Q2 2025 Summary
Published Feb 25, 2025, 11:01 PM UTC- Strong revenue growth and confidence in future expansion: SMCI grew about 60% this year and 110% last year, and projects at least a 65% growth in fiscal 2026, aiming for $40 billion in revenue. The company considers this a conservative estimate due to underutilized production capacity (USA at 55%, Taiwan at 60%, Malaysia at 1%) providing ample room for growth.
- Leadership in liquid cooling (DLC) technology providing competitive advantage: SMCI shipped more than 3,000 DLC racks last year, accounting for about 70% of the global DLC market. With the liquid cooling market expected to grow to 30% or more in the next 12 months, SMCI's dominant position and readiness to ship new products like Blackwell GB200 make it well-positioned for future growth.
- Expansion into Data Center Building Block Solutions increasing total addressable market (TAM): SMCI is expanding its offerings to include complete data center solutions, including infrastructure, on-site deployment, cabling, and services. Few competitors have this capability, and this expansion of services is increasing SMCI's market TAM, positioning the company for faster growth.
- Gross margins may face pressure due to increased competition and product maturation. The company acknowledges that as products like the H100 mature, they face strong price competition, which can negatively impact margins. David Weigand notes that margins depend on competition's ability to deliver, especially with new products like Blackwell.
- Delays in new technology can negatively impact revenue growth. The reduction in fiscal 2025 revenue guidance was primarily due to delays in new technology supply, affecting the company's ability to ship products despite being ready on their end. This dependency on suppliers could continue to pose risks to revenue targets.
- Aggressive revenue targets may be challenging to achieve due to market uncertainties. Analysts question whether historical growth rates are a reliable indicator of future demand, especially with potential delays in technology adoption and customer behaviors during product transitions. Achieving the $40 billion revenue target for fiscal 2026 may be challenging if these factors impact demand.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +55% | Total revenue increased to $5,678.0 million from $3,664.9 million. This robust growth builds on earlier successes in AI demand and new product adoption—particularly in direct liquid‐cooled, rack‐scale AI GPU platforms—that drove significant gains in previous periods, fueling a strong upward trend. |
Server and Storage Systems Revenue | +60% | Revenue for server and storage systems surged to $5,487.2 million from $3,435.6 million. The increase is attributed to strong demand for AI, GPU, and high-performance computing (HPC) solutions, which continue the trend observed in preceding periods with rising average selling prices and integrated system sales. |
Subsystems and Accessories Revenue | -17% | Revenue declined to $190.8 million from $229.3 million. The decrease reflects a strategic shift from selling standalone subsystems toward allocating supply chain–constrained components to the higher-margin server and storage systems, a trend that was beginning to emerge in prior periods. |
U.S. Revenue | +48% | U.S. revenue rose to $3,847.0 million from $2,605.6 million. Driven by robust demand for AI and GPU platforms in enterprise and cloud service provider markets, this growth continues the positive momentum seen in earlier quarters, where the U.S. represented a major revenue share. |
European Revenue | +223% | European revenue jumped dramatically from $288.4 million to $933.8 million. This surge likely reflects a recovery and accelerated adoption of new products in Europe compared to prior periods, where slower uptake and macroeconomic concerns had previously hindered growth. |
Asia Revenue | +17% | Asia revenue increased modestly to $768.2 million. This moderate improvement indicates a stabilization in regional demand after experiencing previous downturns due to macroeconomic constraints, aligning with the gradual recovery trend observed in earlier periods. |
Other Regions Revenue | +12% | Revenue in Other regions grew to $129.0 million. Reflecting modest gains, this increase aligns with global expansion efforts that have delivered steady but smaller-scale improvements compared to the major markets, following the patterns seen in previous periods. |
Balance Sheet Liquidity | N/A | Solid liquidity remains intact with Cash & Equivalents at $1,669,766 thousand and Current Assets at $8,931,960 thousand. This strong financial position supports continued investment and the ability to manage supply chain and market dynamics, consistent with a strategy built from earlier periods. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Net Sales | Q3 2025 | no prior guidance | $5 billion to $6 billion | no prior guidance |
Gross Margin | Q3 2025 | no prior guidance | Approximately 12% | no prior guidance |
Operating Expenses | Q3 2025 | no prior guidance | Increase by approximately $17 million sequentially | no prior guidance |
Other Income and Expenses | Q3 2025 | no prior guidance | Net expense of approximately $12 million | no prior guidance |
GAAP Net Income per Diluted Share | Q3 2025 | no prior guidance | $0.36 to $0.53 | no prior guidance |
Non-GAAP Net Income per Diluted Share | Q3 2025 | no prior guidance | $0.46 to $0.62 | no prior guidance |
Tax Rate (GAAP) | Q3 2025 | no prior guidance | Approximately 10.7% | no prior guidance |
Tax Rate (Non-GAAP) | Q3 2025 | no prior guidance | Approximately 12.7% | no prior guidance |
Diluted Share Count (GAAP) | Q3 2025 | no prior guidance | Approximately 642 million shares | no prior guidance |
Diluted Share Count (Non-GAAP) | Q3 2025 | no prior guidance | Approximately 653 million shares | no prior guidance |
Revenue Guidance | FY 2025 | $26 billion to $30 billion | $23.5 billion to $25 billion | lowered |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Net Sales | Q2 2025 | $5.5B – $6.1B | $5,678.0M | Met |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Liquid cooling (DLC) | Emphasized leadership and expansion in Q1 2025 and prior calls (shipped thousands of racks, ~10x volume growth). | Maintained ~60% global DLC share; ~30% of new DCs expected to adopt DLC in 12 months. | Recurring; expanded capacity and market share |
Revenue growth targets | Q4 2024: $26B–$30B FY25 guide; no specific mention in Q1. | Now targeting $40B in FY26 (~65% YoY “conservative”). | More ambitious than previous guidance |
Data Center Building Block Solutions | Highlighted in Q1 as an end-to-end solution reducing deployment times and costs. | Promotes ~40% TCO savings, integrates liquid cooling with faster deployments. | Recurring focus on full-stack solutions |
Margin pressure from competition | Q1 2025/Q3 2024: Recognized tighter margins from aggressive pricing and new entrants. | Facing price competition on mature products; expecting improved margins with new launches. | Ongoing pressure but offset by new products |
Supply chain & technology delays | Previous quarters saw GPU/component shortages and delayed shipments. | Noted GPU allocation limits and new tech readiness issues slowing shipments. | Continuing challenges, hopeful improvement |
Partnerships with NVIDIA (Blackwell GPU) | Strong ties in prior calls, preparing for next-gen GPU launches. | Awaiting more GPU allocations from NVIDIA to meet high demand. | Central to AI strategy; still strong |
Auditor appointment & governance | Q1 2025: New auditor search, special committee found no fraud. | Special committee found no wrongdoing; new compliance leadership. | Less emphasized; mostly resolved |
Underutilized production capacity | Mentioned ~50% utilization in Q1 2025. | 55% in US, 60% in Taiwan, 1% in Malaysia, indicating significant room to scale. | New emphasis; highlights growth potential |
$40 billion revenue target | No prior mention. | Introduced as a “conservative” FY26 goal; underpinned by DLC and AI demand. | Newly introduced, very ambitious |
Heightened skepticism over goals | Not directly acknowledged before. | Not explicitly addressed in Q2 2025; management remains confident in targets. | No clear mention of increased skepticism |
DLC leadership & expansions | Stressed across multiple calls: DLC, AI, data center focus. | Continues with high market share, expansions, and tie-ins to ambitious top-line goals. | Highly impactful driver for future growth |
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$40B Revenue Target Confidence
Q: What gives you confidence in the $40B fiscal 2026 outlook?
A: Charles Liang stated that the company expects at least 65% growth in fiscal '26, considering it a conservative estimate. They grew 110% last year and about 60% this year. With underutilized capacity—U.S. at 55%, Taiwan at 60%, and Malaysia at 1%—there's ample room to grow. Strong customer engagements, especially in Asia and Europe, support their confidence. -
Gross Margin Outlook
Q: How should we think about gross margins through the Blackwell cycle?
A: Management believes margins will improve with new products like Blackwell. While mature products face price competition, new offerings like GB200 and B200 are expected to yield better margins. They anticipate the liquid cooling market share to grow to 30% or more in the next 12 months, where they hold a leading position. -
NVIDIA Product Transition Impact
Q: Will NVIDIA's product transition affect your revenue outlook?
A: Charles Liang expects to repeat the success of 2023 when H100 launched, as they are well-prepared for the shift to liquid-cooled solutions. With a capacity for 1,500 racks per month and customers ready to deploy in high volume, they anticipate strong growth once Blackwell is in volume production. -
Impact of 10-K Delay
Q: How did the 10-K delay affect your guidance and customer confidence?
A: The 10-K delay impacted growth due to cash flow constraints, but Charles Liang expects the issue to be resolved soon. He believes that once fixed, cash flow won't be a problem, allowing a return to strong growth supported by product strength and customer readiness. -
Capital Needs and Cash Flow
Q: What are your capital needs and cash flow expectations as revenue scales?
A: Management is working on raising additional capital, having secured funds from existing investors. With an unlevered balance sheet and plans to leverage inventory and accounts receivable, they feel confident in funding future growth. -
Data Center Building Block Architecture
Q: What is meant by data center building block architecture?
A: Charles Liang explained it's a comprehensive solution offering key components for data center construction, such as liquid cooling systems, pumps, water towers, cabling, and management software. The goal is to provide a one-stop shop for customers to build data centers quickly and cost-effectively. -
Shift to Inferencing Impact
Q: How does the shift towards inferencing affect your business?
A: Charles Liang views the shift positively, as it expands the market and increases demand worldwide. With more companies needing AI equipment and services, Super Micro is well-positioned to serve a variety of customers across different verticals. -
Demand from Sovereign AI Customers
Q: Are you seeing increased demand from sovereign AI customers?
A: Yes, Charles Liang noted that demand is growing globally, with more countries building their own AI infrastructure. This presents exciting opportunities as AI becomes more popular worldwide. -
Backlog Trends
Q: Is backlog up quarter-over-quarter for December?
A: While specific figures weren't provided, management noted that backlog tends to follow the chip cycle. With new chip solutions coming, they anticipate growing backlog industry-wide. -
Customization and Margins in GB300 Era
Q: Will customization in the GB300 era impact margins?
A: Charles Liang believes there's ample room for differentiation and customization, especially as they expand into data center infrastructure solutions. By offering tailored solutions and expanding their market, they expect to maintain or improve margins.