Super Micro Computer, Inc.

Company Overview

Business Model: Super Micro Computer, Inc. is a Silicon Valley-based provider of total IT solutions for enterprise, cloud, AI, high-performance computing (HPC), and edge computing applications such as 5G Telco and Retail. Its solutions encompass servers, storage systems, modular blade servers, workstations, full-rack scale solutions, networking devices, server sub-systems, and server management. The company leverages its Server Building Block Solutions® architecture for rapid product development and emphasizes optimal power and thermal management, including advanced liquid cooling technologies. Primary revenue generation is derived from the sale of these comprehensive IT solutions.

Market Position: Super Micro Computer, Inc. positions itself as a key provider of advanced IT infrastructure, particularly excelling in AI-focused and liquid-cooled data center solutions. Its Server Building Block Solutions® architecture offers flexibility and accelerated deployment, enabling the company to compete in a dynamic market against major global IT hardware providers. The company's strategic focus on next-generation computing platforms, including those for AI, underpins its competitive stance.

Recent Strategic Developments: In fiscal year 2025, Super Micro Computer, Inc. delivered AI-focused solutions compatible with NVIDIA’s Hopper (H100/H200) and Blackwell (GB200/B200/RTX Pro 6000) generation platforms. It launched Data Center Building Block Solutions (DCBBS) designed for liquid-cooled AI factories and introduced DLC-2 (Direct Liquid Cooling solution), which aims to reduce electricity costs by up to 40% and total cost of ownership (TCO) by up to 20% compared to air-cooled setups. The company also unveiled products supporting Intel® Xeon® 6900 Series processors, Intel® Xeon® 6 data center CPUs, AMD EPYC™ 9005 Series CPUs, and AMD Instinct™ MI350/355 Series GPUs. Additionally, it expanded its edge and IoT portfolio and broadened storage offerings with AI-optimized and enterprise-grade, scale-up storage products.

Geographic Footprint: Super Micro Computer, Inc. conducts its primary operations from its Silicon Valley headquarters and facilities in Taiwan and the Netherlands. A new facility in Malaysia was added during fiscal year 2025. Sales and marketing efforts are executed through a direct sales force and indirect channel partners. International sales constituted 40.6% of net sales in fiscal year 2025, an increase from 32.0% in fiscal year 2024. The company maintains international offices in the Netherlands, Taiwan, South Korea, the United Kingdom, China, and Japan.

Financial Performance

Revenue Analysis

Profitability Metrics:

• Gross Margin: 11.1%
• Operating Margin: 5.7%
• Net Margin: 4.8%

Investment in Growth:

• R&D Expenditure: $636.6 million (2.9% of revenue)
• Capital Expenditures: $127.2 million
• Strategic Investments: Net purchases of non-marketable equity securities amounted to $56.0 million in FY25, including a $6.0 million investment for an 11% interest in Ampera, Inc. in June 2025. Super Micro Computer, Inc. anticipates capital expenditures for FY26 to range from $180.0 million to $200.0 million.

Business Segment Analysis

Super Micro Computer, Inc. operates in one operating segment. However, it provides revenue breakdown for its primary product categories:

Server and Storage Systems

Financial Performance:

• Revenue: $21,311.6 million (+50.2% YoY)
• Operating Margin: Not separately disclosed, but contributes to the overall company operating margin.
• Key Growth Drivers: Strong demand for GPU & Super Racks, including H200, H100, and B200 systems, drove a $5,804.0 million (52%) increase in billings in FY25. This demand also led to a 34% increase in the average selling price of these systems. Additionally, services and software net sales increased by $102.2 million in FY25.

Product Portfolio:

• Liquid and air cooled AI Servers for Training and Inferencing
• SuperBlade®, MicroBlade®, FlexTwin™, GrandTwin®, BigTwin® blade and multi-node systems
• SuperStorage systems
• Hyper, CloudDC, WIO rackmount systems
• Embedded (5G/IoT/Edge) systems
• MicroCloud server systems

Market Dynamics:

• This segment is primarily driven by the escalating demand for high-performance computing, particularly in AI and GPU-accelerated solutions. The company's focus on liquid cooling addresses the increasing power and thermal management requirements of advanced data centers.

Subsystems and Accessories

Financial Performance:

• Revenue: $660.4 million (-17.9% YoY)
• Operating Margin: Not separately disclosed.
• Key Growth Drivers: The decrease in revenue in FY25 was attributed to a strategic shift by Super Micro Computer, Inc. to prioritize sales of its server and storage systems.

Product Portfolio:

• This category includes various server sub-systems and accessories that complement the company's core server and storage system offerings.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: In June 2025, Super Micro Computer, Inc. repurchased 4,891,171 shares for approximately $200.0 million at an average price of $40.89 per share, which were subsequently retired. No publicly announced repurchase plans were in effect during FY25.
• Dividend Payments: Super Micro Computer, Inc. has never declared or paid cash dividends and does not anticipate doing so in the foreseeable future.

Balance Sheet Position:

• Cash and Equivalents: $5,169.9 million
• Total Debt: $4,757.7 million
• Net Cash Position: $412.3 million
• Credit Rating: Not disclosed.
• Debt Maturity Profile: Principal payments for total debt are $75.1 million in FY26, $19.6 million in FY27, $6.6 million in FY28, $5.9 million in FY29, and $5.4 million in FY30, totaling $112.5 million. This excludes convertible notes.
  • 2029 Convertible Notes: $1,725.0 million principal, bearing 3.50% annual interest, with a conversion rate of 11.9842 shares per $1,000 principal (conversion price ~$83.44/share). Carrying value was $1,703.7 million as of June 30, 2025.
  • 2028 Convertible Notes: $700.0 million principal, maturing July 15, 2028, bearing 2.25% annual interest. Initial conversion rate is 16.3784 shares per $1,000 principal (conversion price ~$61.06/share). Carrying value was $685.4 million as of June 30, 2025.
  • 2030 Convertible Notes: $2,300.0 million principal, maturing June 15, 2030, with no regular interest. Initial conversion rate is 18.1154 shares per $1,000 principal (conversion price ~$55.20/share). Carrying value was $2,256.1 million as of June 30, 2025.

Cash Flow Generation:

• Operating Cash Flow: $1,659.5 million
• Free Cash Flow: $1,532.3 million
• Cash Conversion Metrics: Operating cash flow significantly improved in FY25, moving from a negative position in FY24, indicating enhanced working capital efficiency and strong revenue conversion to cash.
• Future Capital Access: On July 16, 2025, Super Micro Computer, Inc. entered into a Receivables Purchase Agreement with MUFG Bank, Ltd. and Crédit Agricole Corporate and Investment Bank, providing an uncommitted facility limit of $1,790.0 million.

Operational Excellence

Production & Service Model: Super Micro Computer, Inc. designs, develops, and manufactures a substantial portion of its systems within the United States, primarily at its San Jose, California headquarters. Global assembly, testing, and quality control operations are conducted at facilities in San Jose, California, Taiwan, the Netherlands, and Malaysia. The company's Quality and Environmental Management Systems are certified to ISO 9001, ISO 14001, and/or ISO 13485 standards.

Supply Chain Architecture: Key Suppliers & Partners: Super Micro Computer, Inc. relies on several third-party suppliers and contract manufacturers. Notably, Ablecom Technology, Inc. and Compuware Technology, Inc., which are related parties, are utilized for contract design, manufacturing coordination, and warehousing. Ablecom Technology, Inc. manufactured 95.4% of the chassis purchased by Super Micro Computer, Inc. in FY25. Supplier Concentration: Two suppliers accounted for 64.4% and 5.1% of total purchases in FY25. Purchases from Ablecom Technology, Inc. and Compuware Technology, Inc. collectively represented 3.3% of the cost of sales in FY25. Non-cancelable purchase commitments: As of June 30, 2025, the company had $1.6 billion in non-cancelable purchase commitments, including $148.9 million to related parties.

Facility Network:

• Manufacturing:
  • San Jose, California: owns approximately 1,601,000 sq ft.
  • Taoyuan County, Taiwan: owns approximately 954,000 sq ft across 6.77 acres, pledged as security for $28.8 million in outstanding loans as of June 30, 2025.
  • Malaysia: owns approximately 590,000 sq ft on 30 acres.
  • Den Bosch, Netherlands: leases approximately 350,000 sq ft.
• Research & Development: R&D centers are located in San Jose, California, and Taiwan.
• Distribution: Leases include approximately 459,479 sq ft warehouse in San Jose, CA (expires Oct 2030), approximately 246,000 sq ft warehouse in Fremont, CA (expires Oct 2030), and approximately 28,000 sq ft warehouse in Milpitas, CA (expires Mar 2027).

Market Access & Customer Relationships

Go-to-Market Strategy: Distribution Channels: Super Micro Computer, Inc. employs a diversified go-to-market strategy, leveraging a direct sales force, channel partners (including distributors, value-added resellers, system integrators, and OEMs), and digital platforms. Compuware Technology, Inc. serves as a non-exclusive authorized distributor for the company in Taiwan, China, and Australia.

Customer Portfolio: Enterprise Customers:

• Customer Concentration: In FY25, four customers each accounted for 10% or more of net sales. This indicates a notable concentration of revenue among key clients.
  • Customer A: 20.9% of net sales (FY25), 20.0% (FY24).
  • Customer B: 11.5% of net sales (FY25).
  • Customer C: 11.3% of net sales (FY25).
  • Customer D: 11.1% of net sales (FY25). Customer Concentration (Accounts Receivable): As of June 30, 2025, Customer A accounted for 33.4% of accounts receivable. As of June 30, 2024, Customer C accounted for 44.8% of accounts receivable.

Geographic Revenue Distribution:

• United States: 59.4% of total revenue
• Asia: 25.0% of total revenue
• Europe: 12.4% of total revenue
• Thailand: 10.9% of total revenue

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: Super Micro Computer, Inc. operates within the IT solutions market, which serves enterprise, cloud, AI, HPC, and edge computing applications. This market is characterized by rapid technological advancements, particularly in AI and high-performance computing, driving demand for specialized server and storage solutions. A key trend is the increasing need for optimal power and thermal management, including liquid cooling, for high-density data center infrastructure.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors:

• Cisco: A global technology conglomerate offering networking hardware, software, and high-technology services.
• Dell: A multinational technology company that develops, sells, repairs, and supports computers and related products and services.
• Hewlett-Packard Enterprise: A multinational enterprise information technology company providing servers, storage, networking, consulting, and support services.
• Lenovo: A global technology company specializing in designing, manufacturing, and marketing consumer electronics, personal computers, software, business solutions, and related services.
• Foxconn: A Taiwanese multinational electronics contract manufacturer.
• Quanta Computer: A Taiwanese manufacturer of notebook computers and other electronic hardware.
• Wiwynn Corporation: A Taiwanese cloud IT infrastructure provider.

Competitive Response Strategy: Super Micro Computer, Inc.'s strategy to maintain competitive advantage involves continuous innovation in AI-focused and liquid-cooled solutions, rapid product development through its Server Building Block Solutions® architecture, and expanding its product portfolio to support the latest processor and GPU technologies.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics:

• AI Industry Dependence: Super Micro Computer, Inc.'s future success is significantly tied to the growth and evolution of the AI industry, which inherently involves substantial risks and uncertainties due to its rapid technological advancements and market shifts.
• Technology Disruption: Operating in a fast-paced technology sector, the company faces risks of technological obsolescence, necessitating continuous innovation and adaptation to remain competitive. Customer Concentration:
• Dependency Risks: Four customers accounted for 10% or more of net sales in FY25. This concentration creates a dependency risk where a significant reduction in demand or loss of one or more of these major customers could materially impact revenue and financial performance.

Operational & Execution Risks

Supply Chain Vulnerabilities:

• Supplier Dependency: Super Micro Computer, Inc. relies on a limited number of suppliers, with two suppliers accounting for 64.4% and 5.1% of total purchases in FY25. This concentration exposes the company to risks related to supplier performance, availability, and pricing.
• Related Party Risks: The company engages in significant transactions with related parties, Ablecom Technology, Inc. and Compuware Technology, Inc. The familial and ownership ties among key executives and these entities present potential conflicts of interest and governance risks.
• Capacity Constraints: The company has $1.6 billion in non-cancelable purchase commitments, which could lead to inventory risks if demand forecasts are inaccurate or if there are production bottlenecks.

Financial & Regulatory Risks

Market & Financial Risks:

• Total Debt: Super Micro Computer, Inc. had consolidated indebtedness of approximately $4.8 billion as of June 30, 2025, including substantial convertible notes. This level of debt could impact the company's financial flexibility, leverage, and ability to fund future operations or investments.
• Data Center Lease Obligations: A Master Colocation Service Agreement (MCSA) for data center space represents over $292.0 million in financial obligations, a long-term commitment that could affect liquidity. Regulatory & Compliance Risks:
• Export Controls: The company is subject to U.S. export restrictions targeting China’s semiconductor and supercomputing industries, which have impacted products containing NVIDIA A100 and H100 integrated circuits. These restrictions were expanded in November 2023 and revised in January 2025, imposing new limits and requiring continuous compliance. New replacement regulations are expected.
• Data Privacy: Compliance with global data privacy regulations, including EU GDPR, California CCPA, and CPRA, imposes ongoing compliance requirements and potential costs.

Geopolitical & External Risks

Geopolitical Exposure:

• Trade Relations: Super Micro Computer, Inc. is exposed to the impacts of trade tensions and policy changes, particularly concerning U.S. export controls affecting sales to certain regions and countries.
• Sanctions & Export Controls: The company has paused sales to Russia, Belarus, and restricted areas in Ukraine, indicating its exposure to geopolitical conflicts and associated international sanctions.

Innovation & Technology Leadership

Research & Development Focus: Core Technology Areas: Super Micro Computer, Inc.'s R&D efforts are concentrated on developing advanced IT solutions for enterprise, cloud, AI, HPC, and edge computing. A significant focus is placed on AI-focused solutions, liquid cooling technologies, and ensuring compatibility with the latest processor and GPU platforms from strategic partners like NVIDIA, Intel, and AMD. Innovation Pipeline: Recent product launches, such as AI-focused solutions for NVIDIA's Hopper and Blackwell platforms, Data Center Building Block Solutions for liquid-cooled AI factories, and the DLC-2 solution, demonstrate a robust innovation pipeline targeting high-growth segments. R&D Expenditure: R&D expenditure totaled $636.6 million in FY25, reflecting a substantial investment in innovation. The R&D organization comprised over 3,200 employees as of June 30, 2025.

Intellectual Property Portfolio:

• Patent Strategy: Charles Liang, the CEO, has been granted 23 U.S. server technology patents, indicating a strategic focus on protecting core server technology innovations and establishing competitive moats.

Technology Partnerships:

• Strategic Alliances: Super Micro Computer, Inc. maintains strategic collaborations with key industry players, including NVIDIA, Intel, and AMD, to ensure optimal performance and compatibility of its solutions with their latest platforms.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: Super Micro Computer, Inc. benefits from long-standing leadership, with co-founders Charles Liang, Sara Liu, and Yih-Shyan (Wally) Liaw having served since the company's inception in 1993. Charles Liang has held the CEO position since the company's founding.

Board Composition: The Board of Directors consists of 9 directors, with 6 of the 9 current members identified as independent. The Board held 26 meetings in FY25.

• Audit Committee: Chaired by Tally Liu, with Robert Blair and Scott Angel as members. All members are designated "audit committee financial experts." The committee met 70 times in FY25.
• Compensation Committee: Chaired by Susan Mogensen (Susie Giordano), with Sherman Tuan and Tally Liu as members.
• Governance Committee: Chaired by Judy Lin, with Robert Blair and Sherman Tuan as members.
• Lead Independent Director: Tally Liu was re-appointed Lead Independent Director in January 2025 for a one-year term expiring January 2026.

Compensation Committee Interlocks and Insider Participation: Sherman Tuan and Tally Liu served on the Compensation Committee for all of FY2025. Susan Mogensen (Susie Giordano) joined the Compensation Committee on June 4, 2025.

Security Ownership of Certain Beneficial Owners and Management (as of July 31, 2025):

• Charles Liang & Sara Liu: 82,071,594 shares (13.5%), including exercisable options and RSU shares.
• Yih-Shyan (Wally) Liaw: 15,482,087 shares (2.6%), including exercisable options and RSU shares.
• All directors and executive officers as a group: 98,904,662 shares (16.2%), including shares issuable upon options exercisable within 60 days.
• The Vanguard Group: 61,946,070 shares (10.4%) as of April 10, 2024.
• BlackRock, Inc.: 41,338,350 shares (7.0%) as of October 25, 2024.

Equity Compensation Plan Information (as of June 30, 2025):

• Number of securities to be issued upon exercise of outstanding options, warrants and rights: 55,276,780 (34,848,133 options, 20,428,647 RSUs).
• Weighted average exercise price of outstanding options, warrants and rights: $22.47.
• Weighted-average remaining contractual term of outstanding options: 6.99 years.
• Number of securities remaining available for future issuance: 17,217,058.

Related Party Transactions:

• Employment Relationships: Several family members of Charles Liang and Sara Liu hold executive or significant positions within the company, including Hung-Fan (Albert) Liu (brother of Sara Liu), Shao Fen (Carly) Kao (sister-in-law of Sara Liu), Mien-Hsia (Michelle) Hung (sister-in-law of Sara Liu), and Bill Liang (son of Sara Liu and Charles Liang).
• Transactions with Ablecom Technology, Inc. and Compuware Technology, Inc.:
  • Ablecom Technology, Inc.: Steve Liang (Charles Liang's brother) is CEO. Charles Liang and Sara Liu owned approximately 10.5% of Ablecom Technology, Inc. as of June 30, 2025. Super Micro Computer, Inc. outsources design and server chassis manufacturing to Ablecom Technology, Inc. Purchases from Ablecom Technology, Inc. were $321.9 million in FY25.
  • Compuware Technology, Inc.: Bill Liang (Charles Liang's brother) is CEO/Chairman. Super Micro Computer, Inc. outsources design and power supply manufacturing to Compuware Technology, Inc. and Compuware Technology, Inc. is a non-exclusive authorized distributor. Purchases from Compuware Technology, Inc. were $328.3 million in FY25.
• Loans: As of June 30, 2025, Charles Liang had an outstanding loan of approximately $16.8 million from Chien-Tsun Chang (spouse of Steve Liang), unsecured and with no maturity date.

Human Capital Strategy

Workforce Composition:

• Total Employees: 6,238 employees as of June 30, 2025.
• Geographic Distribution: 2,948 employees are based in San Jose, California facilities.
• Skill Mix: The workforce comprises 3,255 employees in R&D, 705 in sales and marketing, 545 in general and administrative, and 1,733 in manufacturing.

Talent Management: Acquisition & Retention: Super Micro Computer, Inc.'s compensation structure for employees includes base salary, incentive bonus programs, and long-term equity awards (restricted stock units and options). U.S. employees receive comprehensive benefits such as life and health insurance, paid time off, sick leave, holiday pay, and a 401(k) plan. Diversity & Development: The company is committed to fostering a workplace that encourages diverse voices, perspectives, and backgrounds. CEO Pay Ratio: The ratio of CEO Charles Liang's annual total compensation ($13,518) to the median annual total compensation of all other employees ($86,832) was 0.16 to 1 for FY25.

Environmental & Social Impact

Environmental Commitments: Climate Strategy: Super Micro Computer, Inc. promotes its "We Keep IT Green" initiative. Its DLC-2 (Direct Liquid Cooling solution) is designed to lower electricity costs by up to 40% and reduce total cost of ownership (TCO) by up to 20%, contributing to energy efficiency and reduced environmental impact in data centers.

Regulatory Environment & Compliance

Regulatory Framework: Industry-Specific Regulations: Super Micro Computer, Inc. is subject to U.S. export restrictions targeting China’s semiconductor and supercomputing industries, initially imposed in October 2022 and expanded in November 2023. These restrictions, which impact products containing NVIDIA A100 and H100 integrated circuits, were revised in January 2025 to include worldwide authorization requirements and new limits. New replacement regulations are expected. International Compliance: The company ceased recording revenue from Russia in February 2022 due to geopolitical factors. Data Privacy: Super Micro Computer, Inc. is subject to data privacy regulations including the EU General Data Protection Regulation (GDPR), California Consumer Privacy Act (CCPA), and California Privacy Rights Act of 2020 (CPRA).

Legal Proceedings:

• Putative Class Action Complaints: Multiple class action complaints were filed in the U.S. District Court for the Northern District of California in August, October, and November 2024, and are pending. A putative class action claim was also filed in Ontario Superior Court of Justice, Canada, in November 2024.
• Putative Derivative Lawsuits: Multiple derivative lawsuits were filed in both federal and state courts in September, November, and December 2024, naming current and former directors and officers as defendants, with Super Micro Computer, Inc. as a nominal defendant. These actions have been consolidated.
• Regulatory Investigations: Subpoenas from the Department of Justice and the Securities and Exchange Commission were received in late 2024.

Principal Accounting Fees and Services:

• Audit Fees: FY2025 $8,263 thousand, FY2024 $8,578 thousand. BDO USA, P.C. was appointed as the independent registered public accounting firm starting with fiscal year 2024.

Tax Strategy & Considerations

Tax Profile:

• Effective Tax Rate: The effective tax rate was 12.9% in FY25, compared to 5.2% in FY24 and 14.7% in FY23.
• Geographic Tax Planning: Malaysia joined OECD Pillar Two effective January 1, 2025. The Malaysian subsidiary of Super Micro Computer, Inc. has a 10-year tax exemption beginning in fiscal year 2026.
• Tax Reform Impact: The U.S. One Big Beautiful Bill Act (OBBBA) was enacted July 4, 2025, with effective dates through 2027, which may impact future tax planning initiatives.