Supermicro Q3 Earnings: Net Income Falls 66% to $109M, Revenue Hits $4.6B

Rhea-AI Summary

Supermicro (SMCI) reported its Q3 FY2025 financial results with net sales of $4.60 billion, down from $5.68 billion in Q2'25 but up from $3.85 billion in Q3'24. The company experienced a significant decline in profitability, with net income dropping to $109 million from $321 million in Q2'25 and $402 million in Q3'24. Gross margin decreased to 9.6% from 11.8% in Q2'25. The company noted customer delays in platform decisions but expects commitments to materialize in upcoming quarters. Supermicro updated its FY2025 revenue guidance to $21.8-22.6 billion, down from previous $23.5-25.0 billion. For Q4 FY2025, the company projects net sales of $5.6-6.4 billion with non-GAAP EPS of $0.40-0.50.

Positive

• Net sales of $4.60 billion showed year-over-year growth from $3.85 billion in Q3'24
• Strong cash position with $2.54 billion in cash and cash equivalents
• Positive Q4 guidance projecting revenue growth to $5.6-6.4 billion
• Significant operating cash flow of $627 million in Q3'25

Negative

• Net income declined 66% to $109 million from $321 million in Q2'25
• Gross margin decreased to 9.6% from 11.8% in Q2'25 and 15.5% in Q3'24
• Revenue guidance for FY2025 lowered to $21.8-22.6 billion from $23.5-25.0 billion
• Customer delays in platform decisions affecting current performance
• Economic uncertainty and tariff impacts creating short-term challenges

Insights

Financial Analyst

Supermicro's Q3 shows alarming margin collapse to 9.6% with 66% profit drop despite positive cash flow; material guidance reduction signals ongoing challenges.

Supermicro's Q3 FY2025 results reveal concerning deterioration in key metrics that will worry investors. Revenue of $4.60 billion shows a substantial 19% sequential decline from Q2's $5.68 billion, though still up year-over-year. Most alarming is the severe gross margin compression to 9.6%, down from 11.8% in Q2 and 15.5% a year ago - representing a 590 basis point year-over-year erosion.

This margin collapse has devastated profitability, with net income plummeting to $109 million—down 66% sequentially and 73% year-over-year. EPS cratered to just $0.17 from $0.51 in Q2 and $0.66 a year ago.

The balance sheet shows $2.54 billion in cash against $2.49 billion in debt, maintaining relative stability. One bright spot is the robust operating cash flow of $627 million with modest capex of $33 million, suggesting the company can still generate cash despite profit challenges.

Forward guidance presents mixed signals: Supermicro reduced its full-year revenue outlook from $23.5-25.0 billion to $21.8-22.6 billion, representing a significant $1.7-$2.4 billion reduction. However, Q4 projections of $5.6-6.4 billion would mark a substantial sequential recovery, indicating management views Q3 weakness as temporary.

The widening gap between GAAP and non-GAAP EPS ($0.17 vs $0.31) reflects increasing adjustments, primarily from stock-based compensation, which warrants attention when assessing earnings quality.

Technology Industry Expert

Supermicro faces delayed AI server purchases and tariff headwinds, despite liquid cooling and AI technology advantages; governance improvements insufficient to offset financial decline.

The significant sequential revenue decline in Supermicro's results points to emerging challenges in the AI infrastructure market. CEO Charles Liang's reference to "customers delayed making platform decisions" suggests market hesitation that's likely connected to pending transitions in the underlying AI chip ecosystem. This timing mismatch between infrastructure readiness and customer commitment cycles creates lumpy revenue patterns that appear to be intensifying.

The explicit mention of "tariff impacts" as a headwind signals that ongoing trade tensions are materially affecting Supermicro's cost structure and potentially its competitive positioning in global markets. This geopolitical factor creates a persistent uncertainty that extends beyond typical business cyclicality.

Despite these challenges, Supermicro continues advancing its technological differentiation through Data Center Building Block Solutions (DCBBS) and Direct Liquid Cooling (DLC-2) capabilities. These technologies address critical thermal management requirements for high-density AI compute environments, which remain strategic advantages in a competitive server market increasingly focused on power efficiency.

The corporate governance improvements, including the additions of Scott Angel to the board and new executive appointments in legal and accounting functions, demonstrate progress in addressing previous organizational weaknesses. The company's return to compliance with Nasdaq filing requirements removes a regulatory overhang, though these governance improvements haven't translated to operational excellence as evidenced by the financial results.

Management's confidence that delayed commitments will "land in the June and September quarters" suggests Q3's weakness stems partly from timing issues rather than permanent demand erosion, though the reference to "economic uncertainty" introduces a more concerning structural element to their challenges.

Supermicro Reports Q3 FY2025 Results: Revenue Growth Year-Over-Year Despite Sequential Decline

Super Micro Computer, Inc. (NASDAQ: SMCI) reported third quarter fiscal 2025 revenue of $4.60 billion, representing a 19.5% increase compared to the same period last year but a 19% decline from the previous quarter. The company announced the results on May 6, 2025, revealing significant pressure on both revenue and profitability metrics for the quarter ended March 31, 2025.

The server and storage systems provider, which has positioned itself as a key player in the AI infrastructure market, saw its net income drop to $109 million, down from $321 million in the previous quarter and $402 million in the year-ago period. This represents a substantial 73% year-over-year decrease in profitability.

Financial Performance Details

• Net sales: $4.60 billion (down 19% from Q2 but up 19.5% year-over-year)
• Gross margin: 9.6% (decreased from 11.8% in Q2 and 15.5% in Q3'24)
• Net income: $109 million (down 66% from Q2 and 73% year-over-year)
• Diluted EPS: $0.17 (versus $0.51 in Q2 and $0.66 a year ago)
• Non-GAAP diluted EPS: $0.31 (compared to $0.59 in Q2 and $0.66 in Q3'24)

The company generated $627 million in cash from operations during the quarter while investing $33 million in capital expenditures. As of March 31, 2025, Supermicro reported cash and cash equivalents of $2.54 billion against total bank debt and convertible notes of $2.49 billion.

Customer Delays Impact Performance

Charles Liang, Founder, President, and CEO of Supermicro, attributed the sequential revenue decline to customer indecision rather than competitive losses. "We continue to make great progress with our DCBBS (Data Center Building Block Solution), DLC (Direct Liquid Cooled-2) and AI technology leadership, but some customers delayed making platform decisions in the quarter," Liang stated in the release.

The company's gross margin compression—falling to 9.6% from 15.5% a year ago—signals significant pressure on Supermicro's pricing power or product mix. The non-GAAP gross margin stood slightly higher at 9.7% after adjusting for stock-based compensation expenses of $7 million.

Despite these challenges, Liang expressed optimism about future quarters: "We do expect many of those commitments to land in the June and September quarters, reinforcing my confidence in our ability to meet our long-term targets, however economic uncertainty and tariff impacts may have a short-term impact."

Forward Guidance and Revised Annual Expectations

Looking ahead, Supermicro provided guidance for its fourth quarter ending June 30, 2025, projecting:

• Net sales between $5.6 billion and $6.4 billion
• GAAP net income per diluted share of $0.30 to $0.40
• Non-GAAP net income per diluted share of $0.40 to $0.50

These projections assume a tax rate of approximately 14.9% for GAAP results and 16.5% for non-GAAP results, with fully diluted share counts of 628 million and 642 million shares, respectively.

Significantly, the company reduced its full fiscal year 2025 revenue forecast, lowering guidance from a previous range of $23.5 billion to $25.0 billion to a new range of $21.8 billion to $22.6 billion. This downward revision represents approximately a 7% to 10% reduction in expected annual revenue.

Corporate Governance Enhancements

The press release highlighted progress in strengthening Supermicro's corporate governance practices following recommendations from a Special Committee of the board of directors. The company stated it has filed all outstanding financial statements and is now in compliance with all Nasdaq filing requirements.

Since December 2, 2024, Supermicro has added several key personnel to strengthen its leadership team:

• Scott Angel joined the company's board of directors
• Yitai Hu was appointed as General Counsel & Senior Vice President of Corporate Development
• Kenneth Cheung joined as Senior Vice President and Chief Accounting Officer

These appointments appear aimed at reinforcing the company's governance and compliance infrastructure after previous financial reporting challenges.

While the quarter showed year-over-year revenue growth, the sequential decline and significant profitability contraction suggest Supermicro is navigating a challenging business environment in the server and AI infrastructure markets. The company expressed belief that it remains "well positioned in the long-term to capitalize on the growing market opportunity," despite near-term challenges.

This article is based solely on information provided in Supermicro's press release dated May 6, 2025. The content is for informational purposes only and does not constitute financial, investment, legal, or tax advice. Stock Titan and its writers make no representations as to the accuracy, completeness, or timeliness of the information. Investors should conduct their own due diligence before making any investment decisions.

Source: Supermicro

FAQ

What were Supermicro's (SMCI) Q3 2025 earnings results?

Supermicro reported Q3 FY2025 net sales of $4.60 billion, net income of $109 million, and diluted EPS of $0.17. Non-GAAP EPS was $0.31.

Why did Supermicro's (SMCI) earnings decline in Q3 2025?

The decline was attributed to customer delays in platform decisions, economic uncertainty, and tariff impacts. Gross margin decreased to 9.6% from 11.8% in Q2'25.

What is Supermicro's (SMCI) revenue guidance for Q4 2025?

Supermicro expects Q4 FY2025 net sales between $5.6 billion to $6.4 billion, with non-GAAP EPS of $0.40 to $0.50.

How much cash does Supermicro (SMCI) have as of Q3 2025?

As of March 31, 2025, Supermicro had $2.54 billion in total cash and cash equivalents, with total bank debt and convertible notes of $2.49 billion.

What is Supermicro's (SMCI) updated revenue guidance for fiscal year 2025?

Supermicro lowered its FY2025 revenue guidance from $23.5-25.0 billion to $21.8-22.6 billion.