Super Micro Computer, Inc.
For the period ended Sep 30, 2025. Filed Nov 7, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2025 · Filed Nov 7, 2025
SMCI$28.76+6.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-03-31; filed 2025-05-12.
0001375365-25-000014
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-09-30; filed 2025-11-07.
0001375365-25-000030
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 95 previous paragraphs and 85 current paragraphs.
28 unchanged; 30 reworded; 26 added; 37 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 9 previous and 10 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (26)
Current report
AI and Data Centers
Current report
•Net sales decreased by 15.5% in the three months ended September 30, 2025 as compared to the three months ended September 30, 2024, primarily due to the timing of several substantial customer orders received only in late September, which prevented the related GPU and SuperRack products from being shipped within the quarter. The decrease also reflects changes in product mix and a modest reduction in average selling prices as we continued to price our products competitively.
Current report
•Gross margin decreased to 9.3% in the three months ended September 30, 2025 from 13.1% in the three months ended September 30, 2024, primarily due to our strategy to offer competitive pricing to gain market share, change in product and customer mix, and higher manufacturing related expenses.
Current report
•Net income decreased to $168.3 million in the three months ended September 30, 2025 as compared to $424.3 million in the three months ended September 30, 2024, which was primarily due to decrease in gross profit and increase in operating and other expenses.
Current report
An accounting estimate is considered critical if both (i) the nature of the estimates or assumptions is material due to the levels of subjectivity and judgment involved, and (ii) the impact within a reasonable range of outcomes of the estimates and assumptions is material to our condensed consolidated financial statements. Critical accounting estimates in the areas of inventories, revenue recognition, and income taxes, when applicable, have the greatest potential impact on our condensed consolidated financial statements. Therefore, we consider these to be our critical accounting estimates.
Current report
We use several suppliers and contract manufacturers to design and manufacture subsystems in accordance with our specifications, with most final assembly and testing performed at our manufacturing facilities in the region where our products are sold. We work with Ablecom, one of our key contract manufacturers and a related party, for our chassis and certain other components. We also outsource a significant part of the manufacturing of certain components, particularly power supplies, to Compuware, also a related party. We also collaborate on design and development activities with Ablecom and Compuware, where we substantially fund the design costs and retain the intellectual property rights. Our purchases of products from Ablecom and Compuware combined represented 3.4% and 4.6% of cost of sales on our condensed consolidated statements of operations for the three months ended September 30, 2025 and 2024, respectively. For further details on our dealings with related parties, see Note 10, “Related Party Transactions” in the notes to the condensed consolidated financial statements.
Current report
Other Income, Net and Interest Expense
Current report
Income Tax Provision
Current report
Nets Sales
Current report
The$919.5 million or 15.5% decrease in net sales was primarily due to the timing of several substantial orders, which were only received in late September, such that the products covered by those orders could not be shipped during the quarter ended September 30, 2025. This was caused principally by customer configuration upgrades and delays in data center readiness. A decrease in our average selling price compared to the prior quarter ended September 30, 2024 also contributed modestly to the decline in net sales of server and storage systems, as we maintained our strategy of pricing our products competitively to retain and or gain market shares. This was most pronounced in declining billings for GPU & Super Racks of $527.8 million or 11.7% year over year, including liquid-cooled and air-cooled servers that are generally more complex and of higher average selling price. Additionally, sales across other product categories decreased by $349.9 million, or 28.5%, including Traditional Storage, SuperBlade, Ultra Server, and other product lines.
Current report
The $919.5 million or 15.5% decrease in total net sales was primarily driven by the timing of several substantial customer orders that were received only in late September, which prevented the related products including GPU servers, HPC systems, and rack-scale solutions, which generally have higher average selling prices, from being shipped during the quarter ended September 30, 2025. This was caused principally by customer configuration upgrades and delays in data center readiness. The decrease also reflects a shift in product mix and a modest reduction in average selling prices as we continued to price our products competitively to retain and gain market share. This impact was most notable in the United States, where net sales decreased by $2,406.8 million, or 56.7%, compared to the prior quarter ended September 30, 2024.
Current report
The $611.3 million or 11.8% decrease in cost of sales was primarily driven by a net decrease of approximately $754.5 million or 14.1% in certain products including GPU servers, HPC, and rack-scale solutions, consistent with the lower shipment volume during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024, resulting from the timing of several substantial orders that were received near the end of the quarter and therefore could not be fulfilled. This was caused principally by customer configuration upgrades and delays in data center readiness. This decrease was partially offset by a $91.3 million or 29.8% decrease in vendor rebates, a $42.1 million or 398.3% increase in tariff expenses driven by new trade policies, as well as a $27.4 million or 299.3% increase in inventory write-down adjustments from aged inventory.
Current report
The 3.8% decrease in the gross margin percentage was due to a change in product and customer mix.
Current report
Research and development expenses. The $41.1 million or 31.1% increase in research and development expenses was primarily driven by an increase in employee-related costs of $41.7 million, or 33.4%, mainly comprised of a $20.9 million, or 57.2%, increase in stock-based compensation, and $17.8 million, or 22.0%, increase in salaries, as we expanded our workforce and invested in key talent. These increases along with other immaterial cost increases were partially offset by a $2.0 million, or 29.3%, increase in research and development fees received from certain suppliers and customers.
Current report
Sales and marketing expenses. The $21.0 million or 30.5% decrease in sales and marketing expenses was primarily driven by a $19.9 million, or 289.3%, decrease in advertising and promotion expenses due to a marketing reimbursement of $17.2 million, or 291.6%, received from certain business partners for reimbursed product release and promotion efforts, and a $8.9 million, or 34.7%, decrease in sales commission bonuses during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. These decreases along with other minor cost decreases were partially offset by an increase in employee-related costs, mainly due to a $4.5 million, or 21.7%, increase in salaries and a $3.3 million, or 43.0%, increase in stock-based compensation, similarly to our research and development expenses as we expanded our workforce and invested in key talent company-wide.
Current report
General and administrative expenses. The $1.4 million or 2.1% decrease in general and administrative expenses was primarily attributable to a $6.8 million or 63.3% reduction in audit and tax fees, driven by an absence of additional costs related to the delayed filing of our fiscal 2024 Form 10-K, and a $2.1 million or 68.8% reduction in excise tax expense driven by decrease in sales compared to prior-year quarter which reduced the related tax expense. These reductions were partially offset by a $2.1 million or 39.3% increase in consulting fees, driven by greater use of external consultants to support and enhance our financing activities and other initiatives. Additionally, there was a $3.6 million or 30.3% net increase in employee-related costs including salaries, bonus, and stock-based compensation as we expanded our workforce and invested in key talent, and a $1.9 million or 6.2% increase in facilities costs such as rental costs, utility costs, and indirect depreciation costs, which are related to our efforts to expand our production capacity in order to support growing customer demands.
Current report
Other Income, Net and Interest Expense
Current report
The $44.0 million or 611.1% increase in other income, net was primarily driven by higher interest income and favorable foreign exchange rate fluctuations. This is mainly comprised of an increase of $43.3 million or 543.2% in interest income for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024, reflecting increased cash deposits funded by the proceeds from our convertible notes issuance, a $6.5 million or 459.6% gain from mark-to-market adjustments on a marketable equity securities investment, and a $4.4 million or 1687.7% from foreign currency exchange rate fluctuations resulting from a stronger U.S. dollar in the first quarter of fiscal 2026. These gains were partially offset by a $12.0 million impairment loss related to our non-marketable investment during the first quarter of fiscal 2026.
Current report
The $7.5 million or 43.1% increase in interest expense was primarily driven by a $21.9 million or 1187.3% increase in interest and amortization related to the amendment of the 2029 Convertible Notes and new issuance of the 2028 Convertible Notes and the 2030 Convertible Notes during the second half of fiscal 2025. This increase was partially offset by a $13.9 million or 94.1% decrease in interest expense associated with our Bank of America line of credit and term loans, which were fully repaid in November 2024.
Current report
Income Tax Provision
Current report
Income tax provision decreased by $34.5 million or 46.2% primarily due to a decline in worldwide income before income tax provision that reduced tax expense by $58.4 million which was offset by a lower tax benefit from stock-based compensation of approximately $14.5 million, and the effects of other immaterial tax items of approximately $9.4 million. The income before income tax provision for the first quarter of fiscal 2026 was $208.6 million, which is a decrease of $290.5 million or 58.2%.
Current report
Net cash used in operating activities during the three months ended September 30, 2025 mostly consisted of $168.3 million net income adjusted for certain non-cash items, such as $89.1 million of share-based compensation expense, $12.3 million of depreciation and amortization expense, and changes in working capital. The decrease in cash flows from operating activities during the three months ended September 30, 2025 compared to the three months ended September 30, 2024 was due to a decrease in net income, and increase in an inventory purchases, partially offset by higher stock-based compensation, and other operational spending.
Current report
Net cash used in investing activities during the three months ended September 30, 2025 mostly consisted of $32.3 million of purchases of property, plant, and equipment as we continued to invest in real estate, servers, data centers, and network infrastructure. The decrease in cash used in investing activities during the three months ended September 30, 2025 compared to the three months ended September 30, 2024, was due to decreases in purchases of property, plant, and equipment.
Current report
Net cash used in financing activities during the three months ended September 30, 2025 mostly consisted of payment for withholding taxes related to settlement of equity awards of $43.6 million, partially offset by net proceeds from lines of credit and term loans of $17.0 million. The increase in cash used by financing activities during the three months ended September 30, 2025 compared to the three months ended September 30, 2024, was mostly due to decrease in net proceeds from lines of credits and term loans.
Current report
Contractual Obligations
Current report
Our estimated future obligations as of September 30, 2025, include both current and long-term obligations. For our long-term debt, as noted in Note 7, “Lines of Credit and Term Loans” in the notes to the condensed consolidated financial statements, we have a current obligation of$100.6 million and a long-term obligation of $25.2 million. Additionally, as noted in Note 8, “Convertible Notes” in the notes to the condensed consolidated financial statements, we have a convertible debt obligation of$4,725.0 million. Under our operating leases as noted in Note 9, “Leases” in the notes to the condensed consolidated financial statements, we have a current obligation of $30.1 million and a long-term obligation of$359.8 million. As noted in Note 13, “Commitments and Contingencies” in the notes to the condensed consolidated financial statements, we have current obligations related to non-cancelable purchase commitments of $11.6 billion.
Removed paragraphs (37)
Previous report
This section and other parts of this Quarterly Report contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that involve risks and uncertainties. These statements relate to future events or our future financial performance based on management’s beliefs and assumptions and on information currently available to management. In some cases, you can identify forward-looking statements by terminology including “would,” “could,” “may,” “will,” “goal,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “project,” “estimate,” “predict,” “potential,” “probable of achievement,” or “continue,” the negative of these terms or other comparable terminology. These statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance, time frames or achievements to be materially different from any future results, performance, time frames or achievements expressed or implied by the forward-looking statements. In evaluating these statements, you should specifically consider various factors, including the risks discussed under the heading “Risk Factors” in Part II, Item 1A of this filing and in Part I, Item IA of our Annual Report on Form 10-K for the fiscal year ended June 30, 2024 (the “2024 10-K”). Given these risks, uncertainties, and other factors, you should not place undue reliance on these forward-looking statements. Also, these forward-looking statements represent our estimates and assumptions only as of the date of this filing. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, whether as a result of new information, future events or otherwise. We cannot guarantee future results, levels of activity, performance or achievements.
Previous report
Artificial Intelligence and Data Centers
Previous report
•Net sales increased by 19.5% in the three months ended March 31, 2025 as compared to the three months ended March 31, 2024.
Previous report
•Gross margin decreased to 9.6% in the three months ended March 31, 2025 from 15.5% in the three months ended March 31, 2024.
Previous report
•Effective tax rate increased to 5.1% in the three months ended March 31, 2025 from (5.2)% in the three months ended March 31, 2024.
Previous report
Other (Expense) Income, Net and Interest Expense
Previous report
Income Tax (Provision) Benefit
Previous report
*Totals may not sum due to rounding.
Previous report
Nets Sales by Product Type
Previous report
Server and storage systems constitute an assembly and integration of subsystems and accessories and related services. Subsystems and accessories are comprised of server-boards, chassis and accessories.
Previous report
The$760.4 million increase in net sales of our server and storage systems was primarily driven by an increase in the demand from customers for GPU servers, high performance computing (“HPC”), and rack-scale solutions which are generally more complex and of higher value, resulting in an increase of average selling price (“ASP”).
Previous report
The $10.6 million decrease in net sales for our subsystems and accessories of 7.0% was primarily due to the focus on allocating certain supply chain constrained components to build and ship server and storage systems rather than selling them as parts of subsystems and accessories.
Previous report
The$6,593.1 million increase in net sales of our server and storage systems was primarily driven by an increase in the demand from customers for GPU servers, HPC, and rack-scale solutions which are generally more complex and of higher value, resulting in an increase of ASP.
Previous report
The $12.7 million decrease in net sales for our subsystems and accessories of 2.4% was primarily due to the focus on allocating certain supply chain constrained components to build and ship server and storage systems rather than selling them as parts of subsystems and accessories.
Previous report
The $749.8 million increase in overall net sales is driven by an increase in demand from customers for GPU servers, HPC, and rack-scale solutions which have higher ASPs, especially for large enterprise and data center customers from Asia where these customers have experienced significant growth. The $589.7 million increase of net sales in Asia is mainly due to an increase in net sales in Japan, and Thailand.
Previous report
The $6,580.4 million increase in overall net sales is driven by an increase in demand from customers for GPU servers, HPC, and rack-scale solutions which have higher ASPs, especially for large enterprise and data center customers from the United States, Asia and Europe where these customers have experienced significant growth. The increase of net sales in Europe and Asia is mainly due to an increase in net sales in the United Kingdom, Sweden, Spain, Japan, Singapore and Thailand.
Previous report
Cost of Sales
Previous report
The $907.0 million increase in cost of sales can primarily be attributed to an increase of $772.5 million in costs of materials, contract manufacturing expenses, and the expedited recognition of costs in order to accelerate time-to-market for new products that primarily resulted in the increase in net sales volume. Additionally, there was a $109.6 million increase in inventory write-down adjustment, mainly from prior generations of GPUs and related components, along with additional reserves established during the period. Further, overhead costs increased by $18.0 million and freight costs increased by a $6.9 million, primarily due to the increase in net sales volume.
Previous report
The 5.9% decrease in the gross margin percentage was primarily due to our strategy to offer competitive pricing to gain market share, increased competition, a shift in product focus towards modular system designs that offer scalability and flexibility to meet the diverse needs of data centers, and a change in customer mix, including an increased presence in international markets.
Previous report
The $6,210.0 million increase in cost of sales can primarily be attributed to an increase of $5,978.6 million in costs of materials, contract manufacturing expenses, and expedited costs to accelerate time-to-market for new products primarily related to the increase in net sales volume. Additionally, there was a $131.4 million increase in inventory write-down adjustment, mainly from prior generations of GPU and related components, along with additional reserves established during the period. Further, overhead costs increased by $59.1 million and freight costs increased by $40.9 million, primarily due to the increase in net sales volume.
Previous report
The 4.1% decrease in the gross margin percentage was primarily due to our strategy to offer competitive pricing to gain market share, increased competition, a shift in product focus towards modular system designs that offer scalability and flexibility to meet the diverse needs of data centers, and a change in customer mix, including an increased presence in international markets.
Previous report
Research and development expenses. The $46.7 million increase in research and development expenses was driven by a $41.9 million increase in employee-related costs driven by our planned workforce expansion as we continue to invest in key talent, primarily comprised of additional stock compensation expense and salary increases. In addition, there was a $5.1 million increase in product development costs to support next generation products and technologies. We believe that research and development expenses will continue to increase as we continue to expand our workforce and invest in key talent to stay at the forefront of development of next generation products and technologies.
Previous report
Sales and marketing expenses. The $10.3 million increase in sales and marketing expenses was primarily driven by a $8.6 million increase in employee-related costs, driven by increased strategic hiring across sales and marketing functions to support our growth and sales strategy, primarily comprised of additional stock-based compensation expense and salary increases. In addition, there was $13.8 million increase in advertising and other expenses, which was partially offset by a $12.1 million increase in marketing development funds received.
Previous report
General and administrative expenses. The $17.4 million increase in general and administrative expenses was driven by a $19.0 million increase in professional and service fees primarily from additional external accounting, tax, legal, and advisory services necessary to support our external reporting related activities. This was partially offset by a $3.1 million decrease in employee-related costs, primarily due to lower stock-based compensation expense. We believe that general and administrative expenses will continue to increase as we continue to expand our workforce and invest in key talent.
Previous report
Research and development expenses. The $117.2 million increase in research and development expenses was driven by a $100.4 million increase in employee-related costs driven by our planned workforce expansion as we continue to invest in key talent, primarily comprised of stock-based compensation expense and salary increases. In addition, there was a $22.1 million increase in product development costs to support next generation products and technologies, which was partially offset by a $5.3 million increase in research and development credits received from certain suppliers and customers. We believe that research and development expenses will continue to increase as we continue to expand our workforce and invest in key talent to stay at the forefront of developing next generation products and technologies.
Previous report
Sales and marketing expenses. The $74.6 million increase in sales and marketing expenses was primarily driven by a $47.2 million increase in employee-related costs, driven by increased strategic hiring across sales and marketing functions to support our growth and sales strategy, primarily comprised of additional stock-based compensation expense and salary increases. In addition, there was a $45.0 million increase in advertising and other expenses, which was partially offset by a $17.6 million increase in marketing development funds received.
Previous report
General and administrative expenses. The $76.3 million increase in general and administrative expenses was driven by a $55.1 million increase in professional and service fees primarily from additional external accounting, tax, legal, and advisory services necessary to support our external reporting related activities. In addition, there was a $13.2 million increase in employee-related costs driven by increased strategic hiring across various finance and other functions, comprised primarily of stock-based compensation expense and salary increases, and an $8.0 million increase in facilities related expenses. We believe that general and administrative expenses will continue to increase as we continue to expand our workforce and invest in key talent.
Previous report
Other (Expense) Income, Net and Interest Expense
Previous report
The $28.3 million decrease in other (expense) income, net and interest expense was primarily driven by a $30.3 million loss on extinguishment of the 2029 convertible notes due to the amendment of the existing notes (see Note 7 “Convertible Notes”), and a $6.2 million decrease in foreign exchange gain. The decrease was partially offset by a $9.8 million increase in interest income.
Previous report
The increase in interest expense of $7.2 million was primarily driven by interest charges on the 2029 Convertible Notes and 2028 Convertible Notes of $11.5 million, which was partially offset by decrease in interest expenses associated with the Company's reduced utilization of its lines of credit of $4.3 million.
Previous report
The $6.9 million decrease in other (expense) income, net and interest expense was primarily attributable to a $30.3 million decrease from the loss on extinguishment of the 2029 convertible notes due to the amendment of the existing notes (see Note 7 “Convertible Notes”), partially offset by a $22.9 million increase in interest income.
Previous report
The increase in interest expense of $21.1 million was primarily driven by interest charges on the 2029 Convertible Notes and 2028 Convertible Notes of $14.4 million, as well as an increase in interest expenses associated with the Company's line of credit of $6.7 million.
Previous report
Income Tax (Provision) Benefit
Previous report
The income tax provision for the nine months ended March 31, 2025 was higher than that for the nine months ended March 31, 2024, primarily due to a decrease in the stock compensation tax deduction for the nine months ended March 31, 2025 driven by the decrease in our stock price.
Previous report
Net cash provided by operating activities increased by $2,634.1 million for the nine months ended March 31, 2025, compared to the nine months ended March 31, 2024. This increase was primarily driven by a $2,505.0 million increase in working capital and a $130.8 million increase in non-cash items, comprised of stock-based compensation expense and the loss on extinguishment of our 2029 convertible notes. The increase in working capital was due to a $3,136.9 million increase in inventory in anticipation of planned future shipments. Accounts receivable increased by $596.7 million due to stronger cash collections in the current period, partially offset by a $1,121.3 million decrease in accounts payable, resulting from the timing of vendor payments during the current period. Other operating assets and liabilities decreased by $107.3 million, driven by movements in prepaid expenses, income tax payable, accrued liabilities, and deferred revenue.
Previous report
Net cash used in investing activities decreased by $33.5 million for the nine months ended March 31, 2025 compared to the nine months ended March 31, 2024 primarily due to a reduction in investments in marketable securities by $27.7 million, and a decrease in capital expenditures on property, plant, and equipment of $5.8 million.
Previous report
Net cash provided by financing activities decreased by $3,478.2 million for the nine months ended March 31, 2025 as compared to the nine months ended March 31, 2024. The decrease was primarily driven by a $2,314.0 million reduction in proceeds from the issuance of common stock, net of issuance costs. In addition, net proceeds from convertible notes decreased by $901.2 million, reflecting the difference between the issuances of the 2029 Convertible Notes in February 2024 and the 2028 Convertible Notes in February 2025, net of the purchase of capped calls. There was also a $252.7 million decrease in proceeds from borrowings, net of repayment compared to the prior period.
Reworded paragraphs (30)
Previous wording
The following discussion and analysis of the financial condition and results of our operations should be read in conjunction with our condensed consolidated financial statements and related footnotes included elsewhere in this Quarterly Report and our 2024 10-K, which includes our consolidated financial statements for the fiscal years ended June 30, 2024 and 2023.
Current wording
The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements and the related footnotes included elsewhere in this Quarterly Report on Form 10-Q, and the Annual Report on Form 10-K for the fiscal year ended June 30, 2025, which includes our consolidated financial statements for the fiscal years ended June 30, 2025 and 2024.
Previous wording
We are a global leader in Application-Optimized Total IT Solutions. Founded and operating in San Jose, California, we are committed to delivering first-to-market innovation for Enterprise, Cloud, AI, and 5G Telco/Edge IT Infrastructure. We are a Total IT Solutions manufacturer with server, AI, storage, IoT, switch systems, software, and support services. Supermicro's motherboard, power, and chassis design expertise further enables our development and production, enabling next-generation innovation from cloud to edge for our global customers. Our products are designed and manufactured in-house (in the United States, Taiwan, and the Netherlands), leveraging global operations for scale and efficiency and optimized to improve TCO and reduce environmental impact (Green Computing). The award-winning portfolio of Server Building Block Solutions allows customers to optimize for their exact workload and application by selecting from a broad family of systems built from our flexible and reusable building blocks that support a comprehensive set of form factors, processors, memory, graphic processing units (“GPUs”), storage, networking, power, and cooling solutions (air-conditioned, free air cooling or liquid cooling).
Current wording
We are a global leader in Application-Optimized Total IT Solutions. Founded and operating in San Jose, California, we are committed to delivering first-to-market innovation for Enterprise, Cloud, AI, and 5G Telco/Edge IT Infrastructure. As a Total IT Solutions manufacturer, our offerings include server, artificial intelligence (“AI”) systems, storage, IoT devices, switches, software, and support services. Supermicro's expertise in motherboard, power, and chassis design drives our ability to develop and produce next-generation innovations, from cloud to edge, for our global customers. Our products are designed and manufactured in-house across facilities in the United States, Taiwan, and the Netherlands. Leveraging our global operations for scale and efficiency, we optimize solutions to improve TCO while reducing environmental impact through Green Computing initiatives. Our award-winning portfolio of Server Building Block Solutions empowers customers to tailor systems precisely to their exact workloads and applications. By selecting from a broad family of flexible and reusable building blocks, customers can configure a comprehensive range of form factors, processors, memory, GPUs, storage, networking, power, and cooling solutions, including air-conditioned, free air, and liquid cooling solutions.
Previous wording
We commenced operations in 1993 and have been profitable every year since inception. For the three months ended March 31, 2025 and 2024, our net income was $108.8 million and $402.5 million, respectively. For the nine months ended March 31, 2025 and 2024, our net income was $853.7 million and $855.4 million, respectively.
Current wording
We commenced operations in 1993 and have been profitable every year since inception. For the three months ended September 30, 2025 and 2024, our net income was $168.3 million and $424.3 million, respectively.
Previous wording
In order to increase our sales and profits, we believe that we must continue to develop flexible application optimized server and storage solutions while being among the first to market with new features and products. Our focus is on delivering Total IT Solutions that integrate, validate, and deliver server, storage, networking and software at the rack and cluster (multi-rack) level. Additionally, we will continue to expand our software offering and customer service and support, particularly as we focus more on large enterprise and data center customers. A key component of our strategy is our Data Center Building Block Solutions, which significantly reduces data center build time and supports the full integration of AI computing, server, storage, networking, rack, cabling, liquid cooling, end-to-end management software, onsite deployment services and maintenance. We must also develop our sales partners and distribution channels to further expand our market share.
Current wording
In order to increase our sales and profits, we believe that we must continue to develop flexible application optimized server and storage solutions while being among the first to market with new features and products. Our focus is on delivering Total IT Solutions that integrate, validate, and deliver server, storage, networking and software at the rack and cluster (multi-rack) level. Additionally, we will continue to expand our software offerings and enhance customer service and support, particularly as we increase our focus on large enterprise and data center customers. A key component of our strategy is our DCBBS, which significantly reduces data center build time and enables full integration of AI computing, server, storage, networking, rack, cabling, liquid cooling, end-to-end management software, onsite deployment services, and ongoing maintenance. To further expand our market share, we also recognize the need to strengthen our network of sales partners and distribution channels.
Previous wording
We measure our financial success based on various indicators, including growth in net sales, gross profit margin, operating margin, and growth in net income per common share. Among the key non-financial indicators of our success is our ability to rapidly introduce new products and deliver the latest application-optimized server and storage solutions. To achieve this, we work closely with the developers and manufacturers of key components, ensuring we leverage emerging technologies as they become available. Historically, our ability to quickly introduce new products has allowed us to capitalize on technology transitions such as the launch of new GPUs, microprocessors and storage technologies. As a result, we closely monitor the product introduction cycles of industry leaders, including NVIDIA Corporation, Intel Corporation, Advanced Micro Devices, Inc., Broadcom Inc., Samsung Electronics Company Limited, Micron Technology, Inc. and others. This focus also influences our research and development expenditures as we continue to invest in both our current and future product development efforts.
Current wording
We measure our financial success based on various key indicators, including growth in net sales, gross profit margin, operating margin, and net income per common share. In addition to these financial metrics, a critical non-financial indicator of our success is our ability to rapidly introduce new products and deliver the latest application-optimized server and storage solutions. To support this, we work closely with the developers and manufacturers of key components, allowing us to integrate emerging technologies as they become available. Our ability to quickly bring new products to market, which we believe is enabled by our Building Block Solution architecture and has historically enabled us to capitalize on major technology transitions such as the launch of new GPUs, microprocessors and storage technologies. Accordingly, we closely monitor the product introduction cycles of industry leaders, including NVIDIA Corporation, Intel Corporation, Advanced Micro Devices, Inc., Broadcom Inc., Samsung Electronics Company Limited, Micron Technology, Inc. and others. This strategic focus directly informs our research and development investments, as we continue to allocate resources toward both our current initiatives and future product innovation.
Previous wording
The growing use of artificial intelligence (“AI”), which requires enhanced datacenter capabilities, has substantially increased demand for our products. We expect this trend to continue, with further demand for datacenter expansion driven by the AI market. As a result, we will continue to enhance our product capabilities and expand our service offerings to address the growing demand in the AI market and datacenter markets. We believe that our ability to tailor certain products to the unique needs of these sectors sets us apart from many competitors and positions us to capture an even greater market share going forward.
Current wording
The growing use of AI, which requires enhanced datacenter capabilities, has substantially increased demand for our products. We expect this trend to continue, with further demand for datacenter expansion driven by the AI market. As a result, we will continue to enhance our product capabilities and expand our service offerings, including DCBBS to address the growing demand in the AI market and datacenter markets. We believe that our ability to tailor certain products to the unique needs of these sectors sets us apart from many competitors and positions us to capture an even greater market share going forward.
Previous wording
Our business, results of operations, and financial outlook have been, and may continue to be, impacted by adverse macroeconomic conditions and uncertainties. These challenges include labor shortages, global supply chain disruptions, tariffs, inflation, higher interest rates, fluctuations in capital markets, and ongoing global economic and geopolitical developments. These challenges could, among other things, impact demand for our products as well as our ability to supply products, both of which could impact net sales, affect our operating costs due to foreign exchange rate movements and impact our margins due to exogenous factors such as new and increased tariffs. While many of these macroeconomic factors could have a long-term impact, others may have a short-term impact which could lead to our financial results not being comparable on a period to period basis.
Current wording
Macroeconomic factors, including inflation, interest rate changes, capital market volatility, global supply chain constraints, tariffs, and global economic and geopolitical developments, have had and may continue to have direct and indirect impacts on our business and results of operations, particularly demand for our products and net sales. While difficult to isolate and quantify, these macroeconomic factors have also impacted and may continue to impact our supply chain and manufacturing costs, employee wages, costs for capital equipment and value of our investments. Further, while many of these macroeconomic factors could have a long term impact, others may have a short term impact which could lead to our financial results not being comparable on a period-to-period basis.
Previous wording
•Operating expenses increased by 33.9% as compared to the three months ended March 31, 2024 and were equal to 6.4% and 5.6% of net sales in the three months ended March 31, 2025 and 2024, respectively.
Current wording
•Operating expenses increased by 7.0% in the three months ended September 30, 2025 as compared to the three months ended September 30, 2024, primarily due to higher headcount and increases in salary and stock-based compensation.
Previous wording
Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these condensed consolidated financial statements requires us to make estimates and judgements that affect the reported amounts of assets, liabilities, net sales and expenses. We evaluate our estimates on an on-going basis based on a) historical experience, and b) assumptions we believe to be reasonable under the circumstances and are not readily apparent from other sources, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Because these estimates can vary depending on the situation, actual results may differ from these estimates. Making estimates and judgments about future events is inherently unpredictable and is subject to significant uncertainties, some of which are beyond our control. Should any of these estimates and assumptions change or prove to have been incorrect, it could have a material impact on our results of operations, financial position and statement of cash flows.
Current wording
Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which are prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. On an ongoing basis, we regularly evaluate our accounting estimates based on historical experience and on various other assumptions that we believe are reasonable under the circumstances. The actual impact on our financial performance could differ from these estimates under different assumptions or conditions.
Previous wording
There have been no material changes to our critical accounting policies and estimates as compared to those disclosed in our 2024 10-K.
Current wording
There have been no material changes to our critical accounting policies and estimates as compared to those disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025.
Previous wording
Net sales primarily consist of sales of our server and storage solutions, including systems and related services, subsystems, and accessories. The key factors that impact net sales of our server and storage systems are the number of servers and racks sold and the average selling prices per server or rack. For subsystems and accessories, the main drivers of net sales are the number of units shipped and the average selling price per unit. The prices for our server and storage systems can vary widely depending on the configuration, including factors such as speed, functionality and performance of key components, including central processing units (“CPUs”), GPUs, solid state drives (“SSDs”), cooling systems and memory. Similarly, the prices for our subsystems and accessories fluctuate depending on the relative value of the specific item being purchased. such as power supplies, server boards, chassis or other accessories.
Current wording
Net sales primarily consist of sales of our server and storage solutions, including systems and related services, subsystems, and accessories. The key factors that impact net sales of our server and storage systems are the number of servers and racks sold, as well as the average selling prices per server or rack. For subsystems and accessories, the main drivers of net sales are the number of units shipped and the average selling price per unit. The prices for our server and storage systems can vary widely depending on the configuration, including factors such as speed, functionality and performance of key components, including CPUs, GPUs, SSDs, cooling systems, and memory. Similarly, the prices for our subsystems and accessories fluctuate depending on the relative value of the specific item being purchased, such as power supplies, server boards, chassis or other accessories.
Previous wording
Other (expense) income, net consists primarily of interest earned on our investments, cash balances and foreign exchange gains and losses. Interest expense represents interest expense on our term loans and lines of credit and amortization of the 2029 Convertible Notes and 2028 Convertible Notes issuance costs.
Current wording
Other income, net and interest expense consists primarily of interest earned on our investments and cash balances, interest incurred on our debt, and foreign exchange gains and losses.
Previous wording
The following table presents certain items of our condensed consolidated statements of operations for the three and nine months ended March 31, 2025 and 2024 (dollars in millions):
Current wording
The following table presents certain items of our condensed consolidated statements of operations for the three months ended September 30, 2025 and 2024 (in millions):
Previous wording
The following table presents certain items of our condensed consolidated statements of operations expressed as a percentage of revenue for the three and nine months ended March 31, 2025 and 2024:
Current wording
The following table presents certain items of our condensed consolidated statements of operations expressed as a percentage of net sales for the three months ended September 30, 2025 and 2024:
Previous wording
The following table presents net sales by product type for the three and nine months ended March 31, 2025 and 2024 (dollars in millions):
Current wording
The following table presents net sales for the three months ended September 30, 2025 and 2024 (dollars in millions):
Previous wording
The following table presents net sales by geographic region for the three and nine months ended March 31, 2025 and 2024 (dollars in millions):
Current wording
The following table presents net sales by geographic region for the three months ended September 30, 2025 and 2024 (dollars in millions):
Previous wording
Cost of sales and gross margin for the three and nine months ended March 31, 2025 and 2024 are as follows (dollars in millions):
Current wording
Cost of sales and gross margin for the three months ended September 30, 2025 and 2024 are as follows (dollars in millions):
Previous wording
Operating expenses for the three and nine months ended March 31, 2025 and 2024 are as follows (dollars in millions):
Current wording
Operating expenses for the three months ended September 30, 2025 and 2024 are as follows (dollars in millions):
Previous wording
Other (expense) income, net and Interest expense for the three and nine months ended March 31, 2025 and 2024 are as follows (dollars in millions):
Current wording
Other income, net and interest expense for the three months ended September 30, 2025 and 2024 are as follows (dollars in millions):
Previous wording
Income tax (provision) benefit and effective tax rates for the three and nine months ended March 31, 2025 and 2024 are as follows (dollars in millions):
Current wording
Income tax provision and effective tax rates for the three months ended September 30, 2025 and 2024 are as follows (dollars in millions):
Previous wording
Our quarterly effective income tax rate is based on the estimated annual income tax rate forecast and discrete tax items recognized in the period. The effective tax rate for the three months ended March 31, 2025, was higher than that for the three months ended March 31, 2024, primarily due to a decrease in the stock compensation tax deduction for the three months ended March 31, 2025 driven by the decrease in our stock price.
Current wording
Our quarterly effective income tax rate is based on the estimated annual income tax rate forecast and discrete tax items recognized in the period. The effective tax rate for the three months ended September 30, 2025, is higher than that for the three months ended September 30, 2024, primarily due to a significant decrease in stock-based compensation tax deduction and lower research tax credit because of lower stock vesting price in the three months ended September 30, 2025.
Previous wording
We have financed our growth primarily through funds generated from operations, borrowing facilities, the sale of our common stock, and the issuance of convertible notes. Recent factors contributing to changes in liquidity include an increased need for working capital to support higher inventory levels required for our growing revenues and, to a lesser extent, longer supply chain lead times for certain key components. Our cash and cash equivalents were $2.5 billion and $1.7 billion as of March 31, 2025 and June 30, 2024, respectively. Of these amounts, cash and cash equivalents held in foreign locations were$728.1 million and $337.3 million as of March 31, 2025 and June 30, 2024, respectively.
Current wording
We have financed our growth primarily with funds generated from operations, as well as utilizing borrowing facilities, selling our common stock, and issuing convertible notes. Recent drivers of liquidity changes included an increase in the need for working capital due to higher levels of inventory required to support future growing revenues, greater requests for longer payment terms from customers due to increasing system costs and to a lesser extent longer supply chain lead times on certain key components. Our cash and cash equivalents were $4.2 billion and $5.2 billion as of September 30, 2025 and June 30, 2025, respectively. Our cash and cash equivalents held in foreign locations was $974.2 million and $607.2 million as of September 30, 2025 and June 30, 2025, respectively.
Previous wording
Amounts held outside of the U.S. are typically used to meet non-U.S. liquidity needs. Repatriations of these funds is generally not subject to U.S. federal income tax, though state income or foreign withholding taxes may apply. In cases where local restrictions prevent the intercompany transfer of funds, our strategy is to retain cash balances outside the U.S. and meet liquidity needs through operating cash flows, external borrowings, or both. We do not expect restrictions or potential taxes on the repatriation of amounts held outside the U.S. to materially affect our overall liquidity, financial condition, or results of operations.
Current wording
Amounts held outside of the United States are typically used to meet non-U.S. liquidity needs. Repatriations of these funds are generally not subject to U.S. federal income tax, though state income or foreign withholding taxes may apply. In cases where local restrictions prevent the intercompany transfer of funds, our strategy is to retain cash balances outside the U.S. and meet liquidity needs through operating cash flows, external borrowings, or both. We do not expect restrictions or potential taxes on the repatriation of amounts held outside the U.S. to materially affect our overall liquidity, financial condition, or results of operations.
Previous wording
We believe that our current cash, cash equivalents, borrowing capacity from available credit facilities and internally generated cash flows will be sufficient to support our operating activities, as well as maturing debt and interest payments, for the 12 months following the filing of this Quarterly Report. We continue to assess financing options that may be necessary to support the growth of our business.
Current wording
We believe that our current cash, cash equivalents, borrowing capacity available from our credit facilities and internally generated cash flows will be sufficient to support our operating businesses and maturing debt and interest payments for the 12 months following the issuance of these condensed consolidated financial statements. We continue to assess financing options that may be necessary to support the growth of our business.
Previous wording
Our key cash flow metrics were as follows (dollars in millions):
Current wording
Our key cash flow metrics were as follows (in millions):
Previous wording
Refer to Note 6 “Lines of Credit and Term Loans”, in our notes to the condensed consolidated financial statements in this Quarterly Report for further information on our outstanding bank debt.
Current wording
Refer to Note 7, “Lines of Credit and Term Loans”, in the notes to the condensed consolidated financial statements in this Quarterly Report for further information on our outstanding debt.
Previous wording
On February 20, 2025, we (i) closed the offering of$700.0 million aggregate principal amount of 2028 Convertible Notes and (ii) executed a first supplemental indenture and second supplemental indenture governing to the 2029 Convertible Notes, pursuant to which, among other things, the Company amended certain terms of, and obtained waivers with respect to, the Original 2029 Convertible Notes. Refer to Note 7 “Convertible Notes”, in our notes to the condensed consolidated financial statements in this Quarterly Report for further information on the issuance of the 2028 Convertible Notes and the amendment of the terms of the 2029 Convertible Notes.
Current wording
Refer to Note 8, “Convertible Notes”, in the notes to the condensed consolidated financial statements in this Quarterly Report for further information on the amendment of the terms of the 2029 Convertible Notes, and the issuance of the 2028 Convertible Notes and the 2030 Convertible Notes.
Previous wording
We anticipate our capital expenditures for the remainder of fiscal year 2025 will be in range of$45.0 million to$55.0 million, relating primarily to costs associated with our global manufacturing capabilities, including tooling for new products, new information technology investments, and facilities upgrades and expansion. We will also continue to evaluate new business opportunities and new markets. As a result, our future growth within the existing business or new opportunities and markets may dictate the need for additional facilities and capital expenditures to support that growth. We evaluate capital expenditure projects based on a variety of factors, including expected strategic impacts (such as forecasted impact on revenue growth, productivity, expenses, service levels and customer retention).
Current wording
We anticipate our capital expenditures for the remainder of fiscal year 2026 will be in range of$200.0 million to$220.0 million, primarily relating to costs associated with our global manufacturing capabilities, including tooling for new products, new information technology investments, and facilities upgrades and expansion. We will also continue to evaluate new business opportunities and new markets. As a result, our future growth within the existing business or new opportunities and markets may dictate the need for additional facilities and capital expenditures to support that growth. We evaluate capital expenditure projects based on a variety of factors, including expected strategic impacts (such as forecasted impact on net sales growth, productivity, expenses, service levels and customer retention).
Previous wording
Our future capital requirements will depend on many factors including our growth rate, the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced software and services offerings and investments in our manufacturing and office facilities and enhancements to our IT system infrastructure.
Current wording
Our future capital requirements will depend on a variety of factors, including our growth rate, the timing and scale of investments to support product development, the expansion of sales and marketing efforts, the launch of new and enhanced software and services offerings, and continued investments in our office facilities and IT system infrastructure.
Previous wording
For a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on our condensed consolidated financial statements, see Note 1 “Summary of Significant Accounting Policies”, in our notes to the condensed consolidated financial statements in this Quarterly Report.
Current wording
For a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on our condensed consolidated financial statements, see Note 1, “Organization and Summary of Significant Accounting Policies”, in our notes to the condensed consolidated financial statements in this Quarterly Report.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Cost of Sales, Gross Profit, and Gross Margin