Super Micro Computer Inc Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Michael Ng - Goldman Sachs - Analyst : Hi, good afternoon. Two questions for me, if I could. First, I was wondering if you could talk a little bit about the $40 billion fiscal 2026 revenue outlook. What informs your confidence there? If you could shed any light on backlog or pipeline or product road map that is informing the outlook, that would be great. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 11, 2025 / 10:00PM, SMCI.OQ - Q2 2025 Super Micro Computer Inc Earnings Call

Question: Michael Ng - Goldman Sachs - Analyst : Great. Thank you, Charles. And just as my second question, I was wondering if you could talk about the mix of Blackwell and hopper servers in the quarter, not looking for anything specific, but was it different than what you may have expected was Hopper stronger. It was Blackwell affected by any supply chain constraints? Thank you.

Question: Michael Ng - Goldman Sachs - Analyst : Thank you for your thoughts, Charles. Appreciate it.

Question: Ananda Baruah - Loop Capital Markets LLC - Analyst : Hey, good afternoon, you guys. Thanks for taking the questions, and congrats on what's a pretty solid print in delivering to news here. I guess two, if I could. The first is just on gross margins, Dave, what's the good way to think about June Q gross margins in the context of your guide? And then just sort of the second one there, this is the second part of my first question. I have a follow-up question as well. What's the go way to think about gross margins through the Blackwell cycle? This is obviously a key question for people, and they want to remove the concern off the table that there could be material margin pressure through the Blackwell cycle to those two? And then I have a follow-up. Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 11, 2025 / 10:00PM, SMCI.OQ - Q2 2025 Super Micro Computer Inc Earnings Call

Question: Ananda Baruah - Loop Capital Markets LLC - Analyst : (multiple speakers) Most of us are focused on the gross margins. It's been rightfully so, but I'll miss the critical point that we're driving operating margins above our targets, that translates into shareholder value.

Question: Ananda Baruah - Loop Capital Markets LLC - Analyst : Yeah. I appreciate that. And then the follow-up is just on the rev guide. Charles, the $40 billion. So a couple of things. You mentioned calendar year '25 could be similar to calendar year '24, which is about 40% growth. So that would suggest maybe $8 billion on average in the September/December quarter of revenue. And then the $40 billion -- the at least $40 billion for fiscal '26 would tend to suggest maybe at least $12 billion on average the March and June quarters of '26 fiscal year. So is that sort of what you're talking about? And then what gives the confidence, I guess -- what's the thought process underpinning that $40 billion and those kind of rev quarters? And is it GPUs as well as custom ASICs as the TAM opens up? So just kind of a customer question there as well. Thanks. That's it for me.

Question: Ananda Baruah - Loop Capital Markets LLC - Analyst : Got it. Thank you. Thanks, guys. Really appreciate it.

Question: Samik Chatterjee - JPMorgan - Analyst : Yes. Thanks for taking my question, and I have a couple of questions as well. Maybe just to start off, Charles, I think the last time you mentioned, which was in 2024, that we could expect sequential revenue increases in the medium term on a quarterly basis. When I sort of look back at it in hindsight, it looks like what derailed that sequential growth to some extent, was the product transition from NVIDIA in going from one product generation to another, which also drove some change in customer behavior. As you're thinking about the revenue target here for $40 billion for fiscal '26, I mean, is there an underlying assumption that you won't see a similar customer behavior change towards the next-generation product as NVIDIA goes through a transition again in that timeframe, or is there something that I'm missing in that sort of overall product transition that we should expect from your GPU supplier? And then I have a quick follow-up.

Question: Samik Chatterjee - JPMorgan - Analyst : Okay. Maybe just a follow-up on that. Go ahead.

Question: Samik Chatterjee - JPMorgan - Analyst : Got it. And Charles, I'll just follow up with a question that I'm getting from investors today after the print, which is when we look at that sort of $40 billion revenue target, how confident are you about achieving that revenue target with the current customer engagements that you have relative to what you need in terms of additional customers or new customer engagements to get to that revenue that you're targeting. If you can share your thoughts on that, please? Thank you.

Question: Samik Chatterjee - JPMorgan - Analyst : Thank you. Thanks for taking the question.

Question: Ruplu Bhattacharya - BofA Global Research - Analyst : Thanks for taking my questions. I have two. The first one is on gross margin. Overall, do you think industry margins are now under secular pressure, given more competition from other AI server manufacturers? And is liquid cooling really a competitive advantage, which you can charge more for, or is that also becoming commoditized since it looks like everyone seems to be offering their version of liquid cooling? So David, how are you thinking about the long-term gross margin range for your business? And I have a follow-up on revenues.

Question: Ruplu Bhattacharya - BofA Global Research - Analyst : Okay. For my follow-up, if I can ask, as new efficient AI models like DeepSeek come about, how are you thinking about the impact on your business? And as we move from training to inference, what is Super Micro doing to further penetrate the enterprise vertical? I know you have enterprise REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 11, 2025 / 10:00PM, SMCI.OQ - Q2 2025 Super Micro Computer Inc Earnings Call customers. But for those enterprise customers who don't have a large engineering presence, what is your strategy for attacking that customer base as well as for sovereign customers? Thank you for taking my question.

Question: Ruplu Bhattacharya - BofA Global Research - Analyst : Okay, thanks for all the details. Appreciate it.

Question: Nehal Chokshi - Northland Capital Markets - Analyst : All right, thank you. A quick question here. Can you tell us whether or not backlog is up QoQ for the December quarter?

Question: Nehal Chokshi - Northland Capital Markets - Analyst : Got it, thank you. And then I apologize in advance, this question is going to sound a bit circus. But Charles, you characterized the $40 billion target at 60% year-over-year growth. And given that fiscal year '25 is going to be around 60% year-over-year growth in likely impacted by the 10-K delay.

Question: Nehal Chokshi - Northland Capital Markets - Analyst : Great, thank you. And if I might squeeze one more in. I'm sorry, but I'm not quite getting what you mean by data center building block architecture. Can you give a concrete example as far as what does that mean? Is it like basically the cooling tower design or something else? Can you put a little more concreteness behind that?

Question: Nehal Chokshi - Northland Capital Markets - Analyst : Thank you.

Question: Jonathan Tanwanteng - CJS Securities, Inc. - Analyst : Hi, thank you for taking my questions. Charles, I was wondering if you could break down the factors or maybe David, driving the reduction in the '25 revenue guidance. How much is maybe pricing related? How much do you think is related to delays or availability of Blackwell? On how -- and the impact on Hopper demand? And then maybe how much was related to your 10-K and maybe customers not feeling on. So great about doing business with you until that's filed.

Question: Jonathan Tanwanteng - CJS Securities, Inc. - Analyst : Got it, thank you. And then can you talk about your capital needs and cash flow expectations going forward as you start getting in the quarter were maybe generating $8 billion in revenue, $12 billion of revenue as implied by that $40 billion target.

Question: Jonathan Tanwanteng - CJS Securities, Inc. - Analyst : Got it, thank you.

Question: Aaron Rakers - Wells Fargo Securities, LLC - Analyst : Yeah. Thanks, guys, for taking the questions. Most of them have been answered or asked and answered, but I've got a couple here real quick. So first of all, Charles, I just want to make sure I'm clear. Blackwell in the product cycle, are you shipping the GB200, the NVL72 today? And/or if not, is that a significant factor as far as volume shipments in your current quarter guide? And I've got a few others. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 11, 2025 / 10:00PM, SMCI.OQ - Q2 2025 Super Micro Computer Inc Earnings Call

Question: Aaron Rakers - Wells Fargo Securities, LLC - Analyst : Yeah, go ahead.

Question: Aaron Rakers - Wells Fargo Securities, LLC - Analyst : Yeah. That's perfect. And then my second question is really on gross margin. I apologize to ask again on this topic. But can you walk us through the variables that drove the sequential change in gross margin this last quarter? And I guess the other thing is that Charles, you mentioned some of the utilization rates in US and Taiwan. Hypothetically, let's say that you're at, I don't know, pick a number, 70% or 75% utilization rate, how much of an impact would utilization rates have on gross margin? How do we isolate that impact?

Question: Quinn Bolton - Needham & Company, LLC - Analyst : Thanks for taking my question. Just wanted to follow up on the GB200/NVL72 question. Just it sounds like you guys are ready to go, but the biggest gating factor is just support from NVIDIA, do you guys have a forecast from NVIDIA? When you think you're going to start to see supply of the GPUs so that you can ship the NVL72 or visibility still pretty low on availability of the GPUs?

Question: Quinn Bolton - Needham & Company, LLC - Analyst : Got it. So just waiting for the allocation, it sounds like is the gating factor. Got it. And then maybe just a follow-up, longer-term question, Charles, on this DeepSeek impact on the industry, certainly sounds like we'll get more deployment of AI models, which probably says we get more inferencing. To the extent that you see more inferencing infrastructure put in place, it's probably more fragmented. I assume that, that's good for Super Micro because it's less concentrated, probably more variability of systems. But can you spend a second on whether you think a shift towards inferencing is positive for the business? Is it neutral? Is it negative? Thanks.

Question: Quinn Bolton - Needham & Company, LLC - Analyst : Thank you, Charles.

Question: George Wang - Barclays - Analyst : So hey, guys, and thanks for taking my question. Charles, can you talk about kind of your current pipeline just in terms of the mix of sovereign AI, just especially versus three months ago? Can you kind of talk about whether you're seeing incremental kind of pipeline build from the sovereign AI of the world?

Question: George Wang - Barclays - Analyst : Just a quick follow-up, if I can. As we potentially head into the GB300 era later this year or in 2026, the supply chain chatter of most of the open standards as NVIDIA kind of potentially unbundle the supply chain. So that could potentially add more customization. So maybe directionally, can you talk about the implication to Super Micro, especially for the margin? Do you think that you can add a bit more customization, hence, more margin as we head into GB300 or it's not material?