Thank you. Good afternoon, and thank you for attending Supermicro's call to discuss financial results for the second quarter and full year fiscal 2026, which ended December 31st, 2025.

With me today, as is Charles Liang, Founder, Chairman, Chief Executive Officer, and David Weigand, Chief Financial Officer. By now, you should have received a copy of the press release from the company that was distributed at the close of regular trading and is available on the company's website.

As a reminder, during today's call, the company will refer to a presentation that is available to participants in the IR section of the company's website under Events & Presentations tab. We've also published management's scripted commentary on our website.

Please note that some of the information you'll hear during the discussion today will consist of forward-looking statements including, without limitation, those regarding revenue, gross margin, operating expenses, other income and expenses, taxes, capital allocation, and future business outlook, including guidance for the third quarter of fiscal 2026 and full fiscal year 2026. These statements and other comments are based on management's current expectations and assumptions and involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated, and you should not place undue reliance on forward-looking statements.

You can learn more about these risks and uncertainties in the press release we issued earlier this afternoon, our most recent 10-K filing for fiscal 2025, and other SEC filings. All these documents are available on the IR page of Supermicro's website.

We assume no obligation to update any forward-looking statements. Most of today's presentation will refer to non-GAAP financial results and business outlook.

For an explanation of our non-GAAP financial measures, please refer to accompanying presentation or to our press release published earlier today. The non-GAAP measures are presented as we believe that they provide investors the means of evaluating and understanding that management evaluates the company's operating performance.

These non-GAAP measures should not be considered in isolation from, as substitute for, or superior to financial measures prepared in accordance with US GAAP. In addition, a reconciliation of GAAP to non-GAAP results is contained in today's press release and in the supplemental information attached to today's presentation.

At the end of today's prepared remarks, we will have a Q&A session for sell-side analysts. Our third quarter fiscal 2026 quiet period begins at the close of business Friday, March 13th, 2026.

For now, I will turn the call over to you, Charles.

Thank you, Michael. Thank you all for joining today's call.

Supermicro delivered a strong fiscal Q2 as AI infrastructure demand continues to accelerate across every major customer segment. For the quarter, we achieved a record $12.68 billion in revenue, including $1.5 billion deferred from a couple of accounts last quarter, representing 123% year-over-year growth.

This strong performance reflects the sustained momentum of our AI solutions and the large-scale systems as customers build out next-generation AI factories. Supermicro has been developing some of the largest and most complex AI gigaclusters ever built, highlighting our unmatched capability in large-scale manufacturing, on-site deployment, and integration.

Most notably, our Data Center Building Block Solutions, or DCBBS, have started to gain some key customers' preference as they look for quicker time to deployment, TTD, and quicker time to online, TTO. These pre-designed, pre-validated infrastructure building blocks not only speed up customers' data center builds, but they also save costs with better workload optimization and with minimal power and water consumption.

DCBBS will significantly help us gain market share in large, medium, and small AI infrastructure deployments. With GB300, B200, B300, and MI350 platforms, we are also preparing for the upcoming NVIDIA Vera Rubin and AMD Helios solutions for the second half this year.

While we continuously grow in AI factory buildout, customer and the product mix shift more to large model builders, who have pricing leverage, pressuring gross margin. In Q2, especially, the expedited transportation cost, ongoing components shortage, and their volatile pricing, among with tariffs, had impact our short-term gross margin.

As such, I would like to take a moment to highlight our key strategies to address this and efficiently strengthen our long-term profitability. First and foremost, Supermicro undergoes its fourth phase of product evolution with DCBBS as its key focus.

As these data center deployments scale, DCBBS is and will become an increasingly important part of our value. In the first half of fiscal year '26, DCBBS solutions accounted for 4% of our profit.

We expect this part of our profit to grow and meaningfully contribute to the second half of fiscal '26. We see that growth accelerate to at least double-digit contribution by end of calendar 2026.

With compressed GPU, CPU life cycle, DCBBS become critical helpful to the value of our server and storage products by enhancing the data center infrastructure time to delivery and time to online, reducing power and water consumption, and cost efficiently simplifying data center management and maintenance. In just about 1 year, our DCBBS product lines grew to more than 10 key subsystems, including CDU, L2A heat exchangers, chiller doors, power shelves, battery backup, water tower, dry towers, high-speed switching, data center management software, and service.

We are expanding this product line to including more new categories, such as transformers, next-generation power generators, device for energy backup, and green power replacement, further strengthening customer value, accelerating deployment, and supporting long-term profit margin improvement for Supermicro. Other than the developing DCBBS for better value and profitability, we are also sharpening our focus on traditional enterprise, cloud, and edge IoT customers to further diversify revenue with higher margin.

In addition, we had introduced our X14 and H14 Go series solutions, featuring pre-configured systems that ship directly from our factory, enabling rapid deployment optimized for specific AI, cloud storage, and telco edge workloads. These servers are ready to power up immediately and reinforce Supermicro's core value, time-to-market advantage, for enterprise customers, channel partners, and SMB end users.

We are also driving meaningful cost improvement through enhanced design for manufacturing, DFM, and quality-driven engineering. We had introduced more modularized subsystems and expanded automation across our facilities.

These efforts increase yield rate, reduce rework, and enable us to bring new platforms to volume production even faster and with higher quality. As product cycles shorten and technical complexity increase, these design for manufacturing advancements are essential for scale, efficiency, and long-term margin improvement.

While executing these DFM initiatives, we are also continuous to expand our global manufacturing footprints aggressively and strategically. Our Silicon Valley facility remained the cornerstone of our US operation, delivering faster time to market, strong security, and higher-quality integration.

Internationally, newer production sites in Taiwan, Malaysia, and Netherlands, and soon the Middle East, are ramping to increase capacity, support regional sovereign AI requirements, and most importantly, optimize our overall cost structure. In summary, as the only company with more than 32 years of robust server and storage focus, Supermicro is quickly evolving into a leading AI platform and data center infrastructure total solution provider.

Strong Q2 performance, rapid expansion of DCBBS product line, deeper and more customer engagement, and the global capacity investments position us well for long-term growth. While near-term margin pressure from customer mix, tariffs, international facility expansion, and key components shortage, like memory and storage shortage, our focus on enterprise business, design for manufacturing improvement, and the faster-growing DCBBS portfolio all help us gain new customers, support higher growth and net margin going forward.

Lastly, based on our broad customer backorder forecast, and commitment, we believe demand for AI and IT infrastructure remain unprecedently strong. Our DCBBS solution is exactly what customer need to build out their AI and cloud much faster, cleaner, and lower total cost.

With that in mind, I'm confident to guide at least $12.3 billion for Q3 and up our full-year revenue guidance back to at least $40 billion. I look forward to sharing our progress with you next quarter.

Thank you. Now, I will turn it over to David.

Thank you, Charles. We achieved record Q2 fiscal year '26 revenue of $12.7 billion, up 123% year-over-year and up 153% quarter-over-quarter compared to our guidance of $10 billion to $11 billion.

Q2 revenue included approximately $1.5 billion in delayed Q1 shipments due to customer readiness. Growth was driven this quarter by the rapid ramp and deployment of our rack-scale AI solutions.

Despite supply chain challenges in the industry, our global manufacturing team executed well in delivering record revenue. Order strength remains strong from global large data center and enterprise customers.

AI GPU platforms, which represent over 90% of Q2 revenue, continued to be the key growth driver. During Q2, the enterprise channel revenue segment totaled $2.0 billion, representing about 16% of revenue versus 31% in the prior quarter.

That's up 42% year-over-year and up 29% quarter-over-quarter. The OEM appliance and large data center segment revenue was $10.7 billion, representing approximately 8 84% of Q2 revenue versus 68% in the last quarter.

This was up 151% year-over-year and up 210% quarter-over-quarter. For Q2 FY26, one large data center customer represented approximately 63% of total revenue.

By geography, the US represented 86% of Q2 revenue, Asia 9%, Europe 3%, and the rest of the world 2%. On a year-over-year basis, US revenue increased 184%, Asia grew 53%, Europe decreased 63%, and the rest of the world increased 77%.

On a quarter-over-quarter basis, US revenue increased 496%, Asia decreased 49%, Europe decreased 51%, and the rest of the world increased 53%. The Q2 non-GAAP gross margin was 6.4% versus 9.5% in Q1.

Gross margins were impacted by customer and product mix as well as higher freight, production, and expedite costs as we began to ship new platforms on a large scale. We had significant operating leverage during the quarter with total non-GAAP operating expenses representing 1.9% of revenue versus 4.1% last quarter.

Q2 GAAP operating expenses were $324 million, up 14% quarter-over-quarter and up 8% year-over-year. On a non-GAAP basis, operating expenses were $241 million, which was up 18% quarter-over-quarter and up 6% year-over-year.

Operating expenses were up quarter-over-quarter largely due to higher sales expenses. Non-GAAP operating margin for Q2 was 4.5% compared to 5.4% in Q1.

Other income and expense for Q2 totaled a net income of $26 million, reflecting $51 million in interest income on higher cash balances, partially offset by $25 million in interest expense primarily related to our convertible notes. The tax provision for Q2 was $99 million on a GAAP basis and $122 million on a non-GAAP basis, resulting in a GAAP tax rate of 19.8% and a non-GAAP tax rate of 20.6%.

Q2 GAAP EPS was 60 cents compared to guidance of 37 cents to 45 cents, and non-GAAP diluted EPS was 69 cents versus guidance of 46 cents to 54 cents due to higher revenue and operating leverage. The GAAP fully diluted share count increased sequentially from 663 million in Q1 to 673 million in Q2, and the non-GAAP share count increased from 677 million to 688 million over the same period.

Cash flow used in operations for Q2 was $24 million compared to $918 million used in the prior quarter. On a quarter-over-quarter basis, Q2 operating cash flow reflected higher net income, offset by higher accounts receivable and inventory levels, and aided by higher accounts payable.

Q2 closing inventory was $10.6 billion, up from $5.7 billion in Q1 as we prepared for continuing strength in Q3 shipments. CapEx for Q2 totaled $21 million, resulting in negative free cash flow of $45 million for the quarter.

During the December quarter, we expanded our access to working capital to fund growth, executing a $2 billion cash flow-based secured revolving credit facility in the US. In January, we also closed an approximately $1.8 billion secured Taiwan revolving debt facility.

At quarter-end, our cash position totaled $4.1 billion, while bank and convertible note debt was $4.9 billion, resulting in a net debt position of $787 million compared to a net debt position of $579 million in the prior quarter. Turning to the balance sheet and working capital metrics, the cash conversion cycle significantly improved from 123 days in Q1 to 54 days in Q2.

Days of inventory decreased by 42 days to 63 days versus 105 days in the prior quarter. Days sales outstanding increased by 6 days to 49 days versus 43 days in Q1, while days payables outstanding increased by 32 days to 58 days versus 26 days in Q1.

Turning to the outlook for Q3 FY26, we expect net sales to be at least $12.3 billion, GAAP diluted net income per share of at least 52 cents, and non-GAAP diluted net income per share of at least 60 cents. We expect gross margins to be up 30 basis points relative to Q2 FY26 levels.

GAAP operating expenses are expected to be around $354 million, which include approximately $74 million in stock-based compensation expenses that are excluded from non-GAAP operating expenses. The outlook for Q3 of fiscal year 2026 fully diluted GAAP EPS includes approximately $62 million in expected stock-based compensation expenses, net of the tax effects of $19 million, which are excluded from non-GAAP diluted net income per common share.

We expect other income and expenses, including interest expense, to result in a net expense of approximately $22 million. The company's projections for Q3 FY26 GAAP and non-GAAP diluted net income per common share assume a tax rate of 19.6%, a non-GAAP tax rate of 20.2%, and a fully diluted share count of 684 million for GAAP and 699 million shares for non-GAAP.

Capital expenditures for Q3 are expected to be in the range of $70 to $90 million. For full fiscal year 2026, we expect at least $40 billion in net sales.

Michael, we're now ready for Q&A.

Great. Matt, can you roll the queue?

Hey, yeah, thanks, guys. Good afternoon.

Thanks for taking the questions. Congrats on the solid results here relative to the guide.

I want to just ask about margins, and I have a few questions I want to ask you here, but they're all margin-related. I guess the first is with regards to you mentioned, I think, 90 days ago that December quarter you expected to be sort of the low-water-mark quarter in gross margin, and you're guiding for Q-over-Q improvement for the March quarter.

Do you still think that things progress expensive from here, Charles? You made some comments around customer mix.

It's been a headwind. Do you think it continues to improve?

I have two quick follow-ups, Dave, just margin-related after that. Thanks.

Thank you for the question. Yes, the customer mix, we are improving, quarter after quarter.

Now, we have, many more, large-scale customer, I have to say. That way improve our, profitability.

The other factor is, last quarter, I mean the December quarter, GB300, was very beginning to us. Lots of expedited, transportation cost.

Now, product is getting mature. So, those expedited, transportation cost will be dramatically, reduced.

And, tariff impact also, improving. And, overall, especially a DCBBS also increasing, for our net, for our, gross margin.

I believe our gross margin will start to, improve quarter after quarter.

Charles, that's great context. Truly appreciate it.

Actually, Charles, one of my two clarifications here is from something you said in your prepared remarks. You said higher net margin.

I guess you just clarified you expect gross margin to go up. Maybe this is a Charles question.

Dave, you mentioned opex leverage. The opex as a percentage of sales was really attractive this quarter.

It's 1.5% that's I guess less than 2%. I think it's the second quarter in a row you drove opex leverage last quarter, this September quarter for the first time in a while, and now you have the most attractive opex as a percentage of revenue in a while.

Is the company entering a period of not only gross margin expansion, but opex dollar leverage as well structurally? That's it for me, guys.

Thanks.

Yes, exactly. Economic of scale will help us to improve our cost, right?

That way impact our gross margin and especially operation margin. Again, DCBBS bring Supermicro for more business in service, in software, in overall infrastructure service to customer.

All those factor are positive to our margin improvement.

Very helpful context. Thank you, guys.

Really appreciate it.

Thank you.

Hi. Quick question.

This is MP on behalf of Samik Chatterjee. I just wanted to double-click on your full-year guidance.

You said $40 billion for FY26. If I back into the implied 4Q number, that implies significant quarter-over-quarter moderation.

Is that just conservatism being embedded into the full-year outlook, or do you see definite indications from your order trends that 4Q will imply sequential moderation? I have a follow-up as well.

I believe we say minimum $40 billion is a relatively a conservative number. Our business, indeed, will continue to grow, especially our DCBBS that attract a lot of customer who want to build the data center quicker, less power consumption, better cost, and also more reliable and easy for management.

We are getting more and more customer come to us.

Thank you. For my follow-up, I wanted to ask about DCBBS.

You highlighted it being 4% of profits in first half. Can you please help us understand the contribution in terms of revenues?

Then you also said it will increase to double-digit contribution by end of calendar year. How does that translate to overall gross margin trajectory?

Thank you.

Thank you. As DCBBS is still a new product line to us.

We officially introduced the product about 6 months ago. So, in the first two quarter, September quarter plus December quarter indeed is our first two quarter.

The revenue still relatively small, but because the profit is much better. Overall, it contributed about 4% to our, overall profit, in last 6 months.

Looking forward, it will continue to grow very quickly. We are very happy to see, more and more customer like, DCBBS to speed up their data center buildout, with, easier for management, easier for maintenance, and, our profit will continue to follow because of DCBBS especially.

Thank you.

Great. Thank you for taking my question, and good results here relative to the guide.

I just had two quick ones. One, just there's a lot of discussion about component availability, supply constraints.

If you could just talk to us about your guide and relative to that, is that minimum $40 billion guide a constrained number given the supply constraints? In other words, if supply wasn't an issue, could that number be greater?

Then just on customer concentration, I think the commentary suggested that some of the geos did decline on a year-on-year basis as well as on a quarter-on-quarter basis. Again, relative to the guide, how should we think about the ramp of DCBBS across those various geographies for the back half of this fiscal year and through calendar '26?

Thank you.

You are right. We already considered components price keeping growing.

With that, that's why we try to be conservative, kind of commit to $40 billion. If the shortage situation improve quickly, for sure, our revenue will be more than that.

As to DCBBS, it's globally, almost every region, customer like DCBBS because it help them easier to build a data center. It's kind of like a one-stop shop.

We provide not just computing node, storage node, switch node, and liquid cooling subsystem, including battery shelf, including some energy backup. It kind of make customer's job to build a data center much easier.

The impact is global. We see worldwide, more and more customer like our DCBBS solution, and we are aggressively preparing to blow the support.

Thank you.

Thank you very much. To ask another question on the new DCBBS disclosure, encouraging to hear that growing to double digits share of profit by the end of calendar '26.

Can you talk about the investments that you need to make here to expand the capabilities? I know, Charles, you mentioned some in the prepared remarks, as well as your go-to-market offering to have this increased penetration of DCBBS.

Then I have a quick follow-up as well.

Indeed we start to develop our DCBBS pretty much about 12 months ago. We already consistently invest in that area.

Far, we have about 10 items, including the CDU, including chiller door, including a power shelf, battery backup, water tower, management software. We have about 10 items available now.

We will introduce another 3 to 5 items in next few months or next few quarter. The data center building block solution will be getting more complete.

That's why it will be easier for customer to build a data center. It's not just easier, quicker to build their data center, but also make their data center modularized.

It's easier for management, easier for maintenance, and easier for scale up.

Great. Thank you very much.

Just on the margin profile of DCBBS, could you remind us what you've said in the past about what that looks like relative to the sales that you typically have towards your large neocloud and GPU-as-a-service customers?

Oh, for sure, our gross margin, net margin are much higher for DCBBS because it's so unique. Again, we are the first company build a pre-designed, pre-validated, pre-optimized data center solution for customer.

The margin is much better, for sure, more than 20%. We are happy to make the product line really strong, really complete as soon as possible.

Thank you very much.

Thank you.

Hi, thanks for taking my questions. For the first one, I'll ask a follow-up on margins.

David, you mentioned expedited costs, component cost increases, shortages, and I think last quarter, you talked about increased investment in engineering, support, and services to help new customers. Can you help us size all of these things?

How much did they impact gross margins in the December quarter, and what's baked into guidance as impact from these things in the March quarter? I have a follow-up.

We don't break those things out, Ruplu, but we can just say that the costs were up in each of those areas. In other words, higher transportation and expedite in order to move things around and get things delivered to the customer faster.

I can tell you that over the past year, we've had increases as we have ramped up the new technologies and prepared for mass shipments.

Okay. As a follow-up, can I ask, I think you or Charles talked about component shortages, and you're being a little conservative on the guide.

Are component shortages which areas are they in, and then component cost increases, are they actually impacting data center demand either on the AI side or on the regular non-GPU server side? Are component cost increases a real factor?

If I can sneak one more in, this DCBBS product that you have, can we infer anything about the type of customers who are buying that? If you're thinking that you're going to sell more, it's going to be a bigger percent of your sales, does that mean that the customer mix is also changing?

Do enterprise customers use more of these, or what type of customers likes to use more of the DCBBS packaged solution? Thanks for taking my question.

Thank you for your question. Indeed, the key components shortage this time is the main reason because the AI and the large data center demand are growing.

The shortage because the demand is getting so strong, not because the production capacity is reduced. That's a good sign.

Basically, it's because the industry are growing, and we are part of the major growing company. That's why I believe the impact to us, yes, the cost will be impacted, but won't hurt us too much.

That's first question. Second, the DCBBS, who need the DCBBS?

I would like to say all the people like to build a data center, doesn't matter they are large-scale, middle-sized scale, or small-scale, because our DCBBS just simply to provide more choice for customer to go for one-stop shop or buy everything from everywhere by themselves. Obviously, one-stop shop save their time, make sure when they put the things together, it works, and quickly when they put the things together, it works and optimized.

That's why it's optimized time not just time to delivery, but time to online. Customer use our DCBBS, their data center can go for online, go for operation quickly.

I would like to say global people need DCBBS kind of building block solution.

Thanks for the detail.

Thank you.

Thank you. Congrats on the strong results and guidance.

A little bit of a different question here. Look, Supermicro brought broad DLC to the market one generation faster than when it became part of NVIDIA reference architecture.

Now, it appears that Supermicro has brought to the market one generation faster dry cooling towers, which is really to higher inlet temperatures as part of Rubin reference design. My question is that do you expect Supermicro to continue to bring to the market one generation faster these power efficiency advantages before NVIDIA makes it part of their reference architecture?

Is this going to be part of Supermicro's branding?

As NVIDIA, a very strong company, and we work with them very closely. However, because our strong engineering background, our big engineering team, before we are able to make our total solution one generation or 6 months earlier than others.

Now, and in the future, I believe we will be still able to bring a total solution to market earlier than others. Especially help customer build a data center, build their cloud, AI cloud, time to online quicker than others, if not 6 months earlier, at least 3 months or 4 months earlier.

That's still a big help. I'm very confident that our future growth should be still very strong.

Great. Then for my follow-up question, your 10% customer, was that the primary driver of the upside that you saw in the quarter?

Do you expect them to remain a 10% plus customer in the March quarter? How should they project?

Then you also did sign a pretty big contract with Datavolt 6 or 9 months ago. Is that starting to ramp in as well?

Basically, because our foundation is getting much stronger than before ever, especially our kind of total solution, like data center building block total solution is strong. We are gaining broadly the customer from the all the territory.

More than 10% or not, it's hard to say because now our revenue will grow very fast. Very soon, I hope I can say we have more than $50 or $60 billion revenue.

Not today, but hopefully very soon. More and more large customer is working with us.

That's very exciting condition. Great.

Thank you.

Thank you.

Hey, guys. Let me add congratulations on the nice outlook.

I guess, Charles, David, you had a 53% customer in the December quarter. As you look at sort of the second half of fiscal '26, do you expect revenue to diversify significantly, or do you think that that large customer continues to be pretty concentrated in the March and the June quarters?

Then I've got a follow-up.

Sometimes it's not easy to predict, because customers sometimes shift their schedule of pull-in or push-out. Overall, we are very happy that now we have many more large-scale customer.

The customer is more diversified, and overall revenue will grow quickly. At the same time, DCBBS and software grow our value.

Overall, we are on a very healthy track now.

Got it. I'm understanding that customers can push in and pull out, right now the forecast shows increasing diversification over the next couple quarters.

Because the growth still very fast, that's why now we are focus on more about how to grab more money to grow even faster, right? If we have more cash, for sure we can grow even faster.

Even if we do not grab more money, I guess, because the more diversified customer base and also more higher-value system, more higher-value total solution, so that will help us grow business.

Understood. Then my follow-on, Charles, in your prepared commentary, you mentioned the upcoming platform transitions, the Vera Rubin and the Helios system from AMD.

I'm just wondering have you guys started to get orders for those systems for delivery in the second half, or is it too early to start to get orders for those systems?

Yes, we have a lot of highly interested customer. Some already engage, and we hope we can deliver as soon as possible.

Still, it depends on our partner, depends on when their Vera Rubin or AMD solution will be ready. We are working very closely with them.

Once they are available, we like to deliver to customer quickly. Yes, today we already have some good commitment from customer.

Excellent. Thank you.

Thank you.

Hi, thank you for taking my questions and congrats on a nice quarter and outlook there. I just want to try ask a little bit more about the big versus smaller customer mix that you're expecting the future in the pipeline that you see.

Are you expecting smaller customers to become a greater percentage of sales, or is it the opposite? The reason I ask that's because these bigger customers seem to have that pricing leverage you mentioned.

If you have any color there, that would be helpful. Thank you.

Thank you for the question. Yes, we understand we need more customer, especially more diversified customer base, enterprise.

We are very aggressively growing enterprise, middle-sized, all different kind of enterprise customer as well. Our customer diversify is very important direction to us now.

I guess we will grow both large customer and lots of kind of high number of enterprise account.

Got it. Then just on the Vera Rubin question, and I guess the migration to the 800-volt data center, I was wondering if there's any opportunity for you to drive greater differentiation in this next cycle upgrade compared to the past couple.

Is there anything about the whole platform and data center architecture that might give you more or less opportunity compared to the last cycle of Blackwell and Hopper?

That's why I say NVIDIA provide a very good solution, and based on that, we optimize the whole data center building block solution for our customer, and aim to help them build the data center quicker and more reliable, easy for management, and lower their cost, including energy consumption, including energy backup, and, maybe too early to say, including energy kind of green power replacement. We have a complete plan for the whole solution, but some other system are still too early to say too much at this moment.

Okay. Thank you very much.

Thank you.

Hi, yes, Mark Newman. Thanks for taking my questions and congrats to get, on great quarter and great outlook.

Just curious, if we just take a step back, what's what's what's changed? You've you've you've got, in a big step-up here in sales, gross margins down quite a lot, but you're guiding forwards for, solid sales to continue.

Is this is this, just, a reflection of, a tough pricing environment and and and Supermicro having to react to tougher pricing environment and thus, winning back more share, or is this just, catching up to as you referred to the previous quarter previous previous couple quarters, you you mentioned about, a few orders being getting pushed out. Is this just catch-up of the orders, or is this, a reflection of a of a more, aggressive, pricing strategy?

I guess, importantly, for me, like trying to think about forward estimates going forwards, you guided for the short term, but, how do we think about gross margins longer term? Is this this kind of range, here to stay, or are we looking at getting back to, into the, low, high single digit, low double digit range for its margin like you were before?

Thanks very much.

Thank you. As an engineering company, we, for sure, have some choice.

We can continue to grow large account aggressively, or spend more effort to develop technology, good product, and to grow more enterprise account. We are doing both way, basically.

The gross margin, net margin, for sure, we are expecting to grow to a double digit as soon as possible. David, you may add something.

Sure. We think that we've established ourselves with a number of deployments that we've made as being really the premier provider of the most current technologies that are available on the market.

We think with those strong installations, we've broadened our reach into the market. We think that we're trying to target both, as Charles mentioned, both large-scale and smaller-scale customers and mid-tier customers, but we want to serve all the customer bases that are out there and that are attracted to our products and bring them the very best technologies.

We think ultimately that drives the margins. Yes.

guys. Just, I think, a couple of quick clarification questions.

One for David. David, you raised some new capital this quarter, maybe just help us understand how you're thinking about working capital for the rest of this year.

Then other income came in about $50 million above your guide. Really, what drove that?

Then just one quick follow-up question. Thanks.

Sure. The other income was higher interest income that we had as our cash reserves had grown.

We were earning good interest income. However, that was quickly taken up by the fact that as I mentioned last quarter, we had well in excess of $13 billion of purchase orders for delivery.

We immediately had to use that. That's why our accounts receivable, our inventory went up.

We took in not only two different $2 billion or $2 and $1.8 billion credit facilities. We also set up an accounts receivable factoring.

We have access to over $5 billion of additional capital. If we continue to have growth, then we have access to additional capital in the marketplace.

Right now, we think that for the current outlook, we have adequate capital to meet our needs. When I say current, for

the next

several quarters.

Got it. Just on the factoring, the securitization facility, did you utilize that at all this quarter?

Then on the 63% customer, was that a previous 10% customer? Thanks.

To the first question, we did not use it during the December quarter, but we have subsequently. To your second question, Supermicro does most of its business with repeat customers, I'll just leave it at that.

At the same time, we add lots of

new customer. We've added a lot of new logos at the same time.

That's right.

That's

because of those successful customers.

We don't know if the 63% customer is new to the 10% customer mix or if it's a previous 10% customer. Is that right?

I'll just refer you to the 10-Ks and Qs on that.

Okay. Thanks for taking the questions.

By the way, I do want to clarify one thing in my narrative regarding the fully diluted share count. The GAAP fully diluted share count increased sequentially from 663 to 694 million shares, and then the non-GAAP share count increased from 677 million to 709 million.

Noticed a typo on there, please forgive the correction.

All right. Thank you, everyone, for joining.

Just want to inform you that we had heard there were some technical difficulties with our webcast provider. A replay will be provided after the call, you can catch up on that.

Thank you for joining today.