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We typically sell products pursuant to purchase orders rather than long-term purchase commitments. Some of our customers have, and others may in the future, cancel or defer purchase orders on short notice without incurring a significant penalty. In addition, customers who have purchase commitments may not honor those commitments. Due to their inability to predict demand or for other reasons, during the last few years some of our customers have accumulated excess inventories and, as a consequence, they either have deferred or they may defer future purchases of our products. We cannot accurately predict what or how many products our customers will need in the future. Anticipating demand is difficult because our customers face unpredictable demand for their own products and are increasingly focused more on cash preservation and tighter inventory management.
We place orders with our suppliers based on customer demand and forecast and, in some instances, may establish buffer inventories to accommodate anticipated demand. Our forecasts are based on multiple assumptions, each of which may introduce error into our estimates. For example, our ability to accurately forecast customer demand may be impaired by the delays inherent in our customer’s product development processes, which may include extensive qualification and testing of components included in their products, including ours. In many cases, they design their products to use components from multiple suppliers. This creates the risk that our customers may decide to cancel or change product plans for products incorporating our semiconductor solutions prior to completion, which makes it even more difficult to forecast customer demand. In addition, while many of our customers are subject to purchase orders or other agreements that do not allow for cancellation, there can be no assurance that these customers will honor these contract terms and cancellation of these orders may adversely affect our business operations and demand forecast which is the basis for us to have products made.
If we overestimate customer demand, our excess or obsolete inventory may increase significantly, which would reduce our gross margin and adversely affect our financial results. The risk of obsolescence and/or excess inventory is heightened for semiconductor solutions due to the rapidly changing market for these types of products. Conversely, if we underestimate customer demand or if insufficient manufacturing capacity is available, we would miss revenue opportunities and potentially lose market share and damage our customer relationships. In addition, any future significant cancellations or deferrals of product orders or the return of previously sold products could materially and adversely affect our profit margins, increase product obsolescence and restrict our ability to fund our operations.
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If negative publicity arises with respect to us, our employees, our third-party service providers or our partners, our business and operating results could be adversely affected, regardless of whether the negative publicity is true.
Negative publicity about us or our products, even if inaccurate or untrue, could adversely affect our reputation and confidence in our products, which could harm our business and operating results. For example, on August 27, 2024, a news article was published by a short seller alleging evidence of accounting manipulation, sibling self-dealing and sanctions evasion (the “Report”). We indicated that such Report contained false or inaccurate statements about us, including misleading presentations of information we previously shared publicly. However, despite these statements related to the allegations in the Report, and the announcement of the results of Special Committee investigation, the publication of the Report and our previous Delinquent Reports contributed to a substantial negative impact on the trading price of our common stock and our reputation, and may continue to have a negative impact in the future.
Harm to our reputation can also arise from many other sources, including employee misconduct, which we have experienced in the past, and misconduct by our partners, consultants and outsourced service providers. Additionally, negative publicity with respect to our partners or service providers could also affect our business and operating results to the extent that we rely on these partners or if our customers or prospective customers associate us with these partners.
We rely on a limited number of suppliers for certain components used to manufacture our products.
Certain components used in the manufacture of our products are available from a limited number of suppliers. Shortages could occur in these essential materials due to an interruption of supply, including interruptions on the global supply chain (such as did occur in connection with the prior COVID-19 pandemic, prior global economic downturns, and emergence of regional conflicts) or increased demand in the industry (such as did occur due to volatility in emergent and rapidly evolving markets, including AI). Similar future events may cause additional interruptions in the global supply chain. Two of our suppliers accounted for accounted for a significant portion of our total purchases: 64.4% and 5.1% in fiscal year 2025, 65.4% and 6.3% in fiscal year 2024, and 30.7% and 13.5% in fiscal year 2023. If any of our largest suppliers discontinue their operations, if our relationships with them are adversely impacted, or there are significant adverse changes to the terms upon which we do business, we could experience a material adverse effect on our business, results of operations and financial condition.
Changing technology and intense competition require us to continuously innovate while controlling product costs, and our failure to do so may result in decreased revenues and profitability.
The markets in which we operate are dynamic and complex, and our success depends upon our ability to deliver both our current product offerings and new products and technologies on time and at acceptable prices to our customers. The markets for our products are characterized by rapid technological change, frequent new product introductions and enhancements, substantial capital investment, changes in customer requirements, continued price pressures and a constantly evolving industry. Historically, these pricing pressures have led to a continued decline of average selling prices across our business and we expect that these historical trends will continue. The development of new, technologically advanced products is a complex and uncertain process requiring high levels of innovation and the accurate prediction of technology and market trends. The introduction of new products also often requires significant investment to ramp up production capacity, the benefit of which may not be realized if we are not successful in the production of such products or if customer demand does not develop as expected. Ramping of production capacity also entails risks of delays which can limit our ability to realize the full benefit of new product introductions. We cannot assure that we will be able to identify, develop, manufacture, market or support new or enhanced products successfully, if at all, or on a timely basis. We also cannot assure that potential markets for our new products will materialize on the timelines we anticipate, or at all, or that our technology will meet our customers’ specifications. Our future performance will depend on the successful development, introduction, deployment and market acceptance of new and enhanced features and products that meet our customers’ current and future needs. Future demand for our products is uncertain and will primarily depend on continued technological development and the introduction of new or enhanced products. If this does not continue, sales of our products may decline which could adversely impact our business, results of operations and financial condition.
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Both legacy competitors as well as new entrants, predominantly Asia-based competitors, have intensified market competition in recent years leading to pricing pressure. To preserve our revenues and product margin structures, we remain reliant on an integrated customer and market approach that anticipates end customer needs as requirements evolve. We also must continue to develop more advanced, differentiated products that command a premium with customers, while conversely continuing to focus on streamlining product costs for established legacy products. If we fail to continue to develop enhanced or new products that enable us to increase revenues while maintaining consistent margins, or over time are unable to adjust our cost structure to continue to competitively price more mature products, our financial condition and results of operations could be materially and adversely affected.
The AI industry has driven a portion of our recent success. The AI industry involves significant risks and uncertainties, and the use of AI by our workforce may present risks to our business.
A portion of the recent success of our server and storage solutions has been dependent on the integration of our products and services within the AI industry. However, the global AI market is subject to significant risks and uncertainties, such as evolving regulatory constraints, industry standards and ethical and legal considerations. Additionally, the AI market itself has not yet been fully established and can be influenced by a multitude of factors, such as market needs, legal changes and economic conditions. To the extent the AI market changes or declines, our business and results of operations could be materially and adversely impacted.
Our workforce may use AI tools on an unauthorized basis which poses additional risks relating to the protection of data, including the potential exposure of our proprietary confidential information to unauthorized recipients and the misuse of our or third-party intellectual property. Use of AI technology by our workforce may result in allegations or claims against us related to violation of third-party intellectual property rights, unauthorized access to or use of proprietary information and failure to comply with open-source software requirements. AI technology may also produce inaccurate responses that could lead to errors in our decision-making, solution development or other business activities, which could have a negative impact on our business, operating results and financial condition. Our ability to mitigate these risks will depend on our continued effective training, monitoring and enforcement of appropriate policies and procedures governing the use of AI technology, and compliance by our workforce.
Our results of operations may be subject to fluctuations based upon certain investments we make.
During the last few years, we made investments in various companies, many of which are early stage companies or private companies still defining their strategic direction, several of which are also in emergent markets (such as AI). We may continue to invest in private companies to further our strategic objectives and to support certain key business initiatives. Many of the instruments in which we invest are non-marketable and illiquid at the time of our initial investment, and we are not always able to achieve a return. To the extent any of the companies in which we invest are not successful, we could recognize an impairment and/or lose all or part of our investment. In addition, we have also made some limited investments in public companies, and any investments we make in such companies could create volatility in our results and may generate losses up to the value of the investment.
Our growth into markets outside the United States exposes us to risks inherent in international business operations.
We market and sell our systems and subsystems and accessories both inside and outside the United States. We intend to expand our international sales efforts, especially into Asia, and we are expanding our business operations in Europe and Asia, particularly in Taiwan, Malaysia, the Netherlands, Japan, Mexico and India. We have made, and continue to make, substantial investments for the purchase of land and the development of new facilities in Taiwan and Malaysia to accommodate our expected growth and the migration of a substantial portion of our contract manufacturing operations.
Our international expansion efforts may not be successful. Our international operations expose us to risks and challenges that we would otherwise not face if we conducted our business only in the United States, such as:
• Heightened price sensitivity from customers in emerging markets;
• Our ability to establish local manufacturing, support and service functions, and to form channel relationships with value added resellers in non-United States markets;
• Localization of our systems and components;
• Compliance with multiple, conflicting and changing governmental laws and regulations (including rapid developments in the area of export control particularly for high-end restricted GPU products);
• Foreign currency fluctuations and inflation;
• Limited visibility into sales of our products by our channel partners;
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• Greater concentration of competitors in some foreign markets than in the United States;
• Laws favoring local competitors;
• Weaker legal protections of intellectual property rights and mechanisms for enforcing those rights;
• Market disruptions created by world events, such as a global economic downturn, regional conflicts, or by other public health crises (such as COVID-19, avian flu, SARS and other diseases);
• Import and export tariffs;
• Difficulties in staffing and the costs of managing foreign operations, including challenges presented by relationships with workers’ councils and labor unions; and
• Changing regional economic and political conditions.
These factors could limit our future international sales or otherwise adversely impact our operations or our results of operations.
Risks Related to Regulatory, Legal, Our Stock, and Other Matters
We have been, are currently, and may in the future be subject to various lawsuits and other legal proceedings, disputes, claims, and government inquiries and investigations, which could cause us to incur substantial costs or require us to change our business practices in a way that could seriously harm our business, and any orders, actions or rulings not in our favor could have a material adverse effect on our business, results of operations, and financial condition.
We have been, are currently, and may in the future be subject to various lawsuits, stockholder derivative actions, class action lawsuits, individual or mass arbitration proceedings, and other types of legal proceedings, as well as other disputes, claims, and regulatory or governmental inquiries and investigations, including with regard to contract or commercial disputes, consumer protection, privacy, data protection, intellectual property, tax, employment, and corporate governance, among other matters. In addition, the circumstances underlying the matters discussed in Item 9. “Changes in and Disagreements with Accountants on Accounting and Financial Disclosure” of this Annual Report continue to create the risk of additional litigation and claims by investors and examinations, investigations, proceedings and orders by regulatory authorities. These include a broad range of potential actions that may be taken against us by the SEC or other regulatory agencies, including a cease-and-desist order and/or the assessment of possible civil monetary penalties. If we fail to meet our contractual commitments or otherwise fail to comply with our contractual obligations, then we could be subject to breach of contract or other claims. Any claims, proceedings, individual or mass arbitration demands, or inquiries or investigations initiated by or against us, whether successful or not, may be time-consuming, subject us to damage awards, regulatory orders, consent decrees, injunctive relief, fines, or other penalties or sanctions, require us to change our policies or practices, result in increased operating costs, divert management’s attention, harm our reputation, and require us to incur significant legal fees, other litigation costs and settlement costs, as well as other expenses. In addition, our insurance may not be adequate to protect us from all material expenses related to pending and future claims. Any of these factors could materially and adversely affect our business, financial condition, and results of operations.
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Our operations are impacted by complex laws, rules and regulations related to import and export controls to which our business is subject, and rapid changes in such laws, rules, and regulations as well as political and other actions related thereto may adversely impact our business.
We are subject to U.S. and other applicable trade control regulations that restrict with whom we may transact business, including the trade sanctions enforced by the U.S. Treasury, Office of Foreign Assets Control and the import and export controls enforced by the U.S. Commerce Department’s Bureau of Industry and Security. If we fail to comply with laws and regulations restricting dealings with sanctioned countries or companies and/or persons on restricted lists, we may be subject to civil or criminal penalties. Any future violations could have an adverse impact on our ability to sell our products to United States federal, state and local government and related entities. We have business relationships with companies in China and elsewhere in Eastern Europe who have been, or may in the future be, added to a restricted party list. We take steps to minimize business disruption when these situations arise; however, we may be required to terminate or modify such relationships if our activities are prohibited by U.S. or other applicable laws. Further, our association with these parties could subject us to greater scrutiny or reputational harm among current or prospective customers, partners, suppliers, investors, other parties doing business with us or using our products, government enforcement agencies, or the general public. The United States and other countries continually update their lists of import and export-controlled items and technologies, and may impose new or more-restrictive import and export requirements on our products in the future. As a result of regulatory changes, we may be required to obtain licenses or other authorizations to continue supporting existing customers or to supply existing products to new customers in China, Eastern Europe and elsewhere. Further escalations in trade restrictions or hostilities, particularly between the United States and China, could impede our ability to sell or support our products. Although we historically sold products into Russia before broad sanctions were imposed, we no longer sell products or provide services to Russia. We had last recorded revenue from Russia in February 2022.
Moreover, the increasing focus on the risks and strategic importance of AI technologies has resulted in regulatory restrictions that target products and services capable of enabling or facilitating AI and may in the future result in additional restrictions impacting some or all of our product and service offerings.
Concerns regarding third-party use of AI for purposes contrary to local governmental interests, including concerns relating to the misuse of AI applications, models, and solutions, has resulted in and could in the future result in unilateral or multilateral restrictions on products that can be used for training, modifying, tuning, and deploying large language models (“LLMs”). Such restrictions have limited and could in the future limit the ability of downstream customers and users worldwide to acquire, deploy and use systems that include our products, software, and services, and negatively impact our business and financial results.
Such restrictions could include additional unilateral or multilateral import and export controls on certain products or technology, including but not limited to AI technologies and high-performance computing. As geopolitical tensions have increased, products containing semiconductors associated with AI, including GPUs and associated products, are increasingly the focus of export control restrictions proposed by stakeholders in the U.S. and its allies. The United States has imposed unilateral controls restricting GPUs and associated products, and it is likely that additional unilateral or multilateral controls will be adopted. Such controls have been and may again be very broad in scope and application, prohibit us from exporting our products to any or all customers in one or more markets, including but not limited to China, and could tangentially negatively impact our warehousing locations and options, or could impose other conditions that limit our ability to serve demand abroad and could negatively and materially impact our business, revenue and financial results. Import and export controls targeting products containing GPUs and semiconductors associated with AI, which have been imposed and are increasingly likely to be further tightened, would further restrict our ability to export our technology, products, or services given that competitors may not be subject to similar restrictions, creating a competitive disadvantage for us and negatively impacting our business and financial results. In addition, such controls may subject downstream users to additional restrictions on the use, resale, repair, or transfer of our products, negatively impacting our business and financial results. Controls could negatively impact our cost and/or ability to provide services.
Import and export controls could disrupt our supply chain and distribution channels, negatively impacting our ability to serve demand, including in markets outside China. Repeated changes in the export control rules are likely to impose compliance burdens on our business and our customers, negatively and materially impacting our business.
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Increasing use of economic sanctions and import and export controls has impacted and may in the future impact demand for our products or services, negatively impacting our business and financial results. Reduced demand due to import and export controls could also lead to excess inventory or cause us to incur related supply charges. Additional unilateral or multilateral controls are also likely to include deemed export control limitations that may also have negative impacts. Additional export restrictions may not only impact our ability to serve overseas markets, but also provoke responses from foreign governments, including China, that negatively impact our supply chain or our ability to provide our products and services to customers in all markets worldwide, which could also substantially reduce our revenue.
In October 2022, U.S. export restrictions and export licensing requirements were imposed targeting China’s semiconductor and supercomputing industries. These restrictions impact exports of software, hardware, equipment and technology used to develop, produce or manufacture certain chips in China (including Hong Kong). At the same time, export restrictions and export license requirements were also imposed on certain GPUs and advanced integrated circuits, as well as computing equipment containing such components, with a focus on China (including Hong Kong). These restrictions impacted certain of our products, including products that contain the NVIDIA A100 and H100 integrated circuits, among others.
In November 2023, the export control restrictions on advanced integrated circuits, supercomputing and other end uses were revised and further expanded to cover additional countries where we sell our products, including in the Middle East, and additional parties based on the location of their headquarters, or the headquarters of their ultimate parent. Compliance with ever-changing regulations is complex and time consuming. We may experience delays in implementing procedures to address the changing regulatory requirements.
In January 2025, the U.S. export control regulations targeting advanced integrated circuits and computing were further revised to include a worldwide authorization requirement for certain of our advanced computing products. New license exceptions were added to the regulations and allow us to export in some cases without the need for an export license, thus expanding upon previous authorizations. However, these new regulations will, depending on the country and ultimate consignee, also place new limits on the number of advanced computing products that we can export to each ultimate consignee per calendar year, and the number of advanced computing products that the Commerce Department will license per-country over a given period to all exporters in the aggregate. These new limitations create a competitive process for obtaining the product allocation associated with these new government authorizations and therefore could disadvantage us against certain of our competitors. The limitations could also prevent us from selling our advanced computing products to the full extent of customer demand in certain countries that have not historically been subject to these limitations.
In some cases, we rely on channel partners and third parties to distribute and resell our products globally. If channel partners, or their customers, do not adhere to the applicable trade compliance requirements, this can subject us to greater scrutiny or reputational harm among current or prospective customers, partners, suppliers, investors, other parties doing business with us or using our products, government enforcement agencies, or the general public.
In the event import and export controls require us to transition some operations out of certain geographies, such transitions could be costly and time consuming, and adversely affect our operations during any such transition period. To the extent that a customer requires products covered by the licensing requirements, we may seek a license for the customer. However, the licensing process is time-consuming. We have no assurance that any such license will be granted or that the license application will be acted upon in a timely manner or at all. Even if a license is offered, it may impose burdensome conditions that we or our customer or end users cannot or decide not to accept.
The process to obtain licenses required under recently adopted export control regulations is complicated and time consuming in the event we determine to pursue them, and there are no assurances they may be granted at all. Our competitive position and future results may be harmed, over the long-term, if there are further changes in import and export controls, including further expansion of the geographic, customer, end use, deemed export, or product scope of the controls, if customers purchase product from competitors, if customers develop their own internal solution, if we are unable to provide contractual warranty or other extended service obligations, if licenses are not granted in a timely manner or denied to significant customers or if we incur significant transition costs. Even if requested licenses are granted, the licenses may be temporary or impose burdensome conditions that we or our customers or end users cannot or choose not to fulfill. The licensing requirements may benefit certain of our competitors, as the licensing process will make our technical support efforts more cumbersome and less certain and encourage customers to pursue alternatives to our products.
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Given the increasing strategic importance of AI and rising geopolitical tensions, the export control rules may change again at any time and further subject a wider range of our products to export restrictions and licensing requirements, negatively impacting our business and financial results. In the event of such change, we may be unable to sell our inventory of such products and may be unable to develop replacement products not subject to the licensing requirements, effectively excluding us from markets subject to such restrictions, as well as other impacted markets. Any new control that impacts a wider range of our products would likely have a disproportionate impact on us and may disadvantage us against certain of our competitors that sell products that are outside the scope of such control.
Finally, our business depends on our ability to receive consistent and reliable supplies from our overseas partners, especially in Taiwan. Any new restrictions that negatively impact our ability to receive supply of components, parts, or services from Taiwan, would negatively impact our business and financial results.
Although we attempt to ensure that we, our suppliers, resellers, and partners comply with the applicable import, export, and sanctions laws, we cannot guarantee full compliance by all. Actions of our suppliers, resellers and partners are not within our complete control, and our products could be re-exported to sanctioned persons or countries or provided by our retailers to third persons in contravention of our requirements or instructions or the laws. In addition, there are inherent limitations to the effectiveness of any policies, procedures, and internal controls relating to such compliance, and there can be no assurance that such procedures or internal controls will work effectively at all times or protect us against liability under anti- corruption, sanctions or other laws for actions taken by us, our resellers or partners. Any such potential violation by us, our suppliers, resellers, or our partners could have negative consequences, including government inquiries, investigations, enforcement actions, monetary fines, or civil and/or criminal penalties, and our reputation, brand, and revenue may be harmed.
Because our products and services may store, process and use data, some of which contains personal information, we are subject to complex and evolving domestic and international laws and regulations regarding privacy, data protection and other matters, which are subject to change.
Because our products and services store, process and use data, some of which contains personal information, we are subject to complex and evolving domestic and international laws and regulations regarding privacy, data protection, rights of publicity, content, protection of minors and consumer protection. Many of these laws and regulations, which can be particularly restrictive or onerous, are subject to change and uncertain interpretation. Even our inadvertent failure to comply with such laws and regulations could result in investigations, claims, damages to our reputation, changes to our business practices, increased cost of operations and declines in user growth, retention or engagement, any of which could materially adversely affect our business, results of operations and financial condition.
Global privacy legislation, enforcement, and policy activity for privacy and data protection are rapidly expanding and creating a complex regulatory compliance environment. Costs to comply with and implement these privacy-related and data protection measures could be significant. For example, the EU General Data Protection Regulation 2016/679 (“GDPR”), and further amendments and interpretations thereof, impose stringent EU data protection requirements on companies established in the European Union or companies that offer goods or services to, or monitor the behavior of, individuals in the European Union. The GDPR establishes a robust framework of data subjects’ rights and imposes onerous accountability obligations on companies, including certain data transfer and security mechanisms. Noncompliance with the GDPR can trigger steep fines of up to the greater of 20 million euros or four percent of annual global revenue.
Jurisdictions outside of the European Union are also considering and/or enacting comprehensive data protection legislation. For example, on July 8, 2019, Brazil enacted the General Data Protection Law (“LGPD”), and on June 5, 2020, Japan passed amendments to its Act on the Protection of Personal Information (“APPI”). Both laws broadly regulate the processing of personal information in a manner comparable to the GDPR, and violators of the LGPD and APPI face substantial penalties. Similarly, on November 1, 2021, China’s Personal Information Protection law came into effect, which places restrictions on the transfer of personal information to third parties within China or overseas. These regulations may deter customers from using services such as ours and may inhibit our ability to expand into those markets or prohibit us from continuing to offer services in those markets without significant financial burden.
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In addition, numerous states in the U.S. are also expanding data protection through legislation. For example, California’s Consumer Privacy Act (“CCPA”) gives California residents expanded privacy rights and protections and provides for civil penalties for violations and a private right of action for data breaches. Further, California voters approved the ballot initiative known as the California Privacy Rights Act of 2020 (“CPRA”), enforcement of which began on July 1, 2023. The CPRA significantly expands privacy rights for California consumers and creates additional obligations on businesses, which could subject us to additional compliance costs as well as potential fines, individual claims and commercial liabilities. The CPRA also establishes the California Privacy Protection Agency, which has the power to implement and enforce the CCPA and CPRA through administrative actions, including administrative fines. The effects of the CCPA and the CPRA are potentially significant and may require us to modify our data collection or processing practices and policies and to incur substantial costs and expenses to comply and increase our potential exposure to regulatory enforcement and/or litigation.
Other U.S. states have also enacted data privacy laws that began to take effect in 2023 and impose similar privacy obligations to the CCPA and CPRA. We anticipate that more states may enact legislation similar to these laws, by providing consumers with new privacy rights and increasing the privacy and security obligations of entities handling certain personal information of such consumers. The CCPA continues to prompt a number of proposals for new federal and state-level privacy legislation. Such proposed legislation, if enacted, may add additional complexity, variation in requirements, restrictions and potential legal risk, require additional investment of resources in compliance programs, impact strategies and the availability of previously useful data and could result in increased compliance costs and/or changes in business practices and policies.
We have developed and implemented policies and procedures to address applicable data privacy and protection law requirements. However, because the interpretation and application of many privacy and data protection laws, commercial frameworks, and standards are uncertain, it is possible that these laws, frameworks, and standards may be interpreted and applied in a manner that is inconsistent with our existing data protection practices. If so, we and our customers are at risk of enforcement actions taken by data protection authorities or litigation from consumer advocacy groups acting on behalf of data subjects. In addition to the possibility of fines, lawsuits, breach of contract claims, and other claims and penalties, we could be required to fundamentally change our business activities and practices or modify our solutions, which could materially adversely affect our business, results of operations and financial condition. Furthermore, applicable data privacy and security obligations may require us to notify relevant stakeholders, including affected individuals, customers, regulators and investors, of security incidents, and mandatory disclosure of such incidents could lead to negative publicity.
Adequately protecting our intellectual property rights could be costly, and our ability to compete could be harmed if we are unsuccessful or if we are prohibited from making or selling our products.
From time to time, we are involved in lawsuits or other legal proceedings alleging patent infringement or other IP rights violations by us, our employees or parties that we have agreed to indemnify. An unfavorable ruling could include significant damages, invalidation of one or more patents, indemnification of third parties, payment of lost profits, or injunctive relief. Claims that our products or processes infringe the IP rights of others, regardless of their merit, could technical personnel.
We may commence legal proceedings to protect our IP rights, which may increase our operating expenses. We could be subject to countersuits as a result. If infringement claims are made against us or our products are found to infringe a third party’s IP, we or one of our indemnitees may have to seek a license to the third party’s IP rights. If we or one of our indemnitees is unable to obtain such a license on acceptable terms or at all, we could be subject to substantial liabilities or have to suspend or discontinue the manufacture and sale of one or more of our products. We may also have to make royalty or other payments or cross license our technology. If these arrangements are not concluded on commercially reasonable terms, our business could be negatively impacted. Furthermore, the indemnification of a customer or other indemnitee may increase our operating expenses and negatively impact our operating results.
We rely on patents, trademarks, trade secrets, employee and third-party nondisclosure agreements, licensing arrangements and the laws of the countries in which we operate to protect our IP. Foreign laws may not protect our products or IP rights to the same extent as United States law. This makes the possibility of piracy of our technology and products more likely. The theft or unauthorized use or publication of our trade secrets and other confidential information could harm our competitive position and reduce acceptance of our products; as a result, the value of our investment in research and development, product development and marketing could be reduced. We also may face risks to our IP if our employees are hired by competitors. We continuously assess whether and where to seek formal protection for existing and new innovations and technologies but cannot be certain whether our applications for such protections will be approved, and, if approved, whether they will be enforceable.
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Failure to comply with the U.S. Foreign Corrupt Practices Act, other applicable anti-corruption and anti-bribery laws, and applicable trade control laws could subject us to penalties and other adverse consequences.
We manufacture and sell our products in several countries outside of the United States, both to direct and OEM customers as well as through our indirect sales channel. Our operations are subject to the U.S. Foreign Corrupt Practices Act (the “FCPA”) as well as the anti-corruption and anti-bribery laws in the countries where we do business. The FCPA prohibits covered parties from offering, promising, authorizing or giving anything of value, directly or indirectly, to a “foreign government official” with the intent of improperly influencing the official’s act or decision, inducing the official to act or refrain from acting in violation of lawful duty or obtaining or retaining an improper business advantage. The FCPA also requires publicly traded companies to maintain records that accurately and fairly represent their transactions, and to have an adequate system of internal accounting controls. In addition, other applicable anti-corruption laws prohibit bribery of domestic government officials, and some laws that may apply to our operations prohibit commercial bribery, including giving or receiving improper payments to or from non-government parties, as well as so-called “facilitation” payments.
In addition, while we have implemented policies, internal controls and other measures reasonably designed to promote compliance with applicable anti-corruption and anti-bribery laws and regulations, our employees or agents may engage in improper conduct for which we could be held responsible. If we, or our employees or agents acting on our behalf, are found to have engaged in practices that violate these laws and regulations, we could suffer severe fines and penalties, profit disgorgement, injunctions on future conduct, securities litigation, bans on transacting government business and other consequences that may have a material adverse effect on our business, results of operations and financial condition. In addition, our brand and reputation, our sales activities or our stock price could be adversely affected if we become the subject of any negative publicity related to actual or potential violations of anti-corruption, anti-bribery or other similar applicable laws and regulations.
Provisions of our certificate of incorporation and bylaws and Delaware law might discourage, delay or prevent a change of control of our company or changes in our management and, as a result, depress the trading price of our common stock.
Our certificate of incorporation and bylaws contain provisions that could discourage, delay or prevent a change in control of our company or changes in our management that the stockholders of our company may deem advantageous. These provisions:
• Establish a classified Board of Directors so that not all members of our Board are generally elected at one time;
• Require super-majority voting to amend some provisions in our certificate of incorporation and bylaws;
• Authorize the issuance of “blank check” preferred stock that our Board could issue to increase the number of outstanding shares and to discourage a takeover attempt;
• Limit the ability of our stockholders to call special meetings of stockholders;
• Prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders;
• Provide that our Board is expressly authorized to adopt, alter or repeal our bylaws; and
• Establish advance notice requirements for nominations for election to our Board or for proposing matters that can be acted upon by stockholders at stockholder meetings.
In addition, we are subject to Section 203 of the Delaware General Corporation Law, which, subject to some exceptions, prohibits “business combinations” between a Delaware corporation and an “interested stockholder,” which is generally defined as a stockholder who becomes a beneficial owner of 15% or more of a Delaware corporation’s voting stock for a three-year period following the date that the stockholder became an interested stockholder. Section 203 could have the effect of delaying, deferring or preventing a change in control that our stockholders might consider to be in their best interests.
These anti-takeover defenses could discourage, delay or prevent a transaction involving a change in control of our company. These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors of their choosing and cause us to take corporate actions other than those stockholders’ desire.
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The concentration of our capital stock ownership may limit your ability to influence corporate matters.
As of July 31, 2025, our executive officers and directors together beneficially owned 16.2% of our common stock. In addition, institutional stockholders who are not affiliated with our company and who each hold five percent or more of our common stock, hold an additional 17.4% percent of our common stock. As a result, if our insiders and these institutional stockholders were to act together, they would have significant influence over matters that require approval by our stockholders, including the election of directors and approval of significant corporate transactions. Corporate action might be taken even if other stockholders oppose the action. This concentration of ownership might also have the effect of delaying or preventing a change of control of our company that other stockholders may view as beneficial.
Financial Risks
Our indebtedness, liabilities, and other contractual obligations could limit the cash flow available for our operations, expose us to risks that could adversely affect our business, financial condition and results of operations and impair our ability to meet those obligations.
As of June 30, 2025, we had approximately $4.8 billion of consolidated indebtedness, including $1.7 billion aggregate principal amount of our 2029 Convertible Notes, $700.0 million aggregate principal amount of our 2028 Convertible Notes, and $2.3 billion aggregate principal amount of our 2030 Convertible Notes. We may also incur additional indebtedness to meet future financing needs. Our indebtedness could have significant negative consequences for our security holders and our business, results of operations and financial condition by, among other things:
• Increasing our vulnerability to adverse economic and industry conditions;
• Limiting our ability to obtain additional financing;
• Requiring the dedication of a substantial portion of our cash flow from operations to service our indebtedness, which will reduce the amount of cash available for other purposes
• Limiting our flexibility to plan for, or react to, changes in our business;
• Diluting the interests of our existing stockholders as a result of issuing shares of our common stock upon conversion of the 2029 Convertible Notes, 2028 Convertible Notes or 2030 Convertible Notes or 2030 Convertible Notes, as applicable; and
• Placing us at a possible competitive disadvantage with competitors that are less leveraged than us or have better access to capital.
Our business may not generate sufficient funds, and we may otherwise be unable to maintain sufficient cash reserves to pay amounts due under our indebtedness, including the Convertible Notes, as well as other contractual obligations. For example, in connection with the Master Colocation Service Agreement (MCSA) we entered into in June 2024, we executed a long-term data center space from a supplier and concurrently sublicensed all of our rights and obligations related to such data center space to another party. While we are charging an additional monthly charge to the party to whom we are sublicensing the data center space, on top of the estimated over $292.0 million financial obligation we have to the supplier for the term of the lease for the data center space, no assurances can be given that this arrangement will be successful or profitable, particularly if the party to whom we are sublicensing the data center space defaults on its obligations to us. If we are unsuccessful in recovering our costs related to our lease of data center space, or if we are otherwise unable to meet our obligations under the MCSA, our business, financial condition, and results of operations may be adversely affected. For more information about the MCSA and the data center space lease arrangements, see Note 9, “Leases” in the notes to the consolidated financial statements.
Additionally, we plan to continue making significant investments to support our business growth and may require additional funds to address business challenges. Our future capital requirements may vary materially from those currently planned and will depend on many factors including our growth rate and the continuing market acceptance of our products. Any future indebtedness that we may incur may contain financial and other restrictive covenants and obligations that limit our ability to operate our business, raise capital or make payments under our other indebtedness or contractual obligations. Failure to comply with these covenants or obligations, or to make required payments on time, could result in a default or material breach, potentially accelerating the repayment of that debt or resulting in the breach of contracts, which could in turn harm our business. See also, “Risks Related to Previous Delinquent SEC Reporting Obligations.”
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Provisions in the 2029 Convertible Notes Indenture, the 2028 Convertible Notes Indenture, and the 2030 Convertible Notes Indenture could delay or prevent an otherwise beneficial takeover of us, may dilute the ownership interest of existing stockholders or may otherwise depress the price of our common stock.
Certain provisions in the 2029 Convertible Notes, the 2028 Convertible Notes, and the 2030 Convertible Notes indentures governing such convertible notes could make a third-party attempt to acquire us more difficult or expensive. For example, if a takeover constitutes a fundamental change, then noteholders will have the right to require us to repurchase their convertible notes for cash. In addition, if a takeover constitutes a make-whole fundamental change (as defined in the 2029 Convertible Notes Indenture, the 2028 Convertible Notes Indenture, and the 2030 Convertible Notes Indenture as applicable), then we may be required to temporarily increase the conversion rate of the 2029 Convertible Notes, the 2028 Convertible Notes, or the 2030 Convertible Notes, as applicable, which could increase the cash cost of acquiring us or increase dilution to the potential acquiror. In either case, and in other cases, our obligations under the 2029 Convertible Notes, the 2028 Convertible Notes, the 2030 Convertible Notes, the 2029 Convertible Notes Indenture, the 2028 Convertible Notes Indenture, and the 2030 Convertible Notes Indenture could increase the cost of acquiring us or otherwise discourage a third party from acquiring us or removing incumbent management, including in a transaction that noteholders or holders of our common stock may view as favorable.
The capped call transactions entered into in connection with the issuance of the 2029 Convertible Notes and the 2030 Convertible Notes subject us to counterparty risk and may affect our common stock.
In connection with the offering of the 2029 Convertible Notes and the 2030 Convertible Notes, we entered into privately negotiated capped call transactions with the capped call counterparties. The capped call transactions are expected generally to reduce the potential dilution to our common stock upon any conversion of the 2029 Convertible Notes and the 2030 Convertible Notes or offset any potential cash payments we are required to make in excess of the principal amount of converted 2029 Convertible Notes and the 2030 Convertible Notes, as the case may be, with such reduction or offset subject to a cap. In connection with the amendment of the old 2029 Convertible Notes in March, we entered into agreements to amend certain terms of the capped call transactions. Following these transactions, the capped call counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the 2029 Convertible Notes and the 2030 Convertible Notes (and are likely to do so during any observation period related to a conversion of the 2029 Convertible Notes and 2030 Convertible Notes or following any repurchase of the 2029 Convertible Notes and the 2030 Convertible Notes by us to the extent we elect to unwind a corresponding portion of the capped call transactions in connection with such repurchase). This activity could also cause or avoid an increase or a decrease in the market price of our common stock.
In addition, if any capped call counterparties or their respective affiliates unwind their hedge positions with respect to our common stock, it could adversely affect the value of our common stock. We do not make any representation or prediction as to the direction or magnitude of any potential effect that the transactions described above may have on the price of our common stock. In addition, we do not make any representation that the capped call counterparties will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.
Our future effective income tax rates could be affected by changes in the relative mix of our operations, our relative income among different geographic regions and domestic and foreign income tax laws, which could affect our future operating results, financial condition and cash flows.
We derive significant tax benefits from non‑U.S. operations under current tax laws and incentives. Legislative changes, such as the OECD Pillar Two (15% minimum tax) framework, could reduce these benefits. Malaysia joined Pillar Two effective January 1, 2025. Although our Malaysian subsidiary has a 10‑year tax exemption beginning in fiscal year 2026, guidance on whether a top‑up tax will apply remains pending. In the U.S., the One Big Beautiful Bill Act (“OBBBA”), enacted on July 4, 2025, permanently extends certain Tax Cuts and Jobs Act provisions, modifies the international tax framework, and restores favorable business tax provisions, with effective dates through 2027. We are evaluating its impact on our consolidated results, along with other evolving global tax rules.
Our effective tax rate is also influenced by statutory rate changes, earnings mix, tax incentives and credits, audit resolutions, deferred tax asset valuation, non‑deductible expenses, business combinations, and interpretations of tax law. Stock‑based compensation and related volatility in our stock price can further create significant period‑to‑period variability in our tax rate.
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We continue to monitor evolving global tax legislation and related administrative guidance. These developments may increase complexity, affect our effective tax rate, deferred tax assets, and cash tax obligations, and adversely impact our financial results.
We do not expect to pay any cash dividends in the foreseeable future.
We do not anticipate that we will pay any cash dividends to holders of our common stock in the foreseeable future. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment. Investors seeking cash dividends in the foreseeable future should not purchase our common stock.
General Risks
Our products may not be viewed as supporting climate change mitigation in the IT sector.
Our ability to create energy saving products will be a part of climate change mitigation, and we believe it is one of the keys to our business success. In addition, climate change reporting and product certification are increasingly sought by customers and regulators. If we do not satisfy customer requirements for products that help mitigate climate change, and document how they contribute to such change, it could have a material adverse impact on our business, operating results, and financial conditions.
Expectations and evolving laws and regulations relating to environmental, social and governance considerations expose us to potential liabilities, reputational harm and other unforeseen adverse effects on our business.
Many governments, regulators, investors, employees, customers and other stakeholders are increasingly focused on environmental, social and governance considerations relating to businesses, including climate change and greenhouse gas emissions, human capital, equity and inclusion. We make statements about our environmental, social and governance goals and initiatives through information provided on our website, press statements and other communications. Responding to these environmental, social and governance considerations and implementation of these goals and initiatives involves risks and uncertainties and requires ongoing investments. The success of our goals and initiatives may be impacted by factors that are outside our control. In addition, some stakeholders may disagree with our goals and initiatives and the focus and views of stakeholders may change and evolve over time and vary depending on the jurisdictions in which we operate. Also, we and our suppliers are subject to, and may become subject to, evolving laws and regulations pertaining to ESG matters. Changing rules and regulations have resulted in, and are likely to continue to result in, increased general and administrative expenses and increased management time and attention spent complying with or meeting such regulations. Any failure, or perceived failure, by us to achieve our goals, further our initiatives, adhere to our public statements, make complete or accurate statements with respect to such matters, comply with federal, state or international environmental, social and governance laws and regulations, or meet evolving and varied stakeholder expectations and views could materially adversely affect our business, reputation, results of operations, financial position and stock price.
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
Risk Management and Strategy
We have in place certain infrastructure, systems, policies, and procedures that are designed to proactively and reactively address risks from cybersecurity threats. This includes processes for assessing, identifying, and managing material risks from cybersecurity threats. Our information security management program seeks to follow processes set forth in recognized industry standards, and we evaluate and evolve our security measures as appropriate. We maintain a cybersecurity incident response plan that we practice and update as needed. The identification, assessment and management of cybersecurity risk is integrated into our overall enterprise risk management program that is ultimately overseen by the Board.
We consult with external parties, such as third-party cybersecurity firms, to provide, among other things, monitoring of systems, threat intelligence, and employee cybersecurity training. We also use third parties to assist our risk management processes by conducting security assessments.
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We also have a vendor risk assessment process to oversee and identify risks from cybersecurity threats associated with our use of third-party service providers. These processes consist of the distribution and review of questionnaires designed to identify cybersecurity risks associated with the engagement of third parties. We also audit cybersecurity practices of certain third-party service providers, and take steps designed to ensure that such vendors have implemented data privacy and security controls that help mitigate the cybersecurity risks associated with these vendors, depending on the nature and sensitivity of the supplier and data it processes on our behalf. We routinely assess our high-risk suppliers’ conformance to industry standards and evaluate them for additional information, product, and physical security requirements.
We employ a number of protective measures, including firewalls, endpoint detection and response technologies, regular annual training of employees with respect to cybersecurity and testing employee competence with anti-phishing policies followed up by additional remedial training as needed.
While there have been cyber incidents in the past, none of these incidents, individually or in aggregate, had a material adverse effect on our business strategy, operations, or financial conditions. Refer to “Risk Factors” in Item 1A of this Form 10-K for additional information about cybersecurity-related risks.
Governance
As part of its broader risk oversight activities, our Board maintains oversight of cybersecurity matters, including managing and assessing risks from cybersecurity threats. The Audit Committee also reviews the adequacy and effectiveness of our information security policies and practices and the internal controls regarding information security risks. The Audit Committee and the Board receive regular information security updates relating to cybersecurity risk from management, including from our Director of Information Security.
Cybersecurity risk is primarily managed by our Directors of Information Security and Information Technology . These individuals have decades of experience in managing cybersecurity risk for public companies. Additionally, we have established a cross-functional Cybersecurity Committee, consisting of executive-level leadership, including representatives from Finance, IT, Legal, and other teams, that meets periodically to review cybersecurity risks, incidents, and assess emerging threats. The Cybersecurity Committee is also informed of our responses to such risks, incidents and threats.
Our cybersecurity incident response plan also contains mechanisms to notify executive management of cybersecurity incidents. As part of the plan, an executive-level leadership team may be activated and can act to direct our response efforts, to include mitigation and remediation activities, when appropriate.
Item 2. Properties
As of June 30, 2025, we owned approximately 3,157,000 square feet and leased approximately 1,539,000 square feet of office and manufacturing space, which does not include any leases executed but not commenced. Our long-lived assets, excluding leases, located outside of the United States represented 37.8% of total value of long-lived assets in fiscal year 2025. In addition, we lease various offices, warehouses and other premises in United States and throughout the world. See Note 15, “Segment Reporting” in the notes to the consolidated financial statements in this Annual Report for a summary of long-lived assets by geographic region.
Our principal executive offices, research and development center, and production operations are in San Jose, California where we own approximately 1,601,000 square feet of office and manufacturing space. We lease approximately 459,479 square feet of warehouse space in San Jose, California under a lease that expires in October 2030, lease approximately 246,000 square feet of warehouse space in Fremont, California under a lease that expires in October 2030, lease approximately 46,000 square feet of office space in San Jose, California under a lease that expires in January 2028, lease approximately 28,000 square feet of warehouse space in Milpitas, California under a lease that expires in March 2027, lease approximately 5,000 square feet of office space in Jersey City, New Jersey under a lease that expires in May 2027, lease approximately 63,000 square feet of office space in Milpitas, California under a lease that expires in August 2035, and lease approximately 72,000 square feet of data center space in Vernon, California under a lease that expires in October 2035. Additionally, we own 36 acres of land in San Jose, California that would allow us to expand our Green Computing Park.
Our European headquarters for manufacturing and service operations is located in Den Bosch, the Netherlands where we own approximately 12,000 square feet of office space and lease approximately 350,000 square feet of office and manufacturing space under six leases, which expire at various dates ranging from June 2026 to June 2035.
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In Asia, our manufacturing facilities are located in Taoyuan County, Taiwan where we own approximately 954,000 square feet of office and manufacturing space across 6.77 acres of land, and in Malaysia where we own approximately 590,000 square feet of dormitory, office, and manufacturing space on 30 acres of land. These manufacturing facilities are pledged as security under the existing loans with $28.8 million remaining outstanding as of June 30, 2025. Our research and development center, service operations, and warehouse space in Asia are in an approximately 153,000 square feet facility in Taipei and Hsinchu, Taiwan under nineteen leases that expire at various dates ranging from January 2026 through March 2029 and approximately 93,000 square feet facilities in Taoyuan, Taiwan under three leases that expire at various dates ranging from June 2026 through December 2028.
We believe that our existing facilities in San Jose, California, Taiwan, and the Netherlands, in addition to our new facility in Malaysia, are suitable and adequate for our present purposes, and that the productive capacity of such facilities is substantially being utilized or we have plans to utilize such capacity.
Item 3. Legal Proceedings
The information required by this item is incorporated herein by reference to the information set forth in Note 13. “Commitments and Contingencies” in the notes to the consolidated financial statements included in this Annual Report.
Due to the inherent uncertainties of legal proceedings, we cannot predict the outcome of these proceedings at this time, and we can give no assurance that they will not have a material adverse effect on our financial position or results of operations.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common stock is traded on the Nasdaq Global Select Market under the symbol SMCI. Public trading of our common stock began on March 29, 2007. Prior to that, there was no public market for our common stock.
Holders
As of July 31, 2025, there were 22 registered stockholders of record of our common stock not including those shares held in street or nominee name. Because most of our shares are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of beneficial stockholders represented by these holders of record.
Forward Stock Split
On September 30, 2024, we filed the Amendment to effect the Stock Split of our common stock. The Amendment also effected a proportionate increase in the number of shares of authorized common stock from 100,000,000 to 1,000,000,000. Pursuant to Section 242(d) of the General Corporation Law of the State of Delaware, stockholder approval was not required in connection with the foregoing.
The Stock Split became effective at 5:00 p.m. Eastern Time on September 30, 2024. Trading in the common stock on the Nasdaq Global Select Market commenced on a Stock Split-adjusted basis at the market open on October 1, 2024, under the existing trading symbol “SMCI.”
As a result of the Stock Split, every one (1) share of common stock issued and outstanding was automatically divided into ten (10) shares of common stock. The Stock Split did not modify any rights or preferences of the shares of the common stock. Proportionate adjustments were automatically made to the number of shares of common stock underlying our outstanding equity awards, equity incentive plans, and other existing agreements, as well as exercise or conversion prices, as applicable.
Unless noted, all references to shares of common stock and per share amounts contained in this Annual Report on Form 10-K have been retroactively adjusted to reflect the Stock Split.
Dividend Policy
We have never declared or paid cash dividends on our capital stock. We intend to retain any future earnings and do not expect to pay any dividends in the foreseeable future.
Equity Compensation Plan
Please see Part III, Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” of this Annual Report for disclosure relating to our equity compensation plans.
Stock Performance Graph
This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of Super Micro Computer, Inc. with the SEC, whether made before or after the date of this Annual Report and irrespective of any general incorporation language in those filings, except to the extent that such filing specifically states that such graph and related information are incorporated by reference into such filing.
The following graph shows a comparison of the cumulative total return for our common stock, the Nasdaq Computer Index and the Nasdaq Composite Index for the five years ended June 30, 2025. The annual changes for the five-year period shown in the graph assume that $100 was invested in our common stock and each index at the market close on the last trading day for the fiscal year ended June 30, 2020, and that all dividends (if any were issued) were reinvested. The stock price performance of the following graph is not indicative of future stock price performance.
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*$100 invested on 6/30/2020 in stock and in indices, including reinvestment of dividends.
Source: FactSet financial data and analytics.
6/30/2020 6/30/2021 6/30/2022 6/30/2023 6/30/2024 6/30/2025
Super Micro Computer, Inc. 100.00 123.94 141.90 877.46 2,884.86 1,725.70
Nasdaq Composite Index 100.00 144.19 109.64 137.07 176.29 202.51
Nasdaq Computer Index 100.00 150.23 122.62 168.27 243.25 276.13
Recent Sales of Unregistered Securities
From November 1, 2024 through November 5, 2024, we issued 11,360 shares of our common stock to two current employees and one former employee, upon exercise of vested stock options granted to them in 2018-2023, as compensatory awards under the 2016 Equity Incentive Plan and the 2020 Equity and Incentive Compensation Plan, as amended and restated. The aggregate proceeds from the exercise of the stock options was approximately $33,000. The issued shares represented less than 0.1% of our outstanding common stock and were not issued in a public offering.
Issuer Purchases of Equity Securities
During the three months ended June 30, 2025 , we repurchased the following shares of our common stock:
Period
Total Number of Shares Purchased
Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs
Month 1 (April 1, 2025 to April 30, 2025)
— — —
Month 2 (May 1, 2025 to May 31, 2025)
— — —
Month 3 (June 1, 2025 to June 30, 2025)
4,891,171 $40.89 4,891,171 —
Total
4,891,171 $40.89 4,891,171
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In June 2025, we repurchased 4,891,171 shares of our common stock for an aggregate purchase price of approximately $200.0 million. The repurchased shares were subsequently retired. The repurchase was conducted concurrently with our offering of the 2030 Convertible Notes, in privately negotiated transactions with certain purchasers of the 2030 Convertible Notes. The transactions were effected through one of the initial purchasers of the 2030 Convertible Notes or our affiliates, in each case, acting as our agent. The repurchase price was $40.89 per share, which represented the closing trading price of our common stock on June 23, 2025, the date on which the 2030 Convertible Notes were priced.
This repurchase was conducted outside of a publicly announced repurchase plan or program, and was not made pursuant to a Rule 10b5-1 trading plan or under the Rule 10b-18 safe harbor. We have not adopted any publicly announced repurchase plans or programs, and no such plans were in effect during fiscal year 2025.
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Item 6. [Reserved]
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the consolidated financial statements and related notes which appear elsewhere in this Annual Report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Annual Report, particularly under the heading “Risk Factors.”
Overview
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, AI systems, storage, IoT devices, switches, software, and support services. Supermicro's expertise in motherboard, power, and chassis design expertise 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.
We commenced operations in 1993 and have been profitable every year since inception. For fiscal years 2025, 2024, and 2023, our net income was $1,048.9 million, $1,152.7 million, and $640.0 million, respectively.
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.
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 additional 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.
AI and Data Centers
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.
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Macroeconomic Factors
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.
Financial Highlights
The following is a summary of our financial highlights for fiscal years 2025 and 2024:
Years Ended June 30,
2025 2024
Net sales $ 21,972,042 $ 14,989,251
Gross profit 2,429,922 2,061,410
Total operating expenses 1,176,928 850,636
Income from operations 1,252,994 1,210,774
Net income
1,048,854 1,152,666
Net income per diluted share 1.68 1.92
• Net sales increased by 46.6% in fiscal year 2025 as compared to fiscal year 2024. driven by an increase in demand from customers for GPU servers, HPC and rack-scale solutions which have higher average selling prices, primarily due to large enterprise and data center customers from the United States, Asia, and Europe where we experienced significant growth.
• Gross margin decreased to 11.1% in fiscal year 2025 from 13.8% in fiscal year 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.
• Operating expenses increased by 38.4% in fiscal year 2025 as compared to fiscal year 2024, primarily due to higher headcount and increases in salary and stock-based compensation.
• Net income decreased to $1,048.9 million in fiscal year 2025 as compared to $1,152.7 million in fiscal year 2024, which was primarily due to decrease in gross profit and increase in operating and other expenses partially, offset by the increase in net sales in fiscal year 2025 as compared to fiscal year 2024.
Critical Accounting Estimates
General
Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). The preparation of these 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.
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 consolidated financial statements. We have critical accounting estimates in the areas of inventories, revenue recognition, income taxes, when applicable, have the greatest potential impact on our consolidated financial statements. Therefore, we consider these to be our critical accounting estimates.
For further information on all of our significant accounting policies, see Note 1. “Organization and Summary of Significant Accounting Policies” in the notes to the consolidated financial statements in this Annual Report.
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Revenue Recognition
We generate revenue from the sale of server and storage systems, including systems and related services, subsystems and accessories.
We apply judgment in determining the transaction price as we may be required to estimate variable consideration when determining the amount of revenue to recognize. As part of determining the transaction price in contracts with customers, we estimate reserves for future sales returns based on our history of actual returns for each major product line. Based upon historical experience, a refund liability is recorded at the time of sale for estimated product returns and an asset is recognized for the amount expected to be recorded in inventory upon product return, less the expected recovery costs.
We allocate the transaction price of each customer contract to each performance obligation based on the relative Standalone Selling Price (“SSP”) for each performance obligation within each contract. We recognize the amount of transaction price allocated to each performance obligation within a customer contract as revenue at the time the respective performance obligation is satisfied by transferring control of the promised good or service to a customer. Determining the relative SSP for contracts that contain multiple performance obligations requires significant judgment. We determine SSP based on the price at which the performance obligation is sold separately. If the SSP is not observable through past transactions, we apply judgment to estimate the SSP. For substantially all of the performance obligations, we are able to establish the SSP based on the observable prices of products or services sold separately in comparable circumstances to similar customers. We typically establish an SSP range for our products and services, which is reassessed on a periodic basis or when facts and circumstances change. SSP for our products and services can evolve over time due to changes in our pricing practices, internally approved pricing guidelines with respect to geographies, customer type, internal costs, and gross margin objectives for the related performance obligations which can also be influenced by intense competition, changes in demand for our products and services, economic and other factors.
Revenue is recognized either over time or at a point in time, depending on when control of the underlying products or services are transferred to the customer, which may require judgment. Revenue is recognized at a point in time for products. Revenue is recognized over time for extended warranty and on-site services provided and at a point in time for other services such as rack installation and integration services.
Inventories
Inventories are stated at lower of cost, using weighted average cost method, or net realizable value. Net realizable value is the estimated selling price of our products in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Inventories consist of raw materials (principally electronic components), work in process (principally products being assembled) and finished goods (principally finished products and products ready for sale). We evaluate inventory on a quarterly basis for lower of cost or net realizable value and excess and obsolescence and, as necessary, write down the valuation of inventories.
We charge cost of sales for inventory provisions to write-down our inventory to the lower of cost or net realizable value or for obsolete or excess inventory, and for excess product purchase commitments. Most of our inventory provisions relate to excess quantities of products or components, based on our inventory levels and future product purchase commitments compared to assumptions about future demand and market conditions, which requires management judgment. Situations that may result in excess or obsolete inventory or excess product purchase commitments include changes in business and economic conditions, changes in market conditions, sudden and significant decreases in demand for our products, including potential cancellation or deferral of customer purchase orders, inventory obsolescence because of changing technology and customer requirements, new product introductions resulting in less demand for existing products or inconsistent spikes in demand, failure to estimate customer demand properly, ordering in advance of historical lead-times, government regulations and the impact of changes in future demand, or increase in demand for competitive products, including competitive actions. Net realizable value is the estimated selling price of our products in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.
Our inventory and capacity purchase commitments are based on forecasts of future customer demand and consider our third-party manufacturers’ lead times and constraints. Our manufacturing lead times can be and have been long, and in some cases, extended beyond twelve months for some products. We may place non-cancellable inventory orders for certain product components in advance of our historical lead times, pay premiums and provide deposits to secure future supply and capacity. We also adjust to other market factors, such as product offerings and pricing actions by our competitors, new product transitions, and macroeconomic conditions - all of which may impact demand for our products.
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We receive various rebate incentives from certain suppliers based on our contractual arrangements, including volume-based rebates. The rebates earned are recognized as a reduction of cost of inventories and reduce the cost of sales in the period when the related inventory is sold.
Income Taxes
We are subject to income taxes in the United States and numerous foreign jurisdictions. Significant judgment is required in determining our provision for income taxes and income tax assets and liabilities, including evaluating uncertainties in the application of accounting principles and complex tax laws.
Our calculation of deferred tax assets and liabilities is based on certain estimates and judgments and involves dealing with uncertainties in the application of complex tax laws. Our estimates of deferred tax assets and liabilities may change based, in part, on added certainty or finality to an anticipated outcome, changes in accounting standards or tax laws in the U.S. or foreign jurisdictions where we operate, or changes in other facts or circumstances. In addition, we recognize liabilities for potential U.S. and foreign income tax contingencies based on our estimate of whether, and the extent to which, additional taxes may be due. If we determine that payment of these amounts is unnecessary or if the recorded tax liability is less than our current assessment, we may be required to recognize an income tax benefit or additional income tax expense in our financial statements accordingly.
We record a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized based on all available evidence. To the extent realization of the deferred tax assets becomes more-likely-than-not, we would recognize such deferred tax assets as income tax benefits during the period.
We recognize the benefit from a tax position only if it is more-likely-than-not that the position would be sustained upon audit based solely on the technical merits of the tax position. Our policy is to include interest and penalties related to unrecognized tax benefits as a component of income tax expense.
Results of Operations
Components of Results of Operations
Net Sales
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.
Cost of Sales, Gross Profit and Gross Margin
Cost of sales primarily consists of the costs to manufacture our products, which includes: the costs of components and materials, contract manufacturing, shipping, personnel expenses (salaries, benefits, stock-based compensation and incentive bonuses), equipment and facility expenses, warranty costs and inventory reserve charges.
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 3.3%, 4.3%, and 6.6% of our cost of sales for fiscal years 2025, 2024, and 2023, respectively. For further details on our dealings with related parties, see Note 10, “Related Party Transactions” in the notes to the consolidated financial statements.
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Research and Development
Research and development expenses consist of personnel expenses including salaries, benefits, stock-based compensation and incentive bonuses, and related expenses for our research and development personnel, as well as product development costs such as materials and supplies, consulting services, third-party testing services and equipment and facility expenses related to our research and development activities.
Sales and Marketing
Sales and marketing expenses consist primarily of personnel expenses including salaries, benefits, stock-based compensation and incentive bonuses, and related expenses for our sales and marketing personnel, cost for trade shows, sales representative fees and marketing programs. From time to time, we receive marketing development funding from certain suppliers. Under these arrangements, we are reimbursed for certain marketing costs that we incur as part of the joint promotion of our products and those of our suppliers. These amounts offset a portion of the related expenses and have the effect of reducing our reported sales and marketing expenses.
General and Administrative
General and administrative expenses consist primarily of general corporate costs, including personnel expenses such as salaries, benefits, stock-based compensation and incentive bonuses, and related expenses for our general and administrative personnel, financial reporting, corporate governance and compliance, outside legal, audit, tax fees, insurance and credit losses on accounts receivable.
Other Income, Net and Interest Expense
Other income, net and interest expense consists of interest earned on our investments and cash balances, interest incurred on our debt, and foreign exchange gains and losses.
Income Tax Provision
Our income tax provision is based on our taxable income generated in the jurisdictions in which we operate, which primarily include the United States, Taiwan, and the Netherlands. Our effective tax rate differs from the statutory rate primarily due to research and development tax credits, certain non-deductible expenses, tax benefits from foreign derived intangible income, and stock-based compensation. A reconciliation of the federal statutory income tax rate to our effective tax rate is set forth in Note 12, “Income Taxes” in the notes to the consolidated financial statements in this Annual Report.
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The following table presents certain items of our consolidated statements of operations for the years ended June 30, 2025, 2024, and 2023 (in millions):
Years Ended June 30,
2025 2024 *
2023 *
Net sales $ 21,972.0 $ 14,989.2 $ 7,123.5
Cost of sales 19,542.1 12,927.8 5,840.5
Gross profit 2,429.9 2,061.4 1,283.0
Operating expenses:
Research and development 636.6 463.5 307.3
Sales and marketing 273.1 189.7 115.0
General and administrative 267.2 197.4 99.6
Total operating expenses 1,176.9 850.6 521.9
Income from operations 1,253.0 1,210.8 761.1
Other income, net 18.5 22.7 3.6
Interest expense (59.6) (19.4) (10.5)
Income before income tax provision 1,211.9 1,214.1 754.3
Income tax provision (156.8) (63.3) (110.7)
Share of income (loss) from equity investee, net of taxes (6.2) 1.8 (3.6)
Net income $ 1,048.9 $ 1,152.7 $ 640.0
* Totals may not sum due to rounding.
The following table presents certain items of our consolidated statements of operations expressed as a percentage of net sales for the years ended June 30, 2025, 2024, and 2023:
Years Ended June 30,
2025 2024 2023
Net sales 100.0 % 100.0 % 100.0 %
Cost of sales 88.9 % 86.2 % 82.0 %
Gross profit 11.1 % 13.8 % 18.0 %
Operating expenses:
Research and development 2.9 % 3.1 % 4.3 %
Sales and marketing 1.2 % 1.3 % 1.6 %
General and administrative 1.3 % 1.3 % 1.4 %
Total operating expenses 5.4 % 5.7 % 7.3 %
Income from operations 5.7 % 8.1 % 10.7 %
Other income, net 0.1 % 0.1 % 0.1 %
Interest expense (0.3) % (0.1) % (0.1) %
Income before income tax provision 5.5 % 8.1 % 10.7 %
Income tax provision (0.7) % (0.4) % (1.6) %
Share of income (loss) from equity investee, net of taxes — % — % (0.1) %
Net income 4.8 % 7.7 % 9.0 %
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Net Sales by Product Type
The following table presents net sales by product type for fiscal years 2025, 2024, and 2023 (dollars in millions):
Years Ended June 30, 2025 over 2024 Change 2024 over 2023 Change
2025 2024 2023 $ % $ %
Server and storage systems $ 21,311.6 $ 14,185.2 $ 6,569.8 $ 7,126.4 50.2 % $ 7,615.4 115.9 %
Percentage of total net sales 97.0 % 94.6 % 92.2 %
Subsystems and accessories $ 660.4 804.0 553.7 (143.6) (17.9) % 250.3 45.2 %
Percentage of total net sales 3.0 % 5.4 % 7.8 %
Total net sales $ 21,972.0 $ 14,989.2 $ 7,123.5 $ 6,982.8 46.6 % $ 7,865.7 110.4 %
Fiscal Year 2025 Compared with Fiscal Year 2024
During fiscal year 2025, we experienced increased net sales from server and storage systems, particularly from our large enterprise and datacenter customers. The year-over-year increase in net sales of server and storage systems was primarily due to the strong demand and increased billings for GPU & Super Racks of $5,804.0 million or 52% compared to prior year, including liquid-cooled and air-cooled servers which are generally more complex and of higher value, primarily related to our H200, H100, and B200 systems, resulting in an increase of average selling price of 34%. Our services and software net sales, included in server and storage systems net sales, increased by $102.2 million year-over-year.
The year-over-year decrease in net sales for our subsystems and accessories is primarily due to our strategic shift to focus on prioritizing sales of our server and storage systems.
Fiscal Year 2024 Compared with Fiscal Year 2023
During fiscal year 2024, we experienced increased net sales from server and storage systems, particularly from our large enterprise and datacenter customers. The year-over-year increase in net sales of server and storage systems was primarily due to the strong demand for GPU based rack-scale solutions, including liquid-cooled and air-cooled servers which are generally more complex and of higher value, resulting in an increase of average selling prices.
The year-over-year increase in net sales for our subsystems and accessories is primarily due to increased demand of accessories sold to our larger enterprise and data center customers as more accessories and spares were purchased in conjunction with the increased volume of full systems and servers. Our services and software net sales, included in server and storage systems net sales, increased by $53.8 million year-over-year.
Net Sales by Geography
The following table presents percentages of net sales by geographic region for fiscal years 2025, 2024, and 2023 (dollars in millions):
Years Ended June 30, 2025 over 2024 Change 2024 over 2023 Change
2025 2024 2023 $ % $ %
United States $ 13,052.6 $ 10,187.2 $ 4,834.1 $ 2,865.4 28.1 % $ 5,353.1 110.7 %
Percentage of total net sales 59.4 % 68.0 % 67.9 %
Asia 5,494.1 2,912.6 1,050.8 2,581.5 88.6 % 1,861.8 177.2 %
Percentage of total net sales 25.0 % 19.4 % 14.7 %
Europe 2,727.0 1,294.0 1,003.1 1,433.0 110.7 % 290.9 29.0 %
Percentage of total net sales 12.4 % 8.6 % 14.1 %
Others 698.3 595.4 235.5 102.9 17.3 % 359.9 152.8 %
Percentage of total net sales 3.2 % 4.0 % 3.3 %
Total net sales $ 21,972.0 $ 14,989.2 $ 7,123.5 $ 6,982.8 46.6 % $ 7,865.7 110.4 %
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Fiscal Year 2025 Compared with Fiscal Year 2024
The year-over-year increase in total net sales is driven by an increase in demand from customers for GPU servers, HPC and rack-scale solutions which have higher average selling prices, especially from large enterprise and data center customers resulting in increased sales of 28.1% in the United States, 85.9% in Thailand and Japan, and 111.9% in the United Kingdom, Sweden, and Spain, where we have experienced significant growth.
Fiscal Year 2024 Compared with Fiscal Year 2023
The year-over-year increase in total net sales is driven by an increase in demand from customers for GPU servers, HPC and rack-scale solutions which have higher average selling prices, especially for large enterprise and data center customers from the United States. The year-over-year increase of net sales in the regions outside the United States is mainly due to an increase in net sales in Singapore, Taiwan, South Africa and Germany, including the increase in demand from customers for GPU servers in those countries.
Cost of Sales, Gross Profit, and Gross Margin
Cost of sales and gross margin for fiscal years 2025, 2024, and 2023 are as follows (dollars in millions):
Years Ended June 30, 2025 over 2024 Change 2024 over 2023 Change
2025 2024 2023 $ % $ %
Cost of sales $ 19,542.1 $ 12,927.8 $ 5,840.5 $ 6,614.3 51.2 % $ 7,087.3 121.3 %
Gross profit 2,429.9 2,061.4 1,283.0 368.5 17.9 % 778.4 60.7 %
Gross margin 11.1 % 13.8 % 18.0 % (2.7) % (4.2) %
Fiscal Year 2025 Compared with Fiscal Year 2024
The year-over-year increase in cost of sales was primarily attributed to an increase of $6,353.2 million or 50.6% in costs of components, materials, and contract manufacturing expenses primarily due to increases in shipments of GPU servers, HPC, and rack-scale solutions which have higher costs and a $86.5 million or 493.6% increase in tariff expense related to new trade policies enacted during the year, a $149.6 million or 179.2% increase in inventory write-down adjustments from aged inventory, a $67.9 million or 28.6% increase in overhead costs which includes higher labor costs attributed to increase of operating activities, and a $43.6 million or 75.5% increase in freight charges.
The year-over-year decrease of 2.7% in gross margin percentage was primarily due to our strategy to offer competitive pricing to gain market share, increased competition and a change in product and customer mix.
Fiscal Year 2024 Compared with Fiscal Year 2023
The year-over-year increase in cost of sales was primarily attributed to an increase of $7,006.7 million in costs of components, materials and contract manufacturing expenses primarily related to the increase in shipments of GPU servers, HPC, and rack scale solutions which have higher costs, a $52.3 million increase in inventory write-down adjustments, a $19.6 million increase in overhead costs which includes labor costs attributed to increase of operation activities and a $8.7 million increase in freight charges.
The year-over-year decrease in the gross margin percentage was primarily due to our strategy to offer competitive pricing to gain market share, increased competition and a change in product and customer mix.
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Operating Expenses
Operating expenses for fiscal years 2025, 2024, and 2023 are as follows (dollars in millions):
Years Ended June 30, 2025 over 2024 Change 2024 over 2023 Change
2025 2024 2023 $ % $ %
Research and development $ 636.6 $ 463.5 $ 307.3 $ 173.1 37.3 % $ 156.2 50.8 %
Percentage of total net sales 2.9 % 3.1 % 4.3 %
Sales and marketing 273.1 189.7 115.0 83.4 44.0 % 74.7 65.0 %
Percentage of total net sales 1.2 % 1.3 % 1.6 %
General and administrative 267.2 197.4 99.6 69.8 35.4 % 97.8 98.2 %
Percentage of total net sales 1.3 % 1.3 % 1.4 %
Total operating expenses $ 1,176.9 $ 850.6 $ 521.9 $ 326.3 38.4 % $ 328.7 63.0 %
Fiscal Year 2025 Compared with Fiscal Year 2024
Research and development expenses. The year-over-year increase in research and development expenses was primarily driven by a $153.2 million or 34.7% increase in employee-related costs, mainly comprised of a $81.0 million or 70.0% increase in stock-based compensation, and $60.2 million or 20.2% increase in salaries, as we expanded our workforce and invested in key talent. Additionally, there was a $28.3 million or 78.3% increase in product development costs to support the development of next-generation products and technologies. These increases along with other immaterial cost increases were partially offset by an $11.0 million or 50.9% increase in research and development fees received from certain suppliers and customers. Looking ahead, we expect research and development expenses to continue to rise as we expand our workforce and invest in key talent to remain at the forefront of innovation in next-generation products and technologies.
Sales and marketing expenses. The year-over-year increase in sales and marketing expenses was primarily driven by a $53.5 million or 30.9% increase in employee-related costs, mainly due to a $30.9 million or 23.0% increase in salaries and a $16.6 million or 78.3% increase in stock-based compensation, similarly to our research and development expenses as we expanded our workforce and invested in key talent company-wide. Additionally, there was a $50.0 million or 164.6% increase in advertising, travel, and other related expenses due to an increase in our marketing efforts to support the launch and promotion of new products. These increases, along with other immaterial cost increases, were partially offset by a $20.8 million or 132.6% increase in additional marketing development fees received from certain vendors. Looking ahead, we expect sales and marketing expenses to continue to rise as we expand our workforce and invest in key talent.
General and administrative expenses. The year-over-year increase in general and administrative expenses was primarily driven by a $74.0 million or 241.0% increase in professional and service fees, reflecting higher costs for external accounting, audit, tax, legal, and advisory services, primarily driven by the Special Committee investigation and the delay in filing our Annual Report on Form 10-K for fiscal year 2024. These services were necessary to support enhancements in our external reporting processes and compliance activities during fiscal year ended 2025. Additionally, there was a $20.7 million or 37.5% 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. These increases, along with other immaterial cost increases, were partially offset by a $22.8 million or 28.6% decrease in employee-related costs related to stock-based compensation. Looking ahead, we expect general and administrative expenses to continue rising as we invest in process improvements, expand our workforce, and attract key talent to support our strategic initiatives and operational growth.
Fiscal Year 2024 Compared with Fiscal Year 2023
Research and development expenses. The year-over-year increase in research and development expenses was driven by a $140.4 million increase in employee related costs primarily due to stock-based compensation increases of $84.2 million, salary increases and higher headcount as we expanded our workforce and invested in key talent, a $17.1 million increase in product development costs to support next generation products and technologies, offset by a $1.3 million increase in research and development fees. 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.
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Sales and marketing expenses. The year-over-year increase in sales and marketing expenses was driven by a $64.8 million increase in employee related costs primarily due to stock-based compensation increases of $16.6 million, salary increases and higher headcount as we expanded our workforce and invested in key talent, a $10.6 million increase in advertising and other expenses offset by a $0.7 million increase in marketing development fees received. We believe that sales and marketing expenses will continue to increase as we continue to expand our workforce and invest in key talent.
General and administrative expenses. The year-over-year increase in general and administrative expenses was driven by a $74.4 million increase in employee related costs primarily due to stock-based compensation increases of $65.0 million, salary increases and higher headcount as we expanded our workforce and invested in key talent, and a $23.4 million increase in professional and service fees and other expenses. We believe that general and administrative expenses will continue to increase as we continue to expand our workforce and invest in key talent.
Other Income, Net and Interest Expense
Other income, net and interest expense for fiscal years 2025, 2024, and 2023 are as follows (dollars in millions):
Years Ended June 30, 2025 over 2024 Change 2024 over 2023 Change
2025 2024 2023 $ % $ %
Other income, net $ 18.5 $ 22.7 $ 3.6 $ (4.2) (18.5) % $ 19.1 530.6 %
Interest expense (59.6) (19.4) (10.5) (40.2) 207.2 % (8.9) 84.8 %
Other income, net and interest expense
$ (41.1) $ 3.3 $ (6.9) $ (44.4) (1,345.5) % $ 10.2 (147.8) %
Fiscal Year 2025 Compared with Fiscal Year 2024
The year-over-year decrease in other income, net, was primarily attributable to a $30.3 million or 100.0% increase for loss on extinguishment of our Original 2029 Convertible Notes resulting from the 2029 Convertible Notes Amendments (see Note 8, “Convertible Notes”), and a $17.9 million or 283.8% increase in foreign exchange losses. The increase in interest expense was primarily due to a $34.6 million or 1774.1% increase in interest and amortization related to the amended 2029 Convertible Note and newly issued 2028 Convertible Notes and 2030 Convertible Notes. These increases in expense were partially offset by a $15.7 million or 119.5% net movement in investment gains/(loss), as we incurred a loss in prior year of $13.1 million and a gain in the current year of $2.6 million, and a $31.0 million or 104.8% increase in interest income due to higher average monthly cash balances held in interest-bearing demand deposit accounts.
Fiscal Year 2024 Compared with Fiscal Year 2023
The increase in Other income, net of $19.1 million was driven by an increase of $26.1 million in interest income due to higher balances held in interest-bearing deposit accounts during the year, and an increase in foreign currency exchange gain of $6.1 million due to a strong US dollar, offset by a $13.1 million investment and impairment loss in equity securities. The increase in interest expense of $8.9 million was due to higher borrowing and higher interest rates on our outstanding line of credit and term loan balances.
Income Tax Provision
Provision for income taxes and effective tax rates for fiscal years 2025, 2024, and 2023 are as follows (dollars in millions):
Years Ended June 30, 2025 over 2024 Change 2024 over 2023 Change
2025 2024 2023 $ % $ %
Income tax provision $ (156.8) $ (63.3) $ (110.7) $ (93.5) 147.7 % $ 47.4 (42.8) %
Effective tax rate (12.9) % (5.2) % (14.7) %
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Fiscal Year 2025 Compared with Fiscal Year 2024
The year-over year increase in the effective tax rate is attributable to a decrease in the stock compensation tax deduction and lower research and development tax credits, both driven by the decrease in our stock price. The total effective tax rate increased by 7.7%, from 5.2% in fiscal year 2024, to 12.9% in fiscal year 2025.
Subsequent to June 30, 2025, the OBBBA was enacted in the U.S. on July 4, 2025. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. We are currently assessing its impact on our consolidated financial statements.
In December 2023, Malaysia enacted legislation to implement the OECD Pillar Two global minimum tax framework effective January 1, 2025. Our Malaysian subsidiary was incorporated in October 2022 and commenced operations in July 2025, at which time it began a 10-year income tax exemption under an approved government incentive program. We continue to monitor administrative guidance from the OECD and tax authorities regarding the interaction between the 10-year tax holiday and the 15% minimum tax requirement under Pillar Two and will evaluate the impact of such guidance when issued to determine whether adjustments to our income tax provision or financial statement disclosures are required.
Fiscal Year 2024 Compared with Fiscal Year 2023
The year-over-year decrease in the effective tax rate is attributable to higher tax deductions from stock-based compensation, an increase in the R&D tax credit. As a result of these favorable elements which were partially offset by certain unfavorable items including an increase in IRC section 162(m) officers’ compensation tax add back, the total effective tax rate decreased by 9.5%, from 14.7% in fiscal year 2023, to 5.2% in fiscal year 2024.
S hare of Income (Loss) from Equity Investee, Net of Taxes
Share of income (loss) from equity investee, net of taxes represents our share of income (loss) from the Corporate Venture in which we have a 30% ownership.
Share of income (loss) from equity investee, net of taxes for fiscal years 2025, 2024 and 2023 are as follows (dollars in millions):
Years Ended June 30, 2025 over 2024 Change 2024 over 2023 Change
2025 2024 2023 $ % $ %
Share of income (loss) from equity investee, net of taxes $ (6.2) $ 1.8 $ (3.6) $ (8.0) (444.4) % $ 5.4 (150.0) %
Percentage of total net sales — % *
— % *
(0.1) %
* Represents an amount less than 0.1%.
Fiscal Year 2025 Compared with Fiscal Year 2024
The period-over-period decrease of $8.0 million in share of income from equity investee, net of taxes was primarily due to reduction in profitability from reduced sales of the Corporate Venture. During the year ended June 30, 2025, we recognized an impairment of $6.7 million on this investment. Refer to Note 10, “Related Party Transactions” for more details.
Fiscal Year 2024 Compared with Fiscal Year 2023
The period-over-period increase of $5.4 million in share of income from equity investee, net of taxes was primarily due to improvement in profitability from increased sales of the Corporate Venture.
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Liquidity and Capital Resources
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 by 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 $5,169.9 million and $1,669.8 million as of June 30, 2025 and 2024, respectively. Our cash and cash equivalents held in foreign locations was $607.2 million and $337.3 million as of June 30, 2025 and 2024, respectively.
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.
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 consolidated financial statements. We continue to assess financing options that may be necessary to support the growth of our business.
Our key cash flow metrics were as follows (in millions):
Years Ended June 30, 2025 over 2024 2024 over 2023
2025 2024 2023
Net cash provided by (used in) operating activities
$ 1,659.5 $ (2,486.0) $ 663.6 $ 4,145.5 $ (3,149.6)
Net cash used in investing activities (183.2) (194.2) (39.5) 11.0 (154.7)
Net cash provided by (used in) financing activities 2,024.0 3,911.7 (448.3) (1,887.7) 4,360.0
Effect of exchange rate fluctuations on cash 1.7 (2.2) (3.4) 3.9 1.2
Net increase in cash, cash equivalents and restricted cash $ 3,502.0 $ 1,229.3 $ 172.4 $ 2,272.7 $ 1,056.9
Operating Activities
Net cash provided by operating activities during fiscal 2025 mostly consisted of $1,048.9 million net income adjusted for certain non-cash items, such as $314.5 million of share-based compensation expense, $58.3 million of depreciation and amortization expense, and changes in working capital. The increase in cash flows from operating activities during fiscal 2025 compared to fiscal 2024, was due to an increase in cash collection from our customers driven by the increase in revenue reduction in inventory purchase, partially offset by higher cash paid for interest and other operational spending.
Investing Activities
Net cash used in investing activities during fiscal 2025 mostly consisted of $127.2 million of purchases of property, plant, and equipment as we continued to invest in servers, data centers, and network infrastructure, and $56.0 million of net purchases of non-marketable equity securities. The decrease in cash used in investing activities during fiscal 2025 compared to fiscal 2024 was mostly due to decreases in net purchases of non-marketable equity securities, partially offset by higher purchases of property, plant, and equipment.
Financing Activities
Net cash provided by financing activities during fiscal 2025 mostly consisted of issuance of the 2028 Convertible Notes and the 2030 Convertible Notes of $683.7 million and $2,256.0 million, respectively, partially offset by common stock repurchase of $200.0 million and net repayment of debts. The decrease in cash provided by financing activities during fiscal 2025 compared to fiscal 2024, was mostly due to decrease in issuance of common stock, decrease in proceeds from debt, and increase in repurchase of common stock, partially offset by increase in issuance of the convertible notes.
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Material Cash Requirements
Refer to Note 7, “Lines of Credit and Term Loans” in the notes to the consolidated financial statements in this Annual Report for further information on our outstanding debt.
Refer to Note 8, “Convertible Notes”, in the notes to the consolidated financial statements in this Annual 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.
Capital Expenditure Requirements
We anticipate our capital expenditures for the fiscal year 2026 will be in range of $180.0 million to $200.0 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).
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.
Contractual Obligations
Our estimated future obligations as of June 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 consolidated financial statements, we have a current obligation of $75.1 million and a long-term obligation of $37.4 million. Additionally, as noted in Note 8, “Convertible Notes” in the notes to the 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 consolidated financial statements, we have a current obligation of $21.2 million and a long-term obligation of $280.4 million. Pursuant to the data center lease agreement dated June 14, 2025, we anticipate making an approximately $117.7 million lease payment subject to the remaining tranches expected to commence on October 2, 2025, which is not reflected in the consolidated balance sheets as the lease has not commenced. As noted in Note 13, “Commitments and Contingencies” in the notes to the consolidated financial statements, we have current obligations related to non-cancelable purchase commitments of $1.6 billion.
Recent Accounting Pronouncements
For a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on our consolidated financial statements, see Note 1, “Organization and Summary of Significant Accounting Policies” in the notes to the consolidated financial statements in this Annual Report.
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Item 7A. Quantitative and Qualitative Disclosure About Market Risk
Investment and Interest Rate Risk
We are exposed to interest rate risk related to our fixed-rate investment portfolio and outstanding debt. The investment portfolio is managed consistent with our overall liquidity strategy in support of both working capital needs and growth of our businesses.
The primary objectives of our investment activities are to preserve principal, provide liquidity and maximize income without significantly increasing the risk. Some of the securities we invest in are subject to market risk. This means that a change in prevailing interest rates may cause the fair value of the investment to fluctuate. To minimize this risk, we maintain our portfolio of cash equivalents and short-term investments in money market funds and certificates of deposit. Our investment in an auction rate security has been classified as non-current due to the lack of a liquid market for these securities. Since our results of operations are not dependent on investments, the risk associated with fluctuating interest rates is limited to our investment portfolio, and we believe that a 10% change in interest rates would not have a significant impact on our results of operations. As of June 30, 2025, our investments were in money market funds, certificates of deposits and auction rate securities.
We are exposed to changes in interest rates as a result of our borrowings under our term loan and revolving lines of credit. The interest rates for the term loans and the revolving lines of credit ranged from 1.3% to 5.8% at June 30, 2025. Based on the outstanding principal indebtedness of $112.5 million under our credit facilities as of June 30, 2025, we believe that a 10% change in interest rates would not have a significant impact on the results of operations.
Foreign Exchange Rate Risk
We consider our direct exposure to foreign exchange rate fluctuations to be minimal as substantially all of our sales and purchases are in United States dollars. To date, our international customer and supplier agreements have been denominated primarily in U.S. dollars and accordingly, we have limited exposure to foreign currency exchange rate fluctuations from customer agreements. The functional currency of our subsidiaries in the Netherlands, Taiwan and Malaysia is the U.S. dollar. However, certain loans and transactions in these entities are denominated in a currency other than the U.S. dollar, and thus we are subject to foreign currency exchange rate fluctuations associated with re-measurement to U.S. dollars. Such fluctuations have not been significant historically, and a 10% change in foreign currency exchange rates would not have a significant impact on the results of operations. Gains or losses from foreign currency remeasurement are included in other income or expenses.
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Item 8. Financial Statements and Supplementary Data
Index to Consolidated Financial Statements Page
Report of Independent Registered Public Accounting Firm (PCAOB ID : 243 )
56
Report of Independent Registered Public Accounting Firm (PCAOB ID: 34 )
58
Consolidated Balance Sheets
59
Consolidated Statements of Operations
60
Consolidated Statements of Comprehensive Income
61
Consolidated Statements of Stockholders’ Equity
62
Consolidated Statements of Cash Flows
63
Notes to Consolidated Financial Statements
65
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Report of Independent Registered Public Accounting Firm
Stockholders and Board of Directors
Super Micro Computer, Inc.
San Jose, California
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Super Micro Computer, Inc. (the “Company”) as of June 30, 2025 and 2024, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at June 30, 2025 and 2024, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
We also have audited the adjustments to the 2023 consolidated financial statements to retrospectively apply the stock split, as discussed in Note 1. In our opinion, such adjustments are appropriate and have been properly applied. We were not engaged to audit, review, or apply any procedures to the 2023 consolidated financial statements of the Company other than with respect to the adjustments and, accordingly, we do not express an opinion or any other form of assurance on the 2023 consolidated financial statements taken as a whole.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of June 30, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated August 28, 2025 expressed an adverse opinion thereon.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
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Valuation of Inventories
As described in Notes 1 and 6 to the consolidated financial statements, the Company’s consolidated inventories balance, which is stated at lower of cost, using weighted average cost method, or net realizable value, was $4.68 billion as June 30, 2025. The Company evaluates inventories for excess and obsolescence and lower of cost or net realizable value and, as necessary, writes down the valuation of inventories based upon the Company’s inventory aging, forecasted usage and sales, anticipated selling price, product obsolescence and other factors.
We identified the valuation of inventories as a critical audit matter. Auditing the valuation of inventories, which includes write-down percentages for excess and obsolescence applied to the different inventory aging categories, involved especially challenging and subjective auditor judgments due to the nature and extent of effort required to address this matter.
The primary procedures we performed to address this critical audit matter included:
• Inquiring of various personnel in the Company including but not limited to finance and operations personnel about the expected product lifecycles and product development plans to understand and evaluate the Company’s methodology for determining inventory that is excess or obsolete and the key assumptions and judgments made as part of the process, including the write-down percentages used to write down the valuation of inventories.
• Assessing management’s estimate of write-down percentages by recalculating inventory turns and historical write-down percentages across multiple fiscal periods and comparing it with the write-down percentages used by management to evaluate management’s ability to accurately estimate excess and obsolete inventories.
• Testing the completeness and accuracy of the underlying data utilized in management’s excess and obsolescence analysis, including the classification of inventory by aging category.
• Assessing the existence of contradictory evidence based on reading the Company’s press releases and industry reports, as well as our observations and inquiries as to changes within the business.
Revenue Recognition from Contracts with Customers
As described in Notes 1 and 4 to the consolidated financial statements, the Company’s net sales were $21.97 billion for the year ended June 30, 2025. The Company recognizes revenue upon transfer of control of promised goods or services in a contract. Transfer of control of promised goods generally occurs at the point of shipment or upon delivery to the customer.
We identified the auditing of revenue recognition from contracts with customers as a critical audit matter because it involved a high degree of auditor effort required in performing audit procedures.
The primary procedures we performed to address this critical audit matter included:
• Evaluating revenue transactions on a sample basis by obtaining and inspecting source documents, such as purchase orders, sales quotations, contracts, invoices, and proof of shipment or proof of delivery.
• Inspecting a sample of credit memos and the related invoice to assess whether they were recorded in the appropriate period.
• Evaluating the completeness and accuracy of information produced by the entity.
• Evaluating the completeness and accuracy of the terms and conditions in certain customer contracts, including confirming the terms and conditions of contracts.
/s/ BDO USA, P.C.
We have served as the Company’s auditor since 2024.
San Jose, California
August 28, 2025
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Super Micro Computer, Inc.
Opinion on the Financial Statements
We have audited, before the effects of the adjustments to retrospectively apply the stock split discussed in Note 1 to the consolidated financial statements, the related consolidated statements of operations, comprehensive income, stockholders' equity, and cash flows, for the year ended June 30, 2023, and the related notes (collectively referred to as the "financial statements") (the June 30, 2023 financial statements before the effects of the retrospective adjustments discussed in Note 1 to the financial statements are not presented herein). In our opinion, the 2023 financial statements, before the effects of the adjustments to retrospectively apply the stock split discussed in Note 1 to the financial statements, present fairly, in all material respects, the results of its operations and its cash flows for the year ended June 30, 2023, in conformity with accounting principles generally accepted in the United States of America.
We were not engaged to audit, review, or apply any procedures to the adjustments to retrospectively apply the stock split discussed in Note 1 to the financial statements, and accordingly, we do not express an opinion or any other form of assurance about whether such retrospective adjustments are appropriate and have been properly applied. Those retrospective adjustments were audited by the successor auditor.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ DELOITTE & TOUCHE LLP
San Jose, California
August 25, 2023
We began serving as the Company’s auditor in 2003. In 2023, we became the predecessor auditor.
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SUPER MICRO COMPUTER, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except par value per share amounts)
June 30,
2025 2024
ASSETS
Current assets:
Cash and cash equivalents $ 5,169,911 $ 1,669,766
Accounts receivable, net of allowance for credit losses of $ 0 and $ 73 at June 30, 2025 and 2024, respectively (including amounts receivable from related parties of $ 393 and $ 6,194 at June 30, 2025 and 2024, respectively)
2,203,942 2,737,331
Inventories 4,680,375 4,333,029
Prepaid expenses and other current assets (including receivables from related parties of $ 13,745 and $ 11,939 at June 30, 2025 and 2024, respectively)
247,426 191,834
Total current assets 12,301,654 8,931,960
Property, plant, and equipment, net
504,488 414,008
Deferred income taxes, net 607,416 365,172
Other assets 604,871 114,952
Total assets $ 14,018,429 $ 9,826,092
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable (including amounts due to related parties of $ 129,752 and $ 165,295 at June 30, 2025 and 2024, respectively)
$ 1,281,977 $ 1,472,381
Accrued liabilities (including amounts due to related parties of $ 1,044 and $ 170 at June 30, 2025 and 2024, respectively)
565,637 259,674
Income taxes payable 53,381 18,268
Lines of credit and current portion of term loans 75,060 402,346
Deferred revenue 368,737 193,052
Total current liabilities 2,344,792 2,345,721
Deferred revenue, non-current 362,645 223,324
Term loans, non-current
37,415 74,083
Convertible notes
4,645,178 1,697,716
Other long-term liabilities (including amounts due to related parties of $ 608 and $ 0 at June 30, 2025 and 2024, respectively)
326,528 67,878
Total liabilities 7,716,558 4,408,722
Commitments and contingencies (Note 13)
Stockholders’ equity:
Common stock and additional paid-in capital, $ 0.001 par value
Authorized shares: 1,000,000 ; Issued and outstanding shares: 594,137 and 588,087 at June 30, 2025 and 2024, respectively
2,866,449 2,830,820
Accumulated other comprehensive income 705 706
Retained earnings 3,434,539 2,585,680
Total Super Micro Computer, Inc. stockholders’ equity 6,301,693 5,417,206
Non-controlling interest
178 164
Total stockholders’ equity 6,301,871 5,417,370
Total liabilities and stockholders’ equity $ 14,018,429 $ 9,826,092
See accompanying notes to consolidated financial statements.
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SUPER MICRO COMPUTER, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Years Ended June 30,
2025 2024 2023
Net sales (including related party sales of $ 42,259 , $ 69,791 , and $ 60,537 in fiscal years 2025, 2024, and 2023, respectively)
$ 21,972,042 $ 14,989,251 $ 7,123,482
Cost of sales (including related party purchases of $ 650,658 , $ 552,136 , and $ 384,762 in fiscal years 2025, 2024, and 2023, respectively)
19,542,120 12,927,841 5,840,470
Gross profit 2,429,922 2,061,410 1,283,012
Operating expenses:
Research and development 636,550 463,548 307,260
Sales and marketing 273,139 189,738 115,025
General and administrative 267,239 197,350 99,585
Total operating expenses 1,176,928 850,636 521,870
Income from operations 1,252,994 1,210,774 761,142
Other income, net 18,495 22,717 3,646
Interest expense ( 59,573 ) ( 19,352 ) ( 10,491 )
Income before income tax provision 1,211,916 1,214,139 754,297
Income tax provision ( 156,851 ) ( 63,294 ) ( 110,666 )
Share of (loss) income from equity investee, net of taxes
( 6,211 ) 1,821 ( 3,633 )
Net income $ 1,048,854 $ 1,152,666 $ 639,998
Net income per common share:
Basic $ 1.77 $ 2.07 $ 1.21
Diluted $ 1.68 $ 1.92 $ 1.14
Weighted-average shares used in calculation of net income per common share:
Basic 593,665 555,878 529,249
Diluted 628,402 602,146 559,704
See accompanying notes to consolidated financial statements.
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SUPER MICRO COMPUTER, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Years Ended June 30,
2025 2024 2023
Net income $ 1,048,854 $ 1,152,666 $ 639,998
Other comprehensive (loss) income, net of tax:
Foreign currency translation gain (loss) and other
15 24 ( 223 )
Net change in defined benefit obligations ( 16 ) 43 ( 49 )
Total other comprehensive (loss) income, net of tax
( 1 ) 67 ( 272 )
Total comprehensive income $ 1,048,853 $ 1,152,733 $ 639,726
See accompanying notes to consolidated financial statements.
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SUPER MICRO COMPUTER, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share amounts)
Common Stock and
Additional Paid-In
Capital Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings Non-controlling Interest Total
Stockholders’
Equity
Shares Amount
Balance at June 30, 2022
523,110,140 $ 481,741 $ 911 $ 942,923 $ 172 $ 1,425,747
Exercise of stock options 14,548,110 30,466 — — — 30,466
Release of shares of common stock upon vesting of restricted stock units 9,936,350 — — — — —
Shares withheld for withholding taxes related to settlement of equity awards ( 3,047,520 ) ( 28,197 ) — — — ( 28,197 )
Share repurchase and retirement ( 15,533,500 ) ( 91 ) — ( 149,907 ) — ( 149,998 )
Stock-based compensation — 54,433 — — — 54,433
Other comprehensive loss — — ( 272 ) — — ( 272 )
Net income (loss) — — — 639,998 ( 7 ) 639,991
Balance at June 30, 2023
529,013,580 $ 538,352 $ 639 $ 1,433,014 $ 165 $ 1,972,170
Exercise of stock options 8,725,220 29,453 — — — 29,453
Release of shares of common stock upon vesting of restricted stock units 10,340,470 — — — — —
Shares withheld for withholding taxes related to settlement of equity awards ( 3,142,910 ) ( 174,354 ) — — — ( 174,354 )
Issuances of common stock in public offerings, net of issuance costs 43,151,050 2,313,983 — — — 2,313,983
Purchase of capped calls, net of tax — ( 108,121 ) — — — ( 108,121 )
Stock-based compensation — 231,507 — — — 231,507
Other comprehensive income
— — 67 — — 67
Net income (loss) — — — 1,152,666 ( 1 ) 1,152,665
Balance at June 30, 2024
588,087,410 $ 2,830,820 $ 706 $ 2,585,680 $ 164 $ 5,417,370
Exercise of stock options 4,786,860 20,898 — — — 20,898
Release of shares of common stock upon vesting of restricted stock units 9,927,956 — — — — —
Shares withheld for withholding taxes related to settlement of equity awards ( 3,774,203 ) ( 142,457 ) — — — ( 142,457 )
Share repurchase and retirement ( 4,891,171 ) ( 5 ) — ( 199,995 ) — ( 200,000 )
Stock-based compensation — 314,933 — — — 314,933
Purchase of capped calls, net of tax — ( 157,740 ) — — — ( 157,740 )
Other comprehensive loss
— — ( 1 ) — — ( 1 )
Net income
— — — 1,048,854 14 1,048,868
Balance at June 30, 2025
594,136,852 $ 2,866,449 $ 705 $ 3,434,539 $ 178 $ 6,301,871
See accompanying notes to consolidated financial statements.
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SUPER MICRO COMPUTER, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended June 30,
2025 2024 2023
OPERATING ACTIVITIES:
Net income $ 1,048,854 $ 1,152,666 $ 639,998
Reconciliation of net income to net cash provided by (used in) operating activities:
Depreciation and amortization
58,344 38,693 34,904
Amortization of debt discount and issuance costs 10,268 2,292 —
Stock-based compensation expense 314,452 231,507 54,433
Share of loss (income) from equity investee
6,211 ( 1,821 ) 3,633
Unrealized foreign currency exchange loss (gain)
18,832 ( 531 ) ( 2,619 )
Loss on extinguishment of convertible notes
30,251 — —
Deferred income taxes, net
( 214,638 ) ( 168,499 ) ( 92,969 )
Other non-cash (income) expense, net ( 3,077 ) 12,343 ( 668 )
Changes in operating assets and liabilities:
Accounts receivable, net (including changes in related party balances of $ 5,801 , $( 721 ), and $ 2,925 in fiscal years 2025, 2024, and 2023, respectively)
533,341 ( 1,589,187 ) ( 311,897 )
Inventories ( 355,606 ) ( 2,899,996 ) 100,042
Prepaid expenses and other assets (including changes in related party balances of $( 1,806 ), $ 15,793 , and $( 3,320 ) in fiscal years 2025, 2024, and 2023, respectively)
( 229,107 ) ( 44,646 ) 8,313
Accounts payable (including changes in related party balances of $( 35,543 ), $ 76,161 , and $ 1,779 in fiscal years 2025, 2024, and 2023, respectively)
( 180,968 ) 679,190 127,135
Accrued liabilities (including changes in related party balances of $ 874 , $( 13,847 ), and $( 4,659 ) in fiscal years 2025, 2024, and 2023, respectively)
272,404 92,942 ( 50,311 )
Income taxes payable
32,043 ( 110,897 ) 87,423
Deferred revenue 315,006 111,927 70,587
Other long-term liabilities (including changes in related party balances of $ 608 , $( 178 ), and $( 321 ) in fiscal years 2025, 2024, and 2023, respectively)
2,914 8,045 ( 4,424 )
Net cash provided by (used in) operating activities
1,659,524 ( 2,485,972 ) 663,580
INVESTING ACTIVITIES:
Purchases of property, plant, and equipment (including payments to related parties of $ 17,677 , $ 10,625 , and $ 7,844 in fiscal years 2025, 2024, and 2023, respectively)
( 127,214 ) ( 124,279 ) ( 36,793 )
Investment in equity securities ( 56,000 ) ( 69,673 ) ( 500 )
Acquisition, net of cash acquired
— ( 296 ) ( 2,193 )
Net cash used in investing activities ( 183,214 ) ( 194,248 ) ( 39,486 )
FINANCING ACTIVITIES:
Proceeds from lines of credit and term loans 1,387,991 2,156,529 1,093,860
Repayment of lines of credit and term loans ( 1,768,650 ) ( 1,967,545 ) ( 1,394,391 )
Proceeds from exercise of stock options 20,898 29,453 30,466
Payment for withholding taxes related to settlement of equity awards
( 142,457 ) ( 174,354 ) ( 28,197 )
Stock repurchases ( 200,000 ) — ( 149,998 )
Issuances of common stock in public offerings, net of issuance costs of $ 42,575
— 2,313,983 —
Debt issuance costs in connection with amended 2029 Convertibles Notes
( 31,217 ) — —
Proceeds from issuance of 2029 Convertible Notes, net of issuance costs of $ 29,232
— 1,695,768 —
Proceeds from issuance of 2028 Convertible Notes, net of issuance costs of $ 16,304
683,696 — —
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Years Ended June 30,
2025 2024 2023
Proceeds from issuance of 2030 Convertible Notes, net of issuance costs of $ 44,027
2,255,973 — —
Purchase of capped calls ( 182,215 ) ( 142,140 ) —
Other 26 30 ( 33 )
Net cash provided by (used in) financing activities
2,024,045 3,911,724 ( 448,293 )
Effect of exchange rate fluctuations on cash 1,673 ( 2,191 ) ( 3,400 )
Net increase in cash, cash equivalents and restricted cash 3,502,028 1,229,313 172,401
Cash, cash equivalents and restricted cash at beginning of year 1,670,273 440,960 268,559
Cash, cash equivalents and restricted cash at end of year $ 5,172,301 $ 1,670,273 $ 440,960
Supplemental disclosure of cash flow information:
Cash paid for interest $ 25,490 $ 16,015 $ 8,541
Cash paid for taxes, net of refunds $ 327,158 $ 392,020 $ 114,963
Non-cash investing and financing activities:
Unpaid property, plant, and equipment purchases (including due to related parties of $ 3,879 , $ 2,339 , and $ 810 as of June 30, 2025, 2024, and 2023, respectively)
$ 16,208 $ 19,613 $ 2,181
Right of use (“ROU”) assets obtained in exchange for operating lease commitments
$ 276,170 $ 32,581 $ 3,197
Transfer of inventory to property, plant, and equipment, net
$ 8,260 $ 12,535 $ —
See accompanying notes to consolidated financial statements.
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Note 1. Organization and Summary of Significant Accounting Policies
Organization
Super Micro Computer, Inc. (“Super Micro Computer” or the “Company”) was incorporated in 1993. All references to “Super Micro Computer,” “we,” “us,” “our” or the “Company” mean Super Micro Computer, Inc. and its subsidiaries. Super Micro Computer is a global leader in server technology and green computing innovation. Super Micro Computer develops and provides high performance server and storage solutions based upon an innovative, modular and open-standard architecture. Super Micro Computer has operations primarily in the United States, Taiwan, and the Netherlands.
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and include the accounts of Super Micro Computer, Inc. and our wholly-owned subsidiaries where we have controlling financial interests, and any variable interest entities for which we are deemed to be the primary beneficiary. All intercompany balances and transactions have been eliminated.
Forward Stock Split
On September 30, 2024, we completed a 10 -for-1 forward split of our common stock. Trading on a split-adjusted basis commenced on October 1, 2024. All references to shares of common stock and per share amounts contained in this Annual Report have been retroactively adjusted to reflect the stock split.
Use of Estimates
Preparation of consolidated financial statements in conformity with U.S. GAAP requires the use of estimates and judgments that affect the reported amounts in the consolidated financial statements and accompanying notes. These estimates form the basis for judgments we make about the carrying values of our assets and liabilities, which are not readily apparent from other sources. We base our estimates and judgments on historical information and on various other assumptions that we believe are reasonable under the circumstances. U.S. GAAP requires us to make estimates and judgments in several areas, including, but not limited to, those related to revenue recognition, income taxes, inventory valuation, useful lives of property, plant and equipment, product warranty accruals, impairment of investments and fair value of financial instruments and leases. These estimates are based on management’s knowledge about current events, interpretation of regulations, and expectations about actions we may undertake in the future. Actual results could differ materially from those estimates.
Fair Value of Financial Instruments
We account for certain assets and liabilities at fair value, which is the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly arms-length transaction between market participants. When measuring fair value, we take into account the characteristics of the asset or liability that a market participant would consider when pricing the asset or liability at the measurement date. We consider one or more techniques for measuring fair value: market approach, income approach, and cost approach. The valuation techniques include inputs that are based on three different levels of observability to the market. We categorize each fair value measurements in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety. These levels are:
• Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
• Level 2 - Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly; and
• Level 3 - Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
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SUPER MICRO COMPUTER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Accounts receivable, accounts payable, and accrued liabilities are carried at cost, which approximates fair value due to the short maturity of these instruments. Cash and cash equivalents, certificates of deposit, investment in an auction rate security, and marketable securities, included in prepaid expenses and other current assets and other assets in the consolidated balance sheets, are carried at fair value . Non-current accounts receivable, included in other assets in the consolidated balance sheets, are carried at amortized cost, and bear interest at rates that approximate current market rates for similar credit. We believe the carrying amounts approximate fair value because there have been no significant changes in market rates or credit risk. Short-term and long-term debt, the 2029 Convertible Notes, 2028 Convertible Notes, and the 2030 Convertible Notes, included in lines of credit and current portion of term loans, term loans, non-current, and convertible notes, respectively, in the consolidated balance sheets are all carried at amortized cost.
Non-marketable Equity Securities
Our non-marketable equity securities, included in other assets in the consolidated balance sheets, are investments in privately-held companies without readily determinable fair values. We elected to account for substantially all of our non-marketable equity securities using the measurement alternative, which is cost, less any impairment. We periodically review our non-marketable equity securities for impairment. When indicators exist and the estimated fair value of an investment is below its carrying amount, we write down the investment to its estimated fair value. The change in carrying value, resulted from the remeasurements, is recognized in other income, net on our consolidated statements of operations. For additional information, see Note 3, “Non-marketable Equity Securities”.
Cash, Cash Equivalents, and Restricted Cash
Cash and cash equivalents consist of cash on deposit with financial institutions globally and highly liquid investments with maturities of 90 days or less from the date of purchase. Cash equivalents consist primarily of money market funds and certificates of deposit with original maturities of less than three months. We classify certain restricted cash balances, consisting mostly of cash related to amounts held in bank accounts which are controlled by the lenders pursuant to the terms of certain debt agreements, certificates of deposit primarily related to leases and customs requirements, and money market accounts held in escrow pursuant to our workers’ compensation program, within other assets on our consolidated balance sheets, based upon the expected duration of the restrictions. For further details on our cash, cash equivalents, and restricted cash, see Note 6, “Balance Sheet Components” in the notes to the consolidated financial statements.
Inventories
Inventories are stated at lower of cost, using weighted average cost method, or net realizable value. Net realizable value is the estimated selling price of our products in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Inventories consist of raw materials (principally electronic components), work in process (principally products being assembled) and finished goods. We evaluate inventory on a quarterly basis for excess and obsolescence and lower of cost or net realizable value and, as necessary, write down the valuation of inventories based upon our inventory aging, forecasted usage and sales, anticipated selling price, product obsolescence and other factors. Once inventory is written down, its new value is maintained until it is sold or scrapped.
We receive various rebate incentives from certain suppliers based on our contractual arrangements, including volume-based rebates. The rebates earned are recognized as a reduction of cost of inventories and reduce the cost of sales in the period when the related inventory is sold. For further details on our inventory, see Note 6, “Balance Sheet Components” in the notes to the consolidated financial statements.
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SUPER MICRO COMPUTER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Property, Plant, and Equipment
Property, plant, and equipment is recorded at cost and depreciated using the straight-line method over the estimated useful lives of the related assets as follows:
Software 3 years
Machinery and equipment
3 to 7 years
Furniture and fixtures
5 years
Buildings 39 years
Building improvements
Up to 20 years
Land improvements
15 years
Leasehold improvements Shorter of lease term or estimated useful life
We evaluate at least annually the recoverability of property, plant, and equipment for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. If such review indicates that the carrying amount of property, plant and equipment assets is not recoverable, and the asset’s fair value is less than the carrying amount, an impairment charge is recognized. No impairment charges were recorded for property, plant, and equipment in any of the periods presented.
The useful lives of our property, plant, and equipment are management’s estimates when the assets are initially recognized and are routinely reviewed for the remaining estimated useful lives. Our estimate of useful lives represents the best estimate of the useful lives based on current facts and circumstances but may differ from the actual useful lives due to changes to the business operations, changes in the planned use of assets, and technological advancements. When we change the estimated useful life assumption for any asset, the remaining carrying amount of the asset is accounted for prospectively and depreciated or amortized over the revised estimated useful life.
Revenue Recognition
We generate revenues from the sale of server and storage systems, subsystems, accessories and services.
Product sales . We recognize revenue from sales of products as control is transferred to customers, which generally happens at the point of shipment or upon delivery, unless customer acceptance is required. Determining the point in time that control transfers to the customer requires judgment. Products sold by us are shipped from our facilities or drop shipped from our vendors. We may use distributors to sell products to end customers. Revenue from distributors is recognized when the distributor obtains control of the product, which generally happens at the point of shipment or upon delivery.
We apply judgment in determining the transaction price as we may be required to estimate variable consideration when determining the amount of revenue to recognize. Variable consideration is estimated using either the expected value or most likely amount method, depending on which method better predicts the amount of consideration to which we may be entitled. As part of determining the transaction price in contracts with customers, we estimate reserves for future sales returns based on a review of our history of actual returns for each major product order and return type. Based upon historical experience, a refund liability is recorded at the time of sale for estimated product returns and an asset is recognized for the amount expected to be recorded in inventory upon product return, less the expected recovery costs.
Services sales . Our sale of services mainly consists of extended warranty and on-site services as well as system rack installation and integration services. Revenue related to extended warranty commences upon the expiration of the standard warranty period and is recognized ratably over the contractual period as we stand ready to perform any required warranty service. Revenue related to on-site services commences upon recognition of the product sale and is recognized ratably over the contractual period as the on-site services are made available to the customer. These service contracts are typically one to five years in length. Revenue related to system rack installation and integration services is recognized when we perform the services and the customer receives and consumes the benefits.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Contracts with multiple promised goods and services. Certain of our contracts contain multiple promised goods and services. We assess whether each promised good or service is distinct for the purpose of identifying the performance obligations in the contract. This assessment requires management to make judgments about the individual promised goods or services and whether such goods or services are separable from the other aspects of the contractual relationship. Performance obligations in a contract are identified based on the promised goods or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available from third parties or from us, and are distinct in the context of the contract, whereby the transfer of the services is separately identifiable from other promises in the contract. If these criteria are not met, the promised goods and services are accounted for as a combined performance obligation.
If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. For contracts that contain multiple performance obligations, we allocate the transaction price for each customer contract to each performance obligation based on the relative Stand-alone Selling Price (“SSP”) for each performance obligation within each contract. We recognize the amount of transaction price allocated to each performance obligation within a customer contract as revenue at the time the related performance obligation is satisfied by transferring control of the promised good or service to a customer. Determining the relative SSP for contracts that contain multiple performance obligations requires significant judgment. We determine SSP based on the price at which the performance obligation is sold separately. If the SSP is not observable through past transactions, we apply judgment to estimate the SSP. For all performance obligations, we are able to establish the SSP by maximizing the use of observable inputs. We typically establish an SSP range for our products and services, which is reassessed on a periodic basis or when facts and circumstances change. SSP for our products and services can evolve over time due to changes in our pricing practices, internally approved pricing guidelines with respect to geographies, customer type, internal costs, and gross margin objectives for the related performance obligations which can also be influenced by intense competition, changes in demand for our products and services, economic and other factors.
Our credit terms are predominantly short-term in nature, however, we also grant extended payment terms for certain customers. For the contracts with the extended payment terms in which the financing component is determined to be significant to the contract, the contract transaction price is adjusted for the effect of a financing component.
When we receive consideration from a customer prior to transferring goods or services to the customer, we record a contract liability (deferred revenue). We also recognize deferred revenue when we have an unconditional right to consideration (i.e., a receivable) before transfer of control of goods or services to a customer.
Shipping and handling fees collected from customers are included in net sales when control of the product is transferred to the customer, and the related shipping and handling costs are included in cost of sales. We have elected to account for shipping and handling activities that occur after the customer has obtained control of a good as a fulfillment cost rather than as an additional promised service. Taxes imposed by governmental authorities on our revenue producing activities with customers, such as sales taxes and value added taxes, are excluded from net sales.
Accounts Receivable and Allowance for Credit Losses
We record amounts as accounts receivable when our right to consideration is unconditional. Accounts receivable are recorded at the invoiced amount. For certain customers, we require payment before the products or services are delivered to the customer.
Accounts receivable are recorded and carried at the original invoiced amount less an allowance for any potential uncollectible amounts. We make estimates of expected credit and collectability trends for the allowance for credit losses and allowance for unbilled receivables based upon our assessment of various factors, including historical experience, the age of the accounts receivable balances, credit quality of our customers, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect our ability to collect from customers. Expected credit losses are recorded as general and administrative expenses on our consolidated statements of operations. All receivables due beyond the 12 month period are classified as a non-current receivable within other assets on the consolidated balance sheets.
As of June 30, 2025 and 2024, the allowance for credit losses on accounts receivable were not material. For further details on our non-current receivable and allowance for credit losses, see Note 6, “Balance Sheet Components” in the notes to the consolidated financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Cost of Sales
Cost of sales primarily consists of the costs of materials, contract manufacturing, in-bound shipping, personnel and related expenses including stock-based compensation, tariffs, equipment and facility expenses, warranty costs and write down adjustments for lower of cost or net realizable value and excess and obsolete inventory.
Product Warranties
We offer a limited warranty to end-users ranging from 15 to 39 months for products to repair or replace products for manufacturing defects or hardware component failures. Cost of sales includes the estimated cost of product warranties that are calculated at the point of revenue recognition. Under limited circumstances, we may offer an extended limited warranty to customers for certain products. We also accrue for known warranty and indemnification issues if a loss is probable and can be reasonably estimated. Warranty accruals are based on estimates that are updated on an ongoing basis taking into consideration inputs such as new product introductions, changes in the volume of claims compared with our historical experience, and the changes in the cost of servicing warranty claims. For further details on our product warranties, see Note 6, “Balance Sheet Components” in the notes to the consolidated financial statements.
Research and Development
Research and development expenses consist of personnel expenses including salaries, benefits, stock-based compensation and incentive bonuses, and related expenses for our research and development personnel, as well as materials and supplies, consulting services, third-party testing services, and equipment and facility expenses related to our research and development activities. All research and development costs are expensed as incurred. We occasionally receive funding from certain suppliers and customers towards our development efforts and such amounts are recorded as a reduction of research and development expenses and were $ 32.6 million, $ 21.5 million, and $ 20.0 million for the fiscal years ended June 30, 2025, 2024, and 2023, respectively.
Software development costs, including costs to develop software sold, leased, or otherwise marketed, that are incurred subsequent to the establishment of technological feasibility are capitalized if significant. Costs incurred during the application development stage for internal-use software are capitalized if significant. Capitalized software development costs are amortized using the straight-line amortization method over the estimated useful life of the applicable software. Such software development costs required to be capitalized have not been material to date.
Advertising Costs
Advertising costs net of reimbursements received under the cooperative marketing arrangements with our vendors, are expensed when incurred and are included in sales and marketing expenses on the consolidated statements of operations. We incurred advertising expenses of $ 38.1 million, $ 10.7 million and $ 2.0 million for the fiscal years ended June 30, 2025, 2024 and 2023, respectively.
Stock-Based Compensation
We recognize compensation expense for share-based awards, including stock options, restricted stock units (“RSUs”), and performance-based RSUs (“PRSUs”), based on their grant date fair values over the requisite service period. Stock options and RSUs are expensed on a straight-line basis, while PRSUs are expensed using an accelerated method if performance conditions are likely to be met. If not, no expense is recognized, and previously recognized expense is reversed. For market condition awards, which are typically performance-based, the fair value is amortized over the service period based on the probability of meeting performance criteria. The fair value of RSUs and PRSUs is based on our stock price at grant, while stock options are valued using the Black-Scholes model or Monte Carlo simulation for market-condition awards. The fair value is amortized straight-line over the service period. We recognize stock option and RSU forfeitures when they occur, without estimating forfeiture rates for new grants, while continuing to assess performance conditions.
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SUPER MICRO COMPUTER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Leases
We have arrangements for the right to use our office, warehouse spaces, and other premises, and equipment. We determine at inception if an arrangement is or contains a lease.
Operating and finance leases are recorded as Right-of-use ("ROU") assets in other assets, and as lease liabilities in accrued liabilities and other long-term liabilities on our consolidated balance sheets. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating and finance lease ROU assets and liabilities are initially recognized based on the present value of lease payments over the lease term. In determining the present value of lease payments, we use the implicit interest rate if readily determinable. When the implicit interest rate is not readily determinable, we use the incremental borrowing rate, which is based on our collateralized borrowing capabilities over a similar term of the lease payments. When using the incremental borrowing rate, we utilize the consolidated group incremental borrowing rate. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term. We have elected the accounting policy to not recognize ROU assets and lease liabilities that arise from short-term (12 months or less) leases for any class of underlying asset. We account for fixed payments for lease and non-lease components as a single lease component from both a lessee and lessor perspective. Non-lease components that have variable costs, such as common area maintenance, are expensed as incurred and not included in the ROU assets and lease liabilities. Our finance leases are immaterial.
Income Taxes
We account for income taxes under an asset and liability approach. Deferred income taxes reflect the impact of temporary differences between assets and liabilities recognized for financial reporting purposes and such amounts recognized for income tax reporting purposes, net of operating loss carry-forwards and other tax credits measured by applying enacted tax laws related to the financial statement periods. Valuation allowances are provided when necessary to reduce deferred tax assets to an amount that is more likely than not to be realized.
We recognize tax liabilities for uncertain income tax positions on the income tax return based on the two-step process. The first step is to determine whether it is more likely than not that each income tax position would be sustained upon audit. The second step is to estimate and measure the tax benefit as the amount that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority. Estimating these amounts requires us to determine the probability of various possible outcomes. We evaluate these uncertain tax positions on a quarterly basis. This evaluation is based on the consideration of several factors, including changes in facts or circumstances, changes in applicable tax law, settlement of issues under audit and new exposures. If we later determine that our exposure is lower, or that the liability is insufficient to cover revised expectations, we adjust the liability and record a related charge in our tax provision during the period in which we make this determination.
For non-US earnings in our foreign subsidiaries, we plan to indefinitely reinvest such earnings except for Netherlands. For the earnings we intend to indefinitely reinvest, no deferred tax liabilities for foreign withholding or other taxes have been recorded. The tax impact associated with the potential repatriation related to Netherlands, is estimated to be immaterial.
Variable Interest Entities (“VIE”)
When we obtain an economic interest in an entity, we evaluate whether the entity should be deemed a VIE, and, if so, whether we are the primary beneficiary and therefore required to consolidate the VIE, based on significant judgment whether we (i) have the power to direct the activities that most significantly impact the economic performance of the VIE and (ii) have the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE.
On an ongoing basis, we re-evaluate the VIE assessment based on potential changes in facts and circumstances, including but not limited to, the shareholder loans to the entity and the execution of any future significant agreements between the entity and our shareholders and/or other third parties.
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SUPER MICRO COMPUTER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Foreign Currency Remeasurement
We use the U.S. dollar as our functional currency for all our international subsidiaries, except for Super Micro Asia and Technology Park, Inc., a consolidated variable interest entity. Foreign currency monetary assets and liabilities are remeasured into United States dollars at end-of-period exchange rates. Non-monetary assets and liabilities such as property, plant, and equipment and equity are remeasured at historical exchange rates. Revenue and expenses are remeasured at exchange rates in effect during each period, except for those expenses related to non-monetary balance sheet amounts, which are remeasured at historical exchange rates. Gains or losses from foreign currency remeasurement are included in other income, net in our consolidated statements of operations and, to date, have not been significant. Realized and unrealized foreign exchange (loss) gain for fiscal years ended June 30, 2025, 2024, and 2023 was $( 11.6 ) million, $ 6.3 million, and $ 0.2 million, respectively.
Net Income Per Share
Basic net income per share is computed by dividing net income attributable to common stock by the weighted-average number of shares of common stock outstanding during the period. Diluted net income per share is computed by dividing net income attributable to common stock by the weighted-average number of shares of common stock and potentially dilutive shares of common stock outstanding during the period. Potentially dilutive shares outstanding include the dilutive effect of equity awards, as well as convertible notes. Potentially dilutive shares whose effect would have been antidilutive are excluded from the computation of diluted net income per share. The dilutive effect of equity awards is calculated based on the average stock price for each fiscal period, using the treasury stock method. The dilutive effect of convertible notes is calculated using the if-converted method. Contingently issuable shares are included in computing basic net income per common share as of the date that all necessary conditions, including service vesting conditions have been satisfied. Contingently issuable shares are considered for computing diluted net income per common share as of the beginning of the period in which all necessary conditions have been satisfied and the only remaining vesting condition is a service vesting condition.
Litigation, Investigation and Settlement Costs
We currently are, and will likely continue to be, subject to claims, litigation, and other actions, including potential regulatory proceedings, involving patent and other intellectual property matters, taxes, labor and employment, competition and antitrust, commercial disputes, goods and services offered by us and by third parties, and other matters. There are many uncertainties associated with any litigation or investigation, and we cannot be certain that these actions or other third party claims against us will be resolved without litigation, fines and/or substantial settlement payments or judgments. If information becomes available that causes us to determine that a loss in any of our pending litigation, investigations or settlements is probable, and we can reasonably estimate the loss associated with such events, we will record the loss. However, the actual liability in any such litigation or investigation may be materially different from our estimates, which could require us to record additional costs. If we determine that a loss is reasonably possible and the loss or range of loss can be estimated, we disclose the reasonably possible loss. We accrue legal fees for litigation as the legal services are provided.
Concentration of Supplier Risk
Certain materials used by us in the manufacturing of our products are available from a limited number of suppliers. Shortages could occur in these materials due to an interruption of supply or increased demand in the industry.
Two suppliers accounted for below percentage of total purchases:
June 30, 2025 June 30, 2024 June 30, 2023
Percentage of total purchases
Supplier A 64.4 % 65.4 % 30.7 %
Supplier B 5.1 % 6.3 % 13.5 %
^The supplier references of A and B above may represent different suppliers than those reported in a previous period.
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SUPER MICRO COMPUTER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Purchases from Ablecom and Compuware, our related parties, as shown in Note 10, “Related Party Transactions” in the notes to the consolidated financial statements, accounted for a combined 3.3 %, 4.3 %, and 6.6 % of cost of sales on our consolidated statements of operations for the fiscal years ended June 30, 2025, 2024, and 2023, respectively.
Concentration of Credit Risk