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01/10 16:15
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals a mixed financial performance with declining margins, increased operating expenses, and tight liquidity, despite some positive growth indicators. The Q&A section highlights concerns about macroeconomic uncertainties, tariff issues, and customer concentration risks. The lack of clear guidance for FY2026 and vague responses on inventory reserves further dampen sentiment. Although there are plans for expansion and a private placement to support growth, the overall sentiment leans negative due to financial pressures and market uncertainties.
Net Revenue $4.6 billion, up 19% year-over-year; decline due to customers evaluating AI platforms, leading to delayed commitments.
Non-GAAP EPS $0.31 per share, down from $0.66 last year; decline driven by a one-time inventory write-down of older-generation GPUs.
Non-GAAP Gross Margin 9.7%, down 220 basis points from 11.9% in Q2; primarily due to higher inventory reserves for older products and lower volume.
Operating Expenses (GAAP) $293 million, increased 34% year-over-year; decreased 3% quarter-over-quarter.
Operating Expenses (Non-GAAP) $216 million, increased 30% year-over-year; decreased 5% quarter-over-quarter.
Non-GAAP Operating Margin 5.0%, compared to 7.9% in Q2; due to lower revenues and gross margins.
Cash Flow from Operations $627 million, compared to cash flow usage of $240 million in the previous quarter.
Closing Inventory $3.9 billion, increased by 7.6% quarter-over-quarter; preparation for higher shipments in Q4.
CapEx $33 million for Q3; resulting in free cash flow of $594 million for the quarter.
Closing Cash Position $2.54 billion; net cash position of $44 million, improved from a negative net cash position of $479 million last quarter.
Cash Conversion Cycle 124 days, increased from 104 days in Q2; due to key component purchases for higher expected Q4 shipments.
Days of Inventory 81 days, increased by 3 days compared to the prior quarter.
Days Sales Outstanding 56 days, increased by 9 days quarter-over-quarter.
Days Payables Outstanding 13 days, decreased by 8 days.
New AI Products: Supermicro successfully delivered new generation AI products at the end of March, including air-cooled 10U and liquid-cooled 4U NVIDIA B200 HGX systems and GB200 NVL72 racks.
DCBBS Launch: The company is set to launch its Datacenter Building Block Solutions (DCBBS), featuring second-generation liquid cooling technology (DLC-2), aimed at reducing costs and improving datacenter performance.
AMD MI-325X Solutions: Supermicro has started offering AMD MI-325X solutions to broaden its AI portfolio.
Market Share Expansion: Despite macroeconomic challenges, Supermicro is expanding its market share in IT and AI, with a strong pipeline of design wins.
Geographic Revenue Growth: U.S. revenues increased by 3% year-over-year, while Asia saw a significant increase of 77%.
Operational Efficiencies: The DCBBS is designed to reduce power consumption, optimize space, and decrease water usage, delivering up to 30% lower total cost of ownership (TCO).
Global Operations Expansion: New Malaysia campus is shipping products, and facilities in Taiwan and Europe are scaling up capabilities.
Strategic Shifts: Supermicro is expanding U.S. domestic manufacturing capacities to align with government initiatives and meet rising demand.
Focus on Green Computing: The company is committed to doubling the volume of DLC technology shipments, enhancing sustainability and efficiency.
Revenue Decline: Fiscal Q3 net revenue totaled $4.6 billion, lower than forecast due to customers delaying commitments while evaluating AI platforms.
Macroeconomic Conditions: Macroeconomic conditions and tariff impacts are affecting business operations and revenue forecasts.
Inventory Write-down: A one-time inventory write-down of older-generation GPUs and related components negatively impacted earnings.
Market Uncertainties: Near-term macroeconomic and market uncertainties complicate the forecasting of technology adoption.
Tariff Environment: The company is closely monitoring the rapidly evolving macro and tariff environment, which poses risks to operations.
Customer Concentration: Two existing CSP/large data center customers represented 36% of Q3 revenues, indicating potential revenue concentration risk.
Gross Margin Pressure: Q3 non-GAAP gross margin decreased to 9.7%, down 220 basis points quarter-over-quarter due to higher inventory reserves and lower volume.
Cash Flow and Debt: The company has a net cash position of $44 million, indicating tight liquidity amid significant debt obligations.
DCBBS Launch: Supermicro is set to launch its new Datacenter Building Block Solutions (DCBBS) featuring second-generation liquid cooling technology (DLC-2), aimed at reducing power consumption and optimizing space.
DLC Technology Expansion: Supermicro aims to double the volume of 100kW AI racks equipped with DLC technology in the coming year, enhancing energy efficiency and sustainability.
Global Operations Expansion: The company is expanding its global operations with new facilities in Malaysia, the Midwest U.S., and other locations to meet rising demand and enhance quality.
AI Product Delivery: Supermicro successfully delivered new generation AI products at the end of March, with plans to ramp up production of DCBBS based on new GPU platforms.
Q4 Revenue Guidance: For Q4, Supermicro expects net sales in the range of $5.6 billion to $6.4 billion.
Fiscal Year 2025 Revenue Guidance: For fiscal year 2025, revenues are expected to be between $21.8 billion and $22.6 billion.
Q4 EPS Guidance: GAAP diluted net income per share is expected to be between $0.30 and $0.40, while non-GAAP diluted net income per share is expected to be between $0.40 and $0.50.
CapEx Guidance: CapEx for Q4 is expected to be in the range of $45 million to $55 million.
Gross Margin Outlook: Gross margins for Q4 are expected to be approximately 10%.
Share Repurchase Program: The company raised $700 million in gross proceeds in a new 2028 convertible note, which will be used to strengthen working capital and enable continued investments in R&D and expand global capacity.
The earnings call reveals strong revenue growth driven by new product launches and a robust order pipeline, including high-profile customers. While there are concerns about negative free cash flow and a net debt position, the company is addressing these with strategic initiatives like DCBBS, which is expected to improve margins. The Q&A section provides confidence in revenue guidance and market leadership, further supported by positive analyst sentiment. Despite some uncertainties, the overall outlook is optimistic, suggesting a positive stock price movement over the next two weeks.
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