Super Micro Computer NASDAQ: SMCI reported fiscal third-quarter 2026 results marked by sharp year-over-year growth, a sequential revenue decline tied to customer site readiness delays, and a notable rebound in gross margin. The company also addressed a recent U.S. Department of Justice indictment involving former associated individuals, emphasizing that Super Micro is not a defendant or target of a grand jury investigation.
Management addresses indictment and investigation
CEO Charles Liang opened the call with an update on what he described as “the indictment of certain individuals formerly associated with the company.” Liang said Super Micro “is not a defendant, nor a target of a grand jury investigation,” and added the company has “zero tolerance to any employee who violate the federal law and regulation.” He said the company terminated its relationship with the defendants and is “helping and cooperating fully with the U.S. government.”
CFO David Weigand said the company was “surprised and disappointed to learn of the alleged diversion to China of certain of our products,” adding that the alleged conduct “would violate our export control policies and procedures.” Weigand said independent directors retained outside law firm Munger, Tolles & Olson and forensic firm AlixPartners to conduct an independent investigation. “Based on what we know so far, though that could change as the investigation progresses, no one from the company, other than those named in the DOJ indictment, was involved,” Weigand said.
Asked about potential financial reporting impacts, Weigand said, “we do not believe we will need to restate” earnings based on current information, while noting the investigation is ongoing. Regarding regulatory filings, he said the company was planning to file its Form 10-Q and was “preparing accordingly,” subject to BDO review.
On customer sentiment, Liang said the company has been growing its customer base and that, based on communications, “most of customer indeed feel pretty solid, to continue our business and continue to grow together.”
Revenue up triple digits year-over-year, but delayed deployments pressured the quarter
For the quarter ended March 31, 2026, Weigand reported revenue of $10.2 billion, up 123% year-over-year and down 19% sequentially. Management attributed the sequential decline to “data center and customer readiness” as well as “industry-wide supply chain constraints,” with Liang describing customer site delays as “purely a short-term delay.” Liang said several customer sites were “not yet equipped with the power and networking required for their cloud deployment,” and the company expects to capture that revenue in coming quarters.
Weigand said orders and backlog remained strong and that AI GPU-related platforms contributed over 80% of revenue. However, when asked to quantify deferred revenue timing, he said it depends on when customers’ data centers are ready, adding that the company would have to “wait and see” how much lands in the June versus September quarter.
Mix shift and cost items helped drive gross margin recovery
Super Micro posted a significant improvement in profitability metrics. Weigand said non-GAAP gross margin was 10.1%, up from 6.4% in the prior quarter, while non-GAAP operating margin was 7.3% compared with 4.5% in Q2. Liang said the company is focused on achieving “a sustainable double-digit gross margin model” with greater emphasis on enterprise markets and its Data Center Building Block Solutions (DCBBS) business.
Weigand attributed the margin improvement to “customer and product mix together with lower tariffs, expedite, and inventory reserve charges.” Discussing tariffs, he said they were “reduced by the Supreme Court,” with some replacement tariffs enacted, and added the company was “hopeful that tariffs will be down net” going forward. On expedite fees, he said a “very large deployment” in the prior quarter drove significant expedite charges that “did not recur” in the March quarter.
On the Q4 outlook, Weigand guided gross margin to 8.2% to 8.4%, citing expected customer mix. He said the biggest driver of gross margin remains “which customers that we sell to and which products we sell.”
Enterprise channel grows, DCBBS and software highlighted as profit drivers
Weigand said enterprise channel revenue was $2.8 billion, about 28% of total revenue, up from 15% in the prior quarter. Enterprise channel revenue rose 46% year-over-year and 45% quarter-over-quarter. The OEM appliance and large data center segment generated $7.4 billion, representing 72% of revenue, up 183% year-over-year and down 31% sequentially.
Customer concentration also shifted. Weigand said two existing customers each represented more than 10% of revenues in the quarter: one large data center customer at 27% and one enterprise customer at 10%.
Liang described Super Micro’s evolution from a server designer and manufacturer into “a total data center solution provider,” with DCBBS central to that transition. He said DCBBS includes cooling units, networking, power shelves, battery backup, management software, and other subsystems. Liang said he believes DCBBS “will soon contribute more than 25% of our total profit in the coming few years,” and later told analysts he expects “at least 20% of our net income will be from DCBBS, including the management software” over the next two years.
Liang also highlighted growth in software bookings. He said the company’s data center and cloud software suite, including SuperCloud Composer, is seeing rising demand, and that software bookings increased from less than $10 million per quarter a few quarters ago to $34 million last quarter and “more than $46 million booked for this quarter.” Liang said bundling subscription-based software and services alongside hardware is intended to strengthen customer relationships and improve profitability.
Cash flow swung negative as working capital expanded; guidance issued for Q4 and full year
Weigand reported that cash flow used in operations was $6.6 billion, compared with $24 million used in the prior quarter. He attributed the result primarily to a $10 billion reduction in accounts payable and a $581 million increase in inventory, partially offset by higher net income and a $2.6 billion reduction in accounts receivable. Ending inventory was $11.1 billion, up from $10.6 billion in Q2. Capital expenditures were $80 million, resulting in negative free cash flow of $6.7 billion.
At quarter end, cash totaled $1.3 billion, and Weigand added that $2.7 billion of accounts receivable collections expected in March were received in early April. Total bank and convertible note debt was $8.8 billion, resulting in net debt of $7.5 billion, versus net debt of $787 million in the prior quarter. He said the company also established and began using a $1.8 billion Taiwan revolving credit facility to support working capital needs.
For Q4 fiscal 2026, management guided net sales of $11.0 billion to $12.5 billion, GAAP diluted EPS of $0.53 to $0.67, and non-GAAP diluted EPS of $0.65 to $0.79. Operating expenses are expected to be about $433 million on a GAAP basis, including about $114 million in stock-based compensation excluded from non-GAAP results. Capital expenditures are expected to be $30 million to $50 million.
For the full fiscal year 2026, Weigand guided net sales of $38.9 billion to $40.4 billion. Liang separately said the company is targeting $12 billion for the first quarter, “given stable supply conditions,” and reiterated a $40 billion full-year target.
On supply constraints, Liang said the industry continues to face shortages across components including memory, SSDs, CPUs, and GPUs, describing memory and SSD pricing as having increased “double, triple, more than triple.” He said Super Micro continues to work with suppliers to secure support, and management said partnerships with vendors—including NVIDIA, AMD, Intel, and Broadcom—remain strong, with Weigand adding his understanding is that there has been “no change in allocation.”
About Super Micro Computer NASDAQ: SMCI
Super Micro Computer, Inc (Supermicro) is a technology company that designs, develops and manufactures high-performance server, storage and networking solutions for enterprise, cloud, data center, high performance computing (HPC) and edge computing customers. The company's product portfolio includes rackmount and blade servers, storage subsystems, motherboards, chassis, power supplies and networking components, with an emphasis on high-density, energy-efficient configurations and platforms optimized for GPU-accelerated workloads and artificial intelligence applications.
Headquartered in San Jose, California, Supermicro combines in-house engineering with a global manufacturing and distribution footprint to deliver configurable, application-specific systems.
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