Super Micro Computer, Inc. (SMCI) Q1 2026 Earnings Summary

Executive Summary

• Q1 FY26 revenue was $5.02B, down 13% QoQ and 15% YoY, primarily due to late-quarter customer configuration upgrades and data center readiness pushing ~$1.5B into Q2; non-GAAP diluted EPS was $0.35, below consensus and prior guidance .
• Management raised FY26 revenue outlook to at least $36B from $33B and guided Q2 FY26 revenue to $10–$11B with GAAP EPS $0.37–$0.45 and non-GAAP EPS $0.46–$0.54, while flagging ~300 bps gross margin compression in Q2 due to mega-scale GB300 ramp and customer/product mix .
• Adjusted EBITDA was $334.9M (6.7% of sales); operating cash flow was –$917.5M on inventory build ahead of Q2; net debt shifted to ~$575M as cash fell to $4.2B and debt rose to $4.8B .
• Order momentum remains strong: over $13B in NVIDIA Blackwell Ultra GB300 orders (largest in company history); AI GPU platforms drove >75% of revenue; Asia mix surged as a US customer opened a large data center in Asia .
• Near-term stock catalysts: massive Q2 revenue ramp vs margin pressure and negative OCF; narrative hinges on execution of GB300 mega-cluster, DCBBS monetization (>20% margin potential), and working capital financing progress .

What Went Well and What Went Wrong

What Went Well

• Strong AI order book and GB300 traction: “more than $13B in Blackwell Ultra orders” underpinning the FY26 raise to “at least $36 billion” .
• Channel and geography: OEM/appliance & large data center revenue of $3.4B (68% of total) with Asia up 143% YoY, reflecting hyperscale/sovereign momentum and new Asia DC by a US customer .
• Strategic DCBBS expansion: management emphasized DCBBS as a margin accretive solution (>20% profit margin potential) and began shipping components to key customers .

What Went Wrong

• Top-line miss vs guidance/consensus: Q1 revenue $5.02B vs prior guidance $6–$7B due to configuration upgrades and customer logistics; non-GAAP EPS $0.35 vs guidance $0.40–$0.52 .
• Margin pressure: GAAP gross margin fell to 9.3% (–380 bps YoY) driven by mix, pricing, higher tariffs (+$42.1M YoY), and inventory write-downs (+$27.4M YoY); Q2 margin guide down ~300 bps vs Q1 .
• Cash flow and working capital: operating cash flow –$917.5M as inventories rose to $5.73B to support Q2 ramp; CCC stretched to 123 days with DIO 105, DSO 43, DPO 26 .

Financial Results

Segment/Channel and Geography

KPIs and Balance Sheet/Cash Flow

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “With a rapidly expanding order book, including more than $13B in Blackwell Ultra orders, we expect at least $36 billion in revenue for fiscal year 2026.” — Charles Liang (CEO) .
• “We expect to ship at least $10.5 billion in the December quarter, depending on supply and production capability readiness.” — CEO .
• “We are ramping a new mega-scale GB300 optimized rack platform… we’re making greater investments with new customers… gross margins to be down 300 basis points [in Q2], then improve as we leverage scale and DCBBS.” — CFO .
• “DCBBS… profit margin… more than 20%… we expect it will ramp up very soon.” — CEO .
• “This is basically our first Gigawatt project… a lot of extra costs in December quarter prepare us for upcoming quarters.” — Management .

Q&A Highlights

• Margin trough and trajectory: December (Q2) cited as low watermark for margins due to mega-scale ramp; improvement expected thereafter with scale and DCBBS mix .
• Working capital and financing: Executed $1.8B AR facility; additional programs planned to fund doubling revenues; OCF will guide revenue pacing .
• Capacity: On track to 6,000 racks/month (3,000 DLC); theoretical capacity >$100B if fully utilized, though management guiding conservatively .
• Customer concentration and pipeline: Two 10%+ customers in Q1; strong pipeline among hyperscale, sovereign, and NeoClouds; backlog disclosure remains limited .
• Gross margin drivers: Customer/product mix, higher engineering/support costs in mega-cluster ramp, expedite/overtime costs; Malaysia footprint to lower costs over time .

Estimates Context

Values with asterisk were retrieved from S&P Global.

Implications:

• Q1 FY26 missed consensus on both revenue and EPS; Q2 revenue guide brackets consensus, while guided EPS midpoint is slightly below consensus (reflecting margin compression from mega-ramp) .
• FY26 revenue outlook raised to at least $36B suggests upward estimate revisions on revenue, with margin assumptions likely reduced near term given Q2 guide commentary .

Key Takeaways for Investors

• Execution swing factor: Q2 ramp (GB300 mega-cluster) is the pivotal near-term catalyst; successful delivery and stabilization of margins post-ramp should drive narrative and revisions .
• Margin path: Expect trough in Q2 (–300 bps vs Q1) due to mix and ramp costs; watch for sequential improvement tied to scale efficiencies, Malaysia contribution, and DCBBS mix (>20% margin potential) .
• Working capital discipline: Inventory at $5.73B and OCF –$917.5M highlight financing dependence; AR facility ($1.8B) mitigates, but CCC at 123 days warrants monitoring of cash conversion and leverage (net debt ~$575M) .
• Demand durability: >$13B GB300 orders and Asia growth (+143% YoY) indicate robust AI infrastructure cycle; customer concentration (two 10%+ customers) adds revenue volatility risk .
• Tariff/macro headwinds: Elevated tariff expenses (+$42.1M YoY) and pricing to gain share pressure gross margins; investors should model lower near-term GM with gradual recovery .
• Legal/control overhang: Ongoing litigation/subpoenas and internal control remediation underway; not currently impacting operations but remains a background risk factor .
• Medium-term thesis: If DCBBS scales and margin mix shifts favorably while AI cluster deployments broaden beyond early lighthouse customers, revenue growth with improving profitability supports rerating potential .