Super Micro (SMCI) FY2026: $2.2B Profit, $6.8B Cash Burn

Super Micro earned a record $2,230.5 million in fiscal 2026 and still drained $6,809.9 million of cash from operations — the gap is not an accounting quirk, it is inventory. Revenue jumped 77.8% to $39,063.1 million, but inventories rose 175.5% to $12,895.9 million and receivables rose 177.9% to $6,125.4 million, together pulling roughly $12.1 billion out of the business before offsets. The company covered the hole by raising $9,478.8 million in the financing markets, most of it in a single month. For a server builder riding AI demand, the FY2026 question is no longer whether orders exist — it is whether the cash cycle can be financed until those orders convert.

(All figures are consolidated, US GAAP, fiscal year ended June 30. Super Micro reports as a single operating segment.)

1. Consolidated Balance Sheet

1-1. Principal asset movements

The balance sheet more than doubled while revenue grew 77.8%. Assets grew faster than sales, which is the opposite of operating efficiency improving.

The inventory composition matters more than the total. Finished goods alone were $10,276.0 million, or 79.7% of inventories, up 196.5% from $3,465.4 million. This is not a company stockpiling scarce GPUs as raw material — it is a company holding built, unsold systems. Management also recorded a $188.1 million inventory valuation write-down during the year, following $232.1 million in FY2025.

Working capital efficiency deteriorated sharply. Days inventory outstanding — how long stock sits before it is sold — went from 87 to 135 days. Days sales outstanding, the time to collect from customers, went from 37 to 57 days. Days payable held roughly flat, at 24 days in FY2025 and 23 in FY2026. The cash conversion cycle therefore stretched from 100 days to 169 days, a 69-day deterioration that explains the cash burn almost entirely.

One genuine offset: deferred revenue (customer money collected before delivery) rose 257.1% to $2,612.0 million across current and non-current. Management discloses that 60% of this will be recognized within twelve months. Operating lease right-of-use assets rose to $521.3 million from $293.7 million, reflecting the San Jose campus expansion.

1-2. Debt structure — financial vs operating liabilities

Financial debt nearly doubled, and essentially all of the increase came from bank borrowing rather than capital markets — the convertible balance moved just $18.9 million, which is accretion rather than new issuance. Against $7,521.5 million of cash, Super Micro moved from a $412.2 million net cash position to $1,198.7 million of net debt.

The maturity profile is the pressure point. Of total bank debt, $2,039.8 million falls due within twelve months, with a further $2,000.0 million in year five. The revolvers are effectively exhausted: the JP Morgan facility is drawn at its full $2,000.0 million, and the CTBC revolving facilities are drawn $1,763.5 million against $1,765.0 million available. The bank facilities — $4,056.1 million drawn in total, including the JP Morgan revolver — carried interest rates ranging from 1.3% to 5.7% at June 30, 2026; the convertibles carry effective rates of 0.39% (2030 notes), 2.97% (2028) and 3.86% (2029). Cash interest paid rose to $109.3 million from $25.5 million.

All three convertible note issues sit far out of the money. Conversion prices are $55.20 (2030), $61.06 (2028) and $83.44 (2029), against a June 2026 equity raise priced at $27.50. That removes conversion as a realistic deleveraging path for the notes in the near term. The Series A preferred discussed below is the opposite case: it converts into common stock by June 1, 2029 whether or not the share price recovers, so that portion of the future share count is contractual rather than optional.

1-3. Capital structure

Equity rose to $14,479.6 million from $6,301.9 million, but only $2,217.4 million of that came from earnings. Retained earnings moved from $3,434.5 million to $5,651.9 million — exactly net income less $13.1 million of preferred dividends, with no buybacks or common dividends in the year.

The rest was issued. In June 2026 Super Micro sold 45,454,545 common shares at $27.50 plus an overallotment, netting $1,407.0 million, and issued 7.0% Series A Mandatory Convertible Preferred Stock for $4,231.6 million net. Shares outstanding rose 10.6% to 656,882 thousand.

The preferred's dividend rate deserves more weight than the FY2026 accounts give it. At 7.0% on a $1,000-per-share liquidation preference, the $13.1 million charged in FY2026 covers just over two weeks of accrual. The full-year run-rate is roughly $300 million of cash preferred dividends from FY2027 onward — a fixed claim ranking ahead of common shareholders that is almost invisible in this year's income statement.

A $1.25 billion at-the-market program was also established on June 11, 2026, with no shares sold as of June 30, 2026 and sales not expected to begin before the September 2026 quarter — dilution capacity held in reserve.

2. Consolidated Statement of Operations

2-1. Core metrics

The three-year view is essential here. Operating margin recovered to 7.09% from 5.70%, but it has not returned to the 8.08% of FY2024. Gross margin has fallen in each of the last two years — 13.75% to 11.06% to 10.82%. Management attributes this to competitive pricing to win share, customer and product mix, and higher manufacturing costs.

So margin recovery in FY2026 did not come from pricing. It came from cost discipline. Operating expenses rose 23.8% while revenue rose 77.8%, so opex fell to 3.73% of sales from 5.36%. That is operating leverage — fixed costs spread over a larger base. Operating profit grew about 1.56 times faster than revenue in percentage terms (121.1% versus 77.8%).

Below the operating line, the picture is less flattering. Interest expense tripled to $194.6 million from $59.6 million, nearly offset by $186.9 million of interest income on the cash pile. The effective tax rate rose to 19.9% from 12.9%, a real headwind as prior-year tax benefits faded. Net income grew 112.7%, slower than operating income's 121.1%.

Diluted EPS deserves attention. Basic EPS was $3.65 but diluted EPS only $3.26, a 10.7% gap that widened from 5.1% in FY2025. Diluted share count included 73,803 thousand incremental shares from convertible notes, against just 4,685 thousand a year earlier — the dilution overhang from the notes alone grew roughly sixteenfold. The June preferred issue adds a further and larger claim on the common, but it barely registered in the FY2026 weighted average because it was outstanding for only about two weeks. FY2027 per-share figures will carry the full effect of both.

2-2. Cost structure

Super Micro is overwhelmingly a variable-cost business: cost of sales was $34,835.8 million, or 89.2% of revenue. That is why gross margin compression is so consequential — there is almost no fixed-cost cushion at the gross line.

Fixed costs sit in operating expenses. R&D was $771.2 million (+21.2%), sales and marketing $352.6 million (+29.1%), and G&A $332.9 million (+24.6%). Under US GAAP, most R&D costs are expensed as incurred — IFRS peers may capitalize a broader range of development-phase spending — so this figure can depress reported operating profit relative to those competitors; a direct margin comparison should account for the difference. Stock-based compensation was $412.1 million, a modest 1.05% of revenue and down from 1.43%. Headcount exceeded 7,000, of whom more than 3,500 work in R&D.

3. Consolidated Cash Flow

*The cash flow statement reconciles to cash, cash equivalents, and restricted cash under ASC 230. Balance sheet "Cash and cash equivalents" excludes restricted cash: $5,169.9M (FY2025) and $7,521.5M (FY2026). The $119M difference in FY2026 represents restricted cash primarily held as collateral for credit facilities.

Free cash flow — operating cash flow less capital expenditure of $162.0 million — was negative $6,971.9 million. In two of the last three years free cash flow has been deeply negative; FY2025 was the exception, not the rule.

The quality-of-earnings ratio makes the point bluntly. Operating cash flow divided by net income was −3.05x in FY2026, 1.58x in FY2025 and −2.16x in FY2024. A healthy business runs at or above 1.0. Super Micro's profits are real accounting profits, but they have not been converting to cash.

The bridge from $2,230.5 million of net income to negative $6,809.9 million is almost purely working capital. Non-cash addbacks contributed $607.9 million. Changes in operating assets and liabilities then subtracted $9,648.3 million — inventories alone took $8,215.5 million and receivables $3,921.9 million, partly offset by deferred revenue of $1,880.7 million and payables of $963.3 million.

Capital expenditure is strikingly light at 0.41% of revenue, down from 0.58%. This is maintenance-and-fit-o