Q3 2025 Super Micro Computer Inc Earnings Call
Victoria: Thank you for standing by. My name is Victoria and I will be your conference operator today. At this time I would like to welcome everyone to the Supermicro computer ink, SMCI US 3rd quarter, 4 year 2025 earnings fall.
Speaker Change: With us today are Charles Weiang, founder, president and chief executive officer, David Weigand, CFO , and Michael Staiger.
Senior Vice President of Corporate Development.
Speaker Change: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask the question, please press star followed by one on your telephone keypad. I would now like to pass the conference over to Michael Staiger. [inaudible]
Speaker Change: Victoria, thank you. Good afternoon and thank you for attending Supermicro's call to discuss financial results for the third quarter which ended March 31st, 2025 with me today as Charles Liang, Founder Chairman, and Chief Executive Officer and David Weigand Chief Financial Officer.
Speaker Change: By now, you should have received a copy of the news release from the company that was distributed at the close of regular trading and is available on the company's website. As a reminder during today's call, the company will refer to a presentation that is available to participants in the investor relations section of the company's website under the events and presentations tab. .
Speaker Change: We've also published management scripted commentary on our website. Please note that some of the information you'll hear during our discussion today will consist of forward looking statements, including without limitation those regarding revenue, gross margin, operating expenses, other income and expenses, taxes, capital allocation.
Speaker Change: and Future Business Outlook, including guidance for the fourth quarter and full fiscal year 2025.
Speaker Change: There are a number of risk factors that can cause supermicro's results to differ materially from our expectations. You can learn more about these risks in the press release we issued earlier this afternoon.
Speaker Change: Our most recent 10K filing for Fiscal Year 2024 into our other SEC filings.
Speaker Change: All these documents are available on the Investor Relations page of Supermicro's website.
We assume no obligation to update any forward-looking statements.
Speaker Change: Most of today's presentation will refer to non-GAAP financial results in business outlook for an explanation of our non-GAAP financial measures.
Speaker Change: Please refer to the company presentation or to our press release published earlier today. In addition, the reconciliation of gap and non-GAAP results is contained in today's press release and in the supplemental information attached to today's presentation. At the end of today's prepared march, we'll have a Q&A session for self-analysis.
And we'll now turn the call over to Charles.
Thank you, Michael, and thank you everyone for joining us.
as previously a langs. Iyer Venkateshwaran,
Speaker Change: Our physical Q3 net revenue total 4.6 billion coming in lower than our original forecast.
Speaker Change: This decline was primarily due to a customer waiting and evaluating AI platforms between the current and coming, and coming, a Black whale, GPUs.
Speaker Change: leading to a today commitment. We expect many of these engagements to materialize in the June and September quarters.
Speaker Change: Strengthening our confidence in meeting our long-term growth target as we close out this eventful physical year.
Speaker Change: Despite macroeconomic conditions and tariffs impact, our ability to expand the market share in IT and AI remains strong.
Speaker Change: Ungar, Erning Forum, Our Fritz Koukushi, Nangeb, EPS, Std. Ed.
Speaker Change: 31% per share, compared to 66% last year. This kind was largely driven by an inventory right down
Speaker Change: while the new platforms are finally ramping quickly about now.
Speaker Change: Although our quarterly performance did not align exactly with our expectation, we successfully fulfilled our commitment to begin Valenshwar Regulatory Compliance.
Speaker Change: At the same time, we continue to enhance technical innovation and development, which results in successful high volume delivery of our new generation, it performs at the end of March.
Speaker Change: Looking ahead, some major bright-growing new innovation are set to service the market in this quarter and the new fiscal year, especially our coming soon, DCPBS.
Speaker Change: With the clear time to mark the advantage, Supermicro once again leads the AI infrastructure technology and DLC solutions.
Speaker Change: This strong position enables us to explore new opportunities and expand the market share.
Speaker Change: During the quarter, we achieved volume improvement of the air court, 10U and Nipri Court, for you in VDAP200HGX systems.
Both are ejectally the first to the market again.
as well as GB200 MVN of 72 Rakes. Iyer Venkateshwaran,
Speaker Change: Additionally, we start to offer AMB MI-35X solutions to follow pro-denauer AI portfolio.
Speaker Change: Debridging our season building blocks, we were again over time to market on the upcoming new
Speaker Change: for customer seeking, leading the technology, more optimals, higher density and greener air solution.
Speaker Change: building our strong foundation of technology leadership, building product solution and building DNA. We have been preparing to focus on developing the energy of the forest.
N2M, AIIT, Thera Center, Tolo Solution.
Speaker Change: We are now about full already ready to share this exciting news with the market in the coming days.
Speaker Change: My Langquan, our brand new data center within Barok's solution, we call it DCBBS, featuring our second generation system, Nick Pauline Tathananich, we call it B-R-C-2.
Speaker Change: With DCPPS, we are able to dramatically shorten customers' A4s to build a data center, reduce their cost, and most importantly, make their data center better quality and performance.
Rima, and with higher availability.
D.C.P.P.S. Consolidates, political components, including AI service systems. Iyer Venkateshwaran,
Storage, Dweck, Padden Prey,
Old Devenkates of Sweeties.
BRC Systems,
Water Tower, Boar Dry Tower Iyer Venkateshwaran,
Chiyo Toa, Howard Schaffer, Battery Backup Unit
Speaker Change: People Co-PBU, on-site equipment, networking design, cabering, and data center end-to-end management in Minnesota, and all different scopes of services.
into a Stimline process.
Speaker Change: The true value of DCPPS9 is ability to reduce power consumption, optimum space, and decrease water usage.
Delivery up to 30% Noa TCO. Iyer Venkateshwaran,
Speaker Change: More importantly, it accelerates new telacenter type of image and upgrades existing telacenter in a matter of miles.
Or even Weik.
rather than many quarters or years.
Speaker Change: Tribune Significant Improvement in Thera Central, Tantut, Deepo Eme, we call TTD, and Tantut Online.
TPO
Speaker Change: One of the key components of PCPPS is our industry leading DLRC solutions.
Speaker Change: Supermicro remains at the forefront of driven industry adoption of DRC technology.
Speaker Change: Directive Calling Technology, 13 new standards for performance division and sustainability.
Speaker Change: We are committed to double this volume in the coming year.
for amplifying the impact of Green Computing.
Speaker Change: We are upcoming DLC 2 technology. Supermicro will be able to deliver even greater savings and benefits to our customers.
Speaker Change: For example, in the same power and water up to 40% Iyer Venkateshwaran,
Speaker Change: Anjityus, Thera Central Noise, David, Tantu about 50pp.
That is almost as quiet as a library.
Speaker Change: We are going to announce the details in the coming days.
Speaker Change: Green computing can be everywhere, and with our TRC2 solutions, we are making that Weigand a beautiful reality.
Speaker Change: Our long-term investment and leadership in DRC has solidified sustainable competitive age.
Speaker Change: providing economics of scale and keeping us far ahead of our competition.
Speaker Change: Our global operation continues to expand, with our new Manashiyah campus,
Speaker Change: Meanwhile, all the CDT in Taiwan and Europe are scaring up their capacity and capability, providing customer with flexible options.
Speaker Change: for their logistic choice and minimized their cost during the market and
tariff uncertainties.
Speaker Change: To further strengthen the poll for key partners and align with the government initiatives, we continue to expand our U.S. domestic manufacturing capacity, including new facilities in the Middle West and other locations.
Speaker Change: This statistical expansion will allow us to meet rising demands while continuing to enhance our commitment in quality security and TCO, TTT and TTO.
Speaker Change: In summary, physical Q3 was dynamic and productive. We successfully navigate financial challenge while continuing to strengthen our leadership in poda and technology innovation.
Speaker Change: Our first to market advantage in AI in Australia, along with the expanded reach of DCTPS.
Therath and the William Powell Solution, and then...
and Elementsmen in the DRC technology. Iyer Venkateshwaran,
Speaker Change: Paul solidifying our industry position. I've driven highly committed and optimistic about our long-term strong growth and much share again.
however
Speaker Change: Neatham, Maker Economy, Economic, and Market Uncertainty, Mac is difficult to precisely focus the pace and the technology adoption.
Speaker Change: This pilot is, I'm confident that we were close to the physical ear on a strong note.
Speaker Change: Even the current condition, we anticipate a Q4 revenue of at least $6 billion, and we are now providing a broader focus to the range, once we have better visibility.
Speaker Change: Before passing that call to David for our financial overview, I want to thank you all for our personal customers, investors, and Supermonger team members.
David Weigand: and Expressman Tip Appreciation for their continuous support with that I will now turn the call over to David.
Thank you, Charles.
David Weigand: Fiscal Q3 2025 revenues were 4.6 billion. This was up 19% year over year and down 19% quarter over quarter.
David Weigand: Q3 Revenings were down quarter over quarter as certain new platform decisions by customers moved some sales into Q4 and later.
AIGPU Platforms
David Weigand: Again, represented more than 70% of revenues with AIGPU customers in both the enterprise and cloud service provider markets.
Our Design Win pipeline remains robust.
David Weigand: and we expect continued growth in Q4 as we ramp up production of our data center building block solutions, DCBBS, based on new GPU platforms.
David Weigand: As a leading U.S. technology company, we focused on extensive rack scale and DCVBS technology and capacity investments in the U.S., which is complemented by our investments in Taiwan. Thank you very much.
David Weigand: Netherlands and Malaysia. As Charles indicated, we have a flexible global manufacturing footprint to meet our customers' needs, and we continue to closely monitor the rapidly involving macro and tariff environment.
During Q3, we recorded $1.9 billion in the enterprise. [inaudible]
David Weigand: channel vertical, representing 42% of revenues versus 25% last quarter. This was up 3% year-over-year and up 38% quarter-over-quarter, as we saw a strengthened enterprise adoption of new AI and CPU platforms.
David Weigand: The OEM appliance and large data center vertical revenues were $2.6 billion, which represented 57% of Q3 revenues versus 75% in the last quarter.
So it's up 35% year-over-year and down 38% quarter-over-quarter.
David Weigand: Two existing CSP Flash Large Data Center customers represented 22% and 14% of Q3 Revenants.
David Weigand: Emerging 5G, Telco Edge IoT Revenues were 48 million or 1% of Q3 Revenues.
The remaining 3% Iyer Venkateshwaran,
David Weigand: By Geography, the U.S. represented 60% of Q3 revenues, Asia 30%, Europe 6% and the rest of the world 4%.
David Weigand: on a year-over-year basis, US River news increased 3%, Asia increased 77%, Europe decreased 3%, and the rest of the world increased 83%.
David Weigand: On a quarter over quarter basis, US revenues decreased 20%, Asia increased 76%, Europe decreased 69%, and the rest of the world increased 45%.
David Weigand: China continue to represent less than 1% of fails in Q3.
David Weigand: The Q3 non-GAAP gross margin was 9.7%, which was down 220 basis points, quarter over quarter from 11.9% in Q2 primarily due to higher inventory reserves for older generation products.
David Weigand: Lower volume and accelerated costs to enable time to market for new products.
David Weigand: Q3 operating expenses on a gap basis decreased 3% quarter of a quarter and increased 34% year-over-year
David Weigand: On a non-GAAP basis, operating expenses decreased 5% quarter over quarter and increased 30% year over year to 216 million.
David Weigand: Q3 non-GAAP Operating Margin was 5% compared to 7.9% in Q2 due to lower revenues and gross margins.
David Weigand: Other income and expense for Q3 was a net expense of 31.7 million.
consisting of 13.4 million and interest expense.
Principal Lee from Convertible Bonds and other losses. Iyer Venkateshwaran,
David Weigand: of 18.3 million, principally from a non-cash, $30.3 million loss on the amendment of the 2029 to the Red Bull Bond.
David Weigand: and adverse foreign exchange impact and other miscellaneous expenses offset by higher inter-sync up.
David Weigand: The Gap Effective Tax Rate was 5.1%, resulting in a Gap Tax Expense of $6 million for Q3.
The non-GAAP effective tax rate for Q3 was 15.5 percent. Iyer Venkateshwaran,
resulting in Q3 non-depth tax expense of $36,000,000. Iyer Venkateshwaran, Rob Strechay, Bill Panos,
David Weigand: Q3 gap deluded EPS of 17 cents and Q3 non-GAAP deluded EPS of 31 cents was lower than our guidance due to lower revenues and gross margins.
David Weigand: The gap fully deluded share count for Q3 was 620 million, and the non-GAAP fully deluded share count was 636 million.
David Weigand: Cash Flow generated from operations for Q3 was 627 million compared to Cash Flow usage of 240 million during the previous quarter.
David Weigand: The Q3 closing inventory was 3.9 billion, which increased by 7.6 quarter over quarter, from 3.6 billion in Q2, as we prepare for higher shipments in Q4.
David Weigand: CapEx was $33 million for Q3 resulting in free cash flow of $594 million during the court.
David Weigand: During the quarter, we amended the terms of our existing 2029 convertible notes and raised 700 million in gross proceeds in a new 2028 convertible note.
from the existing convertible investor group. Iyer Venkateshwaran,
David Weigand: The proceeds from the new convertible note offering will be used to strengthen our working capital, enable continued investments in R&D, and expand global capacity as needed.
David Weigand: The closing Q3 balance sheet cast position was $2.54 billion. While bank and convertible note debt was $2.49 million, resulting in a net cash position of $44 million versus a negative net cash position of $479 million last quarter.
David Weigand: turning to the balance sheet and working capital metrics compared to last quarter. The Q3 cash conversion cycle was 124 days versus 104 days in Q2.
David Weigand: Days of Inventory increased by three days to 81 days compared to the prior quarter of 78 days due to key component purchases for higher expected Q4 shipments.
David Weigand: Today's sales outstanding increased by nine days, quarter to quarter to 56 days, while days payable outstanding decreased by eight days to 13 days.
David Weigand: We are closely monitoring the macro environment, tariffs, and the technology transition to new platforms.
David Weigand: The outlook for the fourth quarter of fiscal 2025 into June 30, 2025. Bye.
David Weigand: We expect net sales in the range of 5.6 to 6.4 billion, GAP diluted net income per share of 30 cents to 40 cents, and non-GAAP diluted net income per share of 40 cents to 50 cents.
David Weigand: Given this dynamic environment, we are being prudent and expect gross margins to be approximately ten percent.
David Weigand: Gap operating expenses are expected to be approximately $319 million and include $74 million in stock based compensation expenses that are not included in non-GAAP operating expenses.
David Weigand: The outlook for Q4 of fiscal year 2025, fully diluted Gap EPS, includes approximately 63 million unexpected stock-based compensation expenses, net of tax effects of 18 million, which are excluded from non-GAAP diluted net income per common share.
David Weigand: We expect other incumbent expenses, including interest expense, to be a net expense of approximately $16.000.
The company's projections for Q4.
David Weigand: Gap and non-GAAP diluted net income per common share. Assume a gap tax rate of 14.9%, a non-GAAP tax rate of 16.5%, and a diluted
David Weigand: Chair Count, Affiliated Chair Count of 628 million per gap, and 642 million shares for non-GAAP . We expect capex for Q4 to be in the range of 45,000,000 to 55,000 million.
David Weigand: For the fiscal year 2025 ending June 30, 2025, based on the Q4 guidance above, we are expecting revenues of 21.8 to 22.6 billion.
Michael Word, now ready for Q&A.
Great, Victoria, let's go to Q&A.
Of course.
David Weigand: We will now begin the question and answer session. We ask that participants only ask one question and one follow-up. If you would like to ask a question, please press star followed by one on your telephone keypad.
David Weigand: If for any reason you would like to remove that question, please press star followed by two. Again to ask the question, press star one.
David Weigand: As a reminder, if you're using a speaker phone, please remember to take up your hands up before asking a question.
Speaker Change: Our first question comes from a line of Somik Chatterjee with Javymorgan. [inaudible]
You want to go open? Hi.
Speaker Change: Hi, thanks for taking my question. Maybe for the first one, I know in you prepare remarks, you mentioned that the...
Speaker Change: Macro is making forecasting a bit tougher and you're talking about prudence in your guidance itself but...
Speaker Change: some orders or is there any change in customer order trends that you seeing because of the macro and given just where we stand and rate up to June quarter already a month.
Speaker Change: And I would assume we would have more sort of visibility into the June quarter rather than having to put sort of some level of consumerism in. So, have you seen a lot more volatility in terms of customer orders recently to drive that prudence in terms of the revenue outlook for June and have a follow-up please. Thank you.
Speaker Change: Yeah, I'm a very good question. Basically, June will be our traditional strong quarter. And for sure, the tariffs and the Michael economy, uncertainty, they're concerned some customer.
Speaker Change: But at this moment we see a strong order, so I believe we will have a strong quarter of a tune in September
Speaker Change: Next fiscal year, very even stronger, because our new product, especially Brakeweil, is fully in body and production now, so we gain more and more order for Brakeweil and expect stronger
Speaker Change: Okay, okay, and maybe for my follow up on the gross margins side, previously you have talked about
Margins Improving as you start ramping new products.
Speaker Change: Where is your sound? The guidance itself implies it, but more cautiousness on that front. Has there been a change in the pricing landscape for the new products that you're seeing in the market? Or is this more about the tougher pricing environment for hopper-based products? Thank you.
I think it's a combination.
Speaker Change: Concern about Terrace, and so Conservatives in there, and also with some obviously also some impact from the change over in technology platforms.
Thank you.
Speaker Change: Sorry, just to clarify, so in terms of the changeover that is driving some headwinds to the Gross Margin, the changeover itself from Hopper to Blackwell.
Speaker Change: That's correct. So as you come off of some of the older platforms, you have more price competition. And as we said, we had some delayed decisions because of these technology platform changes.
Speaker Change: And so that's really impacting that along with terror uncertainty, drives a little bit more prudence in setting margin expectations.
Good. Thank you. Thanks for taking my questions.
Thank you for your question.
Michael Ning: Our next question comes from a line of Michael Ning with Goldman Sachs. [inaudible]
Your line is now open.
Michael Ning: Hi, good afternoon. Thank you very much for the question. I was just wondering if you could talk a little bit more mid-term about your demand outlook. Are you... And apologies if I missed it, but...
Michael Ning: Perhaps you can talk a little bit about any changes that you might be seeing from a demand perspective aside from the timing of the technology platform transition and the background uncertainty. Thank you.
Michael Ning: We remain very confident with our meeting and long-term growth. So, especially Black Widow for online, we have a very strong demand, and also our commission.
Michael Ning: TC, TPS, Thera Center, Bidding Browse, Toro Solution, we see lots of customer really interested in our Thera Center Toro Solution.
Michael Ning: So, the demand that growth will keep strong, and yes, the tariff.
Michael Ning: and some macroeconomy uncertainty. We at this moment do not provide guidance for fiscal year 26, but when it's a bit speedy, become more clear, we will share at that time.
Speaker Change: Great, thanks, Charles, it's very helpful. And just as a follow-up, can you talk about whether or not...
Speaker Change: You're seeing differences in demand between HGX versus NBL 72 racks, any differences there either in customer demand or your ability to fulfill demand on either product. Thank you.
Speaker Change: Kind of GP 200 MVL 72 and P200 liquid cooling, but the customer liquid cooling data center basically a little bit dead, so that's why they are waiting there.
Thank you very much.
Thank you for your question, Michael.
Speaker Change: All right, this question comes to the line of George Wang with Barclay.
You know what, it's now open. Oh, hey, hey!
Speaker Change: Do you agree just if any kind of puzzle takes there? Yeah.
Speaker Change: Yeah, I guess whenever the new technology is always putting more chance because Supermicro, as you know, our...
Speaker Change: P200HGX system, for example, we are the first to have a quota available and the demand is strong. So, P300 and GP300 for sure, we expect a very strong demand. And with our very much here, I think we're pulling. [inaudible]
Speaker Change: Solution, you know, we have the LSE Solution, start with Shib al-Asia, 4,000 Rakh.
Speaker Change: And this year, with our DLC2, DLC2, it over even better power saving, water saving.
Speaker Change: and also much better in terms of knowledge level, right? So we believe GB 300, GB 300, our technology advantage will be even more clear.
Speaker Change: and we are excited to see BC 300, GB 300 coming soon in the summer, coming summer.
Speaker Change: Okay, wait, just a quick, if I can squeeze in, maybe for David and also for Charles, just the, in terms of how to customers, this quarter combined the percentage was a bit lower versus last quarter. So is this because of a quarter to quarter kind of limpiness, you know, volatility, or you're dancing out kind of, you ought to call out in terms of who is up to customer contribution a bit lower. Okay, let's go for it.
Speaker Change: Yeah, I don't think there's any trend George, it's just a timing of the upshitments.
But we don't have any concern about, yeah. Yeah.
Speaker Change: Yeah, yeah, just follow up any outlook for the top two customers kind of in the next few quarters, any high level salts and any other kind of customer set, you guys are expanding to kind of you can talk about.
Speaker Change: Yeah, we believe our business will continue to grow much faster.
in the coming quarters.
Speaker Change: I hate to mention but still, I mean in December quarter last year and March quarter without something
Speaker Change: from the cash flow, from the 10k delay impact, but that's already behind us. So now we have a much better cash flow and we are ready to grow much quicker now, especially with the new technology.
Thank you for your questions, George.
Speaker Change: Our next question comes from a line of ACR Merchant with City Group.
You're not a fellow. Great. Thank you for taking.
Okay, great. Thank you for taking my question. Thank you very much.
Speaker Change: So I know there's a lot of uncertainty with tariffs, et cetera, but is there something that you can talk to us or kind of see how investors, AI diffusion rules, there's a lot of investor angst around that? How are you guys thinking about
Speaker Change: You know, your visibility and how the order should flow through given AI diffusion could impact or possibly could impact your revenues and then I have a follow-up. Thank you.
At this moment, we see our demands continue to grow.
Speaker Change: And that's why we continue to expand our facility in US and Taiwan in Malaysia. So overall, our technology did in age, especially. I mean, we do continue to see the demand, well, continue to grow stronger.
Okay, great. And they're not so smart.
Speaker Change: I mean, Tevye put you on next, but it is that much.
Speaker Change: I mean, tell you, my impact, the demand a little bit, but overall, we will continue to get much share.
Speaker Change: Okay, and then if I may on gross margins again, can you just help us understand how you're thinking about, you know, the margins, especially as you expand on your DLC version two, just how we should think about gross margins in 20, you know, calendar 20, fiscal 26, all right.
Speaker Change: Yeah, so we're not going to give forecasts for next year at this meeting.
Speaker Change: But what I can tell you is that we have published before what our target margins are, but right now we've got the headwinds of you mentioned the diffusion rules coming up in mid-May. We have tariffs that we have to find our way through. And so those things are certainly headwinds.
Speaker Change: But on the other hand, we still have the majority of our business from US customers and so we're a US-based manufacturer and so we think that we're well positioned in the marketplace on all of those fronts.
Speaker Change: But we also being a first to market provider of the latest solutions, we also think we have an edge there. So we think that we're as best positioned as someone in the marketplace and be.
Thank you for your question.
Speaker Change: Our next question, Control Line of Ananda Baruah, with Loop Capital.
Okay, my eyes aren't open.
Amanda Burragh: Hey, guys, thanks for taking the questions, really appreciate it. I guess, yeah, too if I could, I guess, you know, this would be for Charles and for Dave.
Amanda Burragh: You guys made mention of ongoing ramp as Blackwell Supply comes on and so should we assume that that means September quarter looks up sequentially from the June quarter?
Amanda Burragh: And just along with that, this is not my follow up, but just like along with that, like during hopper ramp, you had like, you know, you had multiple quarters, that's not accurate, you had two quarters.
Amanda Burragh: 70% sequential growth, you had a 40% sequential growth quarter during the hopper ramp. So not like a forecast, but are those...
Speaker Change: You have 30% up here in June , off of the sophomore, so I guess the question is, is order of magnitude, you know, can you be up, you say you'll be up September quarter again is black or ramps, and like those sort of
Opera, Border of Magnitude, sequential increases, Charles, sort of through cycle.
Speaker Change: Is that the type of thing that you sound so so when you talk excitedly about the Blackwell potential? Is it that kind of order of magnitude that you think is possible to get back to, at some point as you go through Blackwell cycle, but then I have a quick follow up as well. Thanks.
Speaker Change: Thank you for your question. Yes, you are right. I believe much quarter we were solved.
Major reason, because of technology transition. Thank you.
Speaker Change: Not just people waiting for a practical solution, but also, we have a lot of right-hand. Iyer Venkateshwaran,
for Apple.
Speaker Change: Padarnai, right? So looking for work, I hope we can repeat the Harper history, kind of start to grow from June and September and December quarter. I believe so, I hope so.
Okay, that's great, and my follow-up piece!
actually more of a technical question so.
You mentioned in your prepared remarks, Charles, about...
Speaker Change: Liquid Cooling, the HGXB200, and the question is, how many HGX is D200 and then I guess if you want to give an early comments about the B200, how many HGX is
Are you actually seeing you can stack and look with pool? [inaudible]
Speaker Change: and I guess I'm wondering, how many GPUs are folks able to stack and look cool with ACX? I'm interested in seeing how close you can get folks are getting that to the NBL72, thanks. That's it for me, thanks.
Yeah, for Hopper, as you know,
Speaker Change: Aya Kua, work fine, but we try to prove we want to establish the difficulty in technology, so we try to promote
Speaker Change: And we successfully ship about 4,000 Rakes, TRC to the market. [inaudible]
Speaker Change: and so far the 4,000 rack, wrong very desirable, custom adapt, our TRC solution adapt. So we getting those to have our experience.
Speaker Change: and now our DRC solution is much more true than last year.
Speaker Change: And that's why we further prepare to promote DRC2. Our DRC2, Second Generation DRC, we are outperforming the first generation and we will have a big promotion in next few weeks.
Speaker Change: So, with Blackwell, our TLC solution is fully ready, and we will provide the base of the TLC solution to the world, to have a customer, save power, save water, save money, and also improve their tender performance.
Speaker Change: So, we have a very strong confidence for the liquid cooling, especially for the back of the well and the future product.
Thank you for your questions.
Speaker Change: Our next question comes from the line of Nehal Chokshi with Northland.
Your line is now open.
Thank you.
Speaker Change: You want to make sure I understand the inventory reserve that occurred in the March quarter, and then is there any expectation that there will be inventory reserve in the June quarter and at that part of 10% gross margin guidance?
Speaker Change: Yes, so the, as mentioned in our pre-release, and also in this release, the inventory reserve reduced our margin by about 220 basis points. Most of that was caused by taking a reserve for some of the older inventory products.
Speaker Change: And so, we're certainly watching very closely our inventory products.
Speaker Change: However, as mentioned, the substantial reason for the expected reduction in margin is really caution or prudence regarding tariffs.
Speaker Change: I want to point out that by the way, through three quarters we have 16.2 billion in revenues and that was versus last year's four quarters of 15 billion and so we are very happy with where we are in the performance cycle. We are very happy with where we are in the performance cycle.
and even though we expect even better.
Speaker Change: Yeah, to simplify, I would like to share, I mean, for March quarter, we have a 200 point impact from the reserve, right? But June quarter, maybe, I hope only 100 point, or that. And September quarter, I hope, close to 0. So.
Speaker Change: Okay, so just this inventory reserve that you're taking as a charge.
That basically means...
I mean...
Speaker Change: We look at the impact of 200 basis points for a market that basically equates to $100 million.
and then he had a billion dollar shortfall on revenue.
Speaker Change: So does that basically mean that, you know, some percent of that shortfall just isn't finding a new home? Or does that mean that...
Speaker Change: that that shortfall is being resold in the June and September quarter at a lower price.
Speaker Change: Yes, so I mentioned that some of the revenues that we expected in Q3 were platform decision based. So that means actually that people are moving to the newer platforms in the upcoming quarters.
Speaker Change: Okay, and so what that means is that, you know, in cases where people change their minds on platforms, we have to, you know, we have to, you know, write the expected realizable value of those and take a reserve for those and do our best to sell them. [inaudible]
at more competitive prices. Iyer Venkateshwaran,
Thank you for your questions.
Speaker Change: Our next question comes from the line of John Tanwanteng with CJS Security.
G-Live, now open.
Great.
Speaker Change: Thank you for taking my questions. I was wondering if you could expound on that platform decision a little bit more. Is it? Customers declined to take Hopper and decided to move to Blackwell. Was it something else?
Speaker Change: Is that what I'm hearing and was it due to you know design or demand or performance considerations or was there something else going on with maybe like data set or constraints or something like that?
Speaker Change: You know, our customer base is a little bit different from the other competitors, right? Most of our customers are kind of technology-leading companies. So that's why new products are very sensitive to them.
Speaker Change: and Vision is now part of our solution for E-Ready, so we are excited to ramping up Stabum now.
Speaker Change: Okay, great. Charles, I also wanted to touch on something you mentioned before, just with, you know...
Speaker Change: one of the biggest U.S. server manufacturing operations. Can you just talk about your relative?
Speaker Change: Strength there in positioning in US domestic manufacturing versus your competitive set. And how much of an advantage is that when you are seeing tariffs going up across multiple industries, is that providing you any more additional demand or is that too hard to see right now? Iyer Venkateshwaran,
Speaker Change: You know, as a USA company, we are able to, especially manufacture in Silicon Valley, we are able to respond to new technology, much quicker and efficient than others, especially with a better performance.
Speaker Change: Better Solution, like a DLC too, right? And us proletarians who impact, because Terry's program is not quite settled down yet.
Speaker Change: So we are watching carefully and try to adjust our logistics, our operation as efficient as possible.
Speaker Change: This year we have a huge operation in USA and in Taiwan and in Malaysia now as well. So, when Terry program said that we should be able to quickly respond to optimize the based solution for customer.
Thank you for your questions.
Speaker Change: Our next question comes to line of Nicholas Doyle with Needham & Company
Your line is now open.
Speaker Change: Hey guys, I'm Dr. Quinn Bolton, thanks for taking my question. Can you just talk about your supplier allocations? Are you seeing the same GPU allocations for Blackwell as you have for Hopper? How has your supply change as more competitors enter the market? Thank you.
Speaker Change: Yeah, still some allocation made, right, kind of some customer one.
Speaker Change: Blackway, right away, and we had to wait for our location. So, that situation is a little bit better than that happened time frame, but still some constraint there.
Thank you.
Thank you for your question.
Speaker Change: Our last question comes from a line of Mehdi Hosseini with <expletive> .
Your line is now open. Yes, that's right.
Yes, thanks for taking my question.
Capacity has remained around 5,000 reps per month.
and existing capacity and I have a follow-up for you. [inaudible]
There are also capacity remains very huge, 5,000 rack per man's.
Speaker Change: and then 2,000 drag, Tempia, GP, 200, MVL, 72 kind of type performance drag.
Speaker Change: and so we are very fully ready for one-on-demand impact and that's why when Blackway has become more mature, much better year-round and we are...
Speaker Change: We are fully ready for that, especially for our three ERRC-2, much better difficulty solution.
Speaker Change: But Charles, how does that $5000,000 per month today compared to like six months ago?
Speaker Change: It did for USA, we have a 5,000 drag per month, a single six months ago, but now we are growing in Taiwan and Malaysia, next round as well.
Thank you for coming. Thank you very much. Thank you very much.
Thank you. Sorry, go ahead.
Go ahead.
David, go ahead.
Speaker Change: I was going to say we haven't fully enabled Malaysia by the end of this year, they will be fully enabled.
Speaker Change: for Radeh. Okay, largest film rack production. Yes, I think that's what you were driving toward. You have to say, I really think you. I'm on the bus, you're right. To that way, it was very great to you.
Okay, hey Charles, where are we with the dear footage? George?
Speaker Change: When the company continues to grow for sure, we need a more manpower, so we continue our aggressively looking for a more tenant, including shareable position.
Thanks.