EPS of $0.51 increased by 66.7% from previous year
Gross margin of 15.4%
Net income of 295.97M
""This fantastic quarterly result was driven by strong demand and improving supply conditions for GPU and related key system components." - Charles Liang, CEO" - Charles Liang
Super Micro Computer Inc (SMCI) Q2 2024 Results - Record Growth Amid AI Boom
Executive Summary
In Q2 2024, Super Micro Computer Inc achieved record revenues of $3.66 billion, marking a 133% year-over-year growth and a staggering 73% increase from Q1 2024. The impressive performance reflects robust demand for AI-driven products and solutions, bolstered by improving supply chain conditions. The company's earnings per share (EPS) also soared to $5.59, exceeding guidance and highlighting the operating leverage afforded by its growing scale. However, management notes a challenging cash flow environment due to rising working capital tied to strategic growth initiatives. Looking ahead, management increased its full-year revenue guidance to between $14.3 billion and $14.7 billion, driven by a strong pipeline of AI products and customer demand across multiple verticals.
Financial Metrics
- Revenue: $3.66 billion (QoQ: +73%, YoY: +133%)
- Gross Profit: $564.32 million (Gross Margin: 15.5%)
- Operating Income: $371.46 million (Operating Margin: 10.2%)
- Net Income: $295.97 million (Net Margin: 8.1%)
- EPS: $5.59 (Adjusted: +70% YoY)
Cash Flow & Balance Sheet Metrics
- Free Cash Flow: -$609.81 million (reflecting increased inventory and capital expenditures)
- Total Assets: $5.41 billion
- Total Liabilities: $2.33 billion
- Cash and Cash Equivalents: $726.17 million
- Current Ratio: 2.43 (indicating strong liquidity)
Operational Metrics
- Cash Conversion Cycle: 61 days
- Days Inventory Outstanding: 67 days
- Revenue Breakdown by Geography: US (71%), Asia (18%), Europe (8%), Rest of the World (3%)
Management's commentary emphasized the strong operational leverage and a focus on expanding their footprint in AI and rack-scale IT solutions, with expectations for cash flow improvements in upcoming quarters as supply stabilizes.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
3.66B
103.25%
72.90%
Gross Profit
564.32M
67.25%
59.55%
Operating Income
371.46M
72.63%
115.33%
Net Income
295.97M
68.00%
88.52%
EPS
0.55
66.67%
83.33%
Key Financial Ratios
currentRatio
2.43
grossProfitMargin
15.4%
operatingProfitMargin
10.1%
netProfitMargin
8.08%
returnOnAssets
5.48%
returnOnEquity
9.62%
debtEquityRatio
0.13
operatingCashFlowPerShare
$-1.1
freeCashFlowPerShare
$-1.13
priceToBookRatio
5
priceEarningsRatio
13
Net Income vs. Revenue
Expense Breakdown
Management Commentary
1. AI Demand Growth: Charles Liang, CEO, stated, "We achieved revenue of $3.66 billion, a 133% increase from last year... This single quarter's revenue surpassed our annual revenue for 2021," emphasizing the unprecedented market demand for their AI infrastructure solutions.
2. Future Outlook: "We are in overdrive to accelerate Supermicro 3.0 business model with this AI boom... Fiscal Q3 revenue will be in the range of $3.7 billion to $4.1 billion," indicating strong momentum anticipated in the following quarters.
3. Liquid Cooling Technology: Liang highlighted their advancements, stating, "By this June quarter, we will have high volume, dedicated capacity for manufacturing 100 to 120 kilowatt racks with liquid-cooling capabilities..." showcasing their foresight in addressing data center cooling needs for the evolving GPU landscape.
"This fantastic quarterly result was driven by strong demand and improving supply conditions for GPU and related key system components." - Charles Liang, CEO
â Charles Liang
"We are leading the race by developing the most innovative AI infrastructure on many platforms... We may call this an AI revolution." - Charles Liang, CEO
â Charles Liang
Forward Guidance
Management indicated a strong outlook driven by continuous demand for AI and related products. They raised their revenue guidance for the full fiscal year from $10-11 billion to $14.3-14.7 billion, translating to an anticipated growth driver bolstered by new customer acquisitions and increasing order volumes in enterprise and large-scale data centers. For Q3 2024, they project revenues between $3.7 billion and $4.1 billion, suggesting sustained momentum and consumer confidence in their solutions. Key watchpoints for investors include supply chain stability and the pace of customer onboarding, particularly in AI-inference markets.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
SMCI Focus
15.40%
10.10%
9.62%
13.00%
QBTS
63.60%
-8.63%
82.60%
-2.61%
RGTI
64.50%
-5.21%
-10.20%
-3.46%
CRCT
53.50%
15.70%
4.41%
15.19%
QUBT
31.70%
-28.78%
-7.18%
-1.89%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Based on Super Micro's exceptional Q2 performance, strategic positioning within the rapidly growing AI market, and positive management outlook, the investment thesis is strong. The company is well-poised for growth but must navigate through liquidity concerns and supply chain dependencies. The anticipated revenue growth, coupled with significant operating leverage and scaling, could offer substantial returns for investors willing to accept the inherent risks associated with rapid expansion in a competitive landscape.
Key Investment Factors
Growth Potential
Super Micro's robust growth trajectory reflects increasing demand for their AI solutions, with a noted year-on-year revenue increase of 133%. Continued investment in R&D and expansion of manufacturing capacity positions the firm well to capture market share in the growing AI ecosystem.
Profitability Risk
The significant cash burn in Q2, evidenced by a negative free cash flow of $610 million, signals potential risks related to working capital management as the company scales. Furthermore, supply chain constraints remain a challenge as demand continues to outpace supply.
Financial Position
Super Micro exhibits a strong financial position with a current ratio of 2.43, indicative of strong liquidity. A cash balance of $726 million and manageable debt levels allow for strategic investments and growth initiatives, although the increase in short-term debt raises concerns about reliance on external financing.
SWOT Analysis
Strengths
Strong market demand for AI solutions
Record revenue growth and operating leverage
Diverse customer base across multiple sectors including data centers, cloud computing, and emerging technologies
Weaknesses
High reliance on a few large customers for a significant portion of revenue (26% from one customer)
Negative free cash flow due to aggressive growth strategies may concern investors