Super Micro Computer(SMCI) - 2026 Q1 - Earnings Call Transcript

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 [15] - Non-GAAP gross margin for Q1 was 9.5% compared to 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 [16] 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 capturing market share in the AI infrastructure market, with a strong emphasis on DCBBS solutions [13][12] - The company is expanding its global footprint with new production facilities in Taiwan, the Netherlands, Malaysia, and soon the Middle East [11] - The DCBBS solution is becoming a critical part of the business strategy, driving future growth and profitability [10] 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 [14][22] - Management noted that the complexity of new GPU racks has caused revenue shifts from Q1 to Q2, but this will strengthen growth trajectory [8] - Management is optimistic about the demand for AI compute and infrastructural solutions, positioning the company to lead in this space [7] Other Important Information - The company executed a $1.8 billion AR facility to strengthen working capital [19] - The cash position at quarter-end totaled $4.2 billion, while bank and convertible note debt was $4.8 billion, resulting in a net debt position of $575 million [19] Q&A Session Summary Question: What is driving the increased revenue guidance? - Management indicated that the availability of NVIDIA Blackwell Ultra chipsets and market share expansion are both contributing factors [26] Question: When will DCBBS impact gross margins? - Management expects DCBBS to ramp up and positively impact gross margins soon, with current customer feedback being very positive [28] Question: What components contribute to the strong order outlook? - The strong order outlook is driven by GPU products and a comprehensive data center solution approach [32] Question: Is there conservatism in the revenue guidance? - Management confirmed that the guidance is conservative, with expectations for continued growth and capacity expansion [42] Question: How is the company managing working capital? - The company has implemented an accounts receivable sale program to enhance working capital flexibility [56] Question: What is the status of the Malaysia plant? - The Malaysia plant is starting to ramp up production and is expected to contribute significantly going forward [51] Question: How does the company account for risks of revenue push-outs? - Management acknowledged that large projects can lead to timing issues, but the overall trend of revenue growth remains strong [80]