Episode Details

Super Micro Computer, Inc. (SMCI) Q4 FY2026 — Net sales $11.120B vs $5.757B (+93.2%), MISSING an $11.599B bar by 4.1%. Non-GAAP diluted EPS $1.70 vs $0.923, an 84% BEAT; GAAP $1.62. Gross margin 17.5% vs 9.9% in March against the company's own 8.2-8.4% guidance. The 8-K was accepted 4:06pm ET Tue Aug 11 (AMC), so the $31.60 close is the session BEFORE the print; the after-hours move was about +6.2% to ~$33.57. Supermicro printed the best quarter in its history: gross margin 17.5% against 9.9% three months earlier, net income $1.178 billion, and non-GAAP earnings of $1.70 against a $0.923 bar - an 84% beat, on a 4% revenue MISS. But the cash flow statement in the same press release says fiscal 2026 turned $2.230 billion of profit into MINUS $6.810 billion of operating cash, and the company's own prospectus says the June raise existed to buy components for orders it had not yet shipped. THE CALL: HOLD (3/5, A FINANCING CALL, NOT A DEMAND CALL) — base-case value ~$34.0 vs ~$31.6 today. KEY METRICS: - CALL: HOLD 3/5, fair value $34.00 vs the $31.60 pre-print close - about 8% above, and only ~1% above the ~$33.57 after-hours print. We are 21% under the $43.20 Street consensus on the SAME Hold rating. Bull $62, base $34, bear $17. - THE ANGLE: FY2026 GAAP net income +$2.230B; FY2026 net cash used in operating activities MINUS $6.810B; less $162M capex, free cash flow MINUS $6.972B. FY2025 was POSITIVE $1.660B of operating cash on $1.049B of profit - so cash used to be better than profit, and is now ~$9B worse. - WORKING CAPITAL: inventories $4.680B to $12.896B (+175.5%) and receivables $2.204B to $6.125B (+177.9%), both more than twice the 77.8% revenue growth. Inventory days 82 to 128, receivable days 35 to 50, payable days flat at 22. Cash conversion cycle 94 days to 156 days. - THE BEAT DECOMPOSED: not tax (rate rose 8.7% to 19.7%), not a one-off ($22M other income on $1.470B pretax), and not the share count - net income over LAST year's 624.7M diluted shares is $1.886 vs $1.62 reported, so the bigger denominator COST $0.27. At March's 9.94% margin gross profit would have been $1.105B not $1.943B: ~95c a share against a 78c beat. - WHO PAID: financing provided $9.479B - $4.469B of loans, $1.407B of common stock and $4.231B of 7.00% Series A Mandatory Convertible Preferred (SMCIP). The 424B5 use of proceeds says it was 'to fund the purchase of components to satisfy the approximately $39 billion of orders that the Company has received in recent weeks' from more than 20 customers. - DILUTION: diluted shares 624.7M (Q4 FY25) to 705.0M (Q4 FY26) to a guided 745M for Q1 FY27, 761M non-GAAP. The mandatory preferred converts into 130.7M-156.8M new shares by 1 June 2029 - 21-26% of the 613.5M basic count - and the LOWER the stock, the MORE shares it becomes. Preferred dividends ~$302M a year. - GUIDANCE AND GOVERNANCE: FY2027 revenue $65-72B vs a ~$52.5B Street; Q1 FY27 $14.5-15.5B and GAAP EPS $0.89-0.98. But results are PRELIMINARY, the auditor 'has not audited, reviewed, compiled or performed any procedures', and the Board has an open export-control review that could affect 'prior period results'. What to watch: UP: FY2027 revenue guided to $65-72B against a ~$52.5B Street, on more than $60B of new orders and record backlog; 8.7x non-GAAP earnings, 5.8x EBITDA; June-quarter operating cash flow POSITIVE $747M; deferred revenue quadrupled to $2.612B. DOWN: FY2026 free cash flow was minus $6.972B; full-year margin FELL to 10.8%; guidance implies 17.5% does NOT repeat; the preferred adds 131-157M shares by 2029; results are PRELIMINARY; export-control review open. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision. Learn investing free in the Charged Alpha app: https://chargedalpha.com/app?source=youtube&ref=video Educational only. Not financial advice.