Q1 2025 Summary
Published Feb 7, 2025, 7:58 PM UTC- Strong growth in liquid cooling solutions, with over 2,000 liquid-cooled racks shipped in recent months . Customer feedback is very positive, with quality and satisfaction even better than traditional solutions . Supermicro's investment in liquid cooling over the past three years is paying off, providing a major advantage in end-to-end data center solutions .
- Robust partnership with NVIDIA, with a relationship spanning multiple decades . Supermicro expects no negative impacts on supply or allocations from NVIDIA due to auditor issues, and communication remains very positive . As NVIDIA's new chips become available, Supermicro anticipates a good percentage in their product mix, enhancing growth prospects .
- Financial strength and access to capital, having raised $4 billion into working capital from two equity raises and one convertible in the last 8-9 months . Supermicro exited Q4 at a run rate of around $6 billion . The company continues to make a reasonable good net profit every quarter, leaving them in good shape with no impediments to raising working capital .
- High Inventory Levels Pose Financial Risk: The company reported holding $5 billion in inventory and expects to maintain this level as it continues to grow . If demand slows, this high inventory could lead to financial strain due to potential write-downs or cash flow issues.
- Uncertainty from Delayed Auditor Appointment and Lack of Annual Guidance: The company has not provided an update on appointing a new auditor, stating, "we have no update with respect to the time line" . Additionally, they are not providing annual guidance for fiscal year 2025, which may create uncertainty about future performance .
- Corporate Governance Concerns Over Combined CEO and Chairman Roles: Analysts have expressed that separating the CEO and Chairman roles could benefit the company. The CEO acknowledged the consideration but offered "no comment at this moment" on plans to separate the roles, potentially indicating governance risks .
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Net Sales | Q2 2025 | no prior guidance | $5.5B to $6.1B | no prior guidance |
Gross Margin | Q2 2025 | no prior guidance | Decline by 100 basis points sequentially | no prior guidance |
Operating Expenses | Q2 2025 | no prior guidance | Increase by ~$34M sequentially | no prior guidance |
Other Income/Expense | Q2 2025 | no prior guidance | Net expense of ~$7M | no prior guidance |
GAAP Net Income per Share | Q2 2025 | no prior guidance | $0.48 to $0.58 | no prior guidance |
Non-GAAP Net Income per Share | Q2 2025 | no prior guidance | $0.56 to $0.65 | no prior guidance |
GAAP Tax Rate | Q2 2025 | no prior guidance | 14% | no prior guidance |
Non-GAAP Tax Rate | Q2 2025 | no prior guidance | 15% | no prior guidance |
GAAP Diluted Share Count | Q2 2025 | no prior guidance | 640M | no prior guidance |
Non-GAAP Diluted Share Count | Q2 2025 | no prior guidance | 648M | no prior guidance |
Stock-Based Compensation | Q2 2025 | no prior guidance | ~$54M (net of ~$14M tax effects) | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Next-generation GPU hardware | Consistently highlighted in Q2, Q3, and Q4 2024, including delayed Blackwell volumes and AMD co-development | Focus on NVIDIA Blackwell readiness with some customers delaying purchases; strong AMD platform support | Continues as a core growth driver; anticipating stronger demand once new GPUs launch |
Direct liquid cooling (DLC) solutions | Introduced in Q3 2024 with significant energy savings , gained market share leadership in Q4 2024 , and not mentioned in Q2 2024 | Shipped 2,000+ DLC racks, strong customer feedback, 10x volume growth expected, major advantage in data centers | Rapid adoption and production scale-up; becoming a key differentiator |
Growth outlook & market share gains | Emphasized in every quarter (Q2–Q4 2024) with aggressive capacity expansions and strong AI demand leading to design wins | 181% year-over-year revenue growth, guidance of $26B–$30B, increasing manufacturing capacity in Malaysia, AI remains 70% of sales | Stable optimism each quarter; expansions continue, expecting sustained AI-driven growth |
Gross margin pressures | Frequently cited margin headwinds in Q2, Q3, and Q4 2024 due to competitive pricing and initial liquid cooling costs | Improved to ~13.3% in Q1 2025 (up from 11.3% in Q4 2024), with fewer cost pressures noted | Pressures eased as manufacturing efficiencies and product mix improved |
Supply chain constraints | Q2–Q4 2024 saw component shortages (especially for DLC) delaying shipments and increasing costs, with gradual improvement projected | No major constraints mentioned; shift to readiness as product lines await new GPUs | Constraints eased heading into Q1 2025, supporting higher production and delivery |
High inventory levels | Elevated inventories noted in Q3 and Q4 2024 (e.g., $4.4B in Q4) to meet expected demand, with no explicit risk warnings | Inventory at $5B, positioned to support rapid growth; no direct mention of risk if demand lags | Increasing inventories underscore confidence in demand |
Delayed filings & auditor resignation | No prior mentions in Q2, Q3, or Q4 2024 | Newly disclosed: independent auditor resigned, 10-K delayed pending new auditor; special committee found no fraud | New development creating short-term uncertainty, but management expects to resolve promptly |
Dependence on large customers | Cited in Q2 2024 (e.g., 26% from one CSP) and similarly high proportions in Q3 and Q4 2024 (e.g., 20% from one CSP) | Brief note of 10% customers without further detail | Less emphasis in Q1 2025, though still acknowledged |
Financial stability (cash flow) | Q4 2024 noted -$2.6B free cash flow for FY 2024 ; not discussed in Q2 or Q3 2024 | Shift from negative free cash flow in Q4 2024 to +$365M free cash flow in Q1 2025, improved operating cash flow | Significant improvement in Q1 2025, reflecting stronger balance sheet and cash generation |
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Revenue Guidance & Chip Availability
Q: When will Blackwell revenue start impacting guidance?
A: Charles Liang explained revenue was impacted as customers await new chips, particularly NVIDIA's Blackwell. They expect growth once these chips become available, possibly starting in Q1 as volumes improve. However, they are not providing annual guidance currently. -
Gross Margin Outlook
Q: Will gross margins improve this fiscal year?
A: Management is cautiously guiding margins but aims to improve them despite competitive pressures. With new technologies like Blackwell, they are optimistic about growing margins toward their target of 14–17%. -
Financial Filings & Auditor Status
Q: What's the status of audited filings and auditor replacement?
A: The company is diligently working to replace their auditor and will file a plan with NASDAQ for an extension. They have no updates on the timeline but are focused on resolving the issue promptly. -
Inventory Levels & Cash Flow
Q: How are inventory levels affecting cash flow?
A: Inventory remains high at $5 billion to support anticipated growth. As growth normalizes, they expect improved cash flow, evidenced by an improved operating cash flow of about $1 billion this quarter, driven by better working capital management. -
Management Changes
Q: Any plans for management or operational changes?
A: Charles Liang stated they continuously add senior management as the company grows rapidly. They are open to changes benefiting shareholders, including possibly separating Chairman and CEO roles in the future. -
Customer Concentration
Q: Are there significant 10% customer exposures?
A: The company acknowledged having 10% customers but did not disclose specifics. They are gaining new customers, especially in Europe and Asia, to maintain a healthy customer mix. -
Relationship with NVIDIA
Q: Is NVIDIA supply affected by filing issues?
A: Charles Liang affirmed their strong, decades-long relationship with NVIDIA, expecting no negative impact on allocations. NVIDIA confirmed no changes, and they continue close collaboration on new technologies. -
Capacity Utilization
Q: How is capacity utilization tracking?
A: They have expanded capacity in Silicon Valley, Taiwan, and Malaysia to support future growth. Currently, utilization is about 50%, awaiting new chip availability, but they are prepared for increased demand. -
Access to Capital
Q: How should we view your access to capital?
A: With strong profitability, they raised $4 billion in the past 8–9 months, ensuring good working capital. They foresee no impediments to raising additional capital if needed. -
Liquid Cooling Solutions
Q: Is there more efficiency in liquid cooling supply chain?
A: They are ahead in liquid cooling, having shipped over 2,000 racks with positive customer feedback. They expect liquid cooling to continue growing rapidly and remain a major advantage.