10-Q · May 11, 2026
Supermicro reported significant growth in revenue and net income for Q3 FY2026, with revenues reaching $10.2 billion, up 122.7% year-over-year. The company beat EPS estimates, reporting $0.72 versus a consensus of…
Earnings analysis · 10-K
SMCI earnings analysis
Filed August 31, 2026 · Our reading of the company's report
The latest report
Supermicro delivered exceptional FY2026 growth, with revenue up 77.8% to $39.063 billion and diluted EPS up to $3.26, driven primarily by AI-related GPU and rack-scale systems. However, the quality and sustainability of…
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Supermicro delivered exceptional FY2026 growth, with revenue up 77.8% to $39.063 billion and diluted EPS up to $3.26, driven primarily by AI-related GPU and rack-scale systems. However, the quality and sustainability of that growth are challenged by a $6.810 billion operating cash outflow, $12.896 billion of inventory, $8.7 billion of debt, and $34.2 billion of non-cancelable purchase commitments. The unremediated IT control material weakness and BDO’s adverse ICFR opinion, together with ongoing export-control investigations and increased customer concentration, materially outweigh the favorable revenue and earnings trajectory.
From revenue to operating profit
Where each $100 of revenue went in this report.
Cost of sales, operating expenses, and what remained. Figures are rounded to whole dollars.
Reported figures
- Earnings per share
- $3.26
- Segment
- One operating segment: high-performance server solutions based on an innovative, modular and open-standard architecture; FY2026 revenue was $39.063 billion.
What stood out
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AI-focused integrated infrastructure strategy
Management positions Supermicro as a global leader in Application-Optimized Total IT Solutions, using its modular Building Block architecture, in-house manufacturing, and DCBBS offering to integrate AI computing, servers, storage, networking, racks, liquid cooling, software, deployment, and maintenance. The company states that DCBBS significantly reduces data-center build time and that tailoring products to AI and data-center requirements can help it capture additional market share (pp. 39-40).
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Exceptional AI server revenue growth
FY2026 net sales increased 77.8% to $39.063 billion from $21.972 billion in FY2025 and $14.989 billion in FY2024. Growth was led by Hyper Servers, GPU & Super Racks, which increased 83.4% year over year to contribute $15.262 billion of the increase, including GB200 and GB300 systems (pp. 40, 45-46).
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Earnings and operating leverage improved
Net income rose to $2.230 billion in FY2026 from $1.049 billion in FY2025 and $1.153 billion in FY2024, while diluted EPS increased to $3.26 from $1.68 and $1.92, respectively. Operating margin improved to 7.1% from 5.7% in FY2025, despite gross margin declining to 10.8% from 11.1% and 13.8% in FY2024 (pp. 44-45).
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Services mix and backlog expanded
Services and software revenue increased to $538.3 million in FY2026 from $330.5 million in FY2025 and $228.3 million in FY2024, while remaining performance obligations were approximately $2.612 billion at June 30, 2026, with approximately 60% expected to be recognized within 12 months (pp. 74-76).
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U.S. and emerging-region growth
The United States remained the main geographic growth engine, with revenue increasing to $27.690 billion from $13.053 billion in FY2025 and representing 70.9% of FY2026 revenue. Asia rose to $6.063 billion from $5.494 billion, while Europe declined slightly to $2.674 billion from $2.727 billion and Other regions increased to $2.635 billion from $698.3 million (p. 75).
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Capacity expansion funded with new capital
The company expanded capacity and liquidity to support growth: FY2026 property, plant and equipment purchases were $162.0 million, cash ended at $7.522 billion, and FY2027 planned capital expenditures are $380.0 million-$400.0 million. It also raised $1.406 billion from common-stock offerings and $4.232 billion net from Series A Mandatory Convertible Preferred Stock issuance (pp. 51-53, 111-112).
What to watch
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Unremediated IT control weakness
Internal-control risk remains materially unresolved: management concluded that internal control over financial reporting and disclosure controls were not effective as of June 30, 2026 because certain IT controls did not operate for a sufficient period and user-access monitoring was not performed consistently and timely. BDO issued an adverse opinion on ICFR, although the financial-statement audit opinion was unqualified (pp. 122-126).
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Severe working-capital and cash burn
Growth is consuming substantial working capital and has turned operating cash flow sharply negative. FY2026 net cash used in operating activities was $6.810 billion, driven in part by an $8.877 billion inventory increase and a $3.922 billion accounts-receivable increase; inventory reached $12.896 billion and the company recorded $188.1 million of inventory write-downs (pp. 51-52, 62, 80).
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Leverage and purchase commitments
Balance-sheet leverage increased materially to approximately $8.7 billion of consolidated indebtedness at June 30, 2026, including $4.056 billion under credit facilities and $4.725 billion of convertible debt obligations. In addition, the company had $34.2 billion of non-cancelable purchase commitments, primarily due within the next 12 months, increasing downside exposure if customer demand or component prices weaken (pp. 32, 53, 120).
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Greater customer concentration
Customer concentration became more pronounced: one customer represented 28.1% of FY2026 net sales, compared with four customers representing 20.9%, 11.5%, 11.3%, and 11.1% in FY2025. Three customers also represented 23.0%, 17.1%, and 12.5% of accounts receivable at June 30, 2026, creating revenue and collection concentration risk (pp. 14, 75).
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Ongoing export-control investigations
Export-control and legal exposure remains open and expanded during FY2026. Following the March 19, 2026 indictment of three former associates for alleged export-control violations, the company disclosed SEC, DOJ, and BIS/OEE subpoenas and stated that the investigations remain ongoing; it cannot predict their scope, duration, outcome, or potential penalties (pp. 26-29, 119-120).
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Supplier and related-party dependence
Supplier concentration and related-party manufacturing remain significant. One supplier accounted for 63.1% of total purchases in FY2026, while Ablecom manufactured approximately 95.3% of purchased chassis and Compuware manufactured approximately 94.4% of purchased power supplies; non-cancelable purchase orders to Ablecom and Compuware were $59.8 million and $182.2 million, respectively (pp. 19, 72, 101-102).
Management's outlook
The 10-K provides no revenue or EPS guidance. It does quantify expected FY2027 capital expenditures of $380.0 million-$400.0 million, primarily for manufacturing capabilities, tooling, IT investments, and facilities upgrades. Annual revenue and EPS outlook was provided separately in the Q4 earnings release/call.
Earlier filings 1
This is our reading of a public filing, not the filing itself. Analysis can contain errors; check the source document for full context.