Supermicro's Sales Quadruple as Cash Drains: Rapid Earnings Reaction
Key Points
Sales nearly quadrupled to $19.9 billion, but gross margin fell nearly 5 points from the prior quarter.
Supermicro earned $1.6 billion but burned cash, as inventory and receivables grew and customer deposits offset only about half the outflow.
The full-year sales outlook implies slower quarters later in the fiscal year.
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Super Micro Computer (NASDAQ:SMCI) reported fiscal first-quarter sales of $19.9 billion, nearly four times the $5.0 billion of a year ago. Shares rose about 6% in early after-hours trading. The AI server maker earned $1.6 billion but still burned cash, and its full-year outlook points to a slower second half.
Key numbers
- Net sales: $19.9 billion, versus $11.1 billion last quarter and $5.0 billion a year ago.
- Gross margin: 12.7%, versus 17.5% last quarter and 9.3% a year ago.
- Diluted EPS: $1.75, versus $1.62 last quarter and $0.26 a year ago.
- Operating cash flow: Negative $434 million for the quarter.
What it means
Supermicro is winning volume at thin prices. Gross margin fell nearly 5 points from last quarter. The release doesn't explain the drop, but its forward-looking statements note that a small number of large customers could mean lower margins. Profit still jumped because operating expenses grew far slower than sales, up 67% against a 297% sales increase.
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The cash story is weaker. Receivables and inventory soaked up about $6 billion this quarter. Customer deposits offset about half of that. The company still burned cash overall.
Image source: Getty Images.
Growth also looks set to flatten. At the midpoint, the full-year sales outlook implies second-half quarters averaging about $18 billion, below this quarter's pace. Next quarter's GAAP EPS guidance is centered at $1.71, below this quarter's $1.75.
What to watch next
Watch whether operating cash flow turns positive as these receivables come due. Also check that the final quarterly filing matches, since the release calls these figures preliminary and unaudited.
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