What Super Micro Computer (SMCI) Said on Its Q1 Earnings Call

Key Points

• Record revenue and higher outlook: Super Micro reported fiscal Q1 revenue of $19.9 billion, up 298% year over year, and raised its fiscal 2027 revenue forecast to $72 billion–$82 billion from $65 billion–$72 billion.
• AI demand is driving growth, with customer concentration risk: AI solutions made up 71% of revenue, and one large data center customer accounted for 44% of quarterly sales. Management expects AI to remain 70%–80% of full-year revenue.
• Margins face pressure as large AI deployments grow: Non-GAAP gross margin was 12.8%, above guidance but down from 17.6% in the prior quarter, largely due to a greater share of lower-margin AI deployments. Management expects second-half margins to be below first-half levels.

Super Micro Computer NASDAQ: SMCI reported record first-quarter fiscal 2027 revenue of $19.9 billion, up 298% year-over-year and 79% sequentially, as demand for AI infrastructure and large-scale data center deployments accelerated.

The result exceeded the company’s prior guidance of $14.5 billion to $15.5 billion and a preliminary range of $18.5 billion to $19.5 billion provided in October. Chief Financial Officer Mark Long said approximately $2.3 billion of quarterly revenue came from deployments originally scheduled for earlier periods, producing underlying revenue of about $17.6 billion.

Chief Executive Officer Charles Liang said the company’s Data Center Building Block Solutions, or DCBBS, were central to the growth. The offering combines hardware, software and services intended to help customers deploy AI infrastructure more quickly, improve uptime and lower operating costs.

“Fiscal 2027 is off to a record start,” Liang said, adding that the company is seeing adoption from large cloud providers, neocloud companies, enterprises, storage customers, IoT users and sovereign-focused organizations.

AI Mix Drives Growth, While Customer Concentration Remains Elevated

AI solutions accounted for approximately 71% of first-quarter revenue, compared with 59% in the prior quarter. Long said Supermicro expects AI-related solutions to represent roughly 70% to 80% of revenue for the full fiscal year.

• Enterprise and channel revenue was $4.9 billion, or 25% of total revenue, up 229% year-over-year.
• OEM appliance and large data center revenue totaled $14.7 billion, or 74% of revenue, up 321% year-over-year and 167% sequentially.
• The U.S. represented 80% of revenue, followed by Europe at 11%, Asia at 6%, and other regions at 3%.

One large data center customer represented 44% of revenue during the quarter, compared with 28% for fiscal 2026 as a whole. Long said this degree of concentration reflects the scale of AI infrastructure deployments, noting that a single deployment can now exceed the company’s total quarterly revenue from a year earlier.

He said Supermicro expects customer concentration to remain elevated while large AI build-outs continue, though it expects the mix to moderate as enterprise and sovereign business expands. Two customers accounted for 49% and 17%, respectively, of accounts receivable at the end of the quarter.

Long said the company evaluates customer credit before committing manufacturing capacity and components, frequently requires deposits on large deployments, and has a $1.8 billion receivables purchase facility to manage cash timing and credit exposure.

Margins Improve From a Year Earlier but Decline Sequentially

Non-GAAP gross margin was 12.8%, exceeding the company’s guidance range of 10.4% to 10.8% and rising 330 basis points from the year-earlier period. GAAP gross margin was 12.7%.

However, non-GAAP gross margin declined from 17.6% in the fourth quarter. Long attributed the sequential decrease primarily to a greater share of lower-margin large-scale AI deployments, as AI revenue rose to 71% of sales from 59% in the prior quarter. He also said that benefits from tariff relief and lower inventory reserves were largely offset by recognition of certain lower-margin deferred revenue.

Looking across the last two quarters combined, Long said revenue totaled about $31.1 billion and non-GAAP gross margin was approximately 14.5%, compared with $10.8 billion in revenue and a 9.5% margin in the comparable period a year earlier.

GAAP diluted earnings per share were $1.75, while non-GAAP diluted earnings per share were $1.81. The company said its earnings-per-share calculation reflects the impact of mandatory convertible preferred stock issued in the fourth quarter, including about $75 million in quarterly fixed dividends.

Working Capital Efficiency and Capacity Expansion

Supermicro used $434 million of cash in operations during the quarter and reported negative free cash flow of $481 million after $47 million of capital expenditures. The company ended the quarter with $6.9 billion in cash and cash equivalents, $8.6 billion in bank borrowings and convertible notes, and net debt of $1.7 billion.

Long highlighted improvement in the company’s cash conversion cycle, which fell to 97 days from 149 days in the previous quarter. Days of inventory improved by 45 days to 74 days, while days sales outstanding improved by 23 days to 36 days. Customer prepayments contributed to a roughly $3.1 billion increase in deferred revenue.

Liang said Supermicro has reduced inventory and production turnaround time from about 100 days to 74 days over the past three quarters and is targeting 50 days in coming quarters.

The company is expanding manufacturing and service capacity in Silicon Valley and Taiwan, while accelerating containerized data center production in Asia and the U.S. Liang said Supermicro is on track to produce more than 8,000 racks per month, including more than 4,000 direct-liquid-cooling racks, by December.

Outlook Raised Despite Supply and Data Center Constraints

Supermicro raised its fiscal 2027 revenue outlook to $72 billion to $82 billion, from its previous range of $65 billion to $72 billion. The company expects full-year gross margin of 11.8% to 12.2%.

For the fiscal second quarter, Supermicro forecast revenue of $19.5 billion to $21.5 billion, gross margin of 12% to 12.5%, GAAP diluted earnings per share of $1.59 to $1.83, and non-GAAP diluted earnings per share of $1.66 to $1.90.

Management said the full-year outlook does not assume a repeat of the $2.3 billion in catch-up revenue recognized during the first quarter. It does reflect continued underlying demand growth and improved visibility into customer deployment schedules.

Long said margins in the second half are expected to be below first-half levels because AI solutions are expected to move toward the upper end of the company’s 70% to 80% revenue mix estimate, and those large deployments generally carry lower margins than enterprise and channel sales.

Liang and Long cited supply constraints, data center readiness and the availability of land, power and data center shells as the principal constraints on broader AI infrastructure deployment. Management also pointed to component shortages and pricing volatility as reasons for maintaining a prudent outlook.

The company also announced leadership changes, including the appointment of Mark Long as CFO, succeeding David Weigand, who will remain with Supermicro to support operational scaling efforts. Liang also said Shesha Krishnapura joined the company’s board of directors.

About Super Micro Computer (NASDAQ:SMCI)

Super Micro Computer, Inc develops and sells high-performance server and storage systems for data centers, cloud computing, enterprise IT, telecommunications, and other demanding computing environments. The company offers application-optimized servers, workstations, blade and rack systems, storage solutions, networking products, and related infrastructure.

Supermicro also provides systems designed for artificial intelligence, machine learning, accelerated computing, and other workloads that use graphics processing units and specialized processors.

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