Super Micro Launches $7 Billion Raise as AI Orders Hit $39 Billion
The server maker's fiscal third-quarter sales more than doubled year-over-year to $10.2 billion, though they fell 19.5% sequentially from the prior quarter's peak.
Super Micro Computer (SMCI) disclosed $39 billion in recent AI server orders from more than 20 customers and simultaneously launched a $7.0 billion equity and equity-linked financing, the largest capital raise in the company's history. The moves signal an aggressive bet on a pipeline that dwarfs the server maker's current revenue base and will require substantial working capital to fulfill.
The order backlog provides context for a quarter that, on the surface, showed a sharp sequential sales decline. Fiscal third-quarter net sales of $10.2 billion fell 19.5% from the second quarter's $12.7 billion, which had marked a five-quarter peak. On a year-over-year basis, however, revenue more than doubled from $4.6 billion, underscoring the scale of the AI infrastructure buildout Supermicro is riding.
Profitability recovered from a trough that had alarmed investors. GAAP gross margin rebounded to 9.9%, up from the second quarter's 6.3%, the lowest level in the five-quarter span. Non-GAAP gross margin reached 10.1%, improving from both the prior quarter's 6.4% and the 9.7% recorded a year earlier. The margin compression in the second quarter had occurred even as revenue hit its peak, reflecting pricing pressure as AI server volumes scaled.
Net income of $483 million rose 21% sequentially and more than quadrupled from $109 million a year ago, producing diluted earnings of $0.72 a share. Non-GAAP diluted EPS of $0.84 more than doubled from $0.31 in the year-ago quarter. Adjusted EBITDA margin of 7.9% also recovered from the second quarter's 5.0%.
The cost of scaling to meet the $39 billion order pipeline was visible in the balance sheet. Cash used in operations totaled $6.6 billion in the quarter, a massive outflow driven by inventory and receivables growth. Inventories climbed to $11.1 billion as of March 31, up from $4.7 billion nine months earlier, while accounts receivable expanded to $8.4 billion from $2.2 billion over the same period. Cash on hand fell to $1.3 billion from $4.1 billion at the end of December, and total bank debt and convertible notes rose to $8.8 billion.
The $7.0 billion financing — comprising $5.0 billion in underwritten equity and equity-linked securities and a $2.0 billion at-the-market program — is designed to fund that working capital build. The mandatory convertible preferred component carries a 7.0% dividend rate, adding a fixed obligation to the capital structure.
For the fiscal fourth quarter, Supermicro guided to net sales of $11.0 billion to $12.5 billion, implying a sequential rebound, with non-GAAP EPS of $0.65 to $0.79. Full-year fiscal 2026 revenue guidance narrowed to $38.9 billion to $40.4 billion, up from the "at least $33.0 billion" outlook offered at the start of the fiscal year and the "at least $40.0 billion" floor set one quarter ago.
The company's trajectory over the past year has been volatile. First-quarter fiscal 2026 sales of $5.0 billion had marked a revenue trough, declining 16% year-over-year, while net income fell 60% to $168 million. Full fiscal-year 2025 revenue of $22.0 billion grew 47% from fiscal 2024, yet net income declined 9% as non-GAAP gross margin compressed to 11.2% from 13.9%, illustrating the margin trade-offs of the AI volume ramp.