Super Micro Computer said on its fiscal third-quarter earnings call that it has launched an independent investigation after learning of an alleged diversion of some company products to China — while also reporting sharply higher year‑over‑year revenue and a large swing to negative operating cash flow.
CFO David Weigand told analysts the company was “surprised and disappointed to learn of the alleged diversion to China of certain of our products,” saying any such conduct would violate Super Micro’s export control policies. Independent directors have retained law firm Munger, Tolles & Olson and forensic firm AlixPartners to conduct a probe. “Based on what we know so far, though that could change as the investigation progresses, no one from the company, other than those named in the DOJ indictment, was involved,” Weigand said. CEO Charles Liang emphasized the company “is not a defendant, nor a target of a grand jury investigation,” and said Super Micro has terminated relationships with the individuals named and is “helping and cooperating fully with the U.S. government.”
On the financial front, Super Micro reported revenue of $10.2 billion for the quarter ended March 31, 2026 — up 123% year‑over‑year but down 19% sequentially. Management attributed the sequential decline to customer site readiness delays and industry‑wide supply constraints, saying several customer sites “were not yet equipped with the power and networking required for their cloud deployment.” AI GPU platforms accounted for more than 80% of sales in the quarter, and the company said orders and backlog remain strong with the deferred revenue expected to be captured in coming quarters as customer deployments proceed.
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Profitability improved after a prior quarter of margin pressure: non‑GAAP gross margin rose to 10.1% from 6.4% in Q2, and non‑GAAP operating margin improved to 7.3% from 4.5%. Weigand attributed the recovery to product and customer mix, lower expedite and tariff charges, and reduced inventory reserve charges. Liang highlighted the company’s shift toward providing complete data‑center solutions through its Data Center Building Block Solutions (DCBBS) — which he said should contribute more than 25% of total profit in the coming years — and rising software bookings, which topped $46 million in the quarter.
Despite improved margins, working capital movements pushed operating cash flow sharply negative. Super Micro used $6.6 billion in operating cash in the quarter — versus $24 million used a quarter earlier — driven mainly by a $10 billion reduction in accounts payable and a $581 million rise in inventory to $11.1 billion. Free cash flow was negative $6.7 billion. At quarter end cash totaled $1.3 billion, total bank and convertible note debt was $8.8 billion and net debt stood at about $7.5 billion; the company has begun using a newly established $1.8 billion Taiwan revolving credit facility to support working capital.
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Management reiterated guidance for continued growth: Q4 net sales of $11.0 billion to $12.5 billion and fiscal‑year 2026 sales of $38.9 billion to $40.4 billion. GAAP diluted EPS guidance for Q4 was $0.53 to $0.67, with non‑GAAP EPS of $0.65 to $0.79. Weigand said Super Micro is preparing to file its Form 10‑Q subject to BDO’s review and, based on current information, does not expect to need to restate prior earnings, though he stressed the investigation is ongoing. The company also flagged customer concentration, with two customers representing more than 10% of revenues — one at 27% and another at 10% — and warned that supply shortages for memory, SSDs, CPUs and GPUs persist.
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