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Super Micro Computer is a developer and manufacturer of server and storage solutions and specializes in cloud-computing and data center infrastructure. The company’s modular, open-architecture server and storage systems have gained popularity because of the AI boom, and it has become a key supplier for companies adding or building AI infrastructure. Super Micro Computer faced significant headwinds in 2024 after its auditor resigned and it faced a potential delisting, but it has since regained compliance with Nasdaq listing requirements.

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Super Micro Computer (SMCI): Company Profile, Stock Price, News, Rankings

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Super Micro Computer

super micro computer

Release we issued earlier today, our most recent 10-K filing for fiscal 2025 and other SEC filings. All these documents are available on the IR 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 any 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 the means of evaluating and understanding how the company's management evaluates the company's 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 the U.S. GAAP. In addition, a reconciliation of GAAP to non-GAAP results is contained in today's press release and in the supplemental information attached to today's presentation.

At the end of today's presentation, I will marshal a Q&A session for sell-side analysts. Our fiscal 2027 quiet period begins at the close of business of Friday, September 11, 2026. I will now turn the call over to Charles.

Thank you, Michael, and thank you all for joining today's call. Fiscal year 2026 was a historic milestone for Supermicro as we nearly doubled our revenue year-over-year, growing from $22 billion last year to $39 billion fiscal year 2026. The world is being transformed by AI, and Supermicro is transforming as well. From a U.S.A.-based server manufacturer into a leading AI IT data center total solution company. We design and manufacture our total Data Center Building Block Solutions, DCBBS, in the U.S.A. with main facilities in U.S.A., Taiwan, Malaysia, and the Netherlands. The demand for our AI IT solutions is even stronger than ever before as we are transforming into a total DCBBS company. A one-stop shop company for customers who want to build their data center or AI factory quicker and better.

In our pre-announcement, we disclosed over $60 billion in new orders, driving our order book and backlog to new record levels as we enter fiscal year 2027. While Q4 revenue came in at $11.1 billion due to some short-term customer delay in power shortage, cooling, and networking. We know this is purely a timing story. The good news is that now our customer can easily leverage our unique DCBBS total solution advantage and upcoming new technology and product lines to accelerate their time to deployment, we call TTD, and time to online, we call TTO, ensuring a strong future growth and long-term value for Supermicro for many years to come. Most importantly, our focus on profitability is yielding clear results. For the first quarter, I am happy to report non-GAAP gross margin of 17.6% and $1.70 in non-GAAP dilute earnings per share.

This margin expansion mainly came from our strategy focused on balancing customer mix and product mix while having a few one-time positive contributions for the quarter. Since early 2026, we added dedicated departments and resources to focus on growing enterprise customer base and have expanded our enterprise CPU-based server storage and IoT product lines. Our quicker growing infrastructure and agentic AI-centric products are also driving healthier profit margins for the company going forward. Another key to this margin expansion is our DCBBS, which delivers total solution value by seamlessly integrated GPU and CPU server, enterprise storage, direct liquid cooling solutions, CDU, chill door, water tower, high-speed data switch and networking, Supermicro Data Center Management software, and full lifecycle services. This turnkey ecosystem enable customers to build and scale AI data center in quarters rather than years, dramatically reducing TCO and accelerating time to online and time to revenue for customers.

We are further elevating this value proposition with our new proactive service model, where our data center management software and field teams will automatically alert and be ready immediately to fix or maintain the failures unit, preventing reduction of computing power at the customer data center. As a new software with powerful management features and automatic service attached to our hardware builds, they deepen customer trust and drive long-term value. Our DCBBS is getting very powerful, and it will soon contribute a significant net income to our business. By early next quarter, more of those software features and service products will be online. On the operation side, we are complementing this high-value strategy by driving higher manufacturing yields through factory automation, design optimization, and our highly versatile building block architecture.

At the same time, we remain very focused on logistics and inventory management, significantly reducing inventory reserve and expedite charge. Together, these operational disciplines will help moderate quarter-to-quarter margin fluctuation driven by uneven customer and product mix, supporting our goal of consistent growing gross margins. Turning to our key product roadmap. Our system building block allows us to quickly optimize every major silicon platform.

Through our long-term NVIDIA partnership, we are shipping volume SKU across the GB200 NVL72, HGX B200, NVIDIA B200 MV4, and NVIDIA RTX 6000 Pro product lines while preparing first to market for Rubin, Vera Rubin NVL72, Rubin HGX, and Vera CPU, and other high-density Vera systems. With AMD, we launched complete new Helios product line and Instinct MI450 total solution alongside strong EPYC CPU, MI350, and Instinct MI355X momentum. Working with Intel, we brought Puzzle Edge AI system to market and shipping GM6 Plus platform in volume.

We also dedicated on developing product for the strong demand of Arm AGI CPU processor base, codename Phoenix architecture optimized for high performance per watt inferencing workloads, demonstrating our silicone partners' deep confidence in our engineering excellence. To support a massive demand, we continue to expand our physical footprint. In Silicon Valley, we recently announced our new 32-acre DCBBS campus, featuring advanced optical photonics networking lab and data center scale manufacturing, which brings our U.S.A. footprint to nearly 4 million square feet. Globally, our facilities in Taiwan, Malaysia, and the Netherlands are also ramping strongly to meet the demand, putting our total manufacturing capacity on track to exceed 6,000 racks per month, including more than 3,000 direct liquid cooling racks per month. Especially, most of our DLC rack production lines support the most dense densities 250 KW rack platforms. Before I close, a quick update on our capital structure.

Following our $5.6 billion financial in June, our balance sheet fully supports our component supply and business needs. Thank you to our strong cash position and more favorable customer and product mix. We currently have no plan to utilize our ATM program, which we initiated a few months ago. At the same time, we remain focused on building financial efficiency. Within all of this operational and product advancement, I want to emphasize that our growth momentum is accelerating where it matters most. By expanding hundreds of new enterprise customers and other customers and leading the transition into agentic and specialized AI workloads, Supermicro has become a fundamental architect of today's AI backbone.

Our DCBBS total solution, spanning CPU and GPU, compute, storage, energy, and 1.6T high-speed switch, upcoming optical networking, and our management software suite, including SCM, SuperCloud Composer, SVM, Supermicro Data Center Management and SOM, Supermicro Orchestration Manager, delivers the complete one-stop shop experience that modern enterprise, Neocloud, and any other data center customer needs. Looking to fiscal year 2027, our momentum gives us strong confidence to target our revenue in the range of $65 billion-$72 billion, as we are in the process of historic infrastructure build-out. We are balancing top-line expansion with bottom-line profitability by focusing on growing enterprise customer base, customer mix, DCBBS solutions, and operational discipline. We are shaping the future of AI technology while delivering true technology value to our customers. I am very confident that fiscal 2027 will be our strong and fastest growth year again.

Thank you, and I will now turn the call to David.

Thank you, Charles. We are pleased to report record fiscal year 2026 revenue of $39.1 billion, up 78% over fiscal year 2025 revenues and $22 billion in record non-GAAP, fully diluted EPS of $3.63, up 76% over fiscal year 2025 EPS of $2.06. Our fiscal year 2026 ending backlog was at a record level, with over $60 billion in new orders received during Q4 fiscal year 2026, which we expect to fulfill over the coming quarters. Non-GAAP gross margins for fiscal year 2026 were 10.9% versus 11.2% in fiscal year 2025. Our fiscal year 2026 non-GAAP operating margins expanded to 8.1% from 7.1% in fiscal year 2025. Our customer base is diversifying, and we had nine customers in fiscal year 2026 with revenues greater than $1 billion each versus four such customers in fiscal year 2025.

Turning to fiscal Q4, fiscal year 2026 results, we achieved revenue of $11.1 billion, up 93% year-over-year and up 9% quarter-over-quarter. Revenue was near the low end of our guidance range of $11 billion-$12.5 billion due to delays in customer readiness, and we anticipate this revenue to be recognized in subsequent quarters. Our AI solutions contributed approximately 60% of total revenue in Q4 versus over 80% in Q3 due to the timing of some large AI project ramps. Based on our backlog, we believe greater than 80% of revenues will be AI-related solutions going forward. During Q4, enterprise and channel revenue was $5.6 billion, representing 50% of total revenue, compared with 28% in the prior quarter. Revenue in this segment increased 172% year-over-year and 98% quarter-over-quarter.

During Q4, we saw a pickup in demand from enterprise and channel customers, which were upgrading their compute, storage, and network infrastructure with more efficient CPU platforms. OEM appliance and large data center revenue was $5.5 billion, also representing 50% of total revenue, compared with 72% in the prior quarter. Revenue in this segment increased 50% year-over-year and decreased 26% quarter-over-quarter. For fiscal year 2026, enterprise and channel revenue grew 39% and represented 31% of total revenue. The OEM appliance and large data center revenue grew 104% and represented 69% of total revenue. For fiscal year 2026, we had one large data center/CSP customer, which represented 28% of revenue. By geography, the U.S. represented 71% of Q4 revenue. Asia represented 11%, Europe represented 8%, and the rest of the world represented 10%. On a year-over-year basis, revenue in the U.S. grew 259%. Asia decreased 15%.

Europe increased 4%, and the rest of the world increased 296%. On a quarter-over-quarter basis, revenue in the U.S. grew 12%, Asia decreased 13%, Europe increased 25%, and the rest of the world increased 1%. Q4 non-GAAP gross margin was 17.6% versus our guidance of 8.2%-8.4%. This was up from 10.1% in Q3. Gross margins improved by 750 basis points sequentially due to a better than anticipated customer and product mix, including the deferral of several contracts from Q4 fiscal year 2026 to Q1 fiscal year 2027, and perhaps the subsequent quarter. This favorable mix contributed approximately 75% of the gross margin improvement. Lower tariff costs and lower inventory reserves drove the remaining 25% of the gross margin improvement. Q4 GAAP operating expenses were $455 million, up 44% year-over-year and 16% quarter-over-quarter on a non-GAAP basis.

On a non-GAAP basis, operating expenses were $357 million, which was up 49% year-over-year and 28% quarter-over-quarter. The sequential increases in both GAAP and non-GAAP operating expenses primarily reflected higher headcount related expenses and sales and marketing expenses. Non-GAAP operating margin was 14.3% in Q4, compared with 7.2% in Q3. Other income and expense for Q4 was a net expense of $19 million, consisting of $61 million in interest and other income, offset by $80 million in interest expense related to our convertible notes and revolving credit facilities. The Q4 tax provision was $290 million on a GAAP basis and $316 million on a non-GAAP basis. The Q4 GAAP tax rate was 19.7%, while the non-GAAP tax rate was 20.1%. For fiscal year 2026, the GAAP tax rate was 19.9%, compared with 12.9% in fiscal year 2025.

The non-GAAP tax rate was 20.4%, compared with 15.4% in fiscal year 2025. Q4 GAAP diluted earnings per share was $1.62 compared with our guidance range of $0.53-$0.67. Non-GAAP diluted earnings per share was $1.70 compared with our guidance range of $0.65-$0.79. The results exceeded our guidance primarily due to higher gross margins. For fiscal year 2026, GAAP diluted earnings per share was $3.26 compared with $1.68 in fiscal year 2025. Non-GAAP diluted earnings per share was $3.63 compared with $2.06 in fiscal year 2025. The GAAP diluted share count increased sequentially from 692 million shares in Q3 to 705 million shares in Q4. The non-GAAP diluted share count increased from 709 million shares to 721 million shares over the same period.

Cash provided by our operating activities in Q4 was $747 million, compared with cash used in operating activities of $6.6 billion in the prior quarter. For fiscal year 2026, cash used in operating activities was $6.8 billion, compared with cash provided by operating activities of $1.66 billion in fiscal year 2025. Q4 closing inventory was $12.9 billion, up from $11.1 billion at the end of Q3. CapEx totaled $28 million in Q4, resulting in free cash flow of $722 million. For fiscal year 2026, CapEx was $162 million, compared with $127 million in fiscal year 2025, as we invested in our expanding capacity globally. During the quarter, we completed public equity offerings raising $5.6 billion after offering expenses, comprising $1.4 billion of common stock and $4.2 billion of mandatory convertible preferred shares.

The proceeds from these offerings will be used primarily to support increased working capital needed to support our new orders. At quarter end, cash and cash equivalents totaled $7.5 billion. Bank borrowings and convertible note debt totaled $8.7 billion, resulting in net debt of $1.2 billion, compared with net debt of $7.5 billion at the end of the prior quarter. Turning to the balance sheet and working capital metrics. The cash conversion cycle increased by 43 days from 106 days in Q3 to 149 days in Q4. Days of inventory increased by 13 days to 119 days from 106 days in the prior quarter as we built inventory in anticipation of higher revenues going into fiscal year 2027. Days sales outstanding decreased by 26 days to 59 days from 85 days in Q3 as we realized collections from some large customers.

Days payables outstanding decreased by 56 days to 29 days versus 85 days in Q3 due to a significant reduction in our average days payables between Q3 and Q4 due to the completion of some large AI GPU projects and the timing of payments to suppliers. Going forward, we expect the cash conversion cycle to normalize based on terms that we have in our current backlog. Now turning to the outlook for Q1 fiscal year 2027. We expect net sales to be in the range of $14.5 billion-$15.5 billion. GAAP diluted net income per share to be between $0.89 and $0.98, and non-GAAP diluted net income per share to be between $1.01 and $1.10. Based on the expected customer and product mix, we expect gross margin to be in the range of 10.4%-10.8%.

We successfully completed the issuance of $4.2 billion of mandatory convertible preferred shares in Q4. Due to that issuance, our GAAP and non-GAAP EPS is computed based on the two-class method, in which we allocated a portion of our net income for participating convertible preferred shares. This impacts our Q1 FY 2027 EPS guidance and should be considered in all EPS calculations going forward. Please see the earnings release tables for further details. GAAP operating expenses are expected to be approximately $453 million, including approximately $127 million in stock-based compensation expenses, which are excluded from non-GAAP operating expenses. The outlook for Q1 of fiscal year 2027 fully diluted GAAP earnings per share includes approximately $106 million in expected stock-based compensation expenses, net of tax effects of $32 million, which are excluded from non-GAAP diluted net income per common share.

We expect other income and expense, including interest expense, to result in a net expense of approximately $45 million. The company's projections for Q1 fiscal year 2027 GAAP and non-GAAP diluted net income per common share assume a GAAP tax rate of 20.1%, a non-GAAP tax rate of 20.5%, and a fully diluted share count of 745 million shares for GAAP and 761 million shares for non-GAAP. Capital expenditures for Q1 are expected to be in the range of $50 million-$60 million. For the full fiscal year 2027, we expect net sales to be in the range of $65 billion-$72 billion. Michael, we are ready for Q&A now.

Thank you. We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Ananda Baruah with Loop Capital. Your line is open. Please go ahead.

Yeah, guys. Thanks for taking the questions. I have two if I could. Congrats on the strong results and the ongoing improvement in profitability here. Let me start just with that. Charles, Dave, what is a good way to think about what FY 2027 gross margins can be? You benefited from mix in June. Sounds like you are absorbing some of that mix from deal pushout in September. It is still a nice improvement, apples to apples in gross margin guide. Can you walk us through how we should think about the puts and takes on the margins, mix, CPU, things like that? Number one, how should we think about what is useful estimate for gross margin FY 2027, and what may be the progression? Then I have a quick follow-up. Thanks.

Okay. Thank you for the question. Yes. We will be very carefully control of balance between revenue and profitability. As you know, high volume GPU margin usually much lower. CPU, storage, IoT, enterprise application, on the other hand, have a higher margin. We will try to balance between the two vertical. Especially last 12 months, we have continued to grow sales force in the enterprise and server application storage. So, looking forward, we will consistently growing our overall gross margin. Although we will still grow very aggressively, very faster than GPU, but we will focus much more than before on enterprise and CPU storage. Also, the DCBBS product line is getting mature. We are shipping more and more DCBBS hardware and also software service and some switch as well. So, the DCBBS will be our long-term, much better profit margin product line.

Just to clarify before my second question, Charles, I believe I heard you say you anticipate margins to improve from September quarter levels, given the factors that you just mentioned. Did I hear you correctly there?

Yeah. We guided to $10.4 billion-$10.8 billion for September, and we're doing everything we can, as Charles mentioned, to find the best margins that we can.

Okay, that's great. The follow-up is, maybe just to dovetail off of Charles' CPU remarks. Sounds like you had 80% of revenue as AI in your Q3, 60% in Q4, looking for 80% again in Q1. Charles talked about taking on more CPU servers, storage, and networking. What is a useful way to think about what that sort of 20% that's not AI, what is that? If I could just squeeze in quickly, any update on the board investigation? The board inquiry. I assume it's coming close to completion, but any update there would be great, too. That's it for me. Thanks.

Yeah. It depends on customer mix, and when large data center orders a lot, for sure, AI percentage will be higher. When David says 80% will be AI, I believe that including two marked segments. One is traditional AI, the other one is application AI, agentic AI, or edge AI. So, the pure AI will be about 60%-70%, while another 10%-20% AI will be CPU-based AI or agentic AI, edge AI. The other 20% will be pure traditional service storage, IoT. Altogether, 100%.

As to your second question, Ananda, we expect to provide an update shortly, and that's all we can share on this call.

Thanks so much, guys. Really appreciate it.

Your next question comes from the line of Joseph Cardoso with J.P. Morgan. Your line is open. Please go ahead.

Hi. Thank you for taking my question. This is MP on for Joseph Cardoso. For my first question, just wanted to double-click on your robust orders, which you saw during the quarter. You mentioned $60 billion plus orders. Maybe anything in terms of customer concentration within that order growth which you saw, as well as any more incremental color in terms of what really was the driver behind such a robust uptick in orders there. I have follow-up.

Yeah. Around $60 billion, I would like to say 70% are pure AI. The other 30% is either CPU or CPU-based AI, or end of edge AI application. Overall, I believe our profit margin mix will be getting better.

Okay. Got it. For my follow-up, just wanted to ask in terms of, you mentioned that you achieved some success in terms of customer diversification, where you have, I think, nine customers which are $1 billion plus during FY 2026. Anything in terms of the nature of those customers, maybe in terms of Neocloud versus enterprises versus sovereign AI customers? Any more incremental color there will be helpful. Thank you.

Yeah. We have a lot of emerging Neoclouds and CSPs and some enterprise customers that were in that mix that we mentioned.

Yeah. The vision is CPU-based AI, for example. NVIDIA now also have a Vera CPU-based AI. That is from NVIDIA. AMD CPU-based AI, Arm-based, and Intel-based. So now AI is kind of a majority still GPU-based, but still, the CPU-based AI is also growing quickly, especially for agentic AI application.

Your next question comes from the line of Asiya Merchant with Citi. Your line is open. Please go ahead.

Great. Thanks for taking my question here. Two, if I may. One of them was just, was there any change in buying patterns specifically for the large DC and CSP customers? I understand that there was a shipment delay into 1Q. From what I understand, the guide incorporates that the shipment from 4Q would be shipped into fiscal 1Q. Are you sensing any change in the buying patterns from these large data center CSP customers that you're predominant in? Because there seems to be some investor concern that maybe these customers are going more directly to ODMs than they have been typically to the likes of Supermicro. I have a quick follow-up.

Okay. Yeah. For sure. Large data center always have power readiness, data center readiness concern, especially liquid cooling. Our customer base overall have a similar concern as well. Still, basically now order a shipment for September quarter, December quarter have been quite strong. Supermicro business model is a bit special. Indeed, quite special. We have an OEM business, but we also cover ODM business. We have lots of large data center customer now, especially a kind of Neocloud. At the same time, we are growing very aggressively for enterprise server, traditional server and storage. Overall, we are kind of, again, both ODM and OEM. We will continue to grow in both ways.

Okay, thank you. For my follow-up, the liquid cool data centers, are you able to provide what percentage of revenues those are? If you can give any further details on verticals between enterprise versus these large data center/CSP customers that you have for the liquid cool data centers. Thank you.

As you know, we are one of the very early liquid cooling technology leaders. 2024, for example, we ship, I guess, 80%-plus liquid cooling to the market. Now more and more platforms are liquid cooling ready, including GPU liquid cooling and CPU liquid cooling, like Vera, Rubin, and even Vera. Vera is CPU based. Lots of our Vera CPU based will be liquid cooling as well. Some AMD Intel CPU also liquid cooling. So overall, liquid cooling will continue to grow quickly, and very soon will dominate the data center business, I believe.

Your next question comes from the line of Katherine Murphy with Goldman Sachs. Your line is open. Please go ahead.

Thank you very much. Charles, you noted that you are making investments into the sales force to address the enterprise opportunity specifically. Can you talk about the progress that you have made here and what further investments need to be made in both go-to market and in the product features and capabilities of Supermicro's portfolio in order to better address this opportunity, and if this run rate OpEx level is the right way to think about the full year? Thank you very much.

Sure. I will address the question on the operating expenses. There are certainly some expenses that we expect to go up and others that we expect to come down. We think that the levels that we have are at the proper level. If you look at our historical growth rate in operating expenses, it is less than half of our revenue growth rate.

Yeah. As a technology company, our investment in the new technology continues to be very aggressive. For example, the high-speed switch, the optical technology. Overall, our data center total solution, with our DCBBS as a centric kind of focus, will be continuing very strong.

Thank you. Could you talk more about the sales force and how you are engaging with this expanded enterprise customer set, understanding that this is a broader opportunity than the types of engagements that Supermicro may have had in the past?

Yeah. Hey, this is Michael Staiger. I just want to chime in on the sales force, and some of the sales force changes. You probably saw that we elevated a few of our individuals, Matt Thauberger as Chief Revenue Officer, Vik Malyala as Chief Business Officer. There's been a focus on efficiency and aligning the sales force with a solution sale element to address the AI opportunity ahead, which is supportive of better margins. There's definitive actions in place to make those improvements, and we'll keep you posted as we go out through the year, as we expand and make those changes to address the market opportunity.

As a technology leading company, before we are mostly focused on engineering, production, customer service. Now we getting focused much more on the enterprise and growing our overall balance, especially enterprise, as you know. The profit margin is always better, right? We are growing our sales force aggressively now.

Your next question comes from the line of Ruplu Bhattacharya with Bank of America. Your line is open. Please go ahead.

Hi. Thanks for taking my questions. David, given the pace of GPU platform transitions, how are you managing inventory risk around each new generation? What gives you the confidence that the record order backlog that you now have won't result in significant inventory exposure if customer deployment schedules or platform configurations change? I am asking this because Supermicro has had some issues in the past, and I have a follow-up.

Sure. I think everyone in our industry has to watch out for changes in technology. But what we've found was with prices rising so fast

A lot of times now, some of the old inventory does get resold favorably. Nonetheless, as you point out, you don't want to get caught having to hold that inventory. There is risk in that. So, what we do is we try to ensure as much as possible that we have non-cancellable POs, and we also try to match our procurement along with the shipment schedules as much as possible.

Other than that, most of our products are designed based on building block solution. Lots of our subsystems are compatible or optimized for different product lines or even different generations of products. That will help us a lot in maintaining inventory when the technology generation changes.

Okay. Thanks for the details there. As a follow-up, can I ask, the business is scaling towards $70 billion of annual revenue, right? How should we think about working capital intensity and operating cash conversion in FY 2027? I think Charles said something about this in his prepared remarks. I did not fully catch that. David, do you expect in FY 2027 the growth to be self-funded from operating cash flow? Or will the company need incremental external financing to support inventory and receivables beyond the rates that you had recently had? Thank you. Thanks for taking my questions.

Sure, Ruplu. I think, as I mentioned in my prepared comments, that we do expect the cash conversion cycle to improve, and the reason for that is when we look at our backlog, we have improved terms, which will help us on our cash flow conversion. Therefore, we expect that this will allow us to carry a greater volume of business. We are going to do everything possible to utilize our balance sheet, which is much stronger. If you look at our current assets and our current liabilities, it is stronger than most companies that you will see out on the market. We expect to use the strength of our balance sheet, as well as our good customer base to help us fund our growth.

Yeah. Once we take between $65 billion to $72 billion, I guess our cash flow now is pretty enough. But if there are chances to grow much higher revenue, then we may need more cash flow. For example, $80 billion or beyond $80 billion. There are some possibilities like that, but we will carefully control.

Your next question comes from the line of George Notter with Wolfe Research. Your line is open. Please go ahead.

Hi, guys. Thanks for the question. I wanted to ask if you are seeing any relief or shift in the AI pricing environment overall. Then just the balancing revenues and margins commentary, should we take that to mean that you guys are walking away from some low margin deals right now? Or how are you managing some of the proof point deals that you guys have done on the next generation racks in the past? Then I have a follow-up.

Yeah, that is why we forecast between $65 billion to $72 billion. We like to support as many customers as we can, but the business has to be healthy. The margin has to be at a decent, meet the minimum financial kind of demand.

Got it. Okay. Just to dive a little bit deeper in the traditional server and storage benefits right now, is a lot of that sort of standalone CPU demand? What is sort of like the attach rate or the sort of synergies with the AI side of the business look like? How are margins sort of apples-to-apples trending in that business? Thanks, guys.

Yeah. Very good question. Yes. In the last many years, we fully focused on GPU market, AI market. When company become bigger, yes, we circle back to focus on enterprise CPU-based market as well, including enterprise and kind of industrial PC, IoT, storage-based application. We are going to make our balance between the gross revenue and net profit become a much more healthy balance.

I think, by the way, I will add to that, I think we did a reasonable job year-over-year because we grew our top line by 78%, and we grew our bottom line by almost the same amount. I think that shows on a year-over-year basis what goals we are after.

Your next question comes from the line of Nehal Chokshi with Northland Capital Markets. Your line is open. Please go ahead.

Yeah. Thank you. Congrats on amazing gross margin results. Charles, do you see the value add that Supermicro can add to NVIDIA ecosystem being different from the x86 ecosystem, somewhat implied by a discussion in the earnings deck around the Arm AGI CPU platform?

Yes. There are lots of chances we can add our value. For example, our DCBBS solution. They are all for customer. A complete data center build-out support. Not just GPU, CPU storage, but all the major components for data center. Other than that, lots of agentic AI application. We have lots of optimization. For example, Vera-based solution, Rubin, HGX-based, and lots of other workstation-based. We see still lots of room we can differentiate our platform from others.

I guess what I am trying to drive at is that NVIDIA is designing full systems, and where you guys come in is helping end customers customize those full systems. But with the Arm AGI CPU platform, perhaps there is more full system design help that Supermicro can bring to the table relative to NVIDIA ecosystem.

Yes. For example, better time to market. Whenever the CPU, GPU available with our architecture, we are able to provide a better time to market and quality. Not just design quality, production quality, deployment quality, and service. We kind of work with customer for a whole data center deployment and putting data center to operation and maintain high availability. Make sure customer have a minimal failure system. We see indeed more and more customers appreciate our partnership. It's not just buy and go. It's a kind of a buy and work together.

Okay, great. David, just really quickly, you mentioned that the backlog has improved terms with respect to cash conversion cycle. Is those improved terms because of customer mix? Or is it because you're seeing a higher percentage of that backlog represent repeat orders, and repeat orders potentially have more favorable terms?

Yeah. You broke up just a little bit, Nehal, but let me answer what I thought I heard you ask. That is, we really had a combination of two things. We had new customers come in, but we also had existing customers that we were already selling to. And really, we tightened the terms of those contracts. That's what gives us a little better visibility into our cash conversion cycle.

Great. That's super helpful. Thank you, David.

Your next question comes from the line of Brandon Nispel with KeyBanc Capital Markets. Your line is open. Please go ahead.

Hey, guys. Thanks for taking the questions. I wanted to ask about DCBBS. You had previously guided for that to be about 20% of gross profit for this year. Could you maybe update us on how that contributed to revenue and gross profit for this year, and how you are thinking about that for 2027? And I have a follow-up. Thanks.

Yeah. Thank you for the question. Yes, DCBBS is a big project. We provide all our data center hardware and also the software, management software and deployment, networking. Make sure customer have a highest availability and efficient maintenance. So, it is a kind of combination of all. So, for example, management software. Earlier next quarter, we will provide a proactive service package. That is the feature, the service to maintain customers' maximum availability. Make sure all the server they invest are working, instead of failure and waiting there, for example. So, we see a very big room to grow, including a kind of a switch, a high bandwidth switch and the whole networking design management tool. So, we see a big room to grow. 20% should be not far away.

Got it. Thanks, Charles. David, unpacking your comments around gross margins with 75% coming from mix and 25% coming from tariff and inventory write-downs. It is about $700 million for mix and $230 million from the other bucket, on my math. Within mix, I am curious, what did vendor rebates look like this quarter? And within tariffs, did you book a tariff rebate? Thanks.

Yeah, that's a great question. Let me say, we did not book a tariff rebate in our numbers. We are actively pursuing refunds, but we did not take a benefit for those until we see them. I think the rest of the industry is expecting that the tariffs may go back up. Maybe not be in the same fashion, but they may go back up. So, that's why we still look at this as perhaps a one-time benefit. But time will tell. But as to rebates, your question about rebates, we did have, I think a little bit higher rebates because we had a different mix of business, more rebate-laden this past quarter.

Got it. I appreciate the color. If I could do one more, on the gross margin guidance, I think it's 10.6% for the first quarter. If we were to normalize that for tariffs and inventory write-downs, how do you see that from a year-over-year standpoint? I know from a reported basis it's up, but last year you definitely had more tariffs in the numbers and definitely more inventory write-downs that hurt those results. So, I was wondering if you could sort of help us from a normalized year-over-year perspective in the first quarter.

Yeah. So, my comparisons were more quarter to quarter, where we came down a lot on tariffs and on excess and obsolete inventory. Year over year, I think the same things are going to hold true with tariffs coming down a lot in this quarter with the suspension of the IEEPA tariffs. I think there's no question that we had good results on our E&O this quarter. So that was what we would consider a non-recurring event.

Understood. Appreciate you taking the questions.

Your final question comes from the line of Victor Chiu with Raymond James. Your line is open. Please go ahead.

Hi, guys. Thank you. I wanted to circle back on one of Charles' previous comments. Can you just provide some color around how much of your backlog and end demand are being impacted by the shift towards agentic and inference workloads from trading workloads? Are you observing this inflection right now in your results? How does the inflection impact the mix of shipments between CPUs and GPUs in the medium term and going forward?

Yeah. It's basically a complicated mix. I would have to say still 70 something percent GPU. Maybe high 20% CPU. But still, some GPU now is agentic GPU or kind of agent GPU. So, it's kind of, in term of profit margin, the edge GPU is between traditional GPU and CPU. So, it's a complicated combination. But overall, with our DCBBS is growing quickly. So, I believe we should be able to maintain the profit margin we plan for.

I got it. Are you seeing a shift at all? Any changes in this? Yeah, I understand the mix that you're alluding to, but how does that compare to maybe a year ago, in terms of the workloads influencing that?

Yeah. Long-term GPU percentage will continue to grow, I believe. But again, lots of GPU will use in application, agentic AI, enterprise AI. Overall GPU market, I believe, will be not just big, but also get into every vertical. That is what we believe at this moment.

We have reached the end of the Q&A session. This concludes today's call. Thank you for attending. You may now disconnect.

Super Micro Computer (SMCI) Q4 2026 Earnings Call Transcript

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