Super Micro Computer (NasdaqGS:SMCI) Q1 2026 Earnings Call November 04, 2025 05:00 PM ET Company ParticipantsRuplu Bhattacharya - DirectorMichael Staiger - Senior VP of Corporate DevelopmentNehal Chokshi - Managing DirectorCharles Liang - Founder, President, and CEODavid Weigand - CFOJonathan Tanwanteng - Managing DirectorConference Call ParticipantsAsiya Merchant - Technology Equity Research AnalystMark Newman - Managing Director and Senior AnalystShadi Mitwalli - Semiconductor Equity Research AnalystBrand ...

Financial Data and Key Metrics Changes - Q1 fiscal year 2026 revenue was $5 billion, down 15% year over year and down 13% quarter over quarter, compared to guidance of $6 billion-$7 billion [14] - Non-GAAP gross margin for Q1 was 9.5% versus 9.6% in Q4 [17] - GAAP diluted EPS was $0.26 compared to guidance of $0.30-$0.42, and non-GAAP diluted EPS was $0.35 versus guidance of $0.40-$0.52 [18] - Cash flow used in operations for Q1 was $918 million compared to cash flow generated from operations of $864 million in the prior quarter [18] - Q1 closing inventory was $5.7 billion, up from $4.7 billion in Q4 [18] Business Line Data and Key Metrics Changes - AI GPU platforms represented over 75% of Q1 revenues, continuing to be the key growth driver [15] - Enterprise channel revenues totaled $1.5 billion, representing 31% of revenues, down from 36% in the prior quarter [15] - OEM appliance and large data center segment revenues were $3.4 billion, representing 68% of Q1 revenues, up from 63% in the last quarter [15] Market Data and Key Metrics Changes - By geography, the US represented 37% of Q1 revenues, Asia 46%, Europe 14%, and the rest of the world 3% [16] - Year-over-year, US revenues decreased 57%, while Asia grew 143% [16] - Asia's growth was attributed to a US-based customer opening a large data center in Asia [16] Company Strategy and Development Direction - The company is focused on leading the AI growth trend with innovative solutions, including the DCBBS [6] - The DCBBS is critical for future success, enabling rapid planning, design, and deployment of AI-ready data centers [9] - The company is executing an aggressive global expansion, with new production facilities in Taiwan, the Netherlands, Malaysia, and soon the Middle East [11] - The long-term goal is to expand revenues in higher margin segments such as data center building block solutions and software service offerings [21] Management's Comments on Operating Environment and Future Outlook - Management expects to ship at least $10.5 billion in the December quarter, with a full-year revenue outlook raised to at least $36 billion [13][24] - The company anticipates sequential growth through fiscal 2026, driven by strong demand for AI infrastructure [13] - Management acknowledged the complexity of new GPU racks causing revenue shifts from Q1 to Q2, but believes this will strengthen growth trajectory [7] Other Important Information - The company executed a $1.8 billion AR facility to strengthen working capital [19] - Q1 GAAP operating expenses were $285 million, down 10% quarter-over-quarter [17] - The company is investing in expanding its DCBBS portfolio and upcoming releases [10] Q&A Session Summary Question: What drives the increased revenue guidance? - Management indicated that the availability of NVIDIA Blackwell Ultra chipsets and market share expansion are both key drivers for increased revenue guidance [27] Question: When will DCBBS impact gross margins? - Management noted that DCBBS has been well received and is expected to ramp up quickly, with higher profit margins anticipated in the data center infrastructure sector [28] Question: What contributes to the strong order outlook? - Management highlighted that GPU products, including Blackwell Ultra and AMD MI350, are significant contributors to the strong order outlook [32] Question: Is the December quarter the low watermark for gross margins? - Management confirmed that the December quarter is expected to have lower margins due to ramping up new product lines, but improvements are anticipated in future quarters [46] Question: How does the company account for revenue push-outs? - Management acknowledged that large projects often face timing challenges due to logistics and customer readiness, which can impact quarterly results [75]