoroperator
There are no additional questions waiting at this time. So I'll pass the conference back to the management team for any closing remarks.
CL
Charles LiangCEOSuper Micro Computer, Inc.
Thank you. Thank you, everyone.
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Operator Sign-off
OP
Operatoroperator
That concludes the conference call. Thank you for your participation. You may now disconnect your lines.