Super Micro Computer Q3 2025 Earnings Call Transcript

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May 6, 2025
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Operator

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 Microcomputer, Inc. SMCI U. S.

Operator

Third Quarter Full Year twenty twenty five Earnings Call. With us today are Charles Weiang, Founder, President and Chief Executive Officer David Weigand, CFO and Michael Stager, 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. I would now like to pass the conference over to Michael Seeger.

Michael Staiger
Michael Staiger
SVP - Corporate Development at Super Micro Computer

Victoria, thank you. Good afternoon and thank you for attending Super Micro's call to discuss financial results for the third quarter, which ended 03/31/2025. With me today are Charles Liang, Founder, Chairman and chief executive officer, and David Wieggen, chief financial officer. By now, you should have received a copy of the news 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.

Michael Staiger
Michael Staiger
SVP - Corporate Development at Super Micro Computer

We've also published management 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 can cause Super Micro's 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 twenty twenty four, and our other SEC filings. All these documents are available on the Investor Relations page of Super Micro's website.

Michael Staiger
Michael Staiger
SVP - Corporate Development at Super Micro Computer

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 company 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'll have a q and a session for self analysts.

Michael Staiger
Michael Staiger
SVP - Corporate Development at Super Micro Computer

I will now turn the call over to Charles.

Charles Liang
Charles Liang
Founder, Chairman of the Board, President & CEO at Super Micro Computer

Thank you, Michael, and thank you everyone for joining us. As previously announced, our physical q three net revenue total 4,600,000,000.0 coming in lower than our original forecast. This decline was primarily due to our customer waiting and evaluating AI platforms between the current happen and the coming and the upcoming black warehouse GPUs leading to a delay commitment. We expect many of these engagements to materialize in the June and September quarters, strengthening our confidence in meeting our long term growth target as we close out this demand for fiscal year. Despite macroeconomic economic conditions and the tariff impact, our ability to expand the market share in IT and AI remain strong.

Charles Liang
Charles Liang
Founder, Chairman of the Board, President & CEO at Super Micro Computer

On the earning form, our physical q three non GAAP EPS stood at 31¢ per share compared to 66¢ last year. This decline was largely driven by an, inventory write down of old generation GPU and related components, while the new platform are finally ramping quickly about now. Although our quarterly performance did not align exactly with our expectation, we successfully fulfill our commitment to regain financial regulatory compliance. At the same time, we continue to enhance technical innovation and development, which results in successful high volume delivery of our new generation AI platforms at the March. Looking ahead, some major, background new innovation are set to service the market in this quarter and the new fiscal year, especially our coming soon, DCBBS.

Charles Liang
Charles Liang
Founder, Chairman of the Board, President & CEO at Super Micro Computer

With the career time to market advantage, SuperMicro once again leads the AI infrastructure technology and DLC solutions. This strong position enable us to explore new opportunities and expand the market share. During the quarter, we achieved volume shipment of a l cord, 10 u, and liquid cord for you NVIDIA b 200 h g x systems. Both are exactly the first to the market again, as well as g b 200 m v l 72 racks. Additionally, we start to offer AMD m I three twenty five x solutions to further broaden our AI portfolio.

Charles Liang
Charles Liang
Founder, Chairman of the Board, President & CEO at Super Micro Computer

Leveraging our system building blocks, we were again over time to market on the upcoming new platform such as NVIDIA, b 300, g b 300, and AMD m I three fifty platforms this summer for customers seeking leading the technology, more optimized, higher density, and greener AI solutions. Build on our strong foundation of technology leadership, building product solution, and building computing DNA, we have been deeply focused on developing the industry the first end to end AI, IT, data center 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 data center within product solution. We call it DCBBS, featuring our second generation system, deep cooling technology. We call it d l c two.

Charles Liang
Charles Liang
Founder, Chairman of the Board, President & CEO at Super Micro Computer

With DCBPS, we are able to dramatically shorten customers' efforts to build a data center, reduce their cost, and most importantly, make their data center data quality, and performance. We know and with higher availability. DCBBS consolidates critical components, including AI service systems, storage, rack, pad and play, all different kinds of switches, DLC systems, water tower or dry tower, chill door, power shelf, battery backup unit, people call BBU, on-site deployment, networking design, cabling, and data center end to end management software, and all different scopes of services into a streamlined process. The true value of DCBBS line, its ability to reduce power consumption, optimize space, and decrease water usage, delivering up to 30% lower TCO. More importantly, it accelerate new data center deployment and upgrade existing data center in a matter of months or even weeks rather than many quarters or years.

Charles Liang
Charles Liang
Founder, Chairman of the Board, President & CEO at Super Micro Computer

Driven to getting return improvement in data center time to deploy email. We call TTD and time to online, TPO. One of the key components of DC BPS is our industry leading DLC solutions. Chibel Michael remains at a full form of driven industry adoption of DLC technology, direct edicts cooling technology, setting new standard for performance, efficiency, and sustainability. Last year, we shipped 4,100 k y AI racks equipment with DLC, helping our customer reduce energy cost by up to 25 or even 30%.

Charles Liang
Charles Liang
Founder, Chairman of the Board, President & CEO at Super Micro Computer

We are committed to double this volume in the coming year for amplifying the impact of green computing. With the upcoming DLC two technology, SuperMicro will be able to deliver even greater savings and benefits to our customers. For example, it'll save power and water up to 40% and reduce data center noise data down to about 50 dB. That is almost as quiet as a library. We are going to announce the detail in the coming days.

Charles Liang
Charles Liang
Founder, Chairman of the Board, President & CEO at Super Micro Computer

Winning computing can be everywhere. And with our DLC two solutions, we are making the vision a beautiful reality. Our long term investment and leadership in DLC has solidified a sustainable competitive edge, providing economics of scale and keeping us far ahead of our competition. Our global operation continue to expand with our new Malaysia campus begin shipping product to partners. Meanwhile, our facility in Taiwan and Europe are scaling up their capacity and capability, providing customer with flexible options for their logistical choice and minimize their cost during the market and, tariff uncertainties to further strengths to further strengthening the poll for key partners and align with the government initiatives.

Charles Liang
Charles Liang
Founder, Chairman of the Board, President & CEO at Super Micro Computer

We continue to expand our US domestic manufacturing capacity, including new facility in The Middle East and other locations. This strategic expansion will allow us to meet rising demand while continue to enhance our commitment in quality, security, and TCO, PPP, and TTO. In summary, physical q three was dynamic and productive. We successfully navigated financial challenge while continue to strengthen our leadership in product and technology innovation. Our first to market advantage in AI, it was factual along with the expanded reach of DCBBS, data center billing process solution.

Charles Liang
Charles Liang
Founder, Chairman of the Board, President & CEO at Super Micro Computer

And that and the advancement in the DLC technology for so solidify 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 uncertainty make it difficult to precisely forecast the pace and the technology adoption. Despite of these, I'm confident that we were close to the fiscal year on a strong note. Given the current condition, we anticipate a q four revenue of at least $6,000,000,000, and we'll resume providing the further forecast of the range once we have better, visibility.

Charles Liang
Charles Liang
Founder, Chairman of the Board, President & CEO at Super Micro Computer

Before passing the call to David for the financial overview, I want to thank you all for our partner, customers, investors, and Super Mega team members and express my deep appreciation for their continued support. With that, I will now turn the call over to David.

David Weigand
David Weigand
SVP & CFO at Super Micro Computer

Thank you, Charles. Fiscal q three twenty twenty five revenues were 4,600,000,000.0. This was up 19% year over year and down 19% quarter over quarter. Q three revenues were down quarter over quarter as certain new platform decisions by cove by customers moved some sales into q four and later. AI GPU platforms, again, represented more than 70% of revenues with AI GPU customers in both the enterprise and cloud service provider markets.

David Weigand
David Weigand
SVP & CFO at Super Micro Computer

Our design win pipeline remains robust, and we expect continued growth in q four as we ramp up production of our data center building block solutions, DCBBS, based on new GPU platforms. As a leading US technology company, we focus on extensive rack scale and DCBBS technology and capacity investments in The US, which is complemented by our investments in Taiwan, The 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 q three, we recorded 1,900,000,000.0 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.

David Weigand
David Weigand
SVP & CFO at Super Micro Computer

The OEM appliance and large data center vertical revenues were 2,600,000,000.0, which represented 57% of q three revenues versus 75% in the last quarter. So it's up 35% year over year and down 38% quarter over quarter. Two existing CSP slash large data center customers represented 2214% of q three revenues. Emerging five g telco edge IoT revenues were 48,000,000 or 1% of q three revenues. Server and storage systems comprised 97% of q three revenue and subsystems and accessories, the remaining 3%.

David Weigand
David Weigand
SVP & CFO at Super Micro Computer

By geography, The US represented 60% of q three revenues, Asia 30 Percent, Europe 6 Percent, and the rest of the world 4%. On a year over year basis, US revenues increased three percent, Asia increased 77%, Europe decreased 3%, and the rest of the world increased 83%. On a quarter over quarter basis, US revenues decreased 28%, Asia increased 76%, Europe decreased 69%, and the rest of the world increased 45. China continued to represent less than 1% of sales in q three. The q three non GAAP gross margin was 9.7%, which was which was down 220 basis points quarter over quarter from 11.9% in q two, primarily due to higher inventory reserves for older generation products, lower volume, and accelerated costs to enable time to market for new products.

David Weigand
David Weigand
SVP & CFO at Super Micro Computer

Q three operating expenses on a GAAP basis decreased 3% quarter quarter over quarter and increased 34% year over year to 293,000,000. On a non GAAP basis, operating expenses decreased 5% quarter over quarter and increased 30% year over year to 216,000,000. Q 3 non GAAP operating margin was 5% compared to 7.9% in q two due to lower revenues and gross margins. Other income and expense for q three was a net expense of 31,700,000.0, consisting of 13,400,000.0 in interest expense principally from convertible bonds and other losses of 18,300,000.0, principally from a noncash $30,300,000 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 $6,000,000 for q three.

David Weigand
David Weigand
SVP & CFO at Super Micro Computer

The non GAAP effective tax rate for q three was 15.5%, resulting in q three non GAAP tax expense of 36,000,000. Q 3 GAAP diluted EPS of 17¢ and q three non GAAP diluted EPS of 31¢ was lower than our guidance due to lower revenues and gross margins. The GAAP fully diluted share count for q three was 622,000,000, and the non GAAP fully diluted share count was 636,000,000. Cash flow generated from operations for q three was 627,000,000 compared to cash flow usage of 240,000,000 during the previous quarter. The q three closing inventory was 3,900,000,000.0, which increased by 7.6 quarter over quarter from 3,600,000,000.0 in q two as we prepare for higher shipments in q four.

David Weigand
David Weigand
SVP & CFO at Super Micro Computer

CapEx was 33,000,000 for q three resulting in free cash flow of $594,000,000 during the quarter. During the quarter, we amended the terms of our existing 2029 convertible notes and raised 700,000,000 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 and d, and expand global global capacity as needed. The closing q three balance sheet cash position was 2,540,000,000.00, while bank and convertible note debt was 2,490,000,000.00, resulting in a net cash position of 44,000,000 versus a negative net cash position of 479,000,000 last quarter. Turning to the balance sheet and working capital metrics compared to last quarter, the q three cash conversion cycle was a hundred and twenty four days versus a hundred and four days in q two.

David Weigand
David Weigand
SVP & CFO at Super Micro Computer

Days of inventory increased by three days to eighty one days compared to the prior quarter of seventy eight seventy eight days due to key component purchases for higher expected q four shipments. Days sales outstanding increased by nine days quarter over quarter to fifty six days, while days payable outstanding decreased by eight days to thirteen days. We are closely monitoring the macro environment, tariffs, and the tech the technology transition to new platforms. The outlook for the fourth quarter of fiscal twenty twenty five ended 06/30/2025. We expect net sales in the range of 5.6 to 6,400,000,000.0, GAAP diluted net income per share of 30¢ to 40¢, and non GAAP diluted net income per share of 40¢ to 50¢.

David Weigand
David Weigand
SVP & CFO at Super Micro Computer

Given this dynamic environment, we are being prudent and expect gross margins to be approximately 10%. GAAP operating expenses are expected to be approximately 319,000,000 and include 74,000,000 in stock based compensation expenses that are not included in non GAAP operating expenses. The outlook for q four of fiscal year twenty twenty five fully diluted GAAP EPS includes approximately 63,000,000 in expected stock based compensation expenses, net of tax effects of 18,000,000, 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 16,000,000. The company's projections for q four GAAP and non GAAP dilute diluted net income per common share assume a GAAP tax rate of 14.9%, a non GAAP tax rate of 16.5%, and a diluted share count a fully diluted share count of 628,000,000 for GAAP and 642,000,000 shares for non GAAP.

David Weigand
David Weigand
SVP & CFO at Super Micro Computer

We expect CapEx for q four to be in the range of 45,000,000 to 55,000,000. For the fiscal year twenty twenty five ending 06/30/2025, based on the q four guidance above, we are expecting revenues of 21.8 to 22,600,000,000.0. Michael, we're now ready for q and a.

Michael Staiger
Michael Staiger
SVP - Corporate Development at Super Micro Computer

Great. Victoria, let's go to q and a.

Operator

Of course. We will now begin the question and answer session. We ask that participants only ask one question and one follow-up. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two.

Operator

Our first question comes from the line of Samik Jaji with JPMorgan. Your line is now open.

Samik Chatterjee
Samik Chatterjee
Executive Director at JP Morgan

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 you can sort of share what you're hearing from your customers. Are customers already talking about pulling back some orders?

Samik Chatterjee
Samik Chatterjee
Executive Director at JP Morgan

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 already we are month in, I would assume you would have more sort of visibility into the June rather than having to put sort of some level of conservatism 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 I have a follow-up, please. Thank you.

Charles Liang
Charles Liang
Founder, Chairman of the Board, President & CEO at Super Micro Computer

Yeah. I mean, very good question. Basically, June will be our traditional strong quarter. And, for sure, the tariffs and the macro economy uncertainty, that concerns some customer. But at this moment, we see a strong order.

Charles Liang
Charles Liang
Founder, Chairman of the Board, President & CEO at Super Micro Computer

So I believe we will have a a strong strong quarter for June. And September next fiscal year, maybe even stronger because our new product, especially black wire, is floating volume production now. So we gain more and more order for black wire and expect strong growth start from now.

Samik Chatterjee
Samik Chatterjee
Executive Director at JP Morgan

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?

Samik Chatterjee
Samik Chatterjee
Executive Director at JP Morgan

Or is this more about the tougher pricing environment for hopper based products? Thank you.

David Weigand
David Weigand
SVP & CFO at Super Micro Computer

I think it's a a combination of concern about tariffs and so conservatism there. And also, with some, obviously, also some impact from the the changeover in technology platforms.

Samik Chatterjee
Samik Chatterjee
Executive Director at JP Morgan

Sorry. 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?

David Weigand
David Weigand
SVP & CFO at Super Micro Computer

That's that's correct. So as you as you come off of some of the older platforms, you have, you know, you have more price competition. And and the other 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 in setting margin expectations.

Samik Chatterjee
Samik Chatterjee
Executive Director at JP Morgan

Got it. Got it. Thank you. Thanks for taking my questions.

Operator

Thank you for your question.

Operator

Our next question comes from

Operator

the line of Michael Ng with Goldman Sachs. Your line is now open.

Michael Ng
Michael Ng
Managing Director - Global Investment Research at Goldman 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 $40,000,000,000 revenue target for fiscal twenty twenty six? And perhaps you can talk a little bit about any changes that you might be seeing from a demand perspective aside from the you know, timing of the technology platform transition and and the background uncertainty?

Michael Ng
Michael Ng
Managing Director - Global Investment Research at Goldman Sachs

Thank you.

Charles Liang
Charles Liang
Founder, Chairman of the Board, President & CEO at Super Micro Computer

Yeah. We remain very confident with our midterm and long term growth. So especially, black way out for down nine, we have a very strong demand. And also our commission, PCPBS, data center, building blocks, total solution. We see lots of customer really interest in our data center total solution.

Charles Liang
Charles Liang
Founder, Chairman of the Board, President & CEO at Super Micro Computer

So the demand, the growth will keep strong. And, yes, the tariff and some macro economy uncertainty. We, at this moment, do not provide the guidance for fiscal year twenty six. But when it's the visibility become more clear, we will share at that time.

Michael Ng
Michael Ng
Managing Director - Global Investment Research at Goldman Sachs

Great. Thanks, Charles. That's very helpful. And and just as a follow-up, can you talk about whether or not you're seeing differences in demand between h g x versus, MBL 72 racks. Any any differences there, either in customer demand or, you know, your your ability to fulfill demand on on either product?

Michael Ng
Michael Ng
Managing Director - Global Investment Research at Goldman Sachs

Thank you.

Charles Liang
Charles Liang
Founder, Chairman of the Board, President & CEO at Super Micro Computer

Yeah. We see a a strong demand for, kind of g p 200 m v l 72 and, p 200 liquid cooling. But the customer decoding 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 the solution they are the other thing that will be ready very soon.

Charles Liang
Charles Liang
Founder, Chairman of the Board, President & CEO at Super Micro Computer

And we do see our schedule is getting much more exciting now.

Operator

Thank you for your question, Michael. Our next question comes from the line of George Wang with Barclays. Your line is now open.

George Wang
Vice President at Barclays Investment Bank

Oh, hey. Hey. Hey, guys. Thanks for taking my question. Hey, Charles.

George Wang
Vice President at Barclays Investment Bank

Just a kind of a question on the GB 300. You know, any differences in terms of value add from Super Micro just in terms of customization and potentially more services attached? You know, with presumed, you guys, like, NVIDIA potentially open up the components kind of for more open standards for the g v 300 that could lead to a better margins for Super Micro. I mean, do you agree? Just just any kind of puts and takes there.

Charles Liang
Charles Liang
Founder, Chairman of the Board, President & CEO at Super Micro Computer

Yeah. I I guess whenever a new technology, it always putting more chance to Super Micro. As you know, our b 200 h g x system, for example, we are forced to have a product available and the demand is strong. So b 300 and g b 300 for sure, we expect a very strong demand. And we saw very mature, I think, recording solution.

Charles Liang
Charles Liang
Founder, Chairman of the Board, President & CEO at Super Micro Computer

You know, we have a a d l c solution start to ship last year 4,000 direct. And this year, we saw our d l c two d l c division two. It over even better power saving, water saving, and also much better in thermal noise labor. Right? So we believe g b 300, p 300, our technology advantage will be even more clear.

Charles Liang
Charles Liang
Founder, Chairman of the Board, President & CEO at Super Micro Computer

And we are exciting to see a a p 300, g b 300 come very soon in the summer. Right? The coming summer.

George Wang
Vice President at Barclays Investment Bank

Okay. Great. Just a quick one. If I can squeeze in maybe for David and also for Charles, just in terms of top two customers this quarter combined the percentage was a bit lower versus last quarter. So is this because of quarter to quarter kind of lumpiness, you know, volatility or is there anything else kind of you you want to call out in terms of, you know, top two customer contribution a bit lower?

David Weigand
David Weigand
SVP & CFO at Super Micro Computer

Yeah. I don't I don't think there's any, trend, George. It's just the timing of, of shipments. But we don't we don't have any concern about about, yeah.

George Wang
Vice President at Barclays Investment Bank

Yeah. Yeah. Just just kind of follow-up. Any outlook for for the for the, you know, top two customers kind of in the next few quarters? Any high level thoughts and any other kind of customer set you guys are, you know, expanding to kind of you can talk about.

Charles Liang
Charles Liang
Founder, Chairman of the Board, President & CEO at Super Micro Computer

Yeah. We believe our business will continue to grow much faster in the coming quarters. I hate to mention, but still I mean, in December last year and March, we got some impact on the cash flow from the ten k delay 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.

Operator

Thank you for your questions, George.

Operator

Our next question comes from

Operator

the line of ACI Mergent with Citigroup. Your line is now open.

Asiya Merchant
Technology Equity Research at Citigroup Global Markets Inc.

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, you know, your visibility and how the order should flow through given AI in AI diffusion could impact or possibly could impact your revenues?

Asiya Merchant
Technology Equity Research at Citigroup Global Markets Inc.

And then I have a follow-up. Thank you.

Charles Liang
Charles Liang
Founder, Chairman of the Board, President & CEO at Super Micro Computer

Yeah. 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, the leading edge, I mean, we did we do continue to see the demand. We all continue to grow stronger.

Operator

And Okay. Great. And

Operator

then on gross

Charles Liang
Charles Liang
Founder, Chairman of the Board, President & CEO at Super Micro Computer

I mean, Terry, I think you are next year. Mean, Terry, it may impact the demand a little bit, but, overall, we will continue to gain market share.

Asiya Merchant
Technology Equity Research at Citigroup Global Markets Inc.

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, you know, calendar '20 fiscal twenty six. Sorry.

David Weigand
David Weigand
SVP & CFO at Super Micro Computer

Yeah. So we're not we're not gonna give forecasts for for next year at at this meeting. But what I can tell you is is that we have, you know, we we have published before what our our target margins are. But right now, we've got some of the headwinds of of like you mentioned, that the the diffusion rules coming up in mid May. We have tariffs that were that that we have to we have to get, you know, find our way through.

David Weigand
David Weigand
SVP & CFO at Super Micro Computer

And so, you know, those things are, you know, are certainly headwinds. But on the other hand, you know, we have, we still have the majority of our business, from US customers. And so, you know, we're we're a US based manufacturer. And so we think that we're well positioned in the marketplace on all of those all of those fronts. But we don't we also, being a first to market provider of of the latest solutions, we also think we have an edge there.

David Weigand
David Weigand
SVP & CFO at Super Micro Computer

So we think that we're as as best positioned as as someone in the marketplace can be.

Operator

Thank you for your question. Our next question comes from the line of Ananda Barag with Loop Capital. Your line is now open.

Ananda Baruah
Stock Analyst at Loop Capital Markets LLC

Hey, guys. Yeah. Thanks for taking the questions. Really appreciate it. I guess, yeah, two if I could.

Ananda Baruah
Stock Analyst at Loop Capital Markets LLC

I guess, you know, this would be for Charles and and for Dave. You guys made mention of ongoing ramp as Blackwell Supply comes on. And so should we assume that that means September looks up sequentially from the June? 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 know, you had multiple quarters. That that that's not accurate.

Ananda Baruah
Stock Analyst at Loop Capital Markets LLC

You had two quarters of 70% sequential growth. You had a 40% sequential growth quarter, you know, during the hopper ramp. So not like a forecast, but are those you have 30% up here in June off of the soft March. So I guess the question is is order of magnitude, you know, can you be up you you say you'll be up September again as as as Blackwell ramps. And, like, those sort of upper order of magnitude sequential increases, Charles, sort of through cycle, Is that the type of thing, that you sound so when you talk excitedly about the Blackwell potential?

Ananda Baruah
Stock Analyst at Loop Capital Markets LLC

Is it that kind of order of magnitude, that you think is possible to get back to at some point as you go through Blackwell cycle? And then I have a quick follow-up as well. Thanks.

Charles Liang
Charles Liang
Founder, Chairman of the Board, President & CEO at Super Micro Computer

Yeah. Thank you for your question. Yes. You are right. I believe March, we were soft.

Charles Liang
Charles Liang
Founder, Chairman of the Board, President & CEO at Super Micro Computer

The major reason because technology transition, Not just people waiting for a black wheel solution, but also we have a lot of write down for the upper product line. Right? So looking for a wall, I hope we can repeat the Hopper history, kind of a start to grow from June and September and December. I I believe so. I hope so.

Ananda Baruah
Stock Analyst at Loop Capital Markets LLC

Okay. That's great. And then my my follow-up is actually more of a technical question. So you mentioned in your prepared remarks, Charles, about liquid cooling the HD X b two hundreds. And and the question is is, how how many HD Xs b 200?

Ananda Baruah
Stock Analyst at Loop Capital Markets LLC

And then I guess if you wanna give an early early comments about the b 200, the x how many how many HD Xs are you actually seeing you can stack in liquid cool? And I guess I'm wondering, like, how many GPUs are are folks able to stack in liquid cool with HDX? I'm interested in seeing how close you can get folks are getting that to the to the MBL 72. Thanks. That's it for me.

Ananda Baruah
Stock Analyst at Loop Capital Markets LLC

Thanks.

Charles Liang
Charles Liang
Founder, Chairman of the Board, President & CEO at Super Micro Computer

Yeah. Yeah. For half for half, as you know, AIR core work fine, but we like to prove. We want to establish the deep cooling technology. So we try to promote abrasive the deep cooling for Harper, and we successfully ship about 4,000 right CRC to the market.

Charles Liang
Charles Liang
Founder, Chairman of the Board, President & CEO at Super Micro Computer

And so far, the 4,000 direct run very reliable customer adopt our DLC solution adapt. So we gain those of our experience. And now our DLC solution is much more sure than last year. And that's why we further prepare to to promote DLC two. Our DLC two, second generation DLC, we are outperform the first generation.

Charles Liang
Charles Liang
Founder, Chairman of the Board, President & CEO at Super Micro Computer

And we will have a a big promotion in next few day or next few weeks. So with Blackwell, our DLC solution is fully ready, and we will provide a base with DLC solution to the world to have a customer save power, save water, save money, and also improve data center performance. So, we have a very strong, confidence for the new coding, especially for black wire and, future product.

Operator

Thank you for your questions.

Operator

Our next question comes from

Operator

the line of Nehal Chokshi with Northland. Your line is now open.

Nehal Chokshi
Managing Director at Northland Securities, Inc

Hi. Thank you.

Nehal Chokshi
Managing Director at Northland Securities, Inc

Just want to make sure I understand the inventory reserve that occurred in the March. And then is there any expectation that there will be inventory reserve in the June? And is that part of the 10% gross margin guidance?

David Weigand
David Weigand
SVP & CFO at Super Micro Computer

Yes. So the as mentioned in our prerelease and and also in this release, the inventory reserve, you know, reduced our our margin by about 220 basis points. Most of that was was caused by taking a reserve for some of the older inventory products. And so the, certainly, we're watching very closely, you know, our, our inventory products. However, as mentioned, the main the the substantial reason for the for the expected reduction in margin is, is really, caution or or prudence regarding, tariffs.

David Weigand
David Weigand
SVP & CFO at Super Micro Computer

I wanna I wanna point out that, by the way, that we've through three quarters, we have we have 16,200,000,000.0 in revenues. That was that was versus, you know, last year's four quarters of of 15,000,000,000. And so we, we know we're very we're very happy with where we are and and the performance cycle, and, even though we expect even better.

Charles Liang
Charles Liang
Founder, Chairman of the Board, President & CEO at Super Micro Computer

Yeah. To to simplify, I would like to share. I mean, for for March, we have a 200 impact from the reserve. Right? But June, maybe, I hope only 100 or less.

Charles Liang
Charles Liang
Founder, Chairman of the Board, President & CEO at Super Micro Computer

And September, have close to zero.

Nehal Chokshi
Managing Director at Northland Securities, Inc

Okay. And so just this inventory reserve that you're taking as a charge, that basically means I mean, we look at the impact of 200 basis points for a March. That basically equates to a hundred million dollars. And then you had a billion dollar shortfall on revenue. And so does that basically mean that, you know, some percent of that shortfall just isn't isn't finding a new home?

Nehal Chokshi
Managing Director at Northland Securities, Inc

Or does that mean that that shortfall is being resold in the June and September quarter at a lower price?

David Weigand
David Weigand
SVP & CFO at Super Micro Computer

Yeah. So I mentioned that some of the some of the the revenues that we expected in q three were were, you know, platform decision based. So that means actually that people are moving to the newer platforms in the upcoming quarters. K? And so what that means is that, you know, in cases where people change their minds on platforms, we have to, you know, we have to, you know, write the expected realizable value of those, take a reserve for those, and and, and do our best to sell them, at, at more competitive prices.

Operator

Thank you for your questions. Our next question comes from the line of John Pianwatting with CJS Securities. Your line is now open.

Jon Tanwanteng
Managing Director at CJS 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?

Jon Tanwanteng
Managing Director at CJS Securities

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

Charles Liang
Charles Liang
Founder, Chairman of the Board, President & CEO at Super Micro Computer

Yeah. You know, our customer base, did a bit different from the, the other, bit, competitor. Right? Most of our customer kind of technology leading company. So that's why new product is very sensitive to them.

Charles Liang
Charles Liang
Founder, Chairman of the Board, President & CEO at Super Micro Computer

And this thing is now black wheel solution is fully ready. So we are excited to ramping up stuff now.

Jon Tanwanteng
Managing Director at CJS Securities

Okay. Great. Charles, I also wanted to touch on something you mentioned before just with, you know, one of the the biggest, you know, U. S. Server manufacturing operations.

Jon Tanwanteng
Managing Director at CJS Securities

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, you know, multiple industries? And is that, providing you any more additional demand, or is that is that too hard to see right now?

Charles Liang
Charles Liang
Founder, Chairman of the Board, President & CEO at Super Micro Computer

Yeah. I mean, as a USA company, we are able to, especially manufacture in Silicon Valley. We are able to response to a new technology much quicker and efficient than others, especially with a better performance, a better solution like a DLC tool. Right? And as to our tariff impact, because the tariff program is not quite settled down yet.

Charles Liang
Charles Liang
Founder, Chairman of the Board, President & CEO at Super Micro Computer

So we are watching carefully and try to adjust our logistic and our operation as efficient as possible. This year, we have a a huge operation in USA and in Taiwan and in Malaysia now as well. So when the carrier program settled down, we should be able to quickly respond to optimize the the base solution for customer.

Operator

Thank you for your question.

Operator

Our next question comes from the

Operator

line of Nicholas Doyle with Needham and Company. Your line is now open.

Nick Doyle
Equity Research Analyst at Needham & 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?

Nick Doyle
Equity Research Analyst at Needham & Company

How's your supply changed as more competitors enter the market? Thank you.

Charles Liang
Charles Liang
Founder, Chairman of the Board, President & CEO at Super Micro Computer

Yeah. Still some allocation matter. Right? Kind of some customer one breakaway or right away, and we had to wait for allocation. So that situation, a little bit better than a half of time frame, but still some constraint there.

Nick Doyle
Equity Research Analyst at Needham & Company

Thank you.

Operator

Thank you for your question. Our last question comes from the line of Mehdi Hosseini with Zig. Your line is now open.

Mehdi Hosseini
Senior Equity Research Analyst at SIG

Yes, thanks for taking my question. I'm a little bit confused with capacity. I see in this slide that capacity has remained around R5,000 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.

Charles Liang
Charles Liang
Founder, Chairman of the Board, President & CEO at Super Micro Computer

Our capacity remain very huge. 5,000 drag per month, and then 2,000 drag can be GB 200 m v l 72 kind of high performance drag. And so we we are very fully ready for when that demand ramp up. And that's why when back we have become more mature, much better year rate, and we are we are fully ready for that, especially for our d l c two, much better deep coding solution.

Mehdi Hosseini
Senior Equity Research Analyst at SIG

But, Charles, how does that 5,000 drag per month today compared to, like, six months ago?

Charles Liang
Charles Liang
Founder, Chairman of the Board, President & CEO at Super Micro Computer

Indeed, for USA, we have a R5,000 per month since six months ago. But now we are growing in Taiwan and Malaysia, Nestle and as well.

Mehdi Hosseini
Senior Equity Research Analyst at SIG

Okay. Thank you for clarification. So so And then the main update on the CFO's sorry. Go ahead.

David Weigand
David Weigand
SVP & CFO at Super Micro Computer

Go ahead.

Mehdi Hosseini
Senior Equity Research Analyst at SIG

Here we go.

David Weigand
David Weigand
SVP & CFO at Super Micro Computer

Oh, I was gonna say we haven't we haven't fully enabled, Malaysia, as of yet, which, you know, they we will be, by the end of this year, they will be fully enabled for for racket Okay. Larger scale racket production.

David Weigand
David Weigand
SVP & CFO at Super Micro Computer

Yes.

David Weigand
David Weigand
SVP & CFO at Super Micro Computer

Yes. I think that's what you were driving toward.

Mehdi Hosseini
Senior Equity Research Analyst at SIG

Yeah. You have the facility here.

Charles Liang
Charles Liang
Founder, Chairman of the Board, President & CEO at Super Micro Computer

Now is about July. July will very ready. Yeah.

Mehdi Hosseini
Senior Equity Research Analyst at SIG

Okay. Thank you. Hey, Charles. Where are

Mehdi Hosseini
Senior Equity Research Analyst at SIG

we with the CFO search?

Charles Liang
Charles Liang
Founder, Chairman of the Board, President & CEO at Super Micro Computer

When company continue to grow, for sure, we need a more manpower. So we continue aggressively looking for more talent, including CFO position.

Operator

Thank you for your questions. That concludes today's call. Thank you for your participation and enjoy the rest of your day.

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Key Takeaways

  • Super Micro reported Q3 net revenue of $4.6 billion, up 19% year-over-year but down 19% quarter-over-quarter, and guided Q4 revenue of $5.6–6.4 billion with FY25 revenue expected at $21.8–22.6 billion.
  • Q3 non-GAAP EPS was $0.31 versus $0.66 last year, as gross margins fell 220 bps due to an inventory write-down on older GPU platforms and transition to new platforms; Q4 gross margin is forecast at ~10%.
  • Customers delayed AI system orders to evaluate upcoming Blackwell GPU platforms, with those engagements expected to materialize in the June and September quarters as production ramps.
  • The company will soon launch its end-to-end data center solution DCBBS featuring the second-generation deep liquid cooling technology DLC2, promising up to 40% power and water savings and 30% lower TCO.
  • Super Micro expanded its global manufacturing footprint in the U.S., Taiwan, Malaysia and the Netherlands to mitigate tariff risks and support capacity growth; Q3 generated $627 million in operating cash flow and ended with a net cash position of $44 million.
A.I. generated. May contain errors.
Earnings Conference Call
Super Micro Computer Q3 2025
00:00 / 00:00

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