Q3 FY2025 Earnings Call
SMCI · Preprocessing Report
2025-05-06
Quality
100%
62
Turns
13
Speakers
4
Sections
9
Exchanges
362
Claims

Entities by group 38

ai systems manufacturer 2
Super Micro ComputercompanySMCIcompany
company executives 3
Charles LiangpersonDavid WeigandpersonMehdi Hosseiniperson
AI GPU platforms 5
BlackwellproductHopperproductGPUsproductMI-325XproductMI-350product
analysts 5
Ananda BaruahpersonJon TanwantengpersonGeorge WangpersonMichael NgpersonAsiya Merchantperson
datacenter building blocks 3
DLCtechnologyData Center Building Block SolutionstechnologyDLC-2technology
AI server systems 7
GB300productB200productGB200productB300productNVL72productB203HGXproductNVLR72product
sell-side analysts 3
Samik ChatterjeepersonNehal ChoskipersonNicholas Doyleperson
AI server platforms 1
HGXtechnology
chip suppliers 2
NVIDIAcompanyAMDcompany
investment firms 1
Needham and Companycompany
convertible notes 2
2029 Convertible Notesproduct2028 Convertible Notesproduct
liquid cooling solutions 1
RACproduct
Ungrouped 3
ITotherTTDotherTTOother
REPORTING 78PROJECTING 28POSITIONING 97EXPLANATORY 12ANALYST 64

Topics 74

revenue×40inventory×14ai×13growth×10data center×10gross×10customer×9earnings×8platform×8demand×8tariff×7cash×7guidance×7server×7liquid cooling×7cooling×6gpu×6capacity×6dlc×5blackwell×5

Themes 228

non-gaap×4liquid cooling×4technology×4capacity expansion×3gaap×3forward guidance×3quarter outlook×3strong demand×3ai diffusion rules×3order-of-magnitude growth×3shipments×2forecast×2quarterly growth×2global footprint×2macro environment×2enterprise/channel vertical×2segment mix×2geographic mix×2regional mix×2asia growth×2europe decline×2rest of world growth×2gross margin×2fully diluted share count×2quarterly guidance×2blackwell demand×2outlook×2withheld×2readiness×210k impact×2blackwell ramp×2hopper-style×2margin impact×2supply constraints×2rack production×2q3 fy2025×1gpu demand×1ai platform×1long-term targets×1it and ai×1ramping quickly×1financial regulatory×1high-volume delivery×1new product launches×1competitive leadership×1expansion opportunities×1volume of gpu systems and racks×1first to market leadership×1product expansion×1platform availability×1end-to-end solution×1product launch×1build efficiency×1bundle integration×1lower power and space use×1faster deployment×1time to deployment×1dlc solutions×1industry adoption×1customer savings×1efficiency gains×1green×1competitive edge×1malaysia shipping×1rising demand×1fiscal q3 performance×1financial challenges×1product advantage×1market share gains×1fiscal 2025×1q4 guidance×1quarter-over-quarter decline×1revenue mix×1customer market mix×1gpu platform ramp×1design win×1rack-scale and data center building block solutions×1ai and cpu platforms×1oem appliance and large data center mix×1oem appliance and large data center growth×1customer concentration×1emerging 5g/telco/edge/iot×1u.s. growth×1u.s. decline×1sales mix×1cost pressures×1operating×1other expense×1interest expense and other losses×1from operations×1closing balance×1for q4 shipments×1free cash flow×1amended terms×1gross proceeds×1proceeds use×1cash and debt balances×1net cash position×1working capital efficiency×1days on hand×1shipment-driven buildup×1days sales outstanding×1days payables outstanding×1tariffs and platform transition×1included in operating expenses×1stock compensation impact×1stock-based compensation exclusion×1interest expense guidance×1share count assumptions×1full-year guidance×1macro uncertainty×1customer trends and order pullbacks×1order volatility and cautious outlook×1question×1full volume production×1new product ramp×1hopper-based products×1tariff concerns and platform changeover×1product transition margin pressure×1price competition and delayed upgrades×1prudent outlook amid competition and tariffs×1target fiscal 2026×1changes×1midterm and long-term outlook×1data center building blocks demand×1customer interest×1tariff and macro resilience×1deferred×1product fulfillment×1gb200 nvl72 and b200 demand×1improving outlook×1value-add customization×1customization and services×1open standards and margins×1customization and margins×1new opportunities×1power and water efficiency×1product timing×1top-customer mix×1quarter-to-quarter contribution variability×1lower concentration×1shipment timing×1risk assessment×1acceleration×1improvement×1new technology×1order flow×1revenue guidance×1facility expansion tailwind×1product age×1strong growth×1diffusion rules impact on demand×1modeling for 2026×1target levels×1ai diffusion restrictions×1cost headwinds×1u.s. concentration×1market positioning×1first-to-market×1peer positioning×1blackwell supply ramp×1gpu ramp comparison×1hopper ramp×1sequential growth×1march quarter results×1blackwell delay impact×1hopper cycle×1hgx b200 stacking and cooling×1nvl72 proximity with hgx cooling×1deep cooling technology×1deep cooling promotion×1direct liquid cooling shipments×1direct liquid cooling reliability×1solution maturity×1promotion plan×1second generation outperformance×1marketing push×1blackwell readiness×1future product confidence×1older products×1product monitoring×1tariff pressure×1through three quarters×1year-over-year growth×1future outlook×1explanation×1margin guidance×1reserve charge×1march quarter impact×1shortfall×1resale pricing×1platform decisions×1migration to newer platforms×1write-down on platform changes×1decision detail×1customer migration from hopper to blackwell×1possible alternate cause×1customer switch to blackwell×1shift drivers×1differentiated mix×1technology-leading companies×1solution readiness×1production ramp×1u.s. manufacturing strength×1domestic manufacturing advantage×1demand impact×1impact×1operational efficiency×1customer solution optimization×1supplier allocations×1blackwell and hopper allocations×1competitive market conditions×1allocation delays×1concern×1production level×1aggressive spending×1capacity reconciliation×1racks per month×1rack allocation×1ramp-up×1deep cooling readiness×1production capacity×1manufacturing expansion×1malaysia enablement×1malaysia ramp-up×1malaysia expansion×1search×1aggressive recruitment×1

Key Metrics 48

revenue×42gross margin×13capacity×8demand×5shipments×4customer concentration×4eps×3operating expenses×3tax rate×3inventory×3capex×3guidance×3orders×3margin×3revenue growth×3cash flow×3inventory reserve×3growth×2other income and expense×2share count×2diluted net income per share×2volume shipments×1tco×1power consumption×1sales×1operating margin×1diluted eps×1cash from operations×1gross proceeds×1cash×1net cash×1cash conversion cycle×1days sales outstanding×1days payables outstanding×1net sales×1stock-based compensation expenses×1earnings per share×1other income and expenses×1capital expenditures×1visibility×1revenue outlook×1pricing×1customer contribution×1order flow×1forecast×1units shipped×1inventory write-down×1racks per month×1

Entities 569

Super Micro Computer×256Charles Liang×76David Weigand×55Blackwell×23Ananda Baruah×16DLC×14Hopper×13Data Center Building Block Solutions×12GB300×8DLC-2×8Jon Tanwanteng×8George Wang×7Mehdi Hosseini×7HGX×6Samik Chatterjee×6Michael Ng×5GPUs×4B200×4GB200×4B300×4NVIDIA×3NVL72×3SMCI×3Asiya Merchant×3Nehal Choski×3Nicholas Doyle×3Needham and Company×3AMD×2IT×1MI-325X×1MI-350×1TTD×1TTO×12029 Convertible Notes×12028 Convertible Notes×1B203HGX×1RAC×1NVLR72×1

Business Segments 84

Server And Storage Systems×74Enterprise And Channel×2OEM Appliance And Large Data Center×2Rest Of World×2Subsystems And Accessories×1U.S.×1Asia×1Europe×1

Sectors 125

computer hardware×66data center×17semiconductor×16artificial intelligence×10cloud computing×4manufacturing×4server hardware×2logistics×2cooling×1telecommunications×1edge computing×1internet of things×1

Regions 39

U.S.×9Malaysia×8Taiwan×4Europe×4USA×4Asia×3Rest of World×3Midwest×1China×1Silicon Valley×1Netherlands×1

Metadata Distributions

Sentiment
positive 95negative 32neutral 152
Temporality
backward 79forward 62current 138
Certainty
definitive 70confident 78moderate 85tentative 44speculative 2
Magnitude
major 60moderate 178minor 41
Direction
improvement 34decline 13flat 1mixed 6none 225
Time Horizon
immediate 76near_term 125medium_term 25long_term 3unspecified 50
Verifiability
quantitative 85event 25qualitative 169
Analyst Intent
probing 26challenging 3confirming 3seeking_detail 29seeking_guidance 3

Speakers

Executives
CLCharles LiangCEODWDavid WeigandCFO
Analysts
ABAnanda BaruahanalystAMAsiya MerchantanalystGWGeorge WanganalystJTJon TanwantenganalystMHMehdi HosseinianalystMNMichael NganalystNCNehal ChoskianalystNDNicholas DoyleanalystSCSamik Chatterjeeanalyst
Other
MSMichael StaigerirOPOperatoroperator

Sections

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

Q&A Exchanges 9

#AnalystFirmTurns
1
SCSamik Chatterjee
JPMorgan8
2
MNMichael Ng
Goldman Sachs5
3
GWGeorge Wang
Barclays7
4
AMAsiya Merchant
Citigroup7
5
ABAnanda Baruah
Loop Capital5
6
NCNehal Choski
Northland6
7
JTJon Tanwanteng
CJS Securities5
8
NDNicholas Doyle
Needham and Company4
9
MHMehdi Hosseini
SIG10

Claim Taxonomy 279

REPORTING78
resultFinancial outcome for a completed period56
metricNon-financial quantitative fact10
operationalDiscrete completed event12
PROJECTING28
guidanceQuantitative expectation with number + time16
commitmentPromise with binary verifiable outcome12
targetLong-term aspirational quantitative goal0
POSITIONING97
strategyPriority, direction, or initiative77
competitiveCompany's position or advantages8
opportunityMarket condition framed as growth driver1
riskHeadwind, constraint, or uncertainty11
EXPLANATORY12
attributionWhy a specific outcome happened5
contextNon-company macro/industry fact7
FRAMING0
thesisFalsifiable belief about how the world works0
ANALYST64
questionInterrogative seeking information45
observationRestates a fact or data point13
concernFlags a risk or challenge5
estimateAnalyst's own projection or calculation0
sentimentOpinion, praise, or critique1

Transcript

Preamble
OP
Operatoroperator
Thank you for standing by.
My name is Victoria and I will be your conference operator today. At this time, I would like to welcome everyone to the Super Micro Computer, Inc. SMCI U.S. Third Quarter Full Year 2025 Earnings 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. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session.[Operator Instructions] I would now like to pass the conference over to Michael Staiger.
MS
Michael StaigerirSuper Micro Computer, Inc.
Victoria, thank you. Good afternoon and thank you for attending Supermicro's call to discuss financial results for the third quarter which ended March 31st, 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 news released from the company that was distributed at the close of regular trading 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 have 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 fourth quarter and full fiscal year 2025. There are a number of risk factors that could cause Supermicro's future results to differ materially from our expectations. You can learn more about these risks in the press release we issued earlier this afternoon, our most recent 10-K filing for fiscal year 2024, and our other SEC filings. All of these documents are available on the Investor Relations page of Supermicro's 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. In addition, a reconciliation of GAAP to non-GAAP results is contained in today's press release and in the supplemental information attached to today's presentation. At the end of today's prepared remarks, we will have a Q&A session for sell-side analysts. I will now turn the call over to Charles.
Prepared Remarks
CL
Charles LiangCEOSuper Micro Computer, Inc.
Thank you, Michael, and thanks to everyone for joining us.
As previously announced, our fiscal Q3 net revenue totaled $4.6 billion, coming in lower than our original forecast. This decline was primarily due to customers waiting and evaluating AI platforms between the current Hopper and the upcoming Blackwell GPUs, leading to delayed commitments. We expect many of these engagements to materialize in the June and September quarters, strengthening our confidence in meeting our long-term growth targets as we close out this eventful fiscal year. Despite macroeconomic conditions and tariff impacts, our ability to expand market share in IT and AI remains strong. On the earnings front, our fiscal Q3 non-GAAP EPS stood at $0.31 per share, compared to $0.66 last year.
This decline was largely driven by a one-time inventory write-down of older-generation GPUs and related components, while the new platforms are finally ramping quickly now. Although our quarterly performance did not align exactly with our expectations, we successfully fulfilled our commitment to regaining financial regulatory compliance.
At the same time, we continue to enhance technological innovation and development, which resulted in the successful high volume delivery of our new generation AI products at the end of March. Looking ahead, some major groundbreaking new innovations are set to service the market in this quarter and the new fiscal year especially with our coming soon DCBBS. With a clear time-to-market advantage, Supermicro once again leads the AI infrastructure technology and DLC solutions. This strong position enables us to explore new opportunities and expand market share. During the quarter, we achieved volume shipments of air-cooled 10U and liquid-cooled 4U NVIDIA B200 HGX systems, both are exactly the first to market again, as well as GB200 NVL72 racks. Additionally, we started to offer AMD MI-325X solutions to further broaden our AI portfolio. Leveraging our system building blocks, we will again offer time-to-market on the upcoming new platforms, such as NVIDIA B300, GB300 and AMD MI-350 platforms this summer, for customers seeking leading technology, more optimized, higher-density, and greener AI solutions. Built on our strong foundation of technology leadership, building block solutions, and green computing DNA, we have been deeply focused on developing the industry's first end-to-end AI/IT datacenter total solution. We are now about fully ready to share this exciting news with the market in the coming days by launching our brand-new Datacenter Building Block Solutions, we call it "DCBBS", featuring our second-generation system liquid cooling technology, we call it "DLC-2".
With DCBBS, we are able to dramatically shorten customers' efforts to build a datacenter, reduce their cost, and most importantly make their datacenter better quality and performance, greener and with higher availability. DCBBS consolidates critical components — including (AI) server systems, storage, rack PnP, all different kinds of switches, DLC systems, water tower or dry tower, chilled door, power shelf, battery backup unit (BBU), onsite deployment, networking design, cabling, and datacenter end-to-end management software and all different scopes of services — into a streamlined process. The true value of DCBBS lies in its ability to reduce power consumption, optimize space, and decrease water usage, delivering up to 30% lower TCO. More importantly, it accelerates new datacenter deployments and upgrades existing datacenters in a matter of months or even weeks, rather than many quarters or years driving significant improvements in datacenter time-to-deployment (TTD) and time-to-online (TTO). One of the key components of DCBBS is our industry-leading DLC solutions.
Supermicro remains at the forefront of driving industry adoption of DLC technology, setting new standards for performance, efficiency and sustainability. Last year, we shipped 4,000 100kW AI racks equipped with DLC, helping our customers reduce energy costs by up to 25%. We are committed to doubling this volume in the coming year, further amplifying the impact of green computing. With the upcoming DLC-2 technology, Supermicro will be able to deliver even greater savings and benefits to our customers. For example, it saves power and water up to 40% and reduces data center noise levels down to about 50 dB, that is almost as quiet as a library. We are going to announce the details in the coming days. Green computing can be everywhere, and with our DLC-2 solutions, we are making that vision a beautiful reality.
Our long-term investments and leadership in DLC have solidified a sustainable competitive edge, providing economies of scale and keeping us far ahead of the competition. Our global operations continue to expand, with our new Malaysia campus begin shipping products to partners. Meanwhile, our facilities in Taiwan and Europe are scaling up their capabilities and capacity, providing customers with flexible options for their logistic choice and minimizing their cost during these market uncertainties. To further strengthen support for key partners and align with government initiatives, we continue to expand our U.S. domestic manufacturing capacities including new facilities in the Midwest and other locations.
These strategic expansions will allow us to meet rising demand while continuing to enhance our commitment to quality, security, and TCO, TTD, and TTO. In summary, fiscal Q3 was dynamic and productive. We successfully navigated financial challenges while continuing to strengthen our leadership in product and technology innovation. Our first-to market advantage in AI infrastructure, along with the expanded reach of DCBBS and advancements in DLC technology, further solidifies our industry position. I remain highly confident and optimistic about our long-term strong growth and market share gain. However, near-term macroeconomic and market uncertainties make it difficult to precisely forecast the pace of technology adoption. Despite this, I am confident that we will close the fiscal year on a strong note. Given the current conditions, we anticipate Q4 revenues of at least $6 billion and will resume providing a broader forecast range once we have more clear visibility.
Before passing the call to David for the financial overview, I want to thank all of our partners, customers, investors, and Supermicro team members, and express my deep appreciation for their continued support. With that, I will now turn the call over to David.
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DW
David WeigandCFOSuper Micro Computer, Inc.
Thank you, Charles. Fiscal Q3 2025 revenues were $4.6 billion, up 19% year-over-year and down 19% quarter-over-quarter. Q3 revenues were down quarter-over-quarter as certain new platform decisions by customers moved some sales into Q4 and later. AI GPU platforms represented more than 70% of revenues with AI GPU customers in both the enterprise and cloud service provider markets. Our design win pipeline remains robust, and we expect continued growth in Q4 as we ramp up production of our Data Center Building Block Solutions (DCBBS) based on new GPU platforms. As a leading U.S. technology company, we focus on extensive rack-scale and DCBBS technology and capacity investments in the U.S. which is complemented by our investments in Taiwan, Netherlands, and Malaysia. As Charles indicated, we have a flexible global manufacturing footprint to meet our customers' needs, and we continue to closely monitor the rapidly evolving macro and tariff environment. During Q3, we recorded $1.9 billion in the enterprise/channel vertical, representing 42% of revenues versus 25% last quarter. This was up 3% year-over-year and up 38% quarter-over-quarter as we saw strengthened enterprise adoption of new AI and CPU platforms. The OEM appliance and large data center vertical revenues were $2.6 billion, representing 57% of Q3 revenues versus 75% in the last quarter, up 35% year-over-year and down 38% quarter-over-quarter. Two existing CSP/large data center customers represented 22% and 14% of Q3 revenues. Emerging 5G/Telco/Edge/IoT revenues were $48 million or 1% of Q3 revenues. Server and Storage Systems comprised 97% of Q3 revenue and Subsystems and Accessories represented 3%. By geography, the U.S. represented 60% of Q3 revenues, Asia 30%, Europe 6%, and Rest of World 4%. On a year-over-year basis, U.S. revenues increased 3%, Asia increased 77%, Europe decreased 3%, and Rest of World increased 83%. On a quarter-over-quarter basis, U.S. revenues decreased 28%, Asia increased 76%, Europe decreased 69%, and Rest of World increased 45%.
China continued to represent less than 1% of sales in Q3. The Q3 non-GAAP gross margin was 9.7%, down 220 basis points quarter-over-quarter from 11.9% in Q2 primarily due to higher inventory reserves for older generation products, lower volume and accelerated costs to enable time-to-market for new products. Q3 Operating Expenses on a GAAP basis decreased 3% quarter-on-quarter and increased 34% year-over-year to $293 million. On a non-GAAP basis, Operating Expenses decreased 5% quarter-over-quarter and increased 30% year-over-year to $216 million. Q3 non-GAAP operating margin was 5.0% compared to 7.9% in Q2 due to the lower revenues and gross margins. Other Income and Expense for Q3 was a net expense of $31.7 million, consisting of $13.4 million in interest expense principally from convertible bonds and other losses of $18.3 million principally from a non-cash $30.3 million loss on the amendment of the 2029 convertible bond and adverse foreign exchange impact and other miscellaneous expenses offset by higher interest income. The GAAP effective tax rate was 5.1% resulting in a GAAP tax expense of $6 million for Q3. The non-GAAP effective tax rate for Q3 was 15.5% resulting in Q3 non-GAAP tax expense of $36 million. Q3 GAAP diluted EPS of $0.17 and Q3 non-GAAP diluted EPS of $0.31 was lower than our guidance due to the lower revenues and gross margins. The GAAP fully diluted share count for Q3 was 622 million and the non-GAAP fully diluted share count was 636 million. Cash flow generated from operations for Q3 was $627 million compared to cash flow usage of $240 million during the previous quarter. The Q3 closing inventory was $3.9 billion, which increased by 7.6% quarter-over-quarter from $3.6 billion in Q2 as we prepare for higher shipments in Q4. CapEx was $33 million for Q3 resulting in free cash flow of $594 million for the quarter. During the quarter, we amended the terms of our existing 2029 convertible notes and raised $700 million in gross proceeds in a new 2028 convertible note from the existing convertible investor group. The proceeds from the new convertible note offering will be used to strengthen our working capital, enable continued investments in R&D and expand global capacity as needed. The closing Q3 balance sheet cash position was $2.54 billion, while bank and convertible note debt was $2.49 billion resulting in a net cash position of $44 million versus a negative net cash position of $479 million last quarter.
Turning to the balance sheet and working capital metrics compared to last quarter, the Q3 cash conversion cycle was 124 days versus 104 days in Q2. Days of Inventory increased by 3 days to 81 days compared to the prior quarter of 78 days due to key component purchases for higher expected Q4 shipments. Days Sales Outstanding increased by 9 days quarter-over-quarter to 56 days while Days Payables Outstanding decreased by 8 days to 13 days. We are closely monitoring the macro environment, tariffs, and the technology transition to new platforms.
The outlook for the fourth quarter of fiscal 2025 ended June 30, 2025 we expect net sales in the range of $5.6 billion to $6.4 billion, GAAP diluted net income per share of $0.30 to $0.40 and non-GAAP diluted net income per share of $0.40 to $0.50 Given the dynamic environment, we are being prudent and expect gross margins to be approximately 10%. GAAP operating expenses are expected to be approximately $319 million and include $74 million in stock-based compensation expenses that are not included in non-GAAP operating expenses. The outlook for Q4 of fiscal year 2025 fully diluted GAAP EPS includes approximately $63 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 be a net expense of approximately $16 million. The company's projections for Q4 GAAP and non-GAAP diluted net income per common share assume a GAAP tax rate of 14.9%, a non-GAAP tax rate of 16.5%, and a fully diluted share count of 628 million for GAAP and 642 million shares for non-GAAP. We expect CapEx for Q4 to be in the range of $45 million to $55 million. For fiscal year 2025 ending June 30, 2025, based on the Q4 guidance above, we are expecting revenues of $21.8 billion to $22.6 billion. Michael, we're now ready for Question-And-Answer-Session.
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Q&A Session
Q&A 1/9
OP
Operatoroperator
Of course. [Operator Instructions] Our first question comes from the line of Samik Chatterjee with JPMorgan. Your line is now open.
SC
Samik ChatterjeeanalystJPMorgan
Hi. Thanks for taking my question.
Maybe for the first one. I know in your prepared remarks you mentioned that the macro is making forecasting a bit tougher and you're talking about prudence in your guidance itself. But maybe if you sort of share what you're hearing from your customers. Are customers already talking about pulling back some orders or is there any change in customer order trends that you're seeing because of the macro? And given just where we stand relative to the June quarter already we are month and I would assume you would have more sort of visibility into the June quarter rather than having to put sort of some level of consumerism in. So have you seen a lot more volatility in terms of customer orders recently to drive that prudence in terms of the revenue outlook for June and have a follow up please. Thank you.
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CL
Charles LiangCEOSuper Micro Computer, Inc.
Yes, very good question. Basically June will be our traditional strong quarter and for sure the tariff and the macro economy uncertainty that concern some customer. But at this moment we see a strong order. So I believe we will have a strong quarter for June and September.
Next fiscal year will be even stronger because our new product, especially Blackwell, is fully in volume production now. So we gain more and more order for Blackwell and expect stronger start from now.
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Samik ChatterjeeanalystJPMorgan
Okay. Okay, got it. And maybe before my follow up on the gross margin side.
Previously you have talked about margins improving as you start ramping new products, whereas you sound the guidance itself implies a bit more cautiousness on that front. Has there been a change in the pricing landscape for the new products that you're seeing in the market or is this more about the tougher pricing environment for Hopper based products? Thank you.
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CL
Charles LiangCEOSuper Micro Computer, Inc.
I think it's a combination of concern about tariffs and so conservatism there and also with some, obviously also some impact from the changeover in technology platforms.
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SC
Samik ChatterjeeanalystJPMorgan
So just to clarify, so in terms of the changeover that is driving some headwinds to the gross margin, the changeover itself from Hopper to Blackwell.
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CL
Charles LiangCEOSuper Micro Computer, Inc.
That's. That's correct. So as you, as you come off of some of the older platforms, you have, you have more price competition and as we said, we had some delayed decisions because of these technology platform changes. And so that's really impacting that along with tariff uncertainty drives a little bit more prudence in setting margin expectations.
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SC
Samik ChatterjeeanalystJPMorgan
Got it. Thank you. Thanks for taking my questions.
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Q&A 2/9
OP
Operatoroperator
Thank you for your question. Our next question comes from the line of Michael Ng with Goldman Sachs. Your line is now open.
MN
Michael NganalystGoldman Sachs
Hi, good afternoon.
Thank you very much for the question. I was just wondering if you could talk a little bit more midterm about your demand outlook. Are you, and apologies if I missed it, but are you reiterating the $40 billion revenue target for fiscal 2026, and perhaps you can talk a little bit about any changes that you might be seeing from a demand perspective, aside from the timing of the technology platform transition and the macro and uncertainty. Thank you.
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CL
Charles LiangCEOSuper Micro Computer, Inc.
Yes, we remain very confident with our midterm and long-term growth. So especially Blackwell product line, we have a very strong demand and also our coming soon DC BBS data center building blocks total solution. We see lots of customers really interested in our data center total solution. So demand growth will keep strong and yes, the tariff and some macro economy uncertainty. We at this moment do not provide guidance for fiscal year 2026. But when it's the visibility become more clear, we will share at that time.
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Michael NganalystGoldman Sachs
Great, thanks Charles, that's very helpful. And just as a follow up, can you talk about whether or not you're seeing differences in demand between HGX versus NVL 72 racks? Any differences there either in customer demand or your ability to fulfill demand on either product? Thank you.
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Charles LiangCEOSuper Micro Computer, Inc.
Yes, we see strong demand for kind of GB200 NVL 72 and B200 liquid cooling. But customer liquid cooling data center basically a little bit dead. So that's why they are waiting there, waiting a little bit more than what we expect. So but however the solution, their data center will be ready very soon and we to see our schedule is getting much more exciting now.
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Q&A 3/9
OP
Operatoroperator
Thank you for your question, Michael. Our next question comes from the line of George Wang with Barclays. Your line is now open.
GW
George WanganalystBarclays
Oh hey, hey, hey guys. Thanks for taking my question. Hey Charles, just a kind of question on the GB300.
Any differences in terms of value add from Supermicro, just in terms of customization and potentially more services attached, presume, as media potentially open up the components kind of for more open standards for the GB300 that could lead to better margins for Supermicro. I mean, do you agree just any kind of puts and takes there?
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Charles LiangCEOSuper Micro Computer, Inc.
Yes, I guess whenever. The new technology is always putting more chance to Supermicro.
As you know, our B203HGX system, for example, we are forced to have a product available and demand is strong. So B300 and GB300 for sure we expect a very strong demand. And with our very mature liquid cooling solution, we have DRC solution start to ship last year 4000 RAC and this year with our DLC 2 DLC revision tool, it offer even better power saving, water saving and also much better internal noise level. Right. So we believe GB300, B300, our technology advantage will be even more clear. And we are excited to see B300 GB300 coming very soon in the summer, the coming summer.
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GW
George WanganalystBarclays
Okay, great. Just a quick one if I can squeeze in maybe for David and also for Charles. Just in terms of pop [ph] to customers this quarter combined the percentage was a bit lower versus last quarter. So is this because of quarter-to-quarter kind of lumpiness, volatility or is there anything else kind of you want to call out in terms of customer contribution a bit lower?
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Charles LiangCEOSuper Micro Computer, Inc.
Yes, I don't, I don't think there's any trend, George. It's just timing of shipments. But we don't, we don't have any concern about.
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GW
George WanganalystBarclays
Yes, yes, yes. Just kind of follow up any outlook for the top two customers kind of in the next few quarters, any high level thoughts and any other kind of customer set you guys are expanding to kind of you can talk about?
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Charles LiangCEOSuper Micro Computer, Inc.
Yes, we believe our business will continue to grow much faster in the coming quarters. I hate it to mention, but still, I mean in December quarter, last year and March quarter we got some impact from the cash flow from the 10K impact, but that's already behind, behind us. So now we have a much better cash flow and we are ready to grow much quicker now, especially with the new technology.
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Q&A 4/9
OP
Operatoroperator
Thank you for your question, George. Our next question comes from the line of Asiya Merchant with Citigroup. Your line is now open.
AM
Asiya MerchantanalystCitigroup
Great, thank you for taking. Okay, great. Thank you for taking my question.
So I know there's a lot of uncertainty with tariffs, etcetera, but is there something that you can talk to us or kind of see how investors AI diffusion rules? There's a lot of investor angst around that. How are you guys thinking about your visibility and how the order should flow through given AI in AI diffusion could impact or possibly could impact your revenues. And then I have a follow up. Thank you.
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Charles LiangCEOSuper Micro Computer, Inc.
Yes.
At this moment we see our demand continue to grow and that's why we continue to expand our facility in USA, in Taiwan, in Malaysia. So overall our technology didn't age especially. I mean we did, we do continue to see the demand, well, continue to grow strongly.
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Asiya MerchantanalystCitigroup
Okay, great. And then on growth.
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Charles LiangCEOSuper Micro Computer, Inc.
I mean [inaudible] may impact the demand a little bit, but overall we will continue to get much share.
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AM
Asiya MerchantanalystCitigroup
Okay. And then if I may, on gross margins, again, can you just help us understand like how you're thinking about, you know, the margins, especially as you expand on your DLC version two, just how we should think about gross margins in 20, calendar 20, fiscal 2026. Sorry.
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Charles LiangCEOSuper Micro Computer, Inc.
Yes, so we're not, we're not going to give forecasts for next year at this meeting. But what I can tell you is that we have, we have published before what our target margins are. But right now we've got some of the headwinds of like you mentioned that the diffusion rules coming up in mid-May. We have tariffs that we are, that we have to, we have to get, find our way through. And so, those things are, are certainly headwinds. But on the other hand, we have, we still have the majority of our business from U.S. customers.
And so we're, we're a U.S. based manufacturer and so we think that we're well positioned in the marketplace on all of those fronts. But we don't. We also being a first to market provider of the latest solutions, we also think we have an edge there. So we think that we're as best positioned as someone in the marketplace can be.
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Q&A 5/9
OP
Operatoroperator
Thank you for your question. Our next question comes from the line of Ananda Baruah with Loop Capital. Your line is now open.
AB
Ananda BaruahanalystLoop Capital
Hey guys. Yes, thanks for taking the questions. Really appreciate it. I guess. Yes. Two if I could, I guess this would be for Charles and for Dave. You guys made mention of ongoing ramp as Blackwell supply comes on. And so should we assume that that means September quarter looks up sequentially from the June quarter?
And just along with that, this is not my follow up. But just like along with that, like when the during hopper ramp you had like, you had multiple quarters. That's not accurate yet. Two quarters of 70% sequential growth you had a 40% sequential growth quarter during the hopper ramp. So not like a forecast but are those. You have 30% up here in June off of a soft March.
So I guess the question is order of magnitude can you be up? Are you saying you'll be up September quarter again as Blackwell ramps and those sort of copper order of magnitude sequential increases, Charles, sort of through cycle. Is that the type of thing that you sound so excited when you talk excitedly about the Blackwell potential? Is it that kind of order of magnitude that you think is possible to get back to at some point as you go through black Blackwell cycle? And then I have a quick follow up as well. Thanks.
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Charles LiangCEOSuper Micro Computer, Inc.
Yes, thank you for your question. Yes, you are right.
I believe March quarter we were solved. The major reason because technology transition. Not just people waiting for a Blackwell solution, but also we have a lot of write down for product line. Right.
So looking forward I hope we can repeat Hopper history kind of start to grow from June and September and December quarter. I believe so. I hope so.
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Ananda BaruahanalystLoop Capital
Okay, that's great. And my follow up is actually more of a technical question. So you mentioned in your prepared remarks Charles, about liquid cooling the HGX B200. And the question is how many HGXs B200 and then I guess if you want to give an early, early comments about the B200 the X how many, how many HGX is are you actually seeing you can stack and liquid pool. And I guess I'm wondering like how many GPUs are folks able to stack and liquid cool with HGX. I'm interested in seeing how close you can get, folks are getting that to the, to the NVL72.
Thanks. That's it for me. Thanks.
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Charles LiangCEOSuper Micro Computer, Inc.
Yes. For Hopper, as you know air cooler work fine, but we like to prove we want to establish the deep cooling technology. So we try to promote aggressively deep cooling for hopper.
And we successfully ship about 4000 rack DLC to the market. And so far the 4000 rack run very reliable customer — our DLC solution a lot. So we gained lots of experience and now our DLC solution is much mature than last year. And that's why we further prepare to promote DLC2. Our DLC2 second generation DLC will outperform the first generation and we will have a big promotion in next few days or next few weeks. So with Blackwell our DLC solution is fully ready and we will provide a basic DLC solution to the world to help a customer save power, save water, save money and also improve data center performance. So we have a very strong confidence for liquid cooling, especially for Blackwell and future [ph] product.
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Q&A 6/9
OP
Operatoroperator
Thank you for your questions. Our next question comes from the line of Nehal Choski with Northland. Your line is now open.
NC
Nehal ChoskianalystNorthland
Hi. Thank you. Just want to make sure I understand the inventory reserve that occurred in the March quarter and then is there any expectation that there will be inventory reserve in the June quarter and is that part of 10% gross margin guidance?
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David WeigandCFOSuper Micro Computer, Inc.
Yes. So the as mentioned in our pre release and also in this release, the inventory reserve reduced our margin by about 220 basis points. Most of that was caused by taking a reserve for some of the older inventory products. And so the certainly we're watching very closely our inventory products. However, as mentioned, the main, the substantial reason for the reduction, for the expected reduction in margin is really caution or prudence regarding tariffs.
I want to point out that by the way that we've through three quarters we have 16.2 billion in revenues. That was versus last year's four quarters of 15 billion. And so we're very happy with where we are in the performance cycle and even though we expect even better.
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Charles LiangCEOSuper Micro Computer, Inc.
Yes. To simplify, I would like to share. I mean for March quarter we have a 200 point impact from the reserve. Right. But June quarter maybe I hope only 100 point or less and September quarter I hope close to zero.
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Nehal ChoskianalystNorthland
Okay. And so just this inventory reserve that you're taking as a charge. That basically means, I mean you look at the impact of 200 basis points for a March quarter that basically equates to $100 million. And then you had a billion dollar shortfall on revenue. And so does that basically mean that, some percent of that shortfall just isn't finding a new home or does that mean that that shortfall is being resold in the June and September quarter at a lower price?
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David WeigandCFOSuper Micro Computer, Inc.
Yes, So I mentioned that some of the, some of the revenues that we expected in Q3 were platform decision based.
So that means actually that people are moving to the newer platforms in the upcoming quarters. Okay. And so what that means is that in cases where people change their minds on platforms, we have to write the expected realizable value of those, take a reserve for those and do our best to sell them at more competitive prices.
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Q&A 7/9
OP
Operatoroperator
Thank you for your question. Our next question comes from the line of Jon Tanwanteng with CJS Securities. Your line is now open.
JT
Jon TanwantenganalystCJS Securities
Great. Thank you for taking my questions. I was wondering if you could expound on that platform decision A little bit more. Is it customers declined to take Hopper and decided to move to Blackwell. Was it something else? Is that what I'm hearing? And was it due to, design or demand or performance considerations or was there something else going on with maybe like data center constraints or something like that?
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Charles LiangCEOSuper Micro Computer, Inc.
Yes, our customer base a little bit different from the other competitor. Right. Most our customer kind of technology leading company. So that's why new product is very sensitive to them and this thing is now Blackwell solution is fully ready. So we are excited to ramp it up stuff up now.
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JT
Jon TanwantenganalystCJS Securities
Okay, great. Charles, I also want to touch on something you mentioned before. Just with one of the biggest U.S. server manufacturing operations, can you just talk about your relative strength there in positioning in U.S. domestic manufacturing versus your competitive set and how much of an advantage is that? When you are seeing tariffs going up across multiple industries, is that providing you any more additional demand or is that too hard to see right now?
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Charles LiangCEOSuper Micro Computer, Inc.
Yes, I mean as a USA company, we are able to, especially manufacture in Silicon Valley, we are able to respond to new technology much quicker and efficient than others, especially with a better performance, a better solution like a DLC2. Right.
And as to tariff impact, because the tariff program is not quite settled down yet. So we are watching carefully and try to adjust our logistics, our operation as efficient as possible. Good thing is we have a huge operation in USA and in Taiwan and in Malaysia now as well. So when tariff program settles down, we should be able to quickly respond to optimize the best solution for customers.
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Q&A 8/9
OP
Operatoroperator
Thank you for your question. Our next question comes to the line of Nicholas Doyle with Needham and Company. Your line is now open.
ND
Nicholas DoyleanalystNeedham and Company
Hey guys on for Quinn Bolton. Thanks for taking my question. Can you just talk about your supplier allocations? Are you seeing the same GPU allocations for Blackwell as you have for Hopper? How has your supply changed as more competitors enter the market? Thank you.
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Charles LiangCEOSuper Micro Computer, Inc.
Yes, still some allocation matter, right? Kind of some customer 1 Blackwell right away and we had to wait for allocation. So that situation is a little bit better than a half time frame, but still some constraint there.
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Nicholas DoyleanalystNeedham and Company
Thank you.
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Q&A 9/9
OP
Operatoroperator
Thank you for your question. Our last question comes from the line of Mehdi Hosseini with SIG. Your line is now open.
MH
Mehdi HosseinianalystSIG
Yes, sir. Yes, thanks for taking my question.
I'm a little bit confused with capacity. I see in the slide that capacity has remained around 5,000 racks per month. But your CapEx has been pretty aggressive. Can you help me reconcile the CapEx and existing capacity? And I have a follow up question.
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Charles LiangCEOSuper Micro Computer, Inc.
Yes, our capacity remains very huge. 5000 rack per month. And then 2000 rack can be GB200 NVLR72 kind of high performance drag.
And so we are very fully ready for when a demand ramp up. And that's why when Blackwell become more mature, much better year rate, and we are fully ready for that, especially for our DLC2 much better deep cooling solution.
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Mehdi HosseinianalystSIG
But Charles, how does that 5,000 rack per month today compared to like six months ago?
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Charles LiangCEOSuper Micro Computer, Inc.
Indeed for USA we have a 5,000 rack per month since six months ago. But now we are growing in Taiwan and Malaysia, Netherlands as well.
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Mehdi HosseinianalystSIG
Okay, thank you for clarification. Sorry. Go ahead, Go ahead, David, go ahead.
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David WeigandCFOSuper Micro Computer, Inc.
Oh, I was just going to say we haven't, we haven't fully enabled Malaysia as of yet, which that we will be by the end of this year. It will be fully enabled for rack, largest rack production. Yes, I think that's what you were driving toward.
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Charles LiangCEOSuper Micro Computer, Inc.
You have the facility now in about July. July will be very ready.
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Mehdi HosseinianalystSIG
Okay, thank you. Where are we with the CFO search?
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Charles LiangCEOSuper Micro Computer, Inc.
When company continue to grow, for sure we need more manpower so we continue aggressively looking for more talent, including shareholder position.
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Operator Sign-off
OP
Operatoroperator
Thank you for your questions. That concludes today's call. Thank you for your participation and enjoy the rest of your day.