A conference operator welcomes participants to Super Microcomputing's Q3 2026 earnings call, where CFO and other executives discuss financial results, provide guidance for Q4 2026, and address forward-looking statements. A Q&A session follows, with a note on the upcoming quiet period.

Discussed steps taken against misconduct, including termination and investigation support, while emphasizing the company's dedication to maintaining high standards of integrity and expanding its manufacturing presence in the U.S.

Despite global shortages of critical components, the company continues to grow, achieving record special orders. By optimizing data center infrastructure with direct cooling EC technology, it ensures efficient AI factory scaling for customers. Although fiscal Q3 revenue was impacted by delays, the business outlook remains strong, poised to capture future revenue from cloud agreements.

The company achieved a significant gross margin recovery, reaching 10.1% and improving by 58% over the previous quarter. This success is attributed to a stronger focus on enterprise markets and AI, particularly through the expansion of a.c.t.s business. Key growth drivers include the robust AI and cloud market, aggressive fostering of traditional enterprise and storage businesses, and the introduction of total data center solutions. The company also enhanced manufacturing efficiency, managed inventory effectively, and reduced tariff-related costs, all contributing to improved flexibility, tax margins, and customer delivery times. The transformation into a comprehensive solution provider for data center infrastructure, especially through the growing tcpp business, is expected to significantly contribute to future profits, potentially exceeding 25% of total profit in the coming years.

Focuses on enhancing data center technology, expanding global production facilities, and growing software and service offerings to meet increasing demand in AI and data center markets, aiming for significant revenue growth.

Q3 revenue reached 10.2 billion, showing a 123% YoY increase but a 19% QoQ decline, impacted by data center readiness and supply chain issues. AI infrastructure demand, particularly GPU platforms, contributed over 80% of revenue. Enterprise channel revenue rose to 28%, while OEM appliance and large data center segments accounted for 72%. Geographically, US revenue fell 36% QoQ, contrasting with significant growth in Asia, Europe, and the rest of the world. Non-GAAP gross margin improved to 10.1%, exceeding expectations due to favorable customer and product mix, and reduced tariffs and inventory charges.

Q3 operating expenses increased significantly, impacting both GAAP and non-GAAP margins. Interest expenses surpassed income, leading to a net expense. Tax provisions rose, affecting earnings per share. Cash flow used in operations surged due to decreased accounts payable and increased inventory. The company's net debt position widened, necessitating additional credit facilities to support working capital.

The dialogue outlines expectations for diluted net income, non-GAAP earnings, gross margins, operating expenses, tax rates, capital expenditures, and net sales for Q4 of fiscal year 2026, emphasizing guidance for financial results and encouraging focused Q&A on the announced figures.

The company provided updates on an ongoing investigation regarding alleged product diversion to China, assuring no restatement of earnings is anticipated and confirming plans to file the 10-Q. They emphasized the importance of the independent investigation for organizational growth and expressed confidence in maintaining customer relationships despite the situation.

Discussed the impact of DCDD contributions on profits, highlighted growth in TCPP usage, and outlined plans for expanding capacity to meet future data center demands, emphasizing efficiency and innovation.

Discusses the strength of the partnership with Nvidia and other vendors, emphasizing no change in allocation or supply of GPU and components, and ongoing collaboration on new projects.

Investments in engineering support services are contributing to margin expansion, with the business segment showing strong growth. Despite notable progress, the investments have not yet peaked, indicating ongoing potential for further margin improvement.

The dialogue discusses global supply constraints affecting components like CPUs and memory, impacting operations and customer delivery. Despite these challenges, there's a positive outlook on resolving issues through vendor relationships. Additionally, there's growing traction in data center solutions, attracting both enterprise and cloud customers, with a strategic focus on expanding customer base. One-time items impacting margins, such as tariffs and expedite fees, are addressed, highlighting a hopeful reduction in future tariffs and a decrease in expedite charges.

Discussed how delayed customer deliveries affected quarterly margins, emphasizing the benefits of large deals on reputation and margins, noting increased diversification and better margins from larger engagements.

Discusses revenue timing, gross margin fluctuations influenced by customer and product mix, and anticipates working capital adjustments amid GPU transitions, highlighting a diversified customer base and strategic partnerships for smoother financial dynamics.

The dialogue explores the strategic balance between achieving growth and managing capital requirements, emphasizing the importance of a stable business model. It discusses the potential need for additional capital to support revenue growth, while also considering more modest expansion paths. The conversation highlights ongoing efforts to refine the business model to enhance financial stability and operational efficiency.

The dialogue discusses the company's strategic focus on enhancing gross margins through PC-based solutions and targeting enterprise customers, leading to a significant reduction in reliance on a single large customer, from 63% to 27%. It outlines the expectation for continued margin improvements with a diversified customer base, including support for large, mid-sized, and small cloud enterprises.

Discussion focused on the expectation of healthy growth from enterprise channels, the impact of AI deployments on revenue mix, and achieving sustainable gross margins amid expanding customer bases and product lines.

The dialogue covers concerns about export violations, their potential impact on financing growth, and the company's proactive internal investigation. It also touches on a record backlog, its implications for future growth, and the company's strategic balance between growth and margins.

The dialogue clarifies the impact of enterprise mix, particularly AI and traditional servers, on gross margin rebound. It discusses revenue trends influenced by a delayed customer, potential margin effects, and the strength of backlog without disclosing specific numbers, emphasizing diversified pipeline and future growth strategies.