Super Micro Computer, Inc.
Other securities:
SMCI
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Item 1. Business
Our Company
We are a Silicon Valley-based provider of total IT solutions which address demanding workloads from the enterprise and cloud to the intelligent edge. We deliver rack-scale solutions optimized for various workloads, including artificial intelligence (“AI”) and high-performance computing (“HPC”), where acceleration is critical. Additionally, we offer an extensive portfolio of server and storage solutions for enterprise data centers, cloud service providers, and edge computing applications, such as 5G Telco, Retail and embedded.
Our Total IT Solutions encompass complete servers, storage systems, modular blade servers, workstations, full-rack scale solutions, networking devices, server sub-systems and server management. These turn-key solutions are designed, developed, validated and installed for leading AI datacenters. Our Total IT Solutions are designed for optimal power and thermal management, including using Supermicro’s state-of-the-art liquid cooling technologies. We also provide global support and services to help our customers install, upgrade and maintain their computing infrastructure, including liquid-cooling operations. We offer our customers a high degree of flexibility and customization by providing a broad array of server models and configurations from which they can choose the best solutions to meet their computing needs. Our server and storage systems, sub-systems and accessories are architecturally designed for high reliability, quality, configurability, and scalability.
Our in-house design competencies, design control over many of the sub-systems required within our server and storage systems, along with our Server Building Block Solutions® (an innovative, modular and open architecture) enable us to rapidly develop, build and test complete solutions, which include servers, storage, software, and networking components. As a result, when new technologies are brought to market, we are generally able to quickly assemble a broad portfolio of solutions by leveraging common building blocks across product lines. We work closely with the leading microprocessor, graphics processing units (“GPU”), memory, disk/flash, and interconnect vendors and other hardware and software suppliers to coordinate our new products’ design with their product release schedules. This enhances our ability to rapidly introduce new products by incorporating the latest technology, improve quality and reduce costs. We seek to be the first to market with superior product designs, and we have the ability to offer a broad selection of products using those technologies to our customers.
SMCI | 2025 Form 10-K | 1
We conduct our operations principally from our Silicon Valley headquarters and facilities in Taiwan and the Netherlands. Additionally as part of our efforts to expand our capacities, we added a new facility in Malaysia during the fiscal year ended June 30, 2025. Our sales and marketing activities operate through a combination of our direct sales force and indirect sales channel partners. We work with distributors, value-added resellers, system integrators, and original equipment manufacturers (“OEMs”) to market and sell our optimized solutions to their end customers in our indirect sales channels.
Strategy
Our objective is to be the world’s leading provider of Rack Scale Total IT Solutions, offering a comprehensive portfolio of high-performance, application-optimized server, storage and networking solutions. Achieving this objective requires continuous development and innovation of our Total IT Solutions portfolio with better price-performance and architectural advantages over both prior generations of our solutions and competitors’ offerings. Through our strategy, we seek to maintain or improve our relative competitive position in many product areas and pursue markets that provide us with additional long-term growth opportunities. Key elements of our strategy include executing upon the following:
Strong Internal Research and Development and Internal Manufacturing Capability
We are continually investing in our engineering organization. As of June 30, 2025, we had over 3,200 employees in our research and development organization. These resources, along with our understanding of complex computing and storage requirements, enable us to deliver product innovation featuring advanced functionality and capabilities required by our customers. Also, our worldwide manufacturing facilities enable us to reduce the time to delivery in every geography around the world. Our engineers work directly with our manufacturing personnel to plan together and identify and address any issues together.
Introducing Innovative Products Faster
We seek to sustain advantages in both time-to-market and breadth of products by incorporating the latest technological innovations, such as new processors (central processing units (“CPUs”), and GPUs), liquid cooling enhancements, advancements in memory and storage, and evolving I/O technologies. We seek these advantages by leveraging our in-house design capabilities and our Building Block Solutions® architecture. This allows us to offer customers a broad range of products tailored to their specific application requirements and to focus on delivering products with better time-to-market.
In particular, during the fiscal year ended June 30, 2025 (“fiscal year 2025”):
•We delivered a comprehensive portfolio of AI-focused solutions, specifically designed to support the latest AI workloads, including products compatible with NVIDIA’s Hopper (H100/H200) and Blackwell (GB200/B200/RTX Pro 6000) generation platforms;
•We launched our Data Center Building Block Solutions (“DCBBS”), an integrated offering that simplifies the deployment of liquid-cooled AI factories. This solution includes all critical infrastructure components - servers, storage, networking, racks, liquid cooling infrastructure, software, services, and support;
•We unveiled DLC-2, our next-generation Direct Liquid Cooling solution, engineered to significantly reduce power and water consumption, noise, and spatial requirements in data centers. DLC-2 can lower electricity costs by up to 40% compared to air-cooled setups and reduce total cost of ownership (“TCO”) by up to 20%;
•We introduced new products supporting Intel® Xeon® 6900 Series processors and Intel® Xeon® 6 data center CPUs, as well as AMD EPYC™ 9005 Series CPUs and AMD Instinct™ MI350/355 Series GPUs;
•We expanded our edge and IoT portfolio with a variety of new systems designed for low-power environments that require compact, efficient compute solutions; and
•We broadened our storage offerings with an AI-optimized storage solution built for large-scale AI training workloads, and introduced new, enterprise-grade, scale-up storage products.
Capitalizing on New Applications and Technologies
In addition to meeting traditional needs for server and storage systems, we have devoted, and will continue to devote, substantial resources to developing systems that support emerging and growing applications including AI, cloud computing, 5G/edge computing, storage and others. We believe there are significant opportunities for us in each of these rapidly developing markets, driven by stringent design requirements for these applications that often require the use of the latest technologies, allowing us to leverage our capabilities in product innovation, superior time-to-market, and portfolio breadth.
SMCI | 2025 Form 10-K | 2
Liquid Cooling
To reduce the high cost of operating and address constraints on power and cooling in data centers, IT managers increasingly turn to suppliers that offer high-performance, cost-effective, energy-efficient, and environmentally friendly products. Our resource saving architecture supports our leadership in green IT innovation. We offer product lines that are designed to share common computing resources, thereby saving both valuable space and power as compared to general-purpose rackmount servers. In addition, due to the advanced power requirements of these systems, we provide end-to-end liquid cooling solutions across our designs to optimize the elevated power and thermal management requirements. We believe our approach of leveraging an overall architecture that balances data center power requirements, cooling, shared resources and refresh cycles helps reduce environmental impact while providing TCO savings for our customers.
Liquid cooling necessitates the need for rack-scale integration of the power and cooling infrastructure. We design, build, test, validate, and deliver complete rack scale solutions for liquid-cooled direct-to-chip cold plate solutions for CPUs, GPUs, and memory. In addition, we manufacture the sophisticated management systems -- Cooling Distribution Units, Cooling Distribution Manifolds -- to regulate system temperatures for maximum performance. Liquid cooling can be easily included in rack-level integrations to further increase system efficiency, reduce instances of thermal throttling, and lower both the TCO and Total Cost to Environment of data center deployments.
Driving Software and Services Sales to our Global Enterprise Customers
We work closely with customers by offering total data center life-cycle management software. This enables data center operators to closely monitor their entire IT infrastructure, identify potential issues, and address them before they lead to failures. By offering management software and worldwide onsite and remote services to our customers, we also drive additional revenue for our total IT solutions. These software products and services are required for large-scale deployments, help meet service level agreements and address uptime requirements. In addition to our internal software development efforts, we partner with external software vendors to meet customer requirements.
Leveraging Our Global Operating Structure
We are committed to expanding our worldwide manufacturing capacity and logistics operations across the United States, Taiwan, and the Netherlands, and we have increased our manufacturing capacity with our new facility in Malaysia. This strategic expansion allows us to serve our customers more efficiently while reducing overall manufacturing costs.
Products and Services
We offer a broad range of compute, storage and edge platforms that are application-optimized server solutions, rackmount and blade servers, storage, and subsystems and accessories. These products are designed to serve a variety of markets, such as enterprise data centers, cloud computing, AI and 5G/edge computing. We complement our accelerated compute platforms inclusive of server and storage system offerings with software management, global services and support, the revenue for which is included in our server and storage systems revenue.
SMCI | 2025 Form 10-K | 3
Server and Storage Systems
We offer platforms in rackmount, blade, multi-node and embedded form factors, which support single, dual, and multiprocessor architectures. Our key product lines include:
•An extensive portfolio of liquid and air cooled AI Servers for Training and Inferencing with integrated GPUs or PCIe based architectures;
•SuperBlade®, MicroBlade®, FlexTwin™, GrandTwin®, and BigTwin® blade and multi-node system families that are designed for density, performance, and efficiency that share common computing resources, thereby saving space and power over standard rackmount servers and offering superior serviceability and manageability;
•SuperStorage systems that provide high-density storage while leveraging an efficient use of power to achieve performance-per-watt savings. Our storage systems are also designed for maximum performance for AI training environments;
•Hyper, CloudDC, and WIO an extensive rackmount system family that provides optimization for a broad range of workloads and environments that deliver entire clusters of racks, with both liquid-cooled and air-cooled options, per customer requirements;
•Embedded (5G/IoT/Edge) systems optimized for evolving networks and intelligent management of connected devices; and
•MicroCloud server systems that deliver node density in environments with space and power constraints.
In addition to our server and storage platforms business, we offer a large array of modular server subsystems and accessories, including server boards, chassis, power supplies and other accessories. These subsystems serve as the foundation for platform solutions, covering a range of product offerings from entry-level single and dual-processor servers to high-end multiprocessor markets. The majority of the subsystems and accessories we sell individually are designed to work together to optimize performance and are ultimately integrated into complete server and storage systems.
Server Software Management Solutions
Our open industry-standard remote system management solutions, such as our Server Management suite, including Supermicro Server Manager, Supermicro Power Management software, Supermicro Update Manager, SuperCloud Composer and SuperDoctor 5, are designed to efficiently manage large-scale heterogeneous data center environments, including liquid cooling.
Supermicro Global Services
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Financial statements
data from SEC XBRL filings. Values are as-reported; restatements supersede originals. Values reported in .
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SMCI | Q3 2026 Form 10-Q | 40
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements and the related footnotes included elsewhere in this Quarterly Report on Form 10-Q, and the Annual Report on Form 10-K for the fiscal year ended June 30, 2025, which includes our consolidated financial statements for the fiscal years ended June 30, 2025 and 2024.
Overview
We are a global leader in Application-Optimized Total IT Solutions. Founded and operating in San Jose, California, we are committed to delivering first-to-market innovation for Enterprise, Cloud, AI, and 5G Telco/Edge IT Infrastructure. As a Total IT Solutions manufacturer, our offerings include server, artificial intelligence (“AI”) systems, storage, IoT devices, switches, software, and support services. Supermicro's expertise in motherboard, power, and chassis design drives our ability to develop and produce next-generation innovations, from cloud to edge, for our global customers. Our products are designed and manufactured in-house across facilities in the United States, Taiwan, and the Netherlands. Leveraging our global operations for scale and efficiency, we optimize solutions to improve TCO while reducing environmental impact through Green Computing initiatives. Our award-winning portfolio of Server Building Block Solutions empowers customers to tailor systems precisely to their exact workloads and applications. By selecting from a broad family of flexible and reusable building blocks, customers can configure a comprehensive range of form factors, processors, memory, GPUs, storage, networking, power, and cooling solutions, including air-conditioned, free air, and liquid cooling solutions.
We commenced operations in 1993 and have been profitable every year since inception. For the three months ended March 31, 2026 and 2025, our net income was $483.4 million and $108.8 million, respectively. For the nine months ended March 31, 2026 and 2025, our net income was $1,052.2 million and $853.7 million, respectively.
In order to increase our sales and profits, we believe that we must continue to develop flexible application optimized server and storage solutions while being among the first to market with new features and products. Our focus is on delivering Total IT Solutions that integrate, validate, and deliver server, storage, networking and software at the rack and cluster (multi-rack) level. Additionally, we will continue to expand our software offerings and enhance customer service and support, particularly as we increase our focus on large enterprise and data center customers. A key component of our strategy is our Data Center Building Block Solutions (“DCBBS”), which significantly reduces data center build time and enables full integration of AI computing, server, storage, networking, rack, cabling, liquid cooling, end-to-end management software, onsite deployment services, and ongoing maintenance. To further expand our market share, we intend to strengthen our network of sales partners and distribution channels.
We measure our financial success based on various key indicators, including growth in net sales, gross profit margin, operating margin, and net income per common share. In addition to these financial metrics, a critical non-financial indicator of our success is our ability to rapidly introduce new products and deliver the latest application-optimized server and storage solutions. To support this, we work closely with the developers and manufacturers of key components, allowing us to integrate emerging technologies as they become available. Our ability to quickly bring new products to market, which we believe is enabled by our Building Block Solution architecture and has historically enabled us to capitalize on major technology transitions such as the launch of new GPUs, microprocessors and storage technologies. Accordingly, we closely monitor the product introduction cycles of industry leaders, including NVIDIA Corporation, Intel Corporation, Advanced Micro Devices, Inc., Broadcom Inc., Samsung Electronics Company Limited, Micron Technology, Inc. and others. This strategic focus directly informs our research and development investments, as we continue to allocate resources toward both our current initiatives and future product innovation.
SMCI | Q3 2026 Form 10-Q | 41
AI and Data Centers
The growing use of AI, which requires enhanced data center capabilities, has substantially increased demand for our products. We expect this trend to continue, with further demand for data center expansion driven by the AI market. As a result, we will continue to enhance our product capabilities and expand our service offerings, including DCBBS to address the growing demand in the AI market and data center markets. We believe that our ability to tailor certain products to the unique needs of these sectors sets us apart from many competitors and positions us to capture an even greater market share going forward.
Macroeconomic Factors
Macroeconomic factors, including inflation, interest rate changes, capital market volatility, global supply chain constraints, tariffs, and global economic and geopolitical developments, have had and may continue to have direct and indirect impacts on our business and results of operations, particularly demand for our products and net sales. While difficult to isolate and quantify, these macroeconomic factors have also impacted and may continue to impact our supply chain and manufacturing costs, employee wages, costs for capital equipment and value of our investments. Further, while many of these macroeconomic factors could have a long-term impact, others may have a short-term impact which could lead to our financial results not being comparable on a period-to-period basis.
Financial Highlights
The following is a summary of our financial highlights for the three months ended March 31, 2026 and 2025:
| Three Months Ended March 31, | |||||||||||||
| 2026 | 2025 | ||||||||||||
| Net sales | $ | 10,243,014 | $ | 4,599,913 | |||||||||
| Gross profit | $ | 1,018,680 | $ | 440,218 | |||||||||
| Total operating expenses | $ | 392,812 | $ | 293,438 | |||||||||
| Income from operations | $ | 625,868 | $ | 146,780 | |||||||||
Net income | $ | 483,387 | $ | 108,777 | |||||||||
| Net income per diluted share | $ | 0.72 | $ | 0.17 | |||||||||
•Net sales increased by 122.7% in the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, primarily driven by fulfillment and shipment of orders to support our customers' data center deployment, including large design wins from a few customers, during the second and third quarters of fiscal 2026. An increase in our average selling price also contributed modestly by product mix.
•Gross margin remained relatively flat in the three months ended March 31, 2026, as compared to the three months ended March 31, 2025.
•Operating expenses increased by 33.9% in the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, primarily due to higher headcount and increases in salary and stock-based compensation.
•Net income increased to $483.4 million in the three months ended March 31, 2026, as compared to $108.8 million in the three months ended March 31, 2025, which was primarily due to a higher increase in net sales.
SMCI | Q3 2026 Form 10-Q | 42
Critical Accounting Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which are prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. On an ongoing basis, we regularly evaluate our accounting estimates based on historical experience and on various other assumptions that we believe are reasonable under the circumstances. The actual impact on our financial performance could differ from these estimates under different assumptions or conditions.
An accounting estimate is considered critical if both (i) the nature of the estimates or assumptions is material due to the levels of subjectivity and judgment involved, and (ii) the impact within a reasonable range of outcomes of the estimates and assumptions is material to our condensed consolidated financial statements. Critical accounting estimates in the areas of inventories, revenue recognition, and income taxes, when applicable, have the greatest potential impact on our condensed consolidated financial statements. Therefore, we consider these to be our critical accounting estimates.
There have been no material changes to our critical estimates as compared to those disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025.
Results of Operations
Components of Results of Operations
Net Sales
Net sales primarily consist of sales of our server and storage solutions, including systems and related services, subsystems, and accessories. The key factors that impact net sales of our server and storage systems are the number of servers and racks sold, as well as the average selling prices per server or rack. For subsystems and accessories, the main drivers of net sales are the number of units shipped and the average selling price per unit. The prices for our server and storage systems can vary widely depending on the configuration, including factors such as speed, functionality and performance of key components, including CPUs, GPUs, SSDs, cooling systems, and memory. Similarly, the prices for our subsystems and accessories fluctuate depending on the relative value of the specific item being purchased, such as power supplies, server boards, chassis or other accessories.
Cost of Sales, Gross Profit, and Gross Margin
Cost of sales primarily consists of the costs to manufacture our products, which includes: the costs of components and materials, contract manufacturing, shipping, personnel expenses (salaries, benefits, stock-based compensation and incentive bonuses), equipment and facility expenses, warranty costs and inventory reserve charges.
We use several suppliers and contract manufacturers to design and manufacture subsystems in accordance with our specifications, with most final assembly and testing performed at our manufacturing facilities in the region where our products are sold. We work with Ablecom, one of our key contract manufacturers and a related party, for our chassis and certain other components. We also outsource a significant part of the manufacturing of certain components, particularly power supplies, to Compuware, also a related party. We also collaborate on design and development activities with Ablecom and Compuware, where we substantially fund the design costs and retain the intellectual property rights. Our purchases of products from Ablecom and Compuware combined represented 2.2% and 2.1% of cost of sales on our condensed consolidated statements of operations for the three and nine months ended March 31, 2026, respectively, and 2.8% and 3.4% of cost of sales on our condensed consolidated statements of operations for the three and nine months ended March 31, 2025, respectively. For further details on our dealings with related parties, see Note 11, “Related Party Transactions” in the notes to the condensed consolidated financial statements.
SMCI | Q3 2026 Form 10-Q | 43
Research and Development
Research and development expenses consist of personnel expenses including salaries, benefits, stock-based compensation and incentive bonuses, and related expenses for our research and development personnel, as well as product development costs such as materials and supplies, consulting services, third-party testing services and equipment and facility expenses related to our research and development activities.
Sales and Marketing
Sales and marketing expenses consist primarily of personnel expenses including salaries, benefits, stock-based compensation, commissions and incentive bonuses, and related expenses for our sales and marketing personnel, cost for trade shows, sales representative fees and marketing programs. From time to time, we receive marketing development funding from certain suppliers. Under these arrangements, we are reimbursed for certain marketing costs that we incur as part of the joint promotion of our products and those of our suppliers. These amounts offset a portion of the related expenses and have the effect of reducing our reported sales and marketing expenses.
General and Administrative
General and administrative expenses consist primarily of general corporate costs, including personnel expenses such as salaries, benefits, stock-based compensation and incentive bonuses, and related expenses for our general and administrative personnel, financial reporting, corporate governance and compliance, outside legal, audit, tax fees, insurance and credit losses on accounts receivable.
Other Income (Expense), Net, Interest Income, and Interest Expense
Other income (expense), net, interest income, and interest expense consists primarily of interest earned on our investments and cash balances, interest incurred on our debt, and foreign exchange gains and losses.
Income Tax Provision
Our income tax provision is based on our taxable income generated in the jurisdictions in which we operate, which primarily include the United States, Taiwan, and the Netherlands. Our effective tax rate differs from the statutory rate primarily due to research and development tax credits, certain non-deductible expenses, tax benefits from foreign derived intangible income, and stock-based compensation.
SMCI | Q3 2026 Form 10-Q | 44
The following table presents certain items of our condensed consolidated statements of operations for the three and nine months ended March 31, 2026 and 2025 (in millions):
| Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Net sales | $ | 10,243.0 | $ | 4,599.9 | $ | 27,943.3 | $ | 16,215.1 | ||||||||||||||
| Cost of sales | 9,224.3 | 4,159.7 | 25,658.7 | 14,329.3 | ||||||||||||||||||
| Gross profit | 1,018.7 | 440.2 | 2,284.6 | 1,885.8 | ||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||
| Research and development | 215.7 | 162.9 | 569.7 | 453.3 | ||||||||||||||||||
| Sales and marketing | 89.5 | 60.0 | 210.5 | 208.4 | ||||||||||||||||||
| General and administrative | 87.6 | 70.5 | 222.0 | 199.5 | ||||||||||||||||||
| Total operating expenses | 392.8 | 293.4 | 1,002.2 | 861.2 | ||||||||||||||||||
| Income from operations | 625.9 | 146.8 | 1,282.4 | 1,024.6 | ||||||||||||||||||
| Other income (expense), net | 4.2 | (33.0) | 4.3 | (29.5) | ||||||||||||||||||
| Interest income | 45.4 | 14.7 | 147.8 | 31.4 | ||||||||||||||||||
| Interest expense | (64.5) | (13.4) | (114.8) | (37.3) | ||||||||||||||||||
| Income before income tax provision | 611.0 | 115.1 | 1,319.7 | 989.2 | ||||||||||||||||||
Income tax provision | (126.9) | (5.8) | (266.2) | (137.5) | ||||||||||||||||||
| Share of (loss) income from equity investee, net of taxes | (0.7) | (0.5) | (1.3) | 2.0 | ||||||||||||||||||
| Net income | $ | 483.4 | $ | 108.8 | $ | 1,052.2 | $ | 853.7 | ||||||||||||||
The following table presents certain items of our condensed consolidated statements of operations expressed as a percentage of net sales for the three and nine months ended March 31, 2026 and 2025:
| Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Net sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||||||||
| Cost of sales | 90.1 | % | 90.4 | % | 91.8 | % | 88.4 | % | ||||||||||||||||||
| Gross profit | 9.9 | % | 9.6 | % | 8.2 | % | 11.6 | % | ||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||
| Research and development | 2.1 | % | 3.5 | % | 2.0 | % | 2.8 | % | ||||||||||||||||||
| Sales and marketing | 0.9 | % | 1.3 | % | 0.7 | % | 1.3 | % | ||||||||||||||||||
| General and administrative | 0.8 | % | 1.6 | % | 0.8 | % | 1.2 | % | ||||||||||||||||||
| Total operating expenses | 3.8 | % | 6.4 | % | 3.5 | % | 5.3 | % | ||||||||||||||||||
| Income from operations | 6.1 | % | 3.2 | % | 4.7 | % | 6.3 | % | ||||||||||||||||||
| Other income (expense), net | — | % | * | (0.7) | % | — | % | * | (0.2) | % | ||||||||||||||||
| Interest income | 0.4 | % | 0.3 | % | 0.5 | % | 0.2 | % | ||||||||||||||||||
| Interest expense | (0.6) | % | (0.3) | % | (0.4) | % | (0.2) | % | ||||||||||||||||||
| Income before income tax provision | 5.9 | % | 2.5 | % | 4.8 | % | 6.1 | % | ||||||||||||||||||
Income tax provision | (1.2) | % | (0.1) | % | (1.0) | % | (0.8) | % | ||||||||||||||||||
| Share of (loss) income from equity investee, net of taxes | — | % | * | — | % | * | — | % | * | — | % | * | ||||||||||||||
| Net income | 4.7 | % | 2.4 | % | 3.8 | % | 5.3 | % | ||||||||||||||||||
*Represents an amount less than 0.1%.
SMCI | Q3 2026 Form 10-Q | 45
Net Sales
The following table presents net sales for the three and nine months ended March 31, 2026 and 2025 (dollars in millions):
| Three Months Ended March 31, | Change | Nine Months Ended March 31, | Change | |||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ | % | 2026 | 2025 | $ | % | |||||||||||||||||||||||||||||||||||||
Net sales | $ | 10,243.0 | $ | 4,599.9 | $ | 5,643.1 | 122.7 | % | $ | 27,943.3 | $ | 16,215.1 | $ | 11,728.2 | 72.3 | % | ||||||||||||||||||||||||||||
Comparison of the Three Months Ended March 31, 2026 and 2025
The $5,643.1 million or 122.7% increase in net sales was primarily due to fulfillment and shipment of orders to support our customers' data centers deployment, including large design wins from a few customers, during the three months ended March 31, 2026. An increase in our average selling price compared to the quarter ended March 31, 2025 also contributed modestly by product mix. This was most pronounced in increased sales for AI GPU related products of $5,158.6 million or 150.5% year-over-year, including liquid-cooled and air-cooled servers that are generally more complex and of higher average selling price.
Comparison of the Nine Months Ended March 31, 2026 and 2025
The $11,728.2 million or 72.3% increase in net sales was primarily due to fulfillment and shipment of orders to support our customers' data centers deployment, including large design wins from a few customers, during the nine months ended March 31, 2026. An increase in our average selling price compared to the nine months ended March 31, 2025, also contributed modestly by product mix. This was most pronounced in increased sales for AI GPU related products of $12,028.9 million or 97.8% year-over-year, including liquid-cooled and air-cooled servers that are generally more complex and of higher average selling price. This was partially offset by decreased sales across other product categories by $318.0 million, or 34.9% as we continue to focus on gaining market share from our AI GPU platforms.
Cost of Sales, Gross Profit, and Gross Margin
Cost of sales and gross margin for the three and nine months ended March 31, 2026 and 2025 were as follows (dollars in millions):
| Three Months Ended March 31, | Change | Nine Months Ended March 31, | Change | |||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ | % | 2026 | 2025 | $ | % | |||||||||||||||||||||||||||||||||||||
| Cost of sales | $ | 9,224.3 | $ | 4,159.7 | $ | 5,064.6 | 121.8 | % | $ | 25,658.7 | $ | 14,329.3 | $ | 11,329.4 | 79.1 | % | ||||||||||||||||||||||||||||
| Percentage of total net sales | 90.1 | % | 90.4 | % | 91.8 | % | 88.4 | % | ||||||||||||||||||||||||||||||||||||
| Gross profit | $ | 1,018.7 | $ | 440.2 | $ | 578.5 | 131.4 | % | $ | 2,284.6 | $ | 1,885.8 | $ | 398.8 | 21.1 | % | ||||||||||||||||||||||||||||
| Gross margin | 9.9 | % | 9.6 | % | 0.3 | % | 8.2 | % | 11.6 | % | (3.4) | % | ||||||||||||||||||||||||||||||||
Comparison of the Three Months Ended March 31, 2026 and 2025
The $5,064.6 million or 121.8% increase in cost of sales was primarily driven by an increase of approximately $5,047.8 million or 121.6% in certain products including GPU servers, HPC systems, and rack-scale solutions, consistent with the higher shipment volume during the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, as well as a $89.4 million or 608.0% increase in tariff expenses driven by new trade policies from the government. These increases were partially offset by a $54.9 million or 43.9% decrease in inventory write-down adjustments resulting from increase in market price for some of our products in the quarter ended March 31, 2026, and a $12.3 million or 5.5% decrease due to an increase in vendor rebates.
SMCI | Q3 2026 Form 10-Q | 46
Gross margin remained relatively flat for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025.
Comparison of the Nine Months Ended March 31, 2026 and 2025
The $11,329.4 million or 79.1% increase in cost of sales was primarily driven by an increase of approximately $10,636.2 million or 72.0% in certain products including GPU servers, HPC systems, and rack-scale solutions, consistent with the higher shipment volume during the nine months ended March 31, 2026, as compared to the nine months ended March 31, 2025. The remaining increases in cost of sales were driven by a $273.6 million or 891.0% increase in tariff expenses driven by new trade policies, a $79.9 million or 50.0% increase in inventory write-down adjustments resulting from excess and obsolete inventory with either insufficient demand or reduced net realizable value, and a $276.3 million or 29.2% increase due to a decrease in vendor rebates.
The 3.4% decrease in the gross margin was due to a change in product and customer mix, higher production and expedite costs as we began to ship new AI GPU platforms on a large scale and the increases in tariff expense and inventory write-down adjustments described above.
Operating Expenses
Operating expenses for the three and nine months ended March 31, 2026 and 2025 were as follows (dollars in millions):
| Three Months Ended March 31, | Change | Nine Months Ended March 31, | Change | |||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ | % | 2026 | 2025 | $ | % | |||||||||||||||||||||||||||||||||||||
| Research and development | $ | 215.7 | $ | 162.9 | $ | 52.8 | 32.4 | % | $ | 569.7 | $ | 453.3 | $ | 116.4 | 25.7 | % | ||||||||||||||||||||||||||||
| Percentage of total net sales | 2.1 | % | 3.5 | % | 2.0 | % | 2.8 | % | ||||||||||||||||||||||||||||||||||||
| Sales and marketing | $ | 89.5 | $ | 60.0 | $ | 29.5 | 49.2 | % | $ | 210.5 | $ | 208.4 | $ | 2.1 | 1.0 | % | ||||||||||||||||||||||||||||
| Percentage of total net sales | 0.9 | % | 1.3 | % | 0.7 | % | 1.3 | % | ||||||||||||||||||||||||||||||||||||
| General and administrative | $ | 87.6 | $ | 70.5 | $ | 17.1 | 24.3 | % | $ | 222.0 | $ | 199.5 | $ | 22.5 | 11.3 | % | ||||||||||||||||||||||||||||
| Percentage of total net sales | 0.8 | % | 1.6 | % | 0.8 | % | 1.2 | % | ||||||||||||||||||||||||||||||||||||
| Total operating expenses | $ | 392.8 | $ | 293.4 | $ | 99.4 | 33.9 | % | $ | 1,002.2 | $ | 861.2 | $ | 141.0 | 16.4 | % | ||||||||||||||||||||||||||||
Comparison of the Three Months Ended March 31, 2026 and 2025
Research and development expenses. The $52.8 million or 32.4% increase in research and development expenses was primarily driven by an increase in employee-related costs of $50.9 million, or 34.6%, mainly comprised of a $28.6 million, or 52.8%, increase in stock-based compensation, a $18.2 million, or 22.1%, increase in salaries, and a $4.1 million, or 10.4% increase in benefits as we expanded our workforce and invested in key talent to support our global growth across regions.
Sales and marketing expenses. The $29.5 million or 49.2% increase in sales and marketing expenses was primarily driven by an increase in employee-related costs of $26.1 million, or 53.2%, mainly comprised of a $23.0 million, or 61.8%, increase in salaries, and a $2.4 million, or 24.2%, increase in stock-based compensation, similar to our research and development expenses as we expanded our workforce and invested in key talent company-wide. Other increases include a $3.4 million, or 57.6%, increase in standard marketing and advertising activities during the three months ended March 31, 2026, as compared to the three months ended March 31, 2025.
SMCI | Q3 2026 Form 10-Q | 47
General and administrative expenses. The $17.1 million or 24.3% increase in general and administrative expenses was primarily driven by an increase in employee-related costs of $6.1 million, or 16.4%, mainly comprised of a $5.5 million, or 41.4% increase in stock-based compensation, due to the hiring of key talent and the refresh of grants. Additionally, there was a $6.0 million, or 2000.0%, increase in financial fees primarily driven by a $5.7 million, or 100.0%, increase in factoring fees for the receivables sold under the Receivables Purchase Agreement, a $2.4 million or 133.3% increase in excise and franchise tax expense directly related to the increase in sales compared to prior-year quarter which increased the related tax expense, and a $1.6 million, or 6.5%, increase in professional and service fees primarily from additional external accounting, tax, legal and advisory services to support our external reporting related activities.
Comparison of the Nine Months Ended March 31, 2026 and 2025
Research and development expenses.
Recent SEC filings
- 2026-08-11 8-K Earnings Release; Financial Statements and Exhibits
- 2026-08-05 8-K Other Events; Financial Statements and Exhibits
- 2026-07-21 8-K Earnings Release; Financial Statements and Exhibits
- 2026-06-15 8-K Material Agreement Entered; Material Modification to Rights; Bylaws/Articles Amended; Financial Statements and Exhibits
- 2026-06-12 8-K Material Agreement Entered; Regulation FD Disclosure; Financial Statements and Exhibits
- 2026-06-12 424B5 Prospectus Supplement
- 2026-06-12 424B5 Prospectus Supplement
- 2026-06-12 424B5 Prospectus Supplement
- 2026-06-09 8-K Other Events; Financial Statements and Exhibits
- 2026-06-09 S-3ASR S-3ASR
- 2026-06-08 S-8 Employee Benefit Plan Registration
- 2026-05-18 8-K Officer/Director Change; Financial Statements and Exhibits
- 2026-05-11 10-Q Quarterly Report
- 2026-05-05 8-K Earnings Release; Financial Statements and Exhibits
- 2026-04-20 8-K Officer/Director Change; Shareholder Vote Results; Financial Statements and Exhibits