Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Super Micro Computer Inc (SMCI, Financial) reported record quarterly revenue of $5.31 billion, marking a 143% year-over-year growth.
- Fiscal 2024 revenue reached $14.94 billion, a 110% increase from the previous year.
- The company has been included in the Nasdaq-100 Index, reflecting its strong market performance.
- Super Micro Computer Inc (SMCI) is leading in AI infrastructure, particularly with its DLC liquid cooling technology, which is expected to become a mainstream solution.
- The company forecasts fiscal 2025 revenue between $26 billion to $30 billion, indicating continued strong growth.
Negative Points
- Operating margin for Q4 was 7.8%, lower than expected due to a higher mix of hyperscale data center business and expedited costs for DLC liquid cooling components.
- A shortage of key components delayed about $800 million of revenue, impacting the EPS for June.
- Non-GAAP gross margin for Q4 was 11.3%, down from 15.6% in Q3, due to product and customer mix and higher initial costs in ramping production of new DLC AI GPU clusters.
- The company experienced a negative free cash flow of $2.5 billion for fiscal year 2024 due to strong revenue growth and working capital needs.
- Interest expenses and higher operating expenses impacted the financial performance, with Q4 GAAP diluted earnings per share of $5.51 below the guidance range.
Q & A Highlights
Q: Encouraged to see the revenue guidance for $26 billion to $30 billion for fiscal '25. Can you provide a little bit of color around the assumptions underpinning that revenue guidance and any visibility in terms of backlog and supply availability?
A: We continue to gain design wins and see a lot of customer engagement, especially with our DLC liquid cooling and Datacenter Building Block Solutions. Our capacity is growing, and we are targeting $26 billion to $30 billion for the next 12 months. Regarding gross margin, our DLC liquid cooling is now very mature, which will gradually increase our profitability.
Q: How should we think about the sustainability or repeat orders from the hyperscale customer that impacted product mix and margins?
A: We are expanding our capacity in Taiwan and Malaysia, which allows us to cater to large-scale data center customers while maintaining our enterprise customer base. This dual focus will help us grow gross margins and net profit over the long term.
Q: There have been reports about the delay of the GB200 from NVIDIA. How would that impact the conversion of your backlog to revenue through the year?
A: We treat potential delays as a normal possibility with new technology introductions. However, we have no problem providing customers with alternative solutions like H200 liquid cooling. The overall impact should be minimal.
Q: Can you specify how much of the 430 bps sequential decline in gross margin was due to customer mix versus ramping liquid cooling solutions?
A: The decline was primarily due to the higher mix of hyperscale data center business and expedited costs for DLC liquid cooling components. The $800 million revenue push-out was mostly related to liquid cooling key components, which are now more readily available.
Q: Could you frame how the company is thinking about its liquid cooling capability relative to others providing similar services?
A: Liquid cooling has been in the market for 30 years but has had a small market share. Recently, we shipped over 1,000 racks, representing more than 15% of global data center new deployments. Our DLC solutions are highly efficient, saving energy costs and reducing carbon footprint.
Q: Can you provide an update on your rack capacity expansion for both liquid cooled and air cooled solutions?
A: Last month, we had a capacity of 1,000 liquid cooling racks per month, which has now grown to 1,500 racks per month. By year-end, we aim to reach 3,000 racks per month. Liquid cooling will be a significant portion of our business in the next 12 months.
Q: Has your guidance contemplated shipping Blackwell platform solutions for revenue in the December quarter?
A: We are conservative in our estimates. We do not expect any significant Blackwell volume in Q3, and only a small volume in Q4. The real volume is expected in the March quarter next year.
Q: Can you comment on the mix shift of AI rack scale revenue in the quarter? Did it increase quarter on quarter?
A: Yes, our revenues increased significantly, driven primarily by liquid cooled racks. We are building capacity to meet the growing demand, especially with the upcoming Blackwell solution.
Q: Can you comment on Super Micro's DLC failure rates relative to air cooled and other DLC solutions?
A: Our DLC solutions are highly efficient, allowing CPUs and GPUs to run at lower temperatures, which optimizes data center performance and uptime. We have a significant market share in DLC and continue to promote both DLC and air cooled solutions.
Q: Given your time to market and volume capabilities in liquid cooling, can you walk through your pricing strategy?
A: Liquid cooling offers significant value due to energy savings and reduced carbon footprint. We aim to promote it as a mainstream product solution, focusing on gaining market share rather than adding excessive value to customers.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
