Super Micro Computer - Earnings Call - Q4 2025

Executive Summary

• Q4 FY2025 delivered sequential acceleration: net sales $5.76B vs $4.60B in Q3 and $5.35B in Q4 FY2024; GAAP gross margin 9.5% and non-GAAP diluted EPS $0.41.
• Versus consensus, revenue modestly missed ($5.76B vs $5.91B*) and EPS was slightly below ($0.41 vs $0.439*), amid ongoing platform transition and margin pressure; FY2025 revenue finished at $22.0B.
• Management introduced Q1 FY2026 guidance: revenue $6.0–$7.0B, GAAP diluted EPS $0.30–$0.42, non-GAAP $0.40–$0.52; FY2026 net sales guided to “at least $33.0B” (below prior $40B commentary earlier in FY2025).
• Strategic focus: first-to-market AI platforms, ramp of Data Center Building Block Solutions (DCBBS), and DLC-2 liquid cooling; growing enterprise and sovereign AI demand and broader geographic penetration (Europe/Middle East).

Consensus values marked with * are retrieved from S&P Global.

What Went Well and What Went Wrong

• What Went Well

  • Sequential revenue re-acceleration with Q4 net sales $5.76B (+$1.16B QoQ), driven by AI demand; FY2025 revenue reached $22.0B (+47% YoY).
  • Strong operating cash generation: Q4 cash flow from operations $864M; adjusted EBITDA $339M (5.9% margin) as the platform transition progresses.
  • Management emphasized DCBBS one-stop shop and margin/value superiority vs commodity products; expanding customer base and large-scale DC wins targeted from four in FY25 to six–eight in FY26.

• What Went Wrong

  • Margins compressed: GAAP gross margin fell to 9.5% (vs 10.2% YoY; 9.6% QoQ), reflecting product/customer mix and competitive dynamics in mature platforms.
  • EPS below prior-year levels: GAAP diluted EPS $0.31 vs $0.46 YoY; non-GAAP diluted EPS $0.41 vs $0.54 YoY, impacted by lower gross margin and higher stock comp.
  • FY2026 revenue guide of at least $33B is below earlier $40B commentary (Q2 call), tempering expectations amid tariff/macroeconomic caution and supply allocations for newer platforms.

Transcript

Speaker 2

Thank you for standing by. My name is Cameron 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. fourth quarter fiscal year 2025 business update call. With us today are Charles Liang, Founder, President and Chief Executive Officer, David Weigand, CFO, and Michael Staiger, Senior Vice President of Corporate Development. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question, please press Star one.

Speaker 0

Thank you.

Speaker 1

Good afternoon and thank you for attending Super Micro Computer Inc.'s call to discuss financial results for the fourth quarter and full year fiscal 2025, which ended June 30, 2025. With me today are Charles Liang, Founder, Chairman, President and Chief Executive Officer, and David Weigand, Chief Financial Officer. By now you should have received a copy of the press release from the company that was distributed at the close of regular trading and is available on the Company's website. As a reminder, during today's call, the Company will refer to a presentation that is available to participants in the Investor Relations section of the Company's website under the Events and Presentations tab. We have also published management's scripted commentary on our website.

Speaker 0

Please note that some of the information.

Speaker 1

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 first quarter of fiscal 2026 and the full fiscal year 2026. These statements and other comments are based on management's current assumptions and involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated, and you should not place undue reliance on forward-looking statements. You can learn more about these risks and uncertainties in the press release we issued earlier this afternoon, our most recent 10-K for fiscal 2024, and other SEC filings.

Speaker 0

All these documents are available on the.

Speaker 1

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. The non-GAAP measures are presented as we believe that they provide investors with a means of evaluating and understanding how company's management evaluates operating performance. These non-GAAP measures should not be considered in isolation from, as substitutes for, or superior to financial measures prepared in accordance with U.S. GAAP. In addition, a reconciliation of GAAP to non-GAAP 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.

Speaker 0

We'll have a Q and A session.

Speaker 1

For sell side analysts, our first quarter fiscal 2026 quiet period begins at the close of business Friday, September 12, 2025, and with that I will now turn it over to Charles.

Speaker 0

Thank you, Michael. I will be covering our performance for fiscal 2025 and providing insights into our strategic direction for fiscal 2026. Our fiscal 2025 results represent a 47% year-on-year revenue growth at $22 billion. This growth reflects continued strong demand for our AI and green computing solutions. Despite six months cash flow impact from the delayed filing of our fiscal year 2024 10-K and delayed revenue recognition from a major new large partner, non-GAAP earnings per share were $0.41, down year-over-year from 50% last year, primarily due to the tariff impact, although we have taken measures to reduce the impact and we will see their results soon. Allow me to go a little deeper at the tune revenue shortfall in what was otherwise a stronger quarter.

The shortfall stemmed from two key factors: a capital constraint that limited our ability to rapidly scale production and specification changes from a major new customer that delayed revenue recognition because of some new added features. The capital constraint was no longer an issue after we filed the fiscal year 2024 10-K, and large customer orders are now slated for recognition in September and December quarters following close collaboration to align with the customer's updated feature requirements. Despite these circumstances, we remain focused on our strategic priorities, optimizing our solutions and capturing market share. Notably, the number of large-scale paradigm play AI rack customers grew from 2 in fiscal year 2024 to 4 in fiscal year 2025, signaling strong momentum and continuing growth potential across our customer base. We are also on track to add a few more in fiscal year 2026.

We continue our leadership in AI platforms and infrastructure with a comprehensive portfolio optimized for the latest GPU technologies, including NVIDIA B300 and GB300 platforms and AMD's MI350 and MI355X GPUs. Our X14 and H14 GPU systems deliver breakthrough performance, supporting large-scale AI training and inference workloads and enterprise computing demands with exceptional efficiency. Notably, we were able to deliver our B200 systems with an industry-leading time to market to our customers. We are confident our B300 and GB300 solutions will deliver a similar, if not even better, time to market and time to online advantages for customers, helping them accelerate their AI deployments faster than others. To further simplify our customers' AI data center infrastructure deployment and time to online, we officially introduced our Data Center Building Block Solution (DCBBS) to the market last quarter.

With our DCBBS, customers can harness our proven system building block advantage to adapt quickly to evolving market demands, especially in response to increasing complex AI product cycles. Our modular architecture enables faster customization, streamlines production, and reduces time to delivery and time to online while also optimizing quality, efficiency, and ease of maintenance. In most cases, customers who use our DCBBS can finish building a liquid-cooled AI data center in just 18 months instead of two to three years. When converting an existing data center or warehouse to a high density direct liquid cooling data center, customers can complete the transformation in only three to six months instead of 12 or even 18 months. We had just begun deploying large scale total solutions with our DCBBS to a few key customers.

Key components of DCBBS include direct liquid cooling (DLRC) solutions, the LR2A sidecar, liquid to air cooling CDU, especially indoor CDU, indirect CDU as well, and chill door, power share, battery backup, BPU, water or dry power solutions, and more are coming. Our admin's second generation direct liquid cooling (DLRC2) system reduces power and water consumption by up to 40% while operating at a near library quiet level around 50 decibel. This enables superior performance which reduces total cost of ownership (TCO) and total cost to the environment (TCE) for modern data centers. Several DCPPS components are now shipping or entering production very soon, supporting a growing demand for high performance energy efficient data center infrastructure. Equally important, DCPPS meets the growing demand for a comprehensive one stop shop solution including software-defined infrastructure, system management, AI workload optimization, networking, deployment, and all different levels of services.

IT allows cloud service providers to reduce both CapEx and OpEx, capital expense and operating expense. Indeed, IT delivers also greater value to both AI focused and traditional IT data centers. By seamlessly integrating DCPPS capability with our system and rack solution, we are not only enhancing customers' value but also improving our profit margins. This shift toward higher margin and revenue stream is central to our long term strategy. We are also start to strategically focus on the enterprise, IoT, and telco markets, an initiative we believe will improve both growth and net margin over time. In last two quarters, we made a significant investment to optimize our solution for enterprise customers, introducing advanced server and storage systems tailored for hybrid cloud, AI application, and edge computing workloads. This enterprise focused strategy will continue for many years to come.

Supermicro has also launched and enhanced enterprise service program delivering comprehensive 24/7 global support for high density, high performance driven data center deployment based on optimized rack scale architecture. Our IoT portfolio, including embedded system and edge servers, is gaining momentum across industry like manufacturing, health care, telco, smart city, and AI edge applications. Additionally, we have announced strategic partnership to accelerate innovation in AI at the edge and telecom solutions. By expanding into these higher margin segments, we are diversifying our revenue streams and driving long term sustainable profitability that will benefit our shareholders. Our global footprint allows us to efficiently depreciate, optimize the solution worldwide with minimal tariff impact, especially after September quarter. With large and multilevel manufacturing campus across the U.S., Taiwan, Malaysia, and Netherlands, we can deliver a comprehensive system block and data center level building block and total solution to our customer directly and quickly.

This robust global presence enables us to respond to dynamic regional demands, support cost sensitive customers seeking greater value, mitigate tariff exposure, and maintain a reliable global supply chain that's both agile and responsive. Looking ahead to Q1 fiscal year 2026, I anticipate revenue between $6 billion and $7 billion driven by continuing momentum across our AI rack, plug and play DCPPS, software, and service business, which are delivering exceptional customer value and strengthen our profitability. I'm especially excited about our ECBs. For the full fiscal year 2026, I expect at least $33 billion total revenue supported by our expanding large and enterprise customer base, upcoming product innovation, and robust DCBBS total solution. In closing, I want to thank our employees for their dedication, our customers for their trust, and our investors for their continuous support.

We are excited about the opportunity ahead and look forward to updating you on our progress in the next quarter.

Speaker 3

David, please. Thank you, Charles. Q4 fiscal year 2025 revenues were $5.8 billion, up 8% year over year and up 25% quarter over quarter compared to our guidance of $5.6 to $6.4 billion. Growth was led by demand for next generation air cooled and liquid cooled GPU AI platforms, which represented over 70% of Q4 revenues across both enterprise and cloud service provider markets. For the full year fiscal year 2025, we reported revenues of $22 billion, representing 47% growth over fiscal year 2024 revenues of $15 billion. During Q4, we recorded $2.1 billion in the enterprise channel segment, representing 36% of revenues versus 42% in the last quarter, up 7% year over year and up 6% quarter over quarter.

The OEM appliance and large data center segment revenues were $3.7 billion, representing 63% of Q4 revenues versus 57% in the last quarter, up 2% year over year and up 40% quarter over quarter. Emerging 5G telco edge IoT segment revenues were 1% of Q4 revenues for fiscal year 2025. Enterprise channel revenues grew 38% to represent 39% of total revenues. The OEM appliance and large data center segment grew 50% and represented 60% of total revenues. The 5G telco edge IoT segment represented 1% of total revenues for fiscal year 2025. We had four 10% plus large data center customers versus one in fiscal year 2024. Server and storage systems comprised 98% of Q4 revenue, and subsystems and accessories represented 2%. By geography, the U.S. represented 38% of Q4 revenues, Asia 42%, Europe 15%, and the rest of the world 5%. On a year over year basis, U.S.

revenues decreased 33%, Asia increased 91%, Europe increased 66%, and rest of world decreased 3%. On a quarter over quarter basis, U.S. revenues decreased 21%, Asia increased 78%, Europe increased 196%, and the rest of world increased 53%. The Q4 non-GAAP gross margin was 9.6% versus 9.7% in Q3 due to product customer mix. For fiscal year 2025, the non-GAAP gross margin was 11.2% versus 13.9% for fiscal year 2024. Our long term goal is to gradually improve gross margins through providing complete Data Center Building Block Solutions and focusing on the enterprise, IoT, and telco markets. We also expect to benefit from economies of scale from higher revenues, cost effective global facilities including the new Malaysia manufacturing plant, and customer diversification.

The Q4 operating expenses on a GAAP basis increased by 8% quarter over quarter and 23% year over year to $316 million, driven by higher compensation expenses and headcount. On a non-GAAP basis, operating expenses increased 11% quarter over quarter and 29% year over year to $239 million. The Q4 non-GAAP operating margin was 5.3% versus 5% in Q3. Other income and expense for Q4 was a net expense of $5.7 million, consisting of $28.4 million in interest income offset by $22.3 million in interest expense and FX and other losses of $11.8 million. The tax provision for Q4 was $19 million on a GAAP basis and $37 million on a non-GAAP basis. The GAAP tax rate for Q4 was 9% and the non-GAAP tax rate was 12%.

The GAAP tax rate was 13% for fiscal year 2025 versus 5% in fiscal year 2024, and the non-GAAP tax rate was 15% in fiscal year 2025 versus 11% in fiscal year 2024. The Q4 GAAP diluted EPS was $0.31 compared to guidance of $0.30 to $0.40, and non-GAAP diluted EPS of $0.41 versus guidance of $0.40 to $0.50 due to lower gross margins and higher operating expenses in the quarter. For fiscal year 2025, we reported GAAP diluted earnings per share of $1.68 versus $1.92 for fiscal year 2024 and non-GAAP diluted EPS of $2.06 versus $2.12 in fiscal year 2024. The GAAP fully diluted share count increased quarter over quarter from 622 million to 625 million in Q4, and the non-GAAP share count increased sequentially from 636 million to 638 million shares.

Q4 cash flow generated from operations was $864 million compared to $627 million in the previous quarter. For fiscal year 2025, cash generated from operations was $1.7 billion versus cash consumed by operations of $2.5 billion in fiscal year 2024. Q4 closing inventory was $4.7 billion versus $3.9 billion in Q3. CapEx and investments for Q4 was $79 million, resulting in positive free cash flow of $841 million for the quarter. CapEx and investments for fiscal year 2025 were $183 million versus $194 million in fiscal year 2024. During the quarter, we completed a convertible bond offering raising $2.3 billion in gross proceeds before operating expenses and the costs associated with the simultaneous covered call spread and stock buyback.

The Q4 closing balance sheet cash position was $5.2 billion while bank and convertible note debt was $4.8 billion, resulting in a net cash position of $412 million versus a net cash position of $44 million last quarter. Additionally, in July we executed a $1.8 billion facility which allows for the non-recourse sale of certain qualified accounts receivables to strengthen our working capital on a discretionary basis. Turning to the balance sheet and working capital metrics, compared to last quarter, the Q4 cash conversion cycle was 98 days versus 124 days in Q3. Days of inventory decreased by 6 days to 75 days compared to the prior quarter of 81 days. Days sales outstanding were 40 days compared to 56 days in Q3. Payables outstanding increased by 4 days to 17 days versus 13 days in Q3.

Now turning to the outlook for Q1 fiscal year 2026, we expect net sales to be in the range of $6 billion to $7 billion, GAAP diluted net income per share of $0.30 to $0.42, and non-GAAP diluted net income per share of $0.40 to $0.52. We expect gross margins to be similar to Q4 fiscal year 2025 levels. GAAP operating expenses are expected to be approximately $329 million and to include $82 million in stock-based compensation expenses that are not included in non-GAAP operating expenses. The outlook for Q1 of fiscal year 2026 fully diluted GAAP earnings per share includes approximately $69 million in expected stock-based compensation expenses net of tax effects of $20 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 $24 million.

The company's projections for Q1 fiscal year 2026 GAAP and non-GAAP diluted net income per common share assume a GAAP tax rate of 13%, a non-GAAP tax rate of 15.5%, and a fully diluted share count of 631 million for GAAP and 644 million shares for non-GAAP. We expect CapEx for Q1 to be in the range of $60 million to $80 million, and for fiscal year 2026 we expect net sales of at least $33 billion. Michael, we're ready for Q and A.

Speaker 0

Great Cameron.

Speaker 1

Let's turn it over to the question and answer session.

Speaker 2

Thank you. We will now begin the Q&A session. If you would like to ask a question, please press Star followed by one on your telephone keypad. If you'd like to remove your question, press Star followed by two. Again, to ask a question, press Star one. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking a question. We will pause here briefly as questions are registered. The first question is from the line of Simon Matthew Leopold with Raymond James & Associates. You may proceed.

Thanks for taking the question. I wanted to get a better understanding of some of the bottlenecks or gating factors for sales and what I'm looking at is we've got full year revenue outlook of $33 billion, so that's better than $8 billion a quarter and we're looking at September being roughly $6 to $7 billion. I would have thought that availability of Blackwell's GB200s could have given you maybe some more upside to September and a more linear outlook for the year. This would suggest more of a back end load. If you could help us understand how you're thinking about the cadence through that fiscal year and what are the bottlenecks or what are the restraints in terms of the September quarter and availability of the chips.

Speaker 0

Thank you. Basically our business will continue to grow last year because of 10K. Today we have some constraints, so we grew 47% this year. We should be able to grow better than that. You mentioned about bottleneck. Yes, some chip availability, some resource availability from vendor like NVIDIA. Still we had to wait and see. Basically we believe their availability will be much better than last two quarter, and that's why we estimate minimum $3.3 billion. By the way, our new introduction, DCPPS, that help customer to build a data center quicker, especially make their cloud ready for time to online much quicker. That's another factor we believe this year, I mean 2026, we should be able to grow better than last year.

Is any of this related to customers perhaps waiting for GB300s or is that not a factor?

Yes, you are right. Some customers always waiting for coming soon technology like a B300, GB300. The good thing is we have a B300, GB300 pretty much ready to go, just waiting for our partner NVIDIA to support us.

Speaker 3

Great.

Thanks for taking the question.

Speaker 2

The next question is from the line of Ruplu Bhattacharya with Bank of America. You may proceed.

Hi, thanks for taking my questions. I have two of them. The first one is a higher level question. Can you talk about management's strategy for competing in the AI server market? Is your focus on revenue growth and gaining market share or is your focus on margin expansion? If it's both, what gives you confidence that you can grow revenues and grow margins in this competitive market?

Speaker 0

I have a follow up. Very good question. Yes, we can grow much quicker if we don't care about gross margin and net margin. That's why we introduced that DCPPS Data Center Building Block Solution. That's a total solution to support a customer to build a data center quicker and also save money, more reliable. We provide all infrastructure need including on site deployment, networking, cabling, all different kind of service. We believe we can grow revenue, market share, and profitability, especially our data center end to end software solution. DCPPS plus all our software need customer need including service, so we sure able to provide a better value to customers, not just price woe.

Okay, thanks for that. For my follow up, can you talk about the opportunity with sovereigns? You announced an MOU with Data Vault during the quarter. Can you give us your thoughts on expected rollout of that opportunity? David, what margin uplift should we expect from sovereign customers versus your existing customer base, such as tier 2 CSPs? How should we think about the revenue and margin opportunity?

Thank you. Yeah, AI bring us a very good chance. There are so many country need to build their AI infrastructure, and those country, those people really appreciate our DCPPS data center infrastructure total solution. We help them to design their AI infrastructure and help them build AI infrastructure quicker and better. We see a very good room, very big room to grow in that area. David.

Speaker 3

Yeah, Ruplu, on the gross margin side, we are optimistic that we will be able to sell more complete Data Center Building Block Solution (DCBBS) solutions with sovereigns and therefore we don't have enough experience to be forecasting specific gross margins. We're very optimistic that with the additional offerings that we will have, there's upside there.

Speaker 0

Yeah, there are so many countries, especially in Europe, in the Middle East, in Asia. They all are very aggressively building their AI infrastructure for their country, for their company, and we are working very closely with them.

All right, thank you for all the details.

Speaker 2

The next question is from the line of Ananda Prosad Baruah with Loop Capital. You may proceed.

Yeah guys, thanks for taking the question. Two if I could, the first one is maybe a little bit more of a clarification. In the first six months of the calendar year you guys saw, as did the industry, a little bit elongated customer purchase cycles. First from the HCX, from the HCX GB decision making situation in the March quarter, then the B200, B300 sort of decision making situation in the June quarter. Now Charles, it sounds like to one of the first questions, I think it was to Simon's question, you may have suggested, sounds like you're suggesting there may then currently be some B300, you know, sort of elongated customer decision making as well. Just to clarify, are you still going through, are we still not yet to normalize customer decision making cycles?

If that's the case, I think it's useful for us to understand that as distinct from what the organic demand backdrop may be as we go through the year here. Anyway, I have a follow up after that. Thanks.

Speaker 0

Yeah, as you know NVIDIA have so many products, so many better products, new product and we are very happy to provide all the new technology, new product and make them available for the market as soon as possible. Like you just mentioned, B300 entry, GB300 entry, we work with our partner very closely and make sure once NVIDIA able to ship in volume we can service customer quicker. With DCPPS we exactly optimize for customers' data center including a large data center and middle size data center or even small size data center. We are very happy to support a lot of middle size and small size AI infrastructure as well. That's part of Super Micro Computer Inc. advantage. We provide a total solution and make a customer's job much easier to build their AI factory, AI infrastructure quicker and better.

Can you give any context you can give?

Us.

Around the comment of large scale data center customers expanding to 6 to 8 in fiscal 2026, what flavor of customers might that be? When do you consider someone to be large scale, and what market domains do those additional large scale data center customers fit into?

Thanks. Yes, most of the large scale AI CSP continue to have a strong demand, and we are prepared to support them as well. The big thing is with much strong cash flow now, we are ready to support a more large scale data center as well.

Okay, thanks guys.

Appreciate it.

Speaker 2

The next question comes from the line of Samik Chatterjee with JPMorgan. You may proceed.

Speaker 0

Hi, thanks for taking my question.

I have two, but maybe for the first one, you talked about the Data Center Building Block Solution and that it's still maybe a bit early for you to forecast gross margins on that front. Anything that you can help us in terms of what does a typical sales cycle or what are you expecting for a sales cycle on that front to look like? Have any of your larger data center customers shown interest in Data Center Building Block Solutions? I guess the question more is when should we start to see or what should we expect in terms of material revenues in relation to when that does come into the P&L? What would be the earliest if you were sort of going and talking to your customers about these solutions now, what should be our expectation on this front?

I don't know. Thank you. Yeah, thank you.

Yeah.

We officially announced our Data Center Building Block Solution last quarter, and now we have some products fully ready to ship. For example, the AI computing power rack PMP that had been available for four years from Supermicro and kind of like CPU, right? Indoor indirect CPU and kind of like a sidecar LR2A, right? From liquid to air transformation, kind of for those customers who like to go for liquid cooling but do not have a deep cooling data center infrastructure ready, we support them sidecar, and the product is ready to ship now, like a power share, right? When GB200, GB300 go for rack scale, I mean use power share, we have a product ready now, and PPU we have a product about ready now as well, and kind of like a water tower for liquid cooling or dry tower.

We are shipping now and kind of like on-site deployment and networking, including the cabling, all different kind of service. We have most of those components getting ready now, and we started shipping in September quarter, and then we are ramping up in a much higher volume in December, and for sure we'll continue to grow in next year March quarter and June quarter. This Data Center Building Block Solution eventually will help customers to build their AI factory infrastructure much quicker and much energy efficiency and also save money as well. We are very excited for our DCPPS solution. Got it, got it.

For my follow up, you mentioned the investments that you're making on the enterprise opportunity or edge opportunity as well. I mean, assuming some of those are better margin opportunities, including the Data Center Building Block Solutions relative to your business currently, on the sort of where you're around this 9, 10% gross margin right now, do you see an opportunity still to get back to the long term targets that you had on the gross margin of 14 to 17%? Are these new opportunities necessarily big enough and at a margin high enough to get you back to that 14 to 17% run rate? Do you think the expectations of investors should be at maybe a more modest level in terms of what the long term gross margin range of the company would be in the future?

Yeah, very big question and very good question also. I mean yes, enterprise and IoT as you know have a much higher margin and DCPPS service software we sure have a better margin. We are growing in both directions. One is growing revenue and support a large scale data center at the same time growing enterprise data center total solutions software service. I mean long term I believe 15%, 16% still our target and take how long it depends on a combination. I believe yes the direction is still there. I mean we like to get back to our traditional 16%, even 17% profit margin. Maybe you can add a search.

Speaker 3

Yeah, I think that, as Charles mentioned, we have been providing these services already. We've had customers with very large deployments that we've helped in the build out of their data center and with specific services. It's something that we're really focused on, and we know that it'll contribute to our profitability.

Speaker 0

Yeah. As a Silicon Valley-based company, for coexist we are able and we like to provide more value to customer, not just hardware, not just high volume product, but all different kind of service solution optimization, and to make a customer's job much easier. Got it. Great. Thank you.

Speaker 2

The next question is from the line.

Speaker 0

Of Michael Ng with Goldman Sachs.

Speaker 2

You may proceed.

Speaker 0

Hey, good afternoon.

Thank you for the questions. I just have two. First, on the greater than 10% customers for fiscal 2025, I was wondering if you could just let us know what the revenue exposures were for those customers. I can appreciate we'll eventually get it in the 10-K, but any early color would be helpful. Second, thank you for all the guidance on 2026. I was wondering if you could just talk about how we should think about gross margins for the full year. Is the first quarter gross margins that you spoke to a good indication about how we should think about the full year? Thank you very much.

Speaker 3

Okay, Michael, so the four customers which we'll refer to as A, B, C, and D, not in that particular order, but 11%, we had three 11% and a 21%. As to your second question, we're not going to forecast annual guides. I want to revert back to our earlier comments that we're doing everything that we can. Especially, we're very optimistic about these Data Center Building Block Solutions, and we're very quick to market. We think those two combinations, DCBBS and our fast time to market, are our best chances for margin improvement.

Speaker 0

Yeah, it's basically our DCPPS, especially our DCPPS. We are able to have a customer increase speed of their time to online. Traditionally, for example, two years, we have them improved to speed up to 18 months, 16 months. Lots of customers are very interested to those service.

Thank you, Charles.

Thank you.

Speaker 2

The next question is from the line of Nehal Sushil Chokshi with Northland. You may proceed.

Speaker 0

Yeah, thank you. I have two questions. First one is what is going to be the driver to projected Q2 uptick, the September quarter revenue. Maybe that can also help us understand why you're guiding to no operating leverage. I believe effectively the guidance implies about a flat operating margin from the June quarter, September quarter.

Speaker 3

In terms of the customers we have, we have a lot of customers that are building out really good deployments. That's what gives us a guide to the first quarter. We have been shipping MI355X and GB300, and we expect that to ramp in Q1, and that's really what's giving us our guide.

Speaker 0

Yeah. We are also gaining many more customers in Europe, Middle East, and Asia now. Basically, the near future should be pretty strong. With the incremental $1 billion in revenue, we won't see any operating margin leverage?

Speaker 3

Whenever there is a changeover to these new platform technologies, there's always a bit of a ramp for us. That creates a little bit of a production learning curve.

Speaker 0

Okay. And then my second question is that the Data Center Building Block Solution, is that being pitched more as a discrete service where the value of that discrete service is fractional to the GenAI factory, or is it bundled into GenAI factory where it's meant to drive a better margin profile for that GenAI factory? It is support all different scale of data center. That doesn't mean generative AI or agentic AI or application. Right. Inventory. It's a solution that we are well defined, pre-test, pre-validate. When we ship to customer, a customer can put it together easily. It's kind of like a kid's player Lego castle. It's validated in advance. When customers receive, easy to deploy and easy for quickly go for online. Basically, it's the latter of the situation.

I had proposed, yeah, kind of including the computing power, the rack, the deep cooling, even the tower, the water tower, dry tower, the battery system, the power module. We have everything pretty built and validated in advance.

Speaker 3

As Charles mentioned, time to delivery and time to online for our customers is critical because they have end customers that they're waiting for. That's a huge selling point.

Yeah.

Speaker 0

Is Data Center Building Block Solution at least going to be representative of 10% of the deals, that 10% of the deal value that you're going to?

Be doing in the September quarter?

It will be stably growing, I hope, very soon. It will be more than 20% or even more than 30% because so many people provide system computing power. We instead not just computing power, but total solution, a data center or cloud. Total solution. Great.

Speaker 3

Thank you very much.

Speaker 0

Thank you.

Speaker 2

The next question is from the line of Brandon Nispel with KeyCorp. You may proceed.

Hey guys, thanks for taking the question. I was hoping you could unpack gross margins during the quarter. Last quarter you had provided some adjusted gross margins based on inventory reserves, so that you could help us understand whether there were any inventory reserves this quarter and if you're expecting any in 1Q, including maybe potential impacts from tariffs.

Speaker 0

Thank you.

Speaker 3

Yeah, thanks, Brandon. We did mention a little bit about that last quarter, and what I would say is that they did come in as expected. However, we believe that that's not going to be the case going forward. We think that, you know, we were anticipating a stabilization in that area.

Speaker 0

Yeah. Especially with our DCPPS and with our service function. We have customers build a data center and make sure they go for online mostly, and that will kind of make customers' business much more smooth. I mean, it's good for our inventory control as well. That's our main return product. That will help less slow movement. That's product write-down as well. We expect we will improve in that area. Yeah.

Speaker 3

With respect to tariffs, the situation's dynamic. We're actively monitoring the tariff environment. We know there's news coming out next week. If we have any updates, we'll share it with you. We can only watch and react as every other business is.

Speaker 0

Thanks for taking the questions.

Speaker 2

The next question is from the line of Quinn Bolton with Needham & Company. You may proceed.

Hey guys, this is Shadi Melwani on for Quinn.

Speaker 0

Thanks for letting me ask a question. My first question is on the recent export licenses for NVIDIA and AMD. Just curious to see how Super Micro is positioned to potentially support these deployments. Does the guide embed any of these potential shipments?

Speaker 3

Are you referring to H20?

Speaker 0

Yes. H200, I believe. Are you referring to H200 product? Yes.

Speaker 3

Yeah, we're not anticipating selling those products at any quantities.

Speaker 0

Yeah, not at least the nine high volume for us.

Speaker 3

Yeah.

Speaker 0

Got it. I have a follow up which is a clarification question from I think Northland, but did you say that the Data Center Building Block Solutions will be around 20% to 30% of total revenue in the September quarter? No, I mean it will be further away, maybe next year somehow. It will ramp up gradually, not immediately. Got it. Thank you.

Speaker 2

The next question is from the line of Jonathan E. Tanwanteng with CJS Securities. You may proceed.

Speaker 0

Hi, good afternoon and thank you for taking my questions. First one just on the Data Center Building Block Solution.

I was just wondering what the gross margin.

Margin profile looks like there compared to the corporate average, and what an incremental dollar of sales in that kind of.

Solution adds to your gross profit.

Very good question. Data Center Building Block Solution. I believe we are the first one. We are the first company to introduce data center total solution with building block feature. The profit margin, the value to customer for sure both are good. Much better than commodity product when you have to compete with many companies, that's the pressure for profit margin. The Data Center Building Block Solution instead, we have much less competition. Okay, great, thank you, that's helpful. Just on the B300 launch, do you expect to see yourself get sustained yourself from competitors both pricing wise and allocation wise when that reaches volume or is there any reason.

To believe that you may see more.

Of what you've seen in the B200 time frames? We work with our vendor very closely. I believe our position will be second to none. For sure, there will be a good chance once it's available from our vendor. We are very happy to promote quickly. Okay, great. Thank you. Thank you.

Speaker 2

The last question is from the line of Vijay Raghavan Rakesh with Mizuho. You may proceed.

Speaker 0

Yeah, hey, it's Alison David.

Just a quick question on this. On the $33 billion guide for fiscal 2026, wondering what is contemplated in terms of revenues on the Data Vault win that you announced.

We don't make a comment for specific customer, but we do have a growing customer base in Europe and in Middle East. We feel exciting to grow business in the territory Middle East BV and believe it will be a good percentage for Supermicro business to grow. Got it.

On the DCBBS, obviously nice move with the racks and enabling your go-to-market timing. I guess just wondering what would be the split of a full NVL72 rack versus HDX that you're shipping now or into the end of the year.

Of fiscal 2026 failures. Yeah, we started to ship something about now. For example, the LR2A sidecar we are shipping now and CDU we have been shipping for a while, right. Including indoor CDU we are shipping now and DCPPS we will start shipping. Power share we are ready to ship this quarter, so lots of parts we have been shipping for a few months already to ship in volume and some others will be ready in next few months or few quarters. Eventually it will be a really big product line. The goal is to support all the major components for customers to build their data center, their AI factory. To offer one stop shop. One stop shop, not just to save customer time, but to make sure when customer put those components together it works and optimizes for both efficiency, quality, and cost.

Got it.

you. Thank you. Thank you.

Speaker 2

That was our last question. Thank you for joining today's call. That will now conclude today's call. Thank you for your participation and enjoy the rest of your day.