Q4 2026 Super Micro Computer Inc Earnings Call

August 11, 2026

Speaker #1: Thank you for standing by. My name is Jen, and I will be your conference operator today. At this time, I would like to welcome everyone to the Super Micro Computer, Inc. Q4 FY26 business update call.

Operator: Thank you for standing by. My name is Jen, and I will be your conference operator today. At this time, I would like to welcome everyone to the Super Micro Computer, Inc. Q4 FY26 business update call. With us today are Charles Liang, Founder, President, and Chief Executive Officer, David Weigand, CFO, and Michael Staiger, Senior Vice President of Corporate Development. 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 a question, please press star one to raise your hand.

Operator: Thank you for standing by. My name is Jen, and I will be your conference operator today. At this time, I would like to welcome everyone to the Super Micro Computer, Inc. Q4 FY26 Business Update Call. With us today are Charles Liang, Founder, President, and Chief Executive Officer, David Weigand, CFO, and Michael Staiger, Senior Vice President of Corporate Development. 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.

Speaker #1: With us today are Charles Liang, founder, president, and chief executive officer; David Weigand, CFO; and Michael Staiger, senior vice president of corporate development. All lines have been placed on mute to prevent any background noise.

Speaker #1: After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question, please press *1 to raise your hand.

Operator: If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Michael Staiger. Please go ahead.

Speaker #1: To withdraw your question, press *1 again. I will now hand the conference over to Michael Staiger. Please go ahead.

Operator: To withdraw your question, press star one again. I will now hand the conference over to Michael Staiger. Please go ahead.

Speaker #2: Thank you, Jen. Good afternoon, and thank you for attending Super Micro's call to discuss financial results for the fourth quarter of fiscal 2026, which ended June 30, 2026.

Michael Staiger: Thank you, Jen. Good afternoon, and thank you for attending Super Micro's call to discuss financial results for the Q4 of fiscal 2026, which ended 30 June 2026. With me today, as you know, are Charles Liang, Founder, Chairman, and Chief Executive Officer, and David Weigand, Chief Financial Officer. By now, you should have received a copy of the press 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 Presentations tab. We have also published management's scripted commentary on our website.

Michael Staiger: Thank you, Jen. Good afternoon and thank you for attending Super Micro's call to discuss financial results for the Q4 of fiscal 2026, which ended 30 June 2026. With me today, as you know, are Charles Liang, Founder, Chairman, and Chief Executive Officer, and David Weigand, Chief Financial Officer. By now, you should have received a copy of the press release from the company that was distributed at the close of regular trading and is available on the company's website.

Speaker #2: With me today, as you know, are Charles Liang, founder, chairman, and chief executive officer, and David Weigand, chief financial officer. By now, you should have received a copy of the press release from the company that was distributed at the close of regular training and is available on the company's website.

Speaker #2: 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.

Michael Staiger: 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 Presentations tab. We have also published management's scripted commentary on our website.

Speaker #2: Under the Events Presentations tab, 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, and future business outlook.

Michael Staiger: Please note that some of the information you will 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, and future business outlook, including guidance for the Q1 of fiscal 2027 and the full fiscal year 2027. These statements and other comments are based on management's current expectations and assumptions and involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated, and you should not place undue reliance on forward-looking statements. You can learn more about these risks and uncertainties in the press release we issued earlier today, our most recent 10-K filing for fiscal 2025, and other SEC filings. All these documents are available on the IR page of Super Micro's website. We assume no obligation to update any forward-looking statements.

Speaker #2: Including guidance for the first quarter of fiscal 2027 and the full fiscal year 2027. These statements and other comments are based on management's current expectations and assumptions, and involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated. You should not place undue reliance on forward-looking statements.

Michael Staiger: These statements and other comments are based on management's current expectations and assumptions and involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated, and you should not place undue reliance on forward-looking statements. You can learn more about these risks and uncertainties in the press release we issued earlier today, our most recent 10-K filing for fiscal 2025, and other SEC filings. All these documents are available on the IR page of Super Micro's website.

Speaker #2: You can learn more about these risks and uncertainties in the press release we issued earlier today or our most recent 10-K filing for fiscal 2025 and other SEC filings.

Speaker #2: All these documents are available on the IR page at the Super Micro's website. We assume no obligation to update any forward-looking statements, most of today's presentation will refer to non-GAAP financial results and business outlook.

Michael Staiger: We assume no obligation to update any forward-looking statements. Most of today's presentation will refer to non-GAAP financial results and business outlook. For any explanation of our non-GAAP financial measures, please refer to the accompanying presentation or to our press release published earlier today. The non-GAAP measures are presented as we believe that they provide investors the means of evaluating and understanding how the company's management evaluates the company's operating performance.

Michael Staiger: Most of today's presentation will refer to non-GAAP financial results and business outlook. For any explanation of our non-GAAP financial measures, please refer to the accompanying presentation or to our press release published earlier today. The non-GAAP measures are presented as we believe that they provide investors the means of evaluating and understanding how the company's management evaluates the company's operating performance. These non-GAAP measures should not be considered in isolation from, as substitutes for, or superior to financial measures prepared in accordance with the U.S. GAAP. In addition, a reconciliation of GAAP to 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 presentation, we will prepare to marshal a Q&A session for sell-side analysts. Our fiscal 2026, 2027, excuse me, quiet period begins at the close of business of Friday, 11 September 2026.

Speaker #2: For any explanation of our non-GAAP financial measures, please refer to the accompanying presentation or to our press release published earlier today. The non-GAAP measures are presented as we believe that they provide investors the means of evaluating and understanding how the company's management evaluates the company's operating performance.

Speaker #2: These non-GAAP measures should not be considered in isolation from, as substitutes for, or superior to financial measures prepared in accordance with US GAAP. In addition, a reconciliation of GAAP to non-GAAP results is contained in today's press release and in the supplemental information attached to today's presentation.

Michael Staiger: These non-GAAP measures should not be considered in isolation from, as substitutes for, or superior to financial measures prepared in accordance with the U.S. GAAP. In addition, a reconciliation of GAAP to 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 presentation, we will prepare to marshal a Q&A session for sell-side analysts. Our fiscal 2026, 2027, excuse me, quiet period begins at the close of business of Friday, 11 September 2026. I'll now turn the call over to Charles.

Speaker #2: At the end of today's prepared remarks, we'll have a Q&A session for sales and analysts. Our fiscal 2026, 2027, excuse me, quiet period begins at the close of business of Friday, September 11, 2026.

Speaker #2: I'll now turn the call over to Charles.

Michael Staiger: I'll now turn the call over to Charles.

Speaker #3: Thank you, Michael. And thank you all for joining today's call. Fiscal year 2026 was a historic milestone for Super Micro, as we nearly doubled our revenue year over year, growing from $22 billion last year to $39 billion in fiscal year 2026.

Charles Liang: Thank you, Michael, and thank you all for joining today's call. Fiscal year 2026 was a historic milestone for Super Micro as we nearly doubled our revenue year-over-year, growing from $22 billion last year to $39 billion fiscal year 2026. The world is being transformed by AI, and Super Micro is transforming as well. From a USA-based server manufacturer into a leading AI, IT, data center total solution company. We design and manufacture our total Data Center Building Block Solutions, DCBBS, in the USA, with main facilities in USA, Taiwan, Malaysia, and the Netherlands. The demand for our AI, IT solutions is even stronger than ever before as we are transforming into a total DCBBS company. A one-stop shop company for customers who want to build their data center or AI factory quicker and better.

Speaker #3: The world is being transformed by AI, and Super Micro is transforming as well. From a USA-based server manufacturer into a leading AI, IT, and data center total solution company.

Speaker #3: We design and manufacture our total data center building block solutions. DCBBS, in the USA, with main facilities in USA, Taiwan, Malaysia, and Netherlands. The demand for our AI, IT solutions is even stronger.

Charles Liang: The demand for our AI, IT solutions is even stronger than ever before as we are transforming into a total DCBBS company. A one-stop shop company for customers who want to build their data center or AI factory quicker and better. In our pre-announcement, we disclosed over $60 billion in new orders, driving our order book and backlog to new record levels as we enter fiscal year 2027. While Q4 revenue came in at $11.1 billion due to some short-term customer delays in power shortage, cooling, and networking, we know this is purely a timing story.

Speaker #3: Then ever before, as we are transforming into a total DCBBS company. A one-stop shop company for customers who want to build their data center or AI factory quicker and better.

Speaker #3: In our pre-announcement, we disclosed over $60 billion in new orders. Driven our order book and backlog to a new record. Levels. As we enter fiscal year 2027, while Q4 revenue came in at $11.1 billion, due to some short-term customer delay in power shortage, cooling, and networking, we know this is purely a timing story.

Charles Liang: In our pre-announcement, we disclosed over $60 billion in new orders, driving our order book and backlog to new record levels as we enter fiscal year 2027. While Q4 revenue came in at $11.1 billion due to some short-term customer delays in power shortage, cooling, and networking, we know this is purely a timing story. The good news is that now our customers can easily leverage our unique DCBBS total solution advantage and upcoming new technology and product lines to accelerate their time to deployment, we call TTD, and time to online, we call TTO, ensuring strong future growth and long-term value for Super Micro for many years to come. Most importantly, our focus on profitability is yielding clear results. For the first quarter, I am happy to report non-GAAP gross margin of 17.6% and $1.70 in non-GAAP diluted earnings per share.

Speaker #3: The good news is that now our customers can easily leverage our unique DCBBS total solution advantage, and upcoming new technology and product lines to accelerate their time-to-deployment.

Charles Liang: The good news is that now our customers can easily leverage our unique DCBBS total solution advantage and upcoming new technology and product lines to accelerate their time to deployment, we call TTD, and time to online, we call TTO, ensuring strong future growth and long-term value for Super Micro for many years to come. Most importantly, our focus on profitability is yielding clear results. For the first quarter, I am happy to report non-GAAP gross margin of 17.6% and $1.70 in non-GAAP diluted earnings per share.

Speaker #3: We call time-to-delivery TTD, and time-to-online TTO. Ensuring strong future growth and long-term value for Super Micro for many years to come. Most importantly, our focus on profitability is yielding clear results.

Speaker #3: For the fourth quarter, I'm happy to deploy non-GAAP gross margin of 17.6%. And $1.70 in non-GAAP dilute earnings per share. This margin expansion mainly came from our strategy focus on balancing customer mix and product mix, while having new having a few one-time positive contribution for the quarter.

Charles Liang: This margin expansion mainly came from our strategic focus on balancing customer mix and product mix while having a few one-time positive contributions for the quarter. Since early 2026, we added dedicated departments and resources to focus on growing enterprise customer base and have expanded our enterprise CPU-based server storage and IoT product lines. Our quickly growing inferencing and agentic AI-centric products are also driven higher CEO profit margins for the company going forward. Another key to this margin expansion is our DCBBS, which delivers total solution value by seamlessly integrating GPU and CPU server, enterprise storage, direct liquid cooling solutions, CDU, chill door, water tower, high-speed data switch and networking, data center management software, and full lifecycle services.

Speaker #3: Since early 2026, we add a dedicated department and resource to focus on growing enterprise customer base. And have expand our enterprise CPU-based server storage and IoT product lines.

Speaker #3: Our quick-growing inferential and agentic AI-centric products also drive healthier profit margins for the company, going forward. Another key to this margin expansion is our DCBBS.

Charles Liang: Another key to this margin expansion is our DCBBS, which delivers total solution value by seamlessly integrating GPU and CPU server, enterprise storage, direct liquid cooling solutions, CDU, chill door, water tower, high-speed data switch and networking, data center management software, and full lifecycle services. This turnkey ecosystem enables customers to build and scale AI data center in quarters rather than years, dramatically reducing TCO and accelerating time to online and time to revenue for customers.

Speaker #3: Which delivers total solution value by seamlessly integrating GPU and CPU server enterprise storage directly to cooling solutions, CDU, chill door, water tower, high-speed data switch, and networking.

Speaker #3: Data center management software and full lifecycle services. This turnkey ecosystem enables customers to build and scale AI data centers in quarters rather than years.

Charles Liang: This turnkey ecosystem enables customers to build and scale AI data center in quarters rather than years, dramatically reducing TCO and accelerating time to online and time to revenue for customers. We are further elevating this value proposition with our new proactive service model, where our data center management software and field teams will automatically alert and be ready immediately to fix or maintain the failures unit, preventing reduction of computing power at a customer data center. As a new software with powerful management features and automatic service attached to our hardware builds, they deepen customer trust and drive long-term value. Our DCBBS is getting very powerful, and it will soon contribute a significant net income to our business. By early next quarter, more of those software features and service products will be online.

Speaker #3: Dramatically reducing TCO and accelerating time-to-online and time-to-revenue for customers. We are further elevating this value proposition with our new proactive service model, where our data center management is ready immediately to fix or maintain the failed unit.

Charles Liang: We are further elevating this value proposition with our new proactive service model, where our data center management software and field teams will automatically alert and be ready immediately to fix or maintain the failures unit, preventing reduction of computing power at a customer data center. As a new software with powerful management features and automatic service attached to our hardware builds, they deepen customer trust and drive long-term value. Our DCBBS is getting very powerful, and it will soon contribute a significant net income to our business.

Speaker #3: Implementing reduction of computing power at the customer data center. As a new software as the new software with powerful management features and our hardware they depend customer trust and drive long-term value.

Speaker #3: Our DCBBS is getting very powerful and it will turn contribute a significant net income to our business. By early next quarter, more of those software features and service products will be online.

Charles Liang: By early next quarter, more of those software features and service products will be online. On the operations side, we are complementing this high-value strategy by achieving higher manufacturing yields through factory automation, design optimization, and our highly versatile building block architecture. At the same time, we remain very focused on logistics and inventory management, significantly reducing inventory reserve and expedite charge.

Speaker #3: On the operations side, we are complementing this high-value strategy by driving higher manufacturing yields through factory automation, design optimization, and our highly versatile building block architecture.

Charles Liang: On the operations side, we are complementing this high-value strategy by achieving higher manufacturing yields through factory automation, design optimization, and our highly versatile building block architecture. At the same time, we remain very focused on logistics and inventory management, significantly reducing inventory reserve and expedite charge. Together, these operational disciplines will help moderate quarter-to-quarter margin fluctuation driven by uneven customer and product mix, supporting our goal of consistent growing gross margins. Turning to our key product roadmap. Our system building block allows us to quickly optimize every major silicone platform. Through our long-term Nvidia partnership, we are shipping volume SKU across the GB200 NVL72, HGX B200 NVL4, and RTX 6000 Ada Generation product lines while preparing first go-to-market for Rubin, Vera Rubin NVL72, Lupin HGX, Anvera C1, and other high-density Anvera systems.

Speaker #3: At the same time, we mean we remain very focused on logistic and inventory management. Significantly reducing inventory reserve and expedite charge. Together, these operational disciplines will help moderate quarter-to-quarter margin fluctuation driven by uneven customer and product mix.

Charles Liang: Together, these operational disciplines will help moderate quarter-to-quarter margin fluctuation driven by uneven customer and product mix, supporting our goal of consistent growing gross margins. Turning to our key product roadmap. Our system building block allows us to quickly optimize every major silicone platform. Through our long-term Nvidia partnership, we are shipping volume SKU across the GB200 NVL72, HGX B200 NVL4, and RTX 6000 Ada Generation product lines while preparing first go-to-market for Rubin, Vera Rubin NVL72, Lupin HGX, Anvera C1, and other high-density Anvera systems.

Speaker #3: Supporting our goal of consistent growing gross margins. Turning to our key product roadmap. Our system building block allow us to quickly optimize every major silicon platform.

Speaker #3: Through our long-term NVIDIA partnership, we are shipping volume SKU across NVL72, HGX P300, B200 NVL4, and RTX 6000 Pro product lines. While preparing for first-to-market volatility, we are NVL72 looping HGX and Verra C1 and other high-density Verra systems.

Speaker #3: With AMD, we launched complete new Helios product line and MI450 total solution alongside strong Epic CPU, MI350, and MI355 X momentum. Working with Intel, we brought parcel deck edge AI system to market and shipping Xeon 6 Plus platform in volume.

Charles Liang: With AMD, we launched complete new Helios product line and MI450 total solution alongside strong EPYC CPU, MI350 and MI355X momentum. Working with Intel, we brought Parsley Edge AI system to market and shipping GM6 Plus platform in volume. We also dedicated on developing products for the strong demand of Arm AGI CPU processor-based codename Phoenix architecture optimized for high performance per watt inferencing workloads, demonstrating our silicone partners' deep confidence in our engineering excellence. To support a massive demand, we continue to expand our physical footprint. In Silicon Valley, we recently announced our new 32-acre DCBBS campus featuring advanced optical photonics networking lab and data center scale manufacturing, which brings our USA footprint to nearly 4 million square feet.

Speaker #3: We also dedicate on developing products for the strong demand of ARM AGI process-based codename Phoenix. Architecture optimized for high-performance P1 inferential workloads, demonstrating our silicon partners' deep confidence in our engineering excellence.

Speaker #3: To support a massive demand, we continue to expand our physical footprint. In silicon valley, we recently announced our new 32-acre DCBBS campus featuring advanced optical photonics networking lab and data center scale manufacturing.

Charles Liang: To support a massive demand, we continue to expand our physical footprint. In Silicon Valley, we recently announced our new 32-acre DCBBS campus featuring advanced optical photonics networking lab and data center scale manufacturing, which brings our USA footprint to nearly 4 million square feet. Globally, our facilities in Taiwan, Malaysia, and the Netherlands are also ramping strongly to meet the demand, putting our total manufacturing capacity on track to exceed 6,000 racks per month, including more than 3,000 direct liquid cooling racks per month.

Speaker #3: This brings our U.S.A. footprint to nearly 4 million square feet. Globally, our facilities in Taiwan, Malaysia, and the Netherlands are also ramping strongly to meet demand.

Charles Liang: Globally, our facilities in Taiwan, Malaysia, and the Netherlands are also ramping strongly to meet the demand, putting our total manufacturing capacity on track to exceed 6,000 racks per month, including more than 3,000 direct liquid cooling racks per month. Especially, most of our DLC rack production lines support the most dense densities 250 KW rack platforms. Before I close, a quick update on our capital structure. Following our $5.6 billion financing in June, our balance sheet fully supports our components supply and business needs. Thank you to our strong cash position and more favorable customer and product mix. We currently have no plan to utilize our ATM program, which we initiated a few months ago. At the same time, we remain focused on building financial efficiency. Within all of this operational and product advancement, I want to emphasize that our growth momentum is accelerating where it matters most.

Speaker #3: Putting our total manufacturing capacity on track to exceed 6,000 racks per month, including more than 3,000 directed cooling racks per month. Especially, most of our DLC rack production lines support the most dense 30 to 50 kW rack platforms.

Charles Liang: Especially, most of our DLC rack production lines support the most dense densities 250 KW rack platforms. Before I close, a quick update on our capital structure. Following our $5.6 billion financing in June, our balance sheet fully supports our components supply and business needs. Thank you to our strong cash position and more favorable customer and product mix. We currently have no plan to utilize our ATM program, which we initiated a few months ago. At the same time, we remain focused on building financial efficiency.

Speaker #3: Before I close, a quick update on our capital structure. Following our $5.6 billion financing in June, our balance sheet fully supports our component supply and business needs.

Speaker #3: Thank you to our strong cash position and more favorable customer and product mix. We currently have no plans to utilize our ATM program, which we initiated a few months ago.

Speaker #3: At the same time, we remain focused on building financial efficiency. Building on all of these operational and product advancements, I want to emphasize that our growth momentum is accelerating while it matters most.

Charles Liang: Within all of this operational and product advancement, I want to emphasize that our growth momentum is accelerating where it matters most. By expanding hundreds of new enterprise customers and other customers, and leading the transition into agentic and specialized AI workloads, Supermicro has become a fundamental architect of today's AI platform.

Speaker #3: By expanding hundreds of new enterprise customers and other customers, and leading the transition into an agentic and specialized AI workload, Super Micro has become a fundamental architect of today's AI platform.

Charles Liang: By expanding hundreds of new enterprise customers and other customers, and leading the transition into agentic and specialized AI workloads, Supermicro has become a fundamental architect of today's AI platform. Our TCPPS total solution, depending CPU and GPU compute, storage, energy, and 1.6T high-speed switch, upcoming optical networking and our management software suite, including SCF, SuperCloud Composer, SVM, Super Micro Data Center Manager, and SOM, Super Micro Orchestrator Manager, delivers the complete one-stop shop experience that modern enterprise, Neo-Cloud, and any other data center customer needs. Looking to fiscal year 2027, our momentum gives us strong confidence to target our revenue in the range of $65 billion to $72 billion as we are in the process of historic infrastructure build. We are balancing top-line expansion with bottom-line profitability by focusing on growing enterprise customer base, customer mix, TCPPS solutions, and operational discipline.

Speaker #3: Our DCBBS total solution spans CPU and GPU compute, storage, energy, and 1.3/1.6T high-speed switch, upcoming optical networking, and our management software suite, including SCF.

Charles Liang: Our TCPPS total solution, depending CPU and GPU compute, storage, energy, and 1.6T high-speed switch, upcoming optical networking and our management software suite, including SCF, SuperCloud Composer, SVM, Super Micro Data Center Manager, and SOM, Super Micro Orchestrator Manager, delivers the complete one-stop shop experience that modern enterprise, Neo-Cloud, and any other data center customer needs.

Speaker #3: Super Micro Cloud Composer SDM Super Micro data data center manager and SON Super Micro operator manager. Delivers the complete one-stop-shop experience that more than enterprise near cloud and any other data center customer needs.

Speaker #3: Looking to physical year 2027, our momentum give us strong confidence to target our revenue in the range of $65 billion to $72 billion. As we are in the process of historic infrastructure build-out.

Charles Liang: Looking to fiscal year 2027, our momentum gives us strong confidence to target our revenue in the range of $65 billion to $72 billion as we are in the process of historic infrastructure build. We are balancing top-line expansion with bottom-line profitability by focusing on growing enterprise customer base, customer mix, TCPPS solutions, and operational discipline. We are shaping the future of AI technology while delivering true technology value to our customers. I am very confident that fiscal 2027 will be our strong and fastest growth year again. Thank you, and I will now turn the call to David.

Speaker #3: We are balancing top-line expansion with bottom-line profitability by focusing on growing our enterprise customer base, customer mix, DCBBS solutions, and operational discipline. We are shaping the future of AI technology while delivering true technology value to our customers.

Charles Liang: We are shaping the future of AI technology while delivering true technology value to our customers. I am very confident that fiscal 2027 will be our strong and fastest growth year again. Thank you, and I will now turn the call to David.

Speaker #3: I'm very confident that fiscal year 2026 and fiscal year 2027 will be our strong and fast growth years again. Thank you, and I will now turn the call to David.

Speaker #1: Thank you, Charles. We are pleased to report record fiscal year 2026 revenue of $39.1 billion, up 78% over fiscal year 2025 revenues, and $22 billion in record non-GAAP fully diluted EPS of $3.63.

David Weigand: Thank you, Charles. We are pleased to report record fiscal year 2026 revenue of $39.1 billion, up 78% over fiscal year 2025 revenues and $22 billion in record non-GAAP, fully diluted EPS of $3.63, up 76% over fiscal year 2025 EPS of $2.06. Our fiscal year 2026 ending backlog was at a record level with over $60 billion in new orders received during Q4 fiscal year 2026, which we expect to fulfill over the coming quarters. Non-GAAP gross margins for fiscal year 2026 were 10.9% versus 11.2% in fiscal year 2025. Our fiscal year 2026 non-GAAP operating margins expanded to 8.1% from 7.1% in fiscal year 2025. Our customer base is diversifying, and we had nine customers in fiscal year 2026 with revenues greater than $1 billion each versus four such customers in fiscal year 2025.

Speaker #1: Up 76% over fiscal year 2025 EPS of $2.06. Our fiscal year 2026 ending backlog was at a record level, with over $60 billion in new orders received during Q4 fiscal year 2026, which we expect to fulfill over the coming quarters.

Speaker #1: Non-GAAP gross margins for fiscal year 2026 were 10.9%, versus 11.2% in fiscal year 2025. Our fiscal year 2026 non-GAAP operating margins expanded to 8.1%, from 7.1% in fiscal year 2025.

Speaker #1: Our customer base is diversifying and we had 9 customers in fiscal year 26 with revenues greater than $1 billion each versus 4 such customers in fiscal year 25.

David Weigand: Our customer base is diversifying, and we had nine customers in fiscal year 2026 with revenues greater than $1 billion each versus four such customers in fiscal year 2025. Turning to fiscal Q4, fiscal year 2026 results, we achieved revenue of $11.1 billion, up 93% year over year and up 9% quarter over quarter. Revenue was near the low end of our guidance range of $11 billion to $12.5 billion due to delays in customer readiness, and we anticipate this revenue to be recognized in subsequent quarters.

Speaker #1: Turning to fiscal Q4 fiscal year 26 results, we achieved revenue of $11.1 billion up 93% year over year and up 9% quarter over quarter.

David Weigand: Turning to fiscal Q4, fiscal year 2026 results, we achieved revenue of $11.1 billion, up 93% year over year and up 9% quarter over quarter. Revenue was near the low end of our guidance range of $11 billion to $12.5 billion due to delays in customer readiness, and we anticipate this revenue to be recognized in subsequent quarters. Our AI solutions contributed approximately 60% of total revenue in Q4 versus over 80% in Q3 due to the timing of some large AI project ramps. Based on our backlog, we believe greater than 80% of revenues will be AI-related solutions going forward. During Q4, enterprise and channel revenue was $5.6 billion, representing 50% of total revenue, compared with 28% in the prior quarter. Revenue in this segment increased 172% year over year and 98% quarter over quarter.

Speaker #1: Revenue was near the low end of our guidance range of $11 billion to $12.5 billion due to delays in customer readiness, and we anticipate this revenue will be recognized in subsequent quarters.

Speaker #1: Those AI, these AI solutions, our AI solutions contributed approximately 60% of total revenue in Q4 versus over 80% in Q3, due to the timing of some large AI project ramps.

David Weigand: Our AI solutions contributed approximately 60% of total revenue in Q4 versus over 80% in Q3 due to the timing of some large AI project ramps. Based on our backlog, we believe greater than 80% of revenues will be AI-related solutions going forward. During Q4, enterprise and channel revenue was $5.6 billion, representing 50% of total revenue, compared with 28% in the prior quarter. Revenue in this segment increased 172% year over year and 98% quarter over quarter.

Speaker #1: Based on our backlog, we believe greater than 80% of revenues will be AI related solutions going forward. During Q4, enterprise and channel revenue was $5.6 billion representing 50% of total revenue compared with 28% in the prior quarter.

Speaker #1: Revenue in this segment increased 172% year-over-year and 98% quarter-over-quarter. During Q4, we saw a pickup in demand from enterprise and channel customers who were upgrading their compute, storage, and network infrastructure with more efficient CPU platforms.

David Weigand: During Q4, we saw a pickup in demand from enterprise and channel customers, which were upgrading their compute, storage, and network infrastructure with more efficient CPU platforms. OEM appliance and large data center revenue was $5.5 billion, also representing 50% of total revenue, compared with 72% in the prior quarter. Revenue in this segment increased 50% year over year and decreased 26% quarter over quarter. For fiscal year 2026, enterprise and channel revenue grew 39% and represented 31% of total revenue. The OEM appliance and large data center revenue grew 104% and represented 69% of total revenue. For fiscal year 2026, we had one large data center/CSP customer, which represented 28% of revenue. By geography, the US represented 71% of Q4 revenue, Asia represented 11%, Europe represented 8%, and the rest of the world represented 10%.

Speaker #1: OEM appliance and large data center revenue was $5.5 billion also representing 50% of total revenue compared with 72% in the prior quarter. Revenue in this segment increased 50% year over year and decreased 26% quarter over quarter.

Speaker #1: For fiscal year '26, enterprise and channel revenue grew 39% and represented 31% of total revenue. OEM appliance and large data center revenue grew 104% and represented 69% of total revenue.

David Weigand: The OEM appliance and large data center revenue grew 104% and represented 69% of total revenue. For fiscal year 2026, we had one large data center/CSP customer, which represented 28% of revenue. By geography, the US represented 71% of Q4 revenue, Asia represented 11%, Europe represented 8%, and the rest of the world represented 10%. On a year-over-year basis, revenue in the US grew 259%, Asia decreased 50%, Europe increased 4%, and the rest of the world increased 296%.

Speaker #1: For fiscal year '26, we had one large data center/CSP customer, which represented 28% of revenue. By geography, the U.S. represented 71% of Q4 revenue.

Speaker #1: Asia represented 11%, Europe represented 8%, and the rest of the world represented 10%. On a year-over-year basis, revenue in the U.S. grew 259%.

David Weigand: On a year-over-year basis, revenue in the US grew 259%, Asia decreased 50%, Europe increased 4%, and the rest of the world increased 296%. On a quarter-over-quarter basis, revenue in the US grew 12%, Asia decreased 13%, Europe increased 25%, and the rest of the world increased 1%. Q4 non-GAAP gross margin was 17.6% versus our guidance of 8.2% to 8.4%. This was up from 10.1% in Q3. Gross margins improved by 750 basis points sequentially due to a better-than-anticipated customer and product mix, including the deferral of several contracts from Q4 fiscal year 2026 to Q1 fiscal year 2027, and perhaps the subsequent quarter. This favorable mix contributed approximately 75% of the gross margin improvement. Lower tariff costs and lower inventory reserves drove the remaining 25% of the gross margin improvement.

Speaker #1: Asia decreased 50%. Europe increased 4%, and the rest of the world increased 296%. On a quarter-over-quarter basis, revenue in the US grew 12%.

David Weigand: On a quarter-over-quarter basis, revenue in the US grew 12%, Asia decreased 13%, Europe increased 25%, and the rest of the world increased 1%. Q4 non-GAAP gross margin was 17.6% versus our guidance of 8.2% to 8.4%. This was up from 10.1% in Q3. Gross margins improved by 750 basis points sequentially due to a better-than-anticipated customer and product mix, including the deferral of several contracts from Q4 fiscal year 2026 to Q1 fiscal year 2027, and perhaps the subsequent quarter. This favorable mix contributed approximately 75% of the gross margin improvement.

Speaker #1: Asia decreased 13%. Europe increased 25% and the rest of the world increased 1%. Q4 non-GAAP gross margin was $17.6% versus our guidance of $8.2% to $8.4%.

Speaker #1: This was up from 10.1% in Q3. Gross margins improved by $750 basis points sequentially due to a better than anticipated customer and product mix.

Speaker #1: Including the deferral of several contracts from Q4 fiscal year 2026 to Q1 fiscal year 2027, and perhaps the subsequent quarter. This favorable mix contributed approximately 75% of the gross margin improvement.

Speaker #1: Lower tariff costs and lower inventory reserves drove the remaining 25% of the gross margin improvement. Q4 GAAP operating expenses were $455 million, up 44% year over year and 16% quarter over quarter on a non-GAAP basis.

David Weigand: Lower tariff costs and lower inventory reserves drove the remaining 25% of the gross margin improvement. Q4 GAAP operating expenses were $455 million, up 44% year over year and 16% quarter over quarter on a non-GAAP basis. On a non-GAAP basis, operating expenses were $357 million, which was up 49% year over year and 28% quarter over quarter. The sequential increases in both GAAP and non-GAAP operating expenses primarily reflected higher headcount-related expenses and sales and marketing expenses. Non-GAAP operating margin was 14.3% in Q4, compared with 7.2% in Q3.

David Weigand: Q4 GAAP operating expenses were $455 million, up 44% year over year and 16% quarter over quarter on a non-GAAP basis. On a non-GAAP basis, operating expenses were $357 million, which was up 49% year over year and 28% quarter over quarter. The sequential increases in both GAAP and non-GAAP operating expenses primarily reflected higher headcount-related expenses and sales and marketing expenses. Non-GAAP operating margin was 14.3% in Q4, compared with 7.2% in Q3. Other income and expense for Q4 was a net expense of $19 million, consisting of $61 million in interest and other income, offset by $80 million in interest expense related to our convertible notes and revolving credit facilities. The Q4 tax provision was $290 million on a GAAP basis and $316 million on a non-GAAP basis. The Q4 GAAP tax rate was 19.7%, while the non-GAAP tax rate was 20.1%.

Speaker #1: On a non-GAAP basis, operating expenses were $357 million, which was up 49% year over year and 28% quarter over quarter. The sequential increases in both GAAP and non-GAAP operating expenses primarily reflected higher headcount-related expenses and sales and marketing expenses.

Speaker #1: Non-GAAP operating margin was 14.3% in Q4 compared with 7.2% in Q3. Other income and expense for Q4 was a net expense of $19 million, consisting of $61 million in interest and other income offset by $80 million in interest expense related to our convertible notes and revolving credit facilities.

David Weigand: Other income and expense for Q4 was a net expense of $19 million, consisting of $61 million in interest and other income, offset by $80 million in interest expense related to our convertible notes and revolving credit facilities. The Q4 tax provision was $290 million on a GAAP basis and $316 million on a non-GAAP basis. The Q4 GAAP tax rate was 19.7%, while the non-GAAP tax rate was 20.1%. For fiscal year 2026, the GAAP tax rate was 19.9%, compared with 12.9% in fiscal year 2025. The non-GAAP tax rate was 20.4%, compared with 15.4% in fiscal year 2025.

Speaker #1: The Q4 tax provision was $290 million on a GAAP basis and $316 million on a non-GAAP basis. The Q4 tax GAAP tax rate was 19.7% while the non-GAAP tax rate was 20.1%.

Speaker #1: For fiscal year 2026, the GAAP tax rate was 19.9%, compared with 12.9% in fiscal year 2025. The non-GAAP tax rate was 20.4%, compared with 15.4% in fiscal year 2025.

David Weigand: For fiscal year 2026, the GAAP tax rate was 19.9%, compared with 12.9% in fiscal year 2025. The non-GAAP tax rate was 20.4%, compared with 15.4% in fiscal year 2025. Q4 GAAP diluted earnings per share was $1.62, compared with our guidance range of $0.53 to $0.67. Non-GAAP diluted earnings per share was $1.70, compared with our guidance range of $0.65 to $0.79. The results exceeded our guidance primarily due to higher gross margins. For fiscal year 2026, GAAP diluted earnings per share was $3.26, compared with $1.68 in fiscal year 2025. Non-GAAP diluted earnings per share was $3.63, compared with $2.06 in fiscal year 2025. The GAAP diluted share count increased sequentially from 692 million shares in Q3 to 705 million shares in Q4. The non-GAAP diluted share count increased from 709 million shares to 721 million shares over the same period.

Speaker #1: Q4 GAAP diluted earnings per share was $1.62, compared with our guidance range of $0.53 to $0.67. Non-GAAP diluted earnings per share was $1.70, compared with our guidance range of $0.65 to $0.79.

David Weigand: Q4 GAAP diluted earnings per share was $1.62, compared with our guidance range of $0.53 to $0.67. Non-GAAP diluted earnings per share was $1.70, compared with our guidance range of $0.65 to $0.79. The results exceeded our guidance primarily due to higher gross margins. For fiscal year 2026, GAAP diluted earnings per share was $3.26, compared with $1.68 in fiscal year 2025. Non-GAAP diluted earnings per share was $3.63, compared with $2.06 in fiscal year 2025. The GAAP diluted share count increased sequentially from 692 million shares in Q3 to 705 million shares in Q4.

Speaker #1: The results exceeded our guidance primarily due to higher gross margins. For fiscal year '26, GAAP diluted earnings per share was $3.26, compared with $1.68 in fiscal year '25.

Speaker #1: Non-GAAP diluted earnings per share was $3.63, compared with $2.06 in fiscal year '25. The GAAP diluted share count increased sequentially from 692 million shares in Q3 to 705 million shares in Q4.

Speaker #1: The non-GAAP diluted share count increased from 709 million shares to 721 million shares over the same period. Cash provided by operating activities in Q4 was $747 million compared with cash used in operating activities of $6.6 billion in the prior quarter.

David Weigand: The non-GAAP diluted share count increased from 709 million shares to 721 million shares over the same period. Cash provided by operating activities in Q4 was $747 million, compared with cash used in operating activities of $6.6 billion in the prior quarter. For fiscal year 2026, cash used in operating activities was $6.8 billion, compared with cash provided by operating activities of $1.66 billion in fiscal year 2025. Q4 closing inventory was $12.9 billion, up from $11.1 billion at the end of Q3. CapEx totaled $28 million in Q4, resulting in free cash flow of $722 million.

David Weigand: Cash provided by operating activities in Q4 was $747 million, compared with cash used in operating activities of $6.6 billion in the prior quarter. For fiscal year 2026, cash used in operating activities was $6.8 billion, compared with cash provided by operating activities of $1.66 billion in fiscal year 2025. Q4 closing inventory was $12.9 billion, up from $11.1 billion at the end of Q3. CapEx totaled $28 million in Q4, resulting in free cash flow of $722 million. For fiscal year 2026, CapEx was $162 million, compared with $127 million in fiscal year 2025, as we invested in our expanding capacity globally. During the quarter, we completed public equity offerings, raising $5.6 billion after offering expenses, comprising $1.4 billion of common stock and $4.2 billion of mandatory convertible preferred shares.

Speaker #1: For fiscal year '26, cash used in operating activities was $6.8 billion, compared with cash provided by operating activities of $1.66 billion in fiscal year '25.

Speaker #1: Q4 closing inventory was $12.9 billion, up from $11.1 billion at the end of Q3. CapEx totaled $28 million in Q4, resulting in free cash flow of $722 million.

Speaker #1: For fiscal year 2026, CAPEX was $162 million compared with $127 million in fiscal year 2025, as we invested in our expanding capacity globally. During the quarter, we completed public equity offerings, raising $5.6 billion after offering expenses.

David Weigand: For fiscal year 2026, CapEx was $162 million, compared with $127 million in fiscal year 2025, as we invested in our expanding capacity globally. During the quarter, we completed public equity offerings, raising $5.6 billion after offering expenses, comprising $1.4 billion of common stock and $4.2 billion of mandatory convertible preferred shares. The proceeds from these offerings will be used primarily to support increased working capital needed to support our new orders. At quarter end, cash and cash equivalents totaled $7.5 billion.

Speaker #1: This comprises $1.4 billion of common stock and $4.2 billion of mandatory convertible preferred shares. The proceeds from these offerings will be used primarily to support increased working capital needed to fulfill our new orders.

David Weigand: The proceeds from these offerings will be used primarily to support increased working capital needed to support our new orders. At quarter end, cash and cash equivalents totaled $7.5 billion. Bank borrowings and convertible note debt totaled $8.7 billion, resulting in net debt of $1.2 billion, compared with net debt of $7.5 billion at the end of the prior quarter. Turning to the balance sheet and working capital metrics. The cash conversion cycle increased by 43 days, from 106 days in Q3 to 149 days in Q4. Days of inventory increased by 13 days to 119 days, from 106 days in the prior quarter, as we built inventory in anticipation of higher revenues going into fiscal year 2027. Day sales outstanding decreased by 26 days to 59 days from 85 days in Q3, as we realized collections from some large customers.

Speaker #1: At quarter end, cash and cash equivalents totaled $7.5 billion. Bank borrowings and convertible note debt totaled $8.7 billion, resulting in net debt of $1.2 billion.

David Weigand: Bank borrowings and convertible note debt totaled $8.7 billion, resulting in net debt of $1.2 billion, compared with net debt of $7.5 billion at the end of the prior quarter. Turning to the balance sheet and working capital metrics. The cash conversion cycle increased by 43 days, from 106 days in Q3 to 149 days in Q4. Days of inventory increased by 13 days to 119 days, from 106 days in the prior quarter, as we built inventory in anticipation of higher revenues going into fiscal year 2027.

Speaker #1: Compared with net debt of $7.5 billion at the end of the prior quarter. Turning to the balance sheet and working capital metrics, the cash conversion cycle increased by $43 days from $106 days in Q3 to $149 days in Q4.

Speaker #1: Days of inventory increased by 13 days to 119 days, from 106 days in the prior quarter, as we built inventory in anticipation of higher revenues going into fiscal year '27.

Speaker #1: Day sales outstanding decreased by 26 days to 59 days from 85 days in Q3, as we realized collections from some large customers. Days payables outstanding decreased by 56 days to 29 days versus 85 days in Q3, due to a significant reduction in our average days payables between Q3 and Q4.

David Weigand: Day sales outstanding decreased by 26 days to 59 days from 85 days in Q3, as we realized collections from some large customers. Days payables outstanding decreased by 56 days to 29 days versus 85 days in Q3, due to a significant reduction in our average days payables between Q3 and Q4 due to the completion of some large AI GPU projects and the timing of payments to suppliers. Going forward, we expect the cash conversion cycle to normalize based on terms that we have in our current backlog. Now turning to the outlook for Q1 fiscal year 2027.

David Weigand: Days payables outstanding decreased by 56 days to 29 days versus 85 days in Q3, due to a significant reduction in our average days payables between Q3 and Q4 due to the completion of some large AI GPU projects and the timing of payments to suppliers. Going forward, we expect the cash conversion cycle to normalize based on terms that we have in our current backlog. Now turning to the outlook for Q1 fiscal year 2027. We expect net sales to be in the range of $14.5 billion to $15.5 billion, GAAP diluted net income per share to be between $0.89 and $0.98, and non-GAAP diluted net income per share to be between $1.01 and $1.10. Based on the expected customer and product mix, we expect gross margin to be in the range of 10.4% to 10.8%.

Speaker #1: Due to the completion of some large AIU/GPU projects and the timing of payments to suppliers, we saw a temporary impact. Going forward, we expect the cash conversion cycle to normalize based on the terms we have in our current backlog.

Speaker #1: Now, turning to the outlook for Q1 of fiscal year 2027, we expect net sales to be in the range of $14.5 billion to $15.5 billion.

David Weigand: We expect net sales to be in the range of $14.5 billion to $15.5 billion, GAAP diluted net income per share to be between $0.89 and $0.98, and non-GAAP diluted net income per share to be between $1.01 and $1.10. Based on the expected customer and product mix, we expect gross margin to be in the range of 10.4% to 10.8%. We successfully completed the issuance of $4.2 billion of mandatory convertible preferred shares in Q4.

Speaker #1: GAAP diluted net income per share to be between $89 cents and $98 cents and non-GAAP diluted net income per share to be between $1.01 and $1.10.

Speaker #1: Based on the expected customer and product mix, we expect gross margin to be in the range of 10.4% to 10.8%. We successfully completed the issuance of $4.2 billion of mandatory convertible preferred shares in Q4.

David Weigand: We successfully completed the issuance of $4.2 billion of mandatory convertible preferred shares in Q4. Due to that issuance, our GAAP and non-GAAP EPS is computed based on the two-class method, in which we allocated a portion of our net income for participating convertible preferred shares. This impacts our Q1 FY27 EPS guidance and should be considered in all EPS calculations going forward. Please see the earnings release tables for further details. GAAP operating expenses are expected to be approximately $453 million, including approximately $127 million in stock-based compensation expenses, which are excluded from non-GAAP operating expenses. The outlook for Q1 of fiscal year 2027 fully diluted GAAP earnings per share includes approximately $106 million in expected stock-based compensation expenses, net of tax effects of $32 million, which are excluded from non-GAAP diluted net income per common share.

Speaker #1: Due to that issuance, our GAAP and non-GAAP EPS is computed based on the two-class method, in which we allocate a portion of our net income for participating convertible preferred shares.

David Weigand: Due to that issuance, our GAAP and non-GAAP EPS is computed based on the two-class method, in which we allocated a portion of our net income for participating convertible preferred shares. This impacts our Q1 FY27 EPS guidance and should be considered in all EPS calculations going forward. Please see the earnings release tables for further details. GAAP operating expenses are expected to be approximately $453 million, including approximately $127 million in stock-based compensation expenses, which are excluded from non-GAAP operating expenses.

Speaker #1: This impacts our Q1 FY27 EPS guidance and should be considered in all EPS calculations going forward. Please see the earnings release tables for further details.

Speaker #1: GAAP operating expenses are expected to be approximately $453 million, including approximately $127 million in stock-based compensation expenses. Which are excluded from non-GAAP operating expenses.

Speaker #1: The outlook for Q1 of fiscal year 2027 fully diluted GAAP earnings per share includes approximately $106 million in expected stock-based compensation expenses, net of tax effects of $32 million, which are excluded from non-GAAP diluted net income per common share.

David Weigand: The outlook for Q1 of fiscal year 2027 fully diluted GAAP earnings per share includes approximately $106 million in expected stock-based compensation expenses, net of tax effects of $32 million, which are excluded from non-GAAP diluted net income per common share. We expect other income and expense, including interest expense, to result in a net expense of approximately $45 million.

Speaker #1: We expect other income and expense, including interest expense, to result in a net expense of approximately $45 million. The company's projections for Q1 fiscal year '27 GAAP and non-GAAP diluted net income per common share assume a GAAP tax rate of 20.1%.

David Weigand: We expect other income and expense, including interest expense, to result in a net expense of approximately $45 million. The company's projections for Q1 fiscal year 2027 GAAP and non-GAAP diluted net income per common share assume a GAAP tax rate of 20.1%, a non-GAAP tax rate of 20.5%, and a fully diluted share count of 745 million shares for GAAP and 761 million shares for non-GAAP. Capital expenditures for Q1 are expected to be in the range of $50 to $60 million. For the full fiscal year 2027, we expect net sales to be in the range of $65 to $72 billion. Michael, we are ready for Q&A now.

David Weigand: The company's projections for Q1 fiscal year 2027 GAAP and non-GAAP diluted net income per common share assume a GAAP tax rate of 20.1%, a non-GAAP tax rate of 20.5%, and a fully diluted share count of 745 million shares for GAAP and 761 million shares for non-GAAP. Capital expenditures for Q1 are expected to be in the range of $50 to $60 million. For the full fiscal year 2027, we expect net sales to be in the range of $65 to $72 billion. Michael, we are ready for Q&A now.

Speaker #1: A non-GAAP tax rate of 20.5% and a fully diluted share count of 745 million shares for GAAP and 761 million shares for non-GAAP.

Speaker #1: Capital expenditures for Q1 are expected to be in the range of $50 to $60 million. And for the full fiscal year 27, we expect net sales to be in the range of $65 to $72 billion.

Speaker #1: Michael were ready for Q&A now.

Speaker #2: Great. Jen.

Michael Staiger: Great. Jen?

Speaker #3: Thank you. We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand.

Operator: Thank you. We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Ananda Baruah with Loop Capital. Your line is open. Please go ahead.

Speaker #3: To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality.

Speaker #3: If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Ananda Barua with Loop Capital.

Speaker #3: Your line is open. Please go ahead.

Speaker #2: Yeah, guys, thanks for taking the questions. I have two, if I could. And congrats on the strong results and the ongoing improvement in profitability here.

Ananda Baruah: Yeah, guys. Thanks for taking the questions. I have two if I could. Congrats on the strong results and the ongoing improvement in profitability here. Let me start just with that. Charles, Dave, what is a good way to think about what fiscal year 2027 gross margins can be? You benefited from mix in June. Sounds like you are absorbing some of that mix from deal pushout in September. It is still a nice improvement, apples to apples in gross margin guide. Can you walk us through how we should think about the puts and takes on the margins, mix, CPU, things like that? Number one, how should we think about what is useful estimates for gross margin fiscal year 2027, and what may be the progression? Then I have a quick follow-up. Thanks.

Speaker #2: And let me start just with that. Charles Day, what's a good way to think about what fiscal year '27 gross margins can be, and the benefit from mix in June?

Speaker #2: Sounds like you're absorbing some of that mix. From deal push out in September, it's still a nice improvement. Apples to apples in gross margin, guys.

Speaker #2: Can you walk us through how we should think about the puts and takes on the margins—mix, CPU, things like that? And number one, how should we think about what’s a useful estimate for gross margin for fiscal year ’27, and what may be the progression?

Ananda Baruah: Number one, how should we think about what is useful estimates for gross margin fiscal year 2027, and what may be the progression? Then I have a quick follow-up. Thanks.

Speaker #2: And then I have a quick follow-up. Thanks.

Speaker #1: Okay. Thank you for the question. Yes. I mean, we will be very carefully control of balance between revenue and profitability. As you know, high volume GPU margin usually much lower.

Charles Liang: Okay. Thank you for the question. Yes. We will be very carefully control the balance between revenue and profitability. As you know, high volume GPU margin usually much lower. CPU, storage, IoT, enterprise application, on the other hand, have a higher margin. We will try to balance between the two vertical. Especially last 12 months, we have continued to grow sales force in the enterprise and server application storage. Looking forward, we will consistently growing our overall gross margin. Although we will still grow very aggressive, very faster than GPU, but we will focus much more than before on enterprise and CPU storage. The DCBBS product line is getting mature. We are shipping more and more DCBBS hardware and also software service and some switching as well. The DCBBS will be our long-term, much better profit margin product line.

Speaker #1: CPU storage, IoT, enterprise application on the other hand have a higher margin. So we will try to balance between two vertical. Especially last 12 months, we had continue to grow sales force in enterprise.

Speaker #1: And application, server application, storage. So, looking forward, we will consistently grow our overall gross margin. Although we will still grow very aggressively, very fast in GPU, we will focus much more than before on enterprise and CPU storage.

Charles Liang: Although we will still grow very aggressive, very faster than GPU, but we will focus much more than before on enterprise and CPU storage. The DCBBS product line is getting mature. We are shipping more and more DCBBS hardware and also software service and some switching as well. The DCBBS will be our long-term, much better profit margin product line.

Speaker #1: And also, the CPS product line is getting mature. So we are shipping more and more DCPPS hardware and also software service, and some switches as well.

Speaker #1: So, DCPPS will be our long-term, much better profit margin product line.

Speaker #2: And so, just to clarify before my second question, Charles, I believe I heard you say you anticipate margins to improve from September quarter levels, given the factors that you just mentioned.

Ananda Baruah: Just to clarify before my second question, Charles, I believe I heard you say you anticipate margins to improve from September quarter levels given the factors that you just mentioned. Did I hear you correctly there?

Speaker #2: Is that—hearing you correctly there?

Speaker #1: September? Which is September?

Charles Liang: September? Which is September?

Speaker #4: Yeah. So we guided to 10.4 to 10.8 for September. And we're doing everything we can as Charles mentioned to find the best margins that we can.

David Weigand: Yeah. We guided to 10.4% to 10.8% for September, and we are doing everything we can, as Charles mentioned, to find the best margins that we can.

Speaker #2: Okay. That's great. And then the follow-up is, maybe just to dovetail off of Charles' CPU remarks—it sounds like you had 80% of revenue in AI in your Q3, and 60% in Q4.

Ananda Baruah: Okay, that's great. The follow-up is, maybe just to dovetail off of Charles' CPU remarks, it sounds like you had 80% of revenue is AI in your Q3, 60% in Q4, looking for 80% again in Q1. Charles talked about taking on more CPU servers, storage, and networking. What is a useful way to think about what that sort of 20% that's not AI? What is that? If I could just squeeze in quickly, any update on the board investigation? The board inquiry. I assume it's coming close to completion, but any update there would be great too. That's it for me. Thanks.

Speaker #2: Looking for 80% again in Q1. Charles talked about taking on more CPU servers, storage, and networking. What is the useful way to think about what that sort of 20% that's not AI?

Speaker #2: What is that? And then if I could just squeeze in quickly, any update on the board investigation? The board inquiry, I assume it's coming close to completion, but any update there would be great too.

Speaker #2: That's it for me. Thanks.

Speaker #1: Yeah, it depends on customer mix. And when large data centers order a lot, for sure, AI percentage will be higher. But when David says 80% will be AI, I believe that includes two market segments.

Charles Liang: Yeah. It depends on customer mix. When large data center order a lot, for sure, AI percentage will be higher. When David say 80% will be AI, I believe that including two marked segment. One is traditional AI, the other one is application AI, agentic AI or Edge AI. So, the pure AI will be about 60% to 70%, while another 10% to 20% AI will be CPU-based AI or kind of agentic AI, Edge AI. The other 20% will be pure traditional service storage IoT. So together it's 100%.

Speaker #1: One is traditional AI; the other one is application AI—agentic AI or edge AI. So the pure AI will be about 60% to 70%.

Speaker #1: While another 10% to 20% of AI will be CPU-based AI, or kind of agentic AI, edge AI. And the other 20% will be pure traditional server storage, IoT.

Speaker #1: So targeted 100%.

David Weigand: As to your second question, Ananda, we expect to provide an update shortly, and that's all we can share on this call.

Speaker #4: As to your second question, Ananda, we expect to provide an update shortly. That's all we can share on this call.

Speaker #2: Thanks so much, guys. Really appreciate it.

Ananda Baruah: Thanks so much, guys. Really appreciate it.

Speaker #3: Your next question comes from the line of Joseph Cardoso with JP Morgan. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Joseph Cardoso with JPMorgan. Your line is open. Please go ahead.

Speaker #5: Hi, thank you for taking my question. This is MP on for Joseph Cardoso. For my first question, I just wanted to double-click on your robust orders, which you saw during the quarter.

[Analyst] (JPMorgan): Hi. Thank you for taking my question. This is MP on for Joseph Cardoso. For my first question, just wanted to double-click on your robust orders, which you saw during the quarter. You mentioned $60 billion-plus orders. Maybe anything in terms of customer concentration within that order growth, which you saw, as well as any more incremental color in terms of what really was the driver behind such a robust uptick in orders there. I have follow-up.

Speaker #5: You mentioned 60 billion plus orders. Maybe anything in terms of customer concentration within that order growth which you saw as well as any more incremental color in terms of what really was the driver behind such a robust uptick in orders there.

Speaker #5: And I have a follow-up.

Speaker #1: Yeah. I mean, around $60 billion—I would like to say 70% is AI, pure AI. The other 30% is either CPU, or CPU-based AI, or kind of edge AI.

Charles Liang: Around $60 billion, I would like to say 70% pure AI. The other 30% is either CPU or CPU-based AI or kind of edge AI application. So overall, I believe our profit margin mix will be getting better.

Speaker #1: AI application. So overall, I believe our profit margin mix will be getting better.

Speaker #5: Okay, got it. And for my follow-up, I just wanted to ask—in terms of what you mentioned about achieving some success with customer diversification—where you have, I think, nine customers that are $1 billion plus during FY26.

[Analyst] (JPMorgan): Okay, got it. For my follow-up, just wanted to ask in terms of, you mentioned that you achieved some success in terms of customer diversification where you have, I think, nine customers which are $1 billion-plus during FY26. Anything in terms of the nature of those customers, maybe in terms of Neo-Cloud versus enterprises versus sovereign AI customers? Any more incremental color there will be helpful. Thank you.

Speaker #5: Is there anything you can share regarding the nature of those customers—perhaps in terms of new cloud customers versus enterprise or sovereign AI customers? Any more incremental color there would be helpful.

Speaker #5: Thank you.

Speaker #1: Yeah. So, we have a lot of emerging new clouds and CSPs, and there were some enterprise customers that were in that mix that we mentioned.

David Weigand: Yeah. We have a lot of emerging Neo-Cloud and CSPs, and some enterprise customers that were in that mix that we mentioned.

Speaker #4: Yeah. The vision is,

Charles Liang: Yeah. The vision is CPU-based AI, for example. Nvidia now also have Vera Rubin CPU-based AI. That is from Nvidia, and AMD CPU-based AI, Arm-based, right, and Intel-based. So now, AI is, majority is still GPU-based, but still, the CPU-based AI is also growing quickly, especially for generative AI applications.

Speaker #1: CPU-based AI, for example, in media now, you also have better CPU-based AI. That's, for me, in media. And AMD CPU-based AI, ARM-based, right? And Intel-based.

Speaker #1: So now the AI is kind of majority still GPU-based, but still the CPU-based AI is also going agentic AI. AI application.

Speaker #5: Got it. Thank you. Thank you.

David Weigand: Got it. Thank you.

[Analyst] (JPMorgan): Got it. Thank you.

Speaker #3: Your next question comes from the line of Asia Merchant with Citi. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Asiya Merchant with Citi. Your line is open. Please go ahead.

Speaker #6: Great, thanks for taking my question here. Two, if I may—one of them was just, was there any change in buying patterns specifically for the large DC and CSP customers?

Asiya Merchant: Great. Thanks for taking my question here. Two, if I may. One of them was just, was there any change in buying patterns specifically for the large DC and CSP customers? I understand that there was a shipment delay into Q1. From what I understand, the guide incorporates that the shipment from Q4 would be shipped into fiscal Q1. Are you sensing any change in the buying patterns from these large data center CSP customers that you are predominant in? Because there seems to be some investor concern that maybe these customers are going more directly to ODMs than they have been typically to the likes of Super Micro. Then I have a quick follow-up.

Speaker #6: I understand that there was a shipment delay into one queue. From what I understand, the guide incorporates that the shipment from Q4 would be shipped into fiscal Q1.

Speaker #6: But are you sensing any change in the buying patterns from these large data center CSP customers that you're predominant in? Because there seems to be some investor concern that maybe these customers are going more directly to ODMs than they have been typically, to the likes of Super Micro.

Asiya Merchant: Because there seems to be some investor concern that maybe these customers are going more directly to ODMs than they have been typically to the likes of Super Micro. Then I have a quick follow-up.

Speaker #6: And then I have a quick follow-up.

Charles Liang: Okay. Yeah, for sure. I mean, large data center always have power readiness, data center readiness concern, especially liquid cooling. So our customer base overall have a similar concern as well. Still, basically, the older shipment for September quarter, December quarter, have been quite strong. Also, Super Micro business model is a bit special. Indeed, quite special. We have OEM business, but we also cover ODM business. So we have lots of large data center customer now, and especially kind of Neo-Cloud. At the same time, we are growing very aggressively for enterprise server, traditional server and storage. So overall, we are, again, both ODM and OEM. We will continue to grow in both ways.

Speaker #1: Okay, yeah, for sure. I mean, large data centers always have power readiness, data center readiness concerns—especially with liquid cooling. So, our customer base overall has a similar concern as well.

Speaker #1: But still, basically, the older shipments for the September quarter and December quarter have been quite strong. And also, I mean, the Super Micro business model is a little bit special.

Speaker #1: Indeed, quite special. We have OEM business, but we also cover ODM business. So we have lots of data center, large data center customers now.

Speaker #1: And especially kind of new cloud. At the same time, we are growing very aggressively for enterprise server—the traditional server and storage. So overall, we are kind of, again, both.

Charles Liang: At the same time, we are growing very aggressively for enterprise server, traditional server and storage. So overall, we are, again, both ODM and OEM. We will continue to grow in both ways.

Speaker #1: ODM and OEM—we will continue to grow in both ways.

Speaker #6: Okay. Thank you. And for my follow-up, the liquid cool data centers, are you able to provide what percentage of revenues those are and if you can give any further details on verticals between enterprise versus these large data center slash CSP customers that you have for the liquid cool data centers?

Asiya Merchant: Okay. Thank you. For my follow-up, the liquid cool data centers, are you able to provide what percentage of revenues those are? If you can give any further details on verticals between enterprise versus these large data center/CSP customers that you have for the liquid cool data centers. Thank you.

Speaker #6: Thank you.

Charles Liang: As you know, we are one of the very early liquid cooling technology leader. 2024, for example, we ship, I guess, 80% plus liquid cooling to the market. Now more and more platform are liquid cooling ready, and including GPU liquid cooling and CPU liquid cooling, like Vera, Rubin, and even Vera. Vera is CPU-based. Lots of our Vera CPU-based will be liquid cooling as well. Some AMD Intel CPU also liquid cooling. So overall, liquid cooling will continue to grow quickly. Very soon will dominate the data center business, I believe.

Speaker #1: As you know, I mean, we are one of the very early liquid cooling technology leaders. In 2024, for example, we shipped, I guess, 80% plus liquid cooling to the market.

Speaker #1: And now, more and more platforms are liquid cooling ready, including GPU liquid cooling and CPU liquid cooling, like Verra is doing, and even Verra.

Speaker #1: Verra is CPU-based. Lots of our Verra CPU-based systems will be liquid cooled as well. And some AMD, Intel CPUs, also liquid cooled. So overall, liquid cooling will continue to grow quickly.

Speaker #1: And very soon, we're dominating the data center business, I believe.

Asiya Merchant: Thank you.

Speaker #6: Thank you.

Speaker #3: Your next question comes from the line of Catherine Murphy with Goldman Sachs. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Katherine Murphy with Goldman Sachs. Your line is open. Please go ahead.

Speaker #7: Thank you very much. Charles, you noted that you're making investments into the salesforce to address the enterprise opportunity specifically. Can you talk about the progress that you've made here and what further investments need to be made in both go-to-market and in the product features and capabilities of Super Micro's portfolio in order to better address this opportunity?

Katherine Murphy: Thank you very much. Charles Liang, you noted that you are making investments into the sales force to address the enterprise opportunity specifically. Can you talk about the progress that you have made here and what further investments need to be made in both go-to-market and in the product features and capabilities of Super Micro's portfolio in order to better address this opportunity, and if this run rate OpEx level is the right way to think about the full year? Thank you very much.

Speaker #7: And if this run-rate OPEX level is the right way to think about the full year. Thank you very much.

Speaker #1: There you go. That is sure. So I'll address the question on the operating expenses. There are certainly some expenses that we expect to go up and others that we expect to come down.

Charles Liang: You can start it.

David Weigand: Sure. So I will address the question on the operating expenses. So there are certainly some expenses that we expect to go up and others that we expect to come down. So we think that the levels that we have are at the proper level. If you look at our historical growth rate in operating expenses, it is less than half of our revenue growth rate.

Speaker #1: And so we think that the levels that we have are at the proper level. And if you look at our historical growth rate in operating expenses, it's less than half of our revenue growth rate.

Speaker #2: Yeah. As a technology company, our investment in new technology continues to be very aggressive—for example, the high-speed switch, the optical technology. So overall, our data center total solution, with our DC-PPS-centric kind of focus, will be continually strong.

Charles Liang: Yeah. As a technology company, our investment in the new technology continues to be very aggressive. For example, the high-speed switch, the optical technology. So overall, our data center total solution, with our DCBBS as a centric kind of focus, will be continuing very strong.

Speaker #7: Thank you. And could you talk more about the Salesforce and how you're engaging with this expanded enterprise customer set? I understand that this is a broader opportunity than the types of engagements that Super Micro may have had in the past.

Katherine Murphy: Thank you. Could you talk more about the sales force and how you are engaging with this expanded enterprise customer set, understanding that this is a broader opportunity than the types of engagements that Super Micro may have had in the past?

Speaker #2: Yeah. This is Mike Staiger. I just want to chime in on Salesforce and some of the Salesforce changes. You probably saw that we elevated a few of our individuals: Matt Bauber as Chief Revenue Officer, Vic Mayala as Chief Business Officer.

Michael Staiger: Yeah. Hey, this is Mike Staiger. I just want to chime in on the sales force and some of the sales force changes. You probably saw that we elevated a few of our individuals, Matt Bubber as Chief Revenue Officer, Vik Malyala as Chief Business Officer. There has been a focus on efficiency and aligning the sales force with a solution sale element to address the AI opportunity ahead, which is supportive of better margins. So there are definitive actions in place to make those improvements, and we will keep you posted as we go out through the year, as we expand and make those changes to address the market opportunity.

Speaker #2: And there's been a focus on efficiency and aligning the sales force with a solution sales element to address the AI opportunity ahead, which is supportive of better margins.

Speaker #2: So there's definitive actions in place to make those improvements, and we'll keep you posted as we go out through the year as we expand and make those changes to address the market opportunity.

Michael Staiger: So there are definitive actions in place to make those improvements, and we will keep you posted as we go out through the year, as we expand and make those changes to address the market opportunity.

Operator: Thank you.

Katherine Murphy: Thank you.

Charles Liang: Yeah. As a technology leading company, before, we are mostly focused on engineering, production, customer service. But now we getting focused much more on enterprise and growing our overall balance, especially enterprise, as you know, the profit margin is always better, right? So we are growing our sales force aggressively now.

Speaker #2: Yeah. As a technology-leading company, before we were mostly focused on engineering, production, and customer service. But now we are focusing much more on enterprise and growing our overall balance, especially enterprise. As you know, the profit margin is always better, right?

Speaker #2: So, we are growing our sales force aggressively now.

Speaker #3: Your next question comes from the line of Ruplu Bhattacharya with Bank of America. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Ruplu Bhattacharya with Bank of America. Your line is open. Please go ahead.

Speaker #8: Hi. Thanks for taking my questions. David, given the pace of GPU platform transitions, how are you managing inventory risk around each new generation? And what gives you the confidence that the record order backlog that you now have won't result in significant inventory exposure if customer deployment schedules or platform configurations change?

Ruplu Bhattacharya: Hi. Thanks for taking my questions. David, given the pace of GPU platform transitions, how are you managing inventory risk around each new generation? And what gives you the confidence that the record order backlog that you now have won't result in significant inventory exposure if customer deployment schedules or platform configurations change? I'm asking this because Super Micro has had some issues in the past, and I have a follow-up.

Speaker #8: I'm asking this because Super Micro has had some issues in the past, and I have a follow-up.

Speaker #1: Sure. So I think everyone in the industry, in our industry, has to watch out for changes in technology. But with what we've found was with prices rising, so fast, a lot of times now, some of the old inventory does get resold at favorably.

Michael Staiger: Sure. I think everyone in our industry has to watch out for changes in technology. What we found was, with prices rising so fast, a lot of times now, some of the old inventory does get resold favorably. Nonetheless, as you point out, you don't want to get caught having to hold that inventory. There is risk in that. What we do is we try to ensure as much as possible that we have non-cancelable POs. We also try to match our procurement along with the shipment schedules as much as possible.

David Weigand: Sure. I think everyone in our industry has to watch out for changes in technology. What we found was, with prices rising so fast, a lot of times now, some of the old inventory does get resold favorably. Nonetheless, as you point out, you don't want to get caught having to hold that inventory. There is risk in that. What we do is we try to ensure as much as possible that we have non-cancelable POs. We also try to match our procurement along with the shipment schedules as much as possible.

Speaker #1: Nonetheless, as you point out, you don't want to get—you don't want to get caught having to hold that inventory. There is risk in that.

Speaker #1: So what we do is we try to ensure, as much as possible, that we have non-cancellable POs. And we also try to match our procurement along with the shipment schedules.

Speaker #1: As much as possible.

Speaker #8: Okay. Thanks for that.

Ruplu Bhattacharya: Okay. Thanks for the-

Charles Liang: Other than that, indeed, most our product design based on building block solution. Lots of our subsystem compatible or optimized for different product line or even different generation of product. That way, help us a lot in maintaining inventory when the technology generation change.

Speaker #2: Indeed. Most of our product design is based on building power solutions, so many of our subsystems are compatible with or optimized for different product lines, or even different generations of products.

Speaker #2: So that will help us a lot in maintaining inventory when technology generations change.

Speaker #8: Okay, thanks for the details there. As a follow-up, can I ask—now, with the business scaling towards $70 billion of annual revenue, right?

Ruplu Bhattacharya: Okay. Thanks for the details there. As a follow-up, can I ask, now the business is scaling towards $70 billion of annual revenue, right? How should we think about working capital intensity and operating cash conversion in fiscal 2027? I think Charles Liang said something about this in his prepared remarks. I didn't fully catch that. David Weigand, do you expect in fiscal 2027, the growth to be self-funded now from operating cash flow? Or will the company need incremental external financing to support inventory and receivables beyond the raise that you'd recently had? Thank you. Thanks for taking my question.

Speaker #8: How should we think about working capital intensity and operating cash conversion in fiscal ’27? I think Charles said something about this in his prepared remarks.

Speaker #8: I didn't fully catch that. But David, do you expect in fiscal '27, the growth to be self-funded now from operating cash flow? Or will the company need incremental external financing to support inventory and receivables beyond the raise that you’d recently had?

Speaker #8: Thank you. Thanks for taking my question.

Speaker #1: Sure, Ruplu. So I think, as I mentioned in my prepared comments, we do expect the cash conversion cycle to improve. The reason for that is, when we look at our backlog, we have improved terms.

Michael Staiger: Sure, Ruplu. I think, as I mentioned in my prepared comments, we do expect the cash conversion cycle to improve. The reason for that is when we look at our backlog, we have improved terms, which will help us on our cash flow conversion. Therefore, we expect that this will allow us to carry a greater volume of business. We are going to do everything possible to utilize our balance sheet, which is much stronger. If you look at our current assets and our current liabilities, it is stronger than most companies that you will see out on the market. We expect to use the strength of our balance sheet, as well as our good customer base, to help us fund our growth.

David Weigand: Sure, Ruplu. I think, as I mentioned in my prepared comments, we do expect the cash conversion cycle to improve. The reason for that is when we look at our backlog, we have improved terms, which will help us on our cash flow conversion. Therefore, we expect that this will allow us to carry a greater volume of business. We are going to do everything possible to utilize our balance sheet, which is much stronger. If you look at our current assets and our current liabilities, it is stronger than most companies that you will see out on the market.

Speaker #1: And this will help us with our cash flow conversion. Therefore, we expect that this will allow us to carry a greater volume of business.

Speaker #1: And so we're going to do everything possible to utilize our balance sheet, which is much stronger, and if you look at our current assets and our current liabilities, it's stronger than most companies that you'll see out on the market.

Speaker #1: And so, we expect to use the strength of our balance sheet, as well as our good customer base, to help us fund our growth.

David Weigand: We expect to use the strength of our balance sheet, as well as our good customer base, to help us fund our growth.

Speaker #2: Yeah. Once we keep between the $65 billion to $72 billion, I guess our cash flow now is pretty enough. But if there is a chance to grow much higher revenue, then we may need more cash flow.

Charles Liang: Yeah. Once we keep between $65 billion to $72 billion, I guess our cash flow now is pretty enough. But if there are chance to grow much higher revenue, then we may need more cash flow. For example, $80 billion or beyond $80 billion. There are some possibilities like that, but we will carefully control.

Speaker #2: For example, $80 billion or beyond $80 billion. So, there are some possibilities like that, but we will carefully control.

Speaker #8: Okay, thank you for the details, sir.

Ruplu Bhattacharya: Okay. Thank you for the details there.

Speaker #2: Thank you.

Charles Liang: Thank you.

Speaker #3: Your next question comes from the line of George Nodder with Wolfe Research. Your line is open. Please go ahead.

Operator: Your next question comes from the line of George Nader with Wolfe Research. Your line is open. Please go ahead.

Speaker #7: Hi, guys. Thanks for the question. Wanted to ask if you're seeing any relief or shift in sort of the AI pricing environment overall. And then sort of just like the balancing revenues and margins commentary, is that should we take that to mean that you guys are walking away from some low-margin deals right now, or how are you sort of managing some of the proof point deals that you guys have done on the next generation racks in the past?

George Nader: Hi, guys. Thanks for the question. Wanted to ask if you are seeing any relief or shift in sort of the AI pricing environment overall. Then sort of just, like, the balancing revenues and margins commentary. Should we take that to mean that you guys are walking away from some low-margin deals right now? Or how are you sort of managing some of the proof point deals that you guys have done on the next generation racks, in the past? Then I have a follow-up.

George Notter: Hi, guys. Thanks for the question. Wanted to ask if you are seeing any relief or shift in sort of the AI pricing environment overall. Then sort of just, like, the balancing revenues and margins commentary. Should we take that to mean that you guys are walking away from some low-margin deals right now? Or how are you sort of managing some of the proof point deals that you guys have done on the next generation racks, in the past? Then I have a follow-up.

Speaker #7: And then I have a follow-up.

Speaker #2: Yeah, that's why we focus between $65 to $72 billion. So, we like to support as many customers as we can, but the business has to be healthy.

Charles Liang: Well, that is why we forecast between $65 billion to $72 billion. We like to support as many customers as we can, but the business has to be healthy. The margin has to at least meet the minimum financial kind of demand.

Speaker #2: The margin has to be at this mid-minimum financial kind of demand.

Speaker #7: Got it. Okay. And then just to dive a little bit deeper into the traditional server and storage benefits right now, is a lot of that sort of standalone CPU demand? What does the attach rate or the sort of synergies with the AI side of the business look like?

George Nader: Got it. Okay. Then just to dive a little bit deeper in the traditional server and storage benefits right now. Is a lot of that sort of standalone CPU demand? What is the attach rate or the sort of synergies with the AI side of the business look like? Then how are margins sort of apples to apples trending in that business? Thanks, guys.

George Notter: Got it. Okay. Then just to dive a little bit deeper in the traditional server and storage benefits right now. Is a lot of that sort of standalone CPU demand? What is the attach rate or the sort of synergies with the AI side of the business look like? Then how are margins sort of apples to apples trending in that business? Thanks, guys.

Speaker #7: And then, how are margins—sort of apples-to-apples—trending in that business? Thanks, guys.

Speaker #2: Yeah. Very good question. Yes. In last many years, we fully focus on GPU market, AI market. But when company become bigger, I mean, yes, we are circle back to focus on enterprise CPU-based market as well.

Charles Liang: Yeah, very good question. Yes. In last many years, we fully focused on GPU market, AI market. When company becomes bigger, yes, we circle back to focus on enterprise CPU-based market as well, including enterprise and industrial PC, IoT, storage-based application. So we are going to make our balance between gross revenue and net profit become a much more healthy balance.

Speaker #2: Including enterprise and kinds of industry PC IoT storage-based applications. So we are going to make our balance between growth revenue and net profit become a much more healthy balance.

Speaker #1: And I think, by the way, I'll add to that—I think we did a reasonable job year over year, because we grew our top line by 78%.

David Weigand: I think, by the way, I will add to that. I think we did a reasonable job year-over-year because we grew our top line by 78%, and we grew our bottom line by almost the same amount. So I think that shows on a year-over-year basis what goals we are after.

Speaker #1: And we grew our bottom line by almost the same amount. So, I think that shows, on a year-over-year basis, what goals we're after.

Speaker #3: Your next question comes from the line of Nahal Chokshi with Northland Capital Markets. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Nehal Chokshi with Northland Capital Markets. Your line is open. Please go ahead.

Speaker #2: Yeah. Thank you.

Nehal Chokshi: Yeah, thank you. Congrats on amazing gross margin results. Charles, do you see the value add that Super Micro can add to NVIDIA ecosystem being different from the x86 ecosystem, somewhat implied by the discussion in the earnings deck around the Arm AGI CPU platform?

Speaker #7: Congrats on an amazing gross margin result. Charles, do you see the value Super Micro can add to the NVIDIA ecosystem being different from the XP ecosystem?

Speaker #7: Somewhat implied by your discussion and the earnings deck around the ARM, AGI, and CPU platform?

Speaker #2: Yes, still lots of chance. We can add our value. For example, our PCPPS solution. That’s all for customer—complete the data center build-out support.

Charles Liang: Yes. Still lots of chance we can add our value. For example, our DCBBS solution. They are all for customer. A complete data center build-out support. Not just GPU, CPU storage, but all the major components for data center. Other than that, lots of generative AI application. We have lots of optimization. For example, Vera-based solution, Lupin HGX base and lots of other workstation base. We see still lots of room. We can differentiate our platform from others.

Speaker #2: Not just GPU, CPU, storage, but all the major components for data centers. And other than that, lots of agentic AI applications. We have lots of optimization.

Speaker #2: For example, better base solution looping HGX-based and lots of other workstation-based—we still see lots of room. We can differentiate our product from others.

Speaker #8: I guess what I'm trying to drive at is that Nvidia is designing full systems, and where you guys come in is helping end customers customize those full systems.

Nehal Chokshi: I guess what I am trying to drive at is that Nvidia is designing full systems and where you guys come in is helping end customers customize those full systems. But with the Arm AGI CPU platform, perhaps there is more full system design help that Super Micro can bring to the table relative to Nvidia ecosystem.

Speaker #8: But with the ARM, AGI, CPU platform, perhaps there's more full system design help that Super Micro can bring to the table relative to the NVIDIA ecosystem.

Speaker #1: Yeah. I mean, yes.

Charles Liang: Yes. For example, better time to market, right? Whenever CPU, GPU available with our architecture, we are able to provide a better time to market and quality. Not just design quality, production quality, deployment quality and service, kind of work with customer for a whole data center deployment and putting data center to operation and maintain high availability, make sure customer have a minimal failure system. We see indeed more and more customer appreciate our partnership. It is kind of a buy and work together.

Speaker #2: For example, better time to market, right? Whenever the CPU or GPU is available, with our architecture, we are able to provide a better time to market.

Speaker #2: And quality—not just design quality, but production quality, deployment quality, and service. Kind of work with the customer, but a whole data center deployment and bringing the data center to operation.

Speaker #2: And maintain high availability. Make sure customers have a minimal failure system. So we see, indeed, more and more customers appreciate our partnership. So it's not just buy and go.

Speaker #2: It's kind of buy and work together.

Speaker #8: Okay, great. And then David, just real quickly, you mentioned that the backlog has improved terms with respect to the cash conversion cycle. Are those improved terms because of customers?

Nehal Chokshi: Okay, great. David, just real quickly, you mentioned that the backlog has improved terms with respect to cash conversion cycle. Is those improved terms because of customer mix? Or is it because you are seeing a higher percentage of that backlog represent repeat orders, and repeat orders potentially have more favorable terms?

Speaker #8: Or is it because you're seeing a higher percentage of that backlog represent repeat orders, and repeat orders potentially have more favorable terms?

Speaker #1: Yeah, so you broke up just a little bit, Nahal, but let me answer what I thought I heard you ask. And that is, we really had a combination of two things.

David Weigand: Yeah. So you broke up just a little bit, Nehal, but let me answer what I thought I heard you ask. We really had a combination of two things. We had new customers come in, but we also had existing customers that we were already selling to. We tightened the terms of those contracts. That is what gives us a little better visibility into our cash conversion cycle.

Speaker #1: We had new customers come in, and we also had existing customers that we were already selling to. And we tightened—really, we tightened the terms of those contracts.

Speaker #1: So that's what gives us a little better visibility into our cash conversion cycle.

Speaker #8: Great, that's super helpful. Thank you, David.

Nehal Chokshi: Great. That is super helpful. Thank you, David.

Speaker #3: Your next question comes from the line of Brandon Nispel with KeyBanc Capital Markets. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Brandon Nispel with KeyBanc Capital Markets. Your line is open. Please go ahead.

Speaker #6: Hey, guys. Thanks for taking the questions. I wanted to ask about DCBBS. You had previously guided for that to be about 20% of gross profit for this year.

Brandon Nispel: Hey, guys. Thanks for taking the questions. I wanted to ask about DCBBS. You had previously guided for that to be about 20% of gross profit for this year. Could you maybe update us on how that contributed to revenue and gross profit for this year, and how you are thinking about that for 2027? I have a follow-up. Thanks.

Speaker #6: Could you maybe update us on how that contributed to revenue and gross profit for this year, and how you're thinking about that for 2027?

Speaker #6: And I have a follow-up. Thanks.

Speaker #2: Yeah, thank you for that question. I mean, yes, DCBBS is a big project. We provide all our data center hardware and also software management and deployment software.

Charles Liang: Yeah. Thank you for the question. Yes, DCBBS is a big project. We provide all our data center hardware and also the software, management software and deployment, networking, make sure customer have a high availability and efficient maintenance. It is a kind of combination of all. For example, management software. Earlier next quarter, we will provide a proactive service package. That is the feature, the service to maintain customers' maximum availability, make sure all the server they invest are working, instead of failing and waiting there, for example. We see a very big room to grow, including a kind of switch, high bandwidth switch and the whole networking design, management tool. We see a big room to grow. 20% should be not far away.

Speaker #2: Networking, make sure customers have the highest availability and efficient maintenance. So it's kind of a combination of all. So, for example, management software—I mean, earlier, next quarter, we will provide a proactive service package.

Speaker #2: That's the feature, the service—to maintain customers' maximum availability. Make sure all the servers they invest in are working, instead of failing and just waiting there, for example.

Speaker #2: So I mean, we see a very good, very big room to grow, including kind of switches, high-bandwidth switches, and the whole networking design management tool.

Charles Liang: We see a very big room to grow, including a kind of switch, high bandwidth switch and the whole networking design, management tool. We see a big room to grow. 20% should be not far away.

Speaker #2: So we see a big room to grow. Twenty percent should not be far away.

Speaker #6: Got it. Thanks, Charles. And David, unpacking your comments around gross margins, with 75% coming from mix and 25% coming from tariff and inventory write-downs, it's about $700 million for mix and $230 million from the other bucket.

Brandon Nispel: Got it. Thanks, Charles. David, unpacking your comments around gross margins of 75% coming from mix and 25% coming from tariff and inventory write-downs. It is about $700 million for mix and $230 million from the other bucket, on my math. Within mix, I am curious, what did vendor rebates look like this quarter? Then within tariffs, did you book a tariff rebate? Thanks.

Speaker #6: On my math, so within mix, I'm curious, what did vendor rebates look like this quarter? And then within tariffs, did you book a tariff rebate?

Speaker #6: Thanks.

Speaker #1: Yeah, that's a great question. And let me say we did not book a tariff rebate. In our numbers, we are actively pursuing refunds, but we did not take benefit for those.

David Weigand: Yeah, that is a great question. Let me say, we did not book a tariff rebate in our numbers. We are actively pursuing refunds, but we did not take a benefit for those, until we see them. I think the industry is expecting that the tariffs may go back up. Maybe not be in the same fashion, but they may go back up. So that is why we still look at this as perhaps a one-time benefit, but time will tell. As to rebates, your question about rebates, we did have I think a little bit higher rebates, because we had a different mix of business, more rebate laden this quarter, this past quarter.

Speaker #1: Until we see them. But if we do, we're not—I think the rest of the industry is expecting that the tariffs may go back up, maybe not in the same fashion, but they may go back up.

Speaker #1: So, that's why we still kind of can look at this as perhaps a one-time benefit, but time will tell. So I think that we had — but as to rebates, your question about rebates — we did have, I think, a little bit higher rebates because we had a different mix of business, more rebate-laden.

Speaker #1: This quarter. This past quarter.

Speaker #8: Got it. I appreciate

Brandon Nispel: Got it. I appreciate the color. If I could do one more on the gross margin guidance, I think it is 10.6% for Q1. If we were to normalize that for tariffs and inventory write-downs, how do you see that from a year-over-year standpoint? I know from a reported basis it is up, but last year you definitely had more tariffs in the numbers and definitely more inventory write-downs that hurt those results. So I was wondering if you could sort of help us from a normalized year-over-year perspective in Q1.

Speaker #6: The color. And if I give you one more on the gross margin guidance—I think it's 10.6% for the first quarter—if we were to normalize that for tariffs and inventory write-downs, how do you see that from a year-over-year standpoint?

Speaker #6: I know from a reported basis it's up, but last year you definitely had more tariffs in the numbers and definitely more inventory write-downs that hurt those results.

Speaker #6: So, I was wondering if you could sort of help us from a normalized year-over-year perspective in the first quarter.

Speaker #1: Yeah, so my comparisons were more quarter-to-quarter, where we came down a lot on tariffs and on excess and obsolete inventory. Year over year, yeah, I think the same things are going to hold true.

David Weigand: Yeah. My comparisons were more quarter to quarter, where we came down a lot on tariffs and on excess and obsolete inventory. Year-over-year, I think the same things are going to hold true with tariffs coming down a lot in this quarter with the suspension of the IEEPA tariffs. I think there is no question that we had good results on our E&O this quarter. That was what we would consider a non-recurring event.

Speaker #1: With tariffs coming down a lot this quarter with the suspension of the IEEP tariffs, I think there's no question that we had good results on our E&O this quarter.

Speaker #1: And so that was what we would consider a non-recurring event.

Speaker #6: Understood. I appreciate you taking the questions.

Brandon Nispel: Understood. Appreciate you taking the question.

Speaker #3: Your final question comes from the line of Victor Chew with Raymond James. Your line is open. Please go ahead.

Operator: Your final question comes from the line of Victor Chu with Raymond James. Your line is open. Please go ahead.

Speaker #7: Hi, guys. Thank you. I wanted to circle back on one of Charles's previous comments. Can you just provide some color around how much of your backlog and end demand are being impacted by the shift towards agentic and inference workloads from training workloads?

Victor Chu: Hi, guys. Thank you. I wanted to circle back on one of Charles Liang's previous comments. Can you just provide some color around how much of your backlog and end demand are being impacted by the shift towards agentic and inference workloads from trading workloads? Are you observing this inflection right now in your results? I guess how does the inflection impact the mix of shipments between CPUs and GPUs in the medium term and going forward?

Victor Chiu: Hi, guys. Thank you. I wanted to circle back on one of Charles Liang's previous comments. Can you just provide some color around how much of your backlog and end demand are being impacted by the shift towards agentic and inference workloads from trading workloads? Are you observing this inflection right now in your results? I guess how does the inflection impact the mix of shipments between CPUs and GPUs in the medium term and going forward?

Speaker #7: Are you observing this kind of inflection right now in your results? And, I guess, how does the inflection impact the mix of shipments between CPUs and GPUs in the immediate term and going forward?

Speaker #2: Yeah. It's basically a complicated mix. I would never say, still, 70-something percent GPU, maybe high 20% CPU. But still, some GPU now is agentic GPU or kind of agent GPU.

Charles Liang: Yeah. It is basically a complicated mix. I would have to say still 70 something percent GPU, maybe high 20% CPU. But still, some GPU now is agentic GPU or a kind of agent GPU. So, in term of profit margin, an agentic GPU is between traditional GPU and CPU. So it is a complicated combination. But overall, with our DCBBS is growing quickly. So I believe we should be able to maintain the profit margin we plan for.

Speaker #2: So, in terms of profit margin, edge GPU is between traditional GPU and CPU. So, it's a complicated combination. But overall, with our DCBBS, it's growing quickly.

Speaker #2: So I believe we should be able to maintain the profit margin we plan for.

Victor Chu: I got it. Are you seeing a shift at all? Any changes in this? I understand mix that you are alluding to, but how does that compare to maybe a year ago, in terms of the workloads influencing that?

Victor Chiu: I got it. Are you seeing a shift at all? Any changes in this? I understand mix that you are alluding to, but how does that compare to maybe a year ago, in terms of the workloads influencing that?

Speaker #7: I got it. And I just are you seeing kind of a shift at all? Any changes in this or yeah, I understand mix that you kind of alluding to, but is this how is that compare to maybe a year ago or in terms of kind of the workloads influencing that?

Speaker #2: Yeah, yeah. Long-term, GPU percentage will continue to grow, I believe. But again, lots of GPU will be used in application—agentic AI.

Charles Liang: Yeah. Long-term GPU percentage will continue to grow, I believe. But again, lots of GPU will use in application, agentic AI, enterprise AI. So overall GPU market, I believe will be not just big, but also get into every vertical. That is what we believe at this moment.

Speaker #2: Enterprise AI. So overall, we believe the GPU market will not only be big, but also expand into every vertical. And that's what we believe at this moment.

Speaker #7: Okay. Thank you very much.

Victor Chu: Okay. Thank you very much.

Victor Chiu: Okay. Thank you very much.

Operator: We have reached the end of the Q&A session. This concludes today's call. Thank you for attending. You may now disconnect.