Release Date: February 11, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Super Micro Computer Inc (SMCI, Financial) reported a significant year-on-year revenue increase of 54% for Q2 fiscal 2025, driven by strong AI demand.
- The company is optimistic about its growth trajectory, with expectations of continued growth in new-generation platforms as supply ramps up.
- Super Micro Computer Inc (SMCI) has announced a private placement of $700 million in convertible senior notes to support rapid business growth.
- The company is expanding its manufacturing capacity in the US, Taiwan, and Europe to meet increasing demand, particularly for liquid-cooled data center solutions.
- Super Micro Computer Inc (SMCI) is a leader in liquid cooling technology, which is expected to be adopted by more than 30% of new data centers worldwide within the next 12 months.
Negative Points
- The delay in filing the company's fiscal year 2024 10-K and 10-Qs has negatively impacted cash flow and market perception.
- Non-GAAP gross margin decreased to 11.9% from 13.1% last quarter, due to lower margins from product and customer mix.
- The company has lowered its fiscal year 2025 revenue guidance from a range of $26 billion to $30 billion to a new range of $23.5 billion to $25 billion.
- Super Micro Computer Inc (SMCI) is facing temporary margin pressure due to new product R&D investments and customer and product mix.
- There are concerns about potential margin pressure through the Blackwell product cycle due to increased competition in the AI server market.
Q & A Highlights
Q: Can you discuss the $40 billion fiscal 2026 revenue outlook and what informs your confidence in achieving it?
A: Charles Liang, CEO, explained that the confidence stems from the continuous growth of their product line, including industry-standard and confidential products under development. He noted that their production capacity is underutilized, with significant room for growth in the USA, Taiwan, and Malaysia. The company expects at least a 65% growth, which they consider a conservative estimate.
Q: How should we think about gross margins through the Blackwell cycle, and is there a concern about margin pressure?
A: Charles Liang, CEO, acknowledged that mature products face price competition, but new products like Blackwell offer better margins. He emphasized the growing market share of liquid cooling, which provides a competitive edge. David Weigand, CFO, added that operating margins are above targets, translating into shareholder value.
Q: What impact do you expect from the transition to new NVIDIA products on your revenue targets?
A: Charles Liang, CEO, stated that they are well-prepared for the transition, with significant capacity for liquid cooling and a strong customer base ready to deploy in high volume. He expects strong growth once Blackwell is in volume production, similar to the growth experienced with previous NVIDIA product launches.
Q: How do you view the impact of new AI models like DeepSeek on your business, and what is your strategy for enterprise customers?
A: Charles Liang, CEO, believes that while software efficiency improves, the market size will not shrink. He highlighted their strong presence in the enterprise market, with a focus on service, management software, and end-to-end data center solutions to grow quickly in this segment.
Q: Can you elaborate on the data center building block architecture and its impact on your business?
A: Charles Liang, CEO, described it as a comprehensive solution for building data centers, offering key components like liquid cooling, cabling, and management tools. This approach aims to provide a one-stop shop for customers, reducing time to market and costs, and enhancing quality.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
