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What changed in Supermicro's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Supermicro's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+496 added−652 removedSource: 10-K (2025-08-28) vs 10-K (2025-02-25)

Top changes in Supermicro's 2025 10-K

496 paragraphs added · 652 removed · 312 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

99 edited+20 added−18 removed11 unchanged
Biggest changeGlobal assembly, test and quality control of our servers are performed at our manufacturing facilities in San Jose, California, Taiwan and the Netherlands, with plans to expand manufacturing to Malaysia. In each of our existing facilities, a Quality and Environmental Management System has been certified according to ISO 9001, ISO 14001 and/or ISO 13485 standards.
Biggest changeIn each of our existing facilities, a Quality and Environmental Management System has been certified according to ISO 9001, ISO 14001 and/or ISO 13485 standards. Our suppliers and contract manufacturers are required to adhere to the same standards to maintain consistent product and service quality and continuous improvement of quality and environmental performance.
We leverage our relationships in our indirect sales channel and with our OEMs to penetrate select industry vertical market segments where our products can provide better alternatives to existing solutions. We maintain close contact with our indirect sales channel partners and end customers.
We leverage our relationships in our indirect sales channel and with OEMs to penetrate select industry vertical market segments where our products can provide better alternatives to existing solutions. We maintain close contact with our indirect sales channel partners and end customers.
International Sales Our global sales efforts are supported both by our international offices in the Netherlands, Taiwan, South Korea, United Kingdom, China and Japan as well as by our United States based sales team. Product fulfillment and first level support for our international customers are provided by Supermicro Global Services and through our indirect sales channel and OEMs.
International Sales Our global sales efforts are supported both by our international offices in the Netherlands, Taiwan, South Korea, United Kingdom, China, and Japan, as well as by our United States based sales team. Product fulfillment and first level support for our international customers are provided by Supermicro Global Services, as well as through our indirect sales channel and OEMs.
We encourage opportunities for growth and conduct regular performance reviews that set clear expectations to motivate employees and align their performance with company objectives. We communicate to our employees through a secure intranet site, executive communications, company meetings, and business-related emails.
We encourage opportunities for growth and conduct regular performance reviews that set clear expectations to motivate employees and align their performance with our objectives. We communicate to our employees through a secure intranet site, executive communications, company meetings, and business-related emails.
It is our policy to ensure equal employment opportunity for all applicants and employees without regard to prohibited considerations of race, color, religion, sex (including pregnancy, gender identity and sexual orientation), national origin, age, disability or genetic information, marital status or any other classification protected by applicable local, state or federal laws.
It is our policy to ensure equal employment opportunity for all applicants and employees without regard to prohibited considerations of race, color, religion, sex (including pregnancy, gender identity, and sexual orientation), national origin, age, disability, genetic information, marital status, or any other classification protected by applicable local, state or federal laws.
Our competitive position and future results may be harmed, over the long-term, if there are further changes in export controls, including further expansion of the geographic, customer, end use, deemed export, or product scope of the controls, if customers purchase product from competitors, if customers develop their own internal solution, if we are unable to provide contractual warranty or other extended service obligations, if licenses are not granted in a timely manner or denied to significant customers or if we incur significant transition costs.
Our competitive position and future results may be harmed, over the long-term, if there are further changes in import and export controls, including further expansion of the geographic, customer, end use, deemed export, or product scope of the controls, if customers purchase product from competitors, if customers develop their own internal solution, if we are unable to provide contractual warranty or other extended service obligations, if licenses are not granted in a timely manner or denied to significant customers or if we incur significant transition costs.
Liquid cooling can be easily included in rack-level integrations to further increase system efficiency, reduce instances of thermal throttling, and lower both the TCO and Total Cost to Environment ("TCE") of data center deployments. Driving Software and Services Sales to our Global Enterprise Customers We work closely with customers by offering total data center life-cycle management software.
Liquid cooling can be easily included in rack-level integrations to further increase system efficiency, reduce instances of thermal throttling, and lower both the TCO and Total Cost to Environment of data center deployments. Driving Software and Services Sales to our Global Enterprise Customers We work closely with customers by offering total data center life-cycle management software.
We offer product lines that are designed to share common computing resources, thereby saving both valuable space and power as compared to general-purpose rackmount servers. In addition, due to the advanced power requirements of these systems we seek to provide end-to-end liquid cooling solutions across our designs to optimize the elevated power and thermal management requirements.
We offer product lines that are designed to share common computing resources, thereby saving both valuable space and power as compared to general-purpose rackmount servers. In addition, due to the advanced power requirements of these systems, we provide end-to-end liquid cooling solutions across our designs to optimize the elevated power and thermal management requirements.
We continue to invest in reducing our design and manufacturing costs and improving the performance, cost-effectiveness and power- and space-efficiency of our Total IT Solutions. Our research and development teams focus on the development of new and enhanced products that can support emerging technological and engineering innovations while achieving high overall system performance.
Additionally, we continue to invest in reducing our design and manufacturing costs while improving the performance, cost-effectiveness and power- and space-efficiency of our Total IT Solutions. Our research and development teams focus on the development of new and enhanced products that can support emerging technological and engineering innovations while achieving high overall system performance.
Due to our building-block designs, our inventory can generally be used with multiple different products, lowering working capital requirements and reducing the risk of inventory write-downs. Competition The market for our products is highly competitive, rapidly evolving and subject to new technological developments, changing customer needs and new product introductions.
Due to our building-block designs, our inventory can generally be used with multiple products, lowering working capital requirements and reducing the risk of inventory write-downs. Competition The market for our products is highly competitive, rapidly evolving and subject to new technological developments, changing customer needs and new product introductions.
All employees receive training in the prevention of sexual harassment and abusive conduct in the workplace. Total Rewards Program Our total rewards program is designed to attract and reward talented individuals who possess the skills necessary to support our business objectives, assist in the achievement of our strategic goals and create long-term value for our stockholders.
All employees receive training on the prevention of sexual harassment and abusive conduct in the workplace. Total Rewards Program Our total rewards program is designed to attract and reward talented individuals who possess the skills necessary to support our business objectives, assist in the achievement of our strategic goals and create long-term value for our stockholders.
We often collaborate during the sales process with our indirect sales channel partners and the end customer’s technical staff to help determine the optimal system configuration for the customer’s needs. Our interaction with our indirect sales channel partners and end customers allows us to monitor customer requirements and develop new products to meet their needs.
We often collaborate during the sales process with our indirect sales channel partners and the end customer’s technical staff to determine the optimal system configuration for the customer’s needs. Our interaction with our indirect sales channel partners and end customers allows us to monitor customer requirements and develop new products to meet their needs.
We are subject to U.S. and other applicable trade control regulations that restrict with whom we may transact business, including the trade sanctions enforced by the U.S. Treasury, Office of Foreign Assets Control and the export controls enforced by the U.S. Commerce Department’s Bureau of Industry and Security.
We are subject to U.S. and other applicable trade control regulations that restrict with whom we may transact business, including the trade sanctions enforced by the U.S. Treasury, Office of Foreign Assets Control and the import and export controls enforced by the U.S. Commerce Department’s Bureau of Industry and Security.
In recent years, we have experienced increased competition from original design manufacturers ("ODMs”) that benefit from their scale and very low-cost manufacturing and are increasingly offering their own branded products. We believe our principal competitors include: • Global technology vendors, such as Cisco, Dell, Hewlett-Packard Enterprise, and Lenovo; and • ODMs, such as Foxconn, Quanta Computer, and Wiwynn Corporation.
In recent years, we have experienced increased competition from original design manufacturers (“ODMs”) that benefit from their scale and very low-cost manufacturing and are increasingly offering their own branded products. We believe our principal competitors include: • global technology vendors, such as Cisco, Dell, Hewlett-Packard Enterprise, and Lenovo; and • ODMs, such as Foxconn, Quanta Computer, and Wiwynn Corporation.
Our in-house design competencies, design control over many of the sub-systems required within our server and storage systems, and our Server Building Block Solutions® (an innovative, modular and open architecture) enable us to rapidly develop, build and test complete solutions, which include servers, storage, software, and networking components.
Our in-house design competencies, design control over many of the sub-systems required within our server and storage systems, along with our Server Building Block Solutions ® (an innovative, modular and open architecture) enable us to rapidly develop, build and test complete solutions, which include servers, storage, software, and networking components.
Our collaborative approach with these vendors allows us to coordinate the design of our new products with their product release schedules, thereby enhancing our ability to rapidly introduce new products incorporating the latest technology. We work closely with their respective development teams to enhance system performance and reduce system-level issues.
Our collaborative approach with these vendors allows us to align the design of our new products with their product release schedules, thereby enhancing our ability to rapidly introduce new products incorporating the latest technology. We work closely with their respective development teams to enhance system performance and reduce system-level issues.
In addition, we have a centralized command center, designed to assist customers with quick and accurate configurations. We work with distributors, value-added resellers, system integrators, and OEMs to market and sell our optimized solutions to their end customers. We provide sales and marketing assistance and training to our indirect sales channel partners and OEMs.
In addition, we operate a centralized command center, designed to assist customers with quick and accurate configurations. We work with distributors, value-added resellers, system integrators, and OEMs to market and sell our optimized solutions to their end customers. We provide sales and marketing assistance and training to our indirect sales channel partners and OEMs.
The Stock Split did not modify any rights or preferences of the shares of the common stock. Proportionate adjustments were automatically made to the number of shares of common stock underlying the Company’s outstanding equity awards, equity incentive plans, and other existing agreements, as well as exercise or conversion prices, as applicable.
The Stock Split did not modify any rights or preferences of the shares of the common stock. Proportionate adjustments were automatically made to the number of shares of common stock underlying our outstanding equity awards, equity incentive plans, and other existing agreements, as well as exercise or conversion prices, as applicable.
Capitalizing on New Applications and Technologies In addition to serving traditional needs for server and storage systems, we have devoted, and will continue to devote, substantial resources to developing systems that support emerging and growing applications including AI, cloud computing, 5G/edge computing, storage and others.
Capitalizing on New Applications and Technologies In addition to meeting traditional needs for server and storage systems, we have devoted, and will continue to devote, substantial resources to developing systems that support emerging and growing applications including AI, cloud computing, 5G/edge computing, storage and others.
Although there is no assurance that existing or future governmental laws and regulations, including environmental regulations, applicable to our operations or Total IT Solutions will not have a material adverse effect on our business, financial condition, results of operations, and competitive position, we do not currently anticipate material increases in expenditures for compliance with government regulations.
Although there is no assurance that existing or future governmental laws and regulations, including environmental and import and export controls regulations, applicable to our operations or Total IT Solutions will not have a material adverse effect on our business, financial condition, results of operations, and competitive position, we do not currently anticipate material increases in expenditures for compliance with government regulations.
We believe that we compete favorably with respect to most of these factors. However, most of our competitors have longer operating histories, significantly greater resources, greater name recognition and deeper market penetration.
We believe that we compete favorably with respect to most of these factors. However, most of our competitors have longer operating histories, significantly greater resources, greater name recognition, or deeper market penetration.
We believe there are significant opportunities for us in each of these rapidly developing markets due to stringent design requirements for these applications that often require the use of the latest technologies, allowing us to leverage our capabilities in product innovation, superior time-to-market, and portfolio breadth.
We believe there are significant opportunities for us in each of these rapidly developing markets, driven by stringent design requirements for these applications that often require the use of the latest technologies, allowing us to leverage our capabilities in product innovation, superior time-to-market, and portfolio breadth.
These resources, along with our understanding of complex computing and storage requirements, enable us to deliver product innovation featuring advanced functionality and capabilities required by our customers. Also, we have worldwide manufacturing facilities which enable us to reduce the time to delivery in every geography around the world.
These resources, along with our understanding of complex computing and storage requirements, enable us to deliver product innovation featuring advanced functionality and capabilities required by our customers. Also, our worldwide manufacturing facilities enable us to reduce the time to delivery in every geography around the world.
We identify opportunities through tracking and analyzing data from various sources such as annual performance reviews to assess our progress in ensuring critical talent are in critical roles.
We identify opportunities through tracking and analyzing data from various sources such as annual performance reviews to assess our progress in ensuring critical talent fills critical roles.
Our common stock is listed on the Nasdaq Global Select Market under the symbol “SMCI.” Our principal executive offices are located at 980 Rock Avenue, San Jose, California 95131, and our telephone number is (408) 503-8000. Our website address is www.supermicro.com.
Our common stock is listed on the Nasdaq Global Select Market under the symbol “SMCI”. Our principal executive offices are located at 980 Rock Avenue, San Jose, California 95131. Our telephone number is (408) 503-8000, and our website address is www.supermicro.com.
We design, build, test, validate, and deliver complete in-house liquid-cooled direct-to-chip cold plate solutions for CPUs, GPUs, and memory. In addition, we manufacture the sophisticated management systems -- Cooling Distribution Units, Cooling Distribution Manifolds -- to regulate system temperatures for maximum performance.
We design, build, test, validate, and deliver complete rack scale solutions for liquid-cooled direct-to-chip cold plate solutions for CPUs, GPUs, and memory. In addition, we manufacture the sophisticated management systems -- Cooling Distribution Units, Cooling Distribution Manifolds -- to regulate system temperatures for maximum performance.
Global Services: Our strategic direct and OEM customers may purchase a variety of on-site support service plans. Our service plans vary depending on specific services, response times, coverage hours and duration, repair priority levels, spare parts requirements, logistics, data privacy and security needs.
Global Services: Our strategic direct and OEM customers may purchase a variety of on-site support service plans. Our service plans vary in terms of specific services, response times, coverage hours and duration, repair priority levels, spare parts requirements, logistics, data privacy and security needs.
These new limitations create a competitive process for obtaining the product allocation associated with these new government authorizations and therefore could disadvantage us against certain of our competitors. The limitations could also prevent us from selling our advanced computing products to the full extent of customer demand in certain countries that have not historically been subject to these limitations.
These new limitations create a competitive process for obtaining the product allocation associated with these new government authorizations and therefore could disadvantage us relative to certain of our competitors. The limitations may also prevent us from selling our advanced computing products to the full extent of customer demand in certain countries that have not historically been subject to such limitations.
The majority of the subsystems and accessories we sell individually are designed to work together to improve performance and are ultimately integrated into complete server and storage systems.
The majority of the subsystems and accessories we sell individually are designed to work together to optimize performance and are ultimately integrated into complete server and storage systems.
We also have a series of agreements with Compuware, including multiple product development, production and service agreements, product manufacturing agreements and lease agreements for office space.
We also have a series of agreements with Compuware, including multiple product development, production and service agreements, as well as product manufacturing agreements and lease agreements for office space.
Achieving this objective requires continuous development and innovation of our Total IT Solutions portfolio with better price-performance and architectural advantages compared with our prior generation of solutions and our competitors' offerings. Through our strategy, we seek to maintain or improve our relative competitive position in many product areas and pursue markets that provide us with additional long-term growth opportunities.
Achieving this objective requires continuous development and innovation of our Total IT Solutions portfolio with better price-performance and architectural advantages over both prior generations of our solutions and competitors’ offerings. Through our strategy, we seek to maintain or improve our relative competitive position in many product areas and pursue markets that provide us with additional long-term growth opportunities.
Our Global Services team provides help desk services and on-site product support for our server and storage systems. Support Services: Our customer support services offer competitive market warranties, generally from one-to-three years, and warranty extension options for products sold by our direct sales team and approved indirect sales channel partners.
Our Global Services team provides help desk services and on-site product support for our server and storage systems. Support Services: Our customer support services offer competitive warranties, typically ranging from one-to-three years, and warranty extension options for products sold by our direct sales team and approved indirect sales channel partners.
To date, costs and expenses incurred to comply with these governmental regulations, including environmental regulations, have not been material to our business, financial condition, results of operations, and competitive position.
To date, costs and expenses incurred to comply with these governmental regulations, including environmental and import and export controls regulations, have not been material to our business, financial condition, results of operations, and competitive position.
We seek to be the first to market with superior product designs, and we have the ability to offer a broad selection of products using those technologies to our customers. SMCI | 2024 Form 10-K | 1 We conduct our operations principally from our Silicon Valley headquarters, Taiwan and Netherlands facilities.
We seek to be the first to market with superior product designs, and we have the ability to offer a broad selection of products using those technologies to our customers. SMCI | 2025 Form 10-K | 1 Table of Contents We conduct our operations principally from our Silicon Valley headquarters and facilities in Taiwan and the Netherlands.
We compete primarily with large vendors of x86-based general purpose servers and components. In addition, we also compete with smaller vendors that specialize in the sale of server components and systems.
We compete primarily with large vendors of x86-based general purpose servers and components. In addition, we also face competition from smaller vendors that specialize in the sale of server components and systems.
In November 2023, the export control restrictions on advanced integrated circuits, supercomputing and other end uses were revised and further expanded to cover additional countries where we sell our products, including in the Middle East, and additional parties based on the location of their headquarters, or the headquarters of their ultimate parent.
In November 2023, the export control restrictions on advanced integrated circuits, supercomputing and other end uses were revised and further expanded to cover additional countries where we sell our products, such as those in the Middle East, as well as additional parties based on the location of their headquarters, or the headquarters of their ultimate parent.
We provide employees with compensation packages that include base salary in the form of cash and representing fixed compensation to reward individual performance and contributions (“Base Salary”), incentive bonus programs, and long-term equity awards, including restricted stock units and options, tied to the value of our stock price.
We provide employees with compensation packages that include base salary in the form of cash and representing fixed compensation to reward individual performance and contributions (“Base Salary”), incentive bonus programs, and long-term equity awards, such as restricted stock units and options, which are tied to the value of our stock price.
However, these new regulations will, depending on the country and ultimate consignee, also place new limits on the number of advanced computing products that we can export to each ultimate consignee per calendar year, and the number of advanced computing products that the Commerce Department will license per-country over a given period to all exporters in the aggregate.
However, these new regulations will, depending on the country and ultimate consignee, impose new limits on the number of advanced computing products that we can export to each ultimate consignee per calendar year, as well as the number of advanced computing products that the Commerce Department will license per-country over a given period to all exporters in the aggregate.
The Amendment also effected a proportionate increase in the number of shares of authorized common stock from 100,000,000 to 1,000,000,000. Pursuant to Section 242(d) of the General Corporation Law of the State of Delaware, stockholder approval was not required in connection with the foregoing. The Stock Split became effective at 5:00 p.m.
The Amendment also effected a proportionate increase in the number of shares of authorized common stock from 100,000,000 to 1,000,000,000. Pursuant to Section 242(d) of the General Corporation Law of the State of Delaware, stockholder approval was not required in connection with the foregoing. The Stock Split became effective at 5:00 p.m. Eastern Time on September 30, 2024.
We place manufacturing orders for our products based on forecasted demand. We maintain substantial inventories of our products because the computer server industry is characterized by short lead-time orders and quick delivery schedules.
Based on these forecasts, we place manufacturing orders for our products. We maintain substantial inventories of our products because the computer server industry is characterized by short lead-time orders and quick delivery schedules.
We rely on a variety of marketing vehicles, including advertising, public relations, web, social media, collateral, and participation in industry events and tradeshows, to gain market awareness and generate new customer demand. We provide funds for cooperative marketing to our indirect sales channel partners to extend the reach of our marketing efforts.
We utilize a variety of marketing vehicles, including advertising, public relations, web, social media, collateral, and participation in industry events and tradeshows, to build market awareness and generate new customer demand. We provide cooperative marketing funds to our indirect sales channel partners to extend the reach of our marketing efforts.
Talent Development, Acquisition, Retention and Rewards SMCI | 2024 Form 10-K | 8 Talent Strategy Our talent strategy focuses on attracting skilled, engaged employees who contribute the talent and skills critical to our innovative and forward-looking workforce. Our recruiting process actively sources talent supporting our ability to hire candidates with professional qualifications and potential.
SMCI | 2025 Form 10-K | 8 Table of Contents Talent Development, Acquisition, Retention and Rewards Talent Strategy Our talent strategy focuses on attracting skilled, engaged employees who bring the talent and skills critical to our innovative and forward-looking workforce. Our recruiting process actively sources talent supporting our ability to hire candidates with professional qualifications and potential.
Sales to customers located outside of the United States represented 32.0%, 32.1% and 41.6% of net sales in fiscal years 2024, 2023 and 2022, respectively.
Sales to customers located outside of the United States represented 40.6%, 32.0%, and 32.1% of net sales in fiscal years 2025, 2024, and 2023, respectively.
Our key product lines include: • Extensive portfolio of air cooled and liquid cooled AI Servers for Training and Inferencing with integrated GPUs or PCIe based architectures; • SuperBlade ® and MicroBlade ® system families are designed to share common computing resources, thereby saving space and power over standard rackmount servers; • SuperStorage systems that provide high-density storage while leveraging an efficient use of power to achieve performance-per-watt savings.
Our key product lines include: • An extensive portfolio of liquid and air cooled AI Servers for Training and Inferencing with integrated GPUs or PCIe based architectures; • SuperBlade ® , MicroBlade ® , FlexTwin™, GrandTwin ® , and BigTwin ® blade and multi-node system families that are designed for density, performance, and efficiency that share common computing resources, thereby saving space and power over standard rackmount servers and offering superior serviceability and manageability; • SuperStorage systems that provide high-density storage while leveraging an efficient use of power to achieve performance-per-watt savings.
Key elements of our strategy include executing upon the following: Strong Internal Research and Development and Internal Manufacturing Capability We are continually investing in our engineering organization. As of June 30, 2024, we had over 2,800 employees in our research and development organization.
Key elements of our strategy include executing upon the following: Strong Internal Research and Development and Internal Manufacturing Capability We are continually investing in our engineering organization. As of June 30, 2025, we had over 3,200 employees in our research and development organization.
See Note 10, “Related Party Transactions,” in the Notes to Consolidated Financial Statements and Part III, Item 13, “Certain Relationships and Related Transactions and Director Independence.” We monitor our inventory continuously to be able to meet customer delivery requirements and to avoid inventory obsolescence.
See Note 10, “Related Party Transactions” in the notes to the consolidated financial statements and Part III, Item 13, “Certain Relationships and Related Transactions and Director Independence.” We continuously monitor our inventory to meet customer delivery requirements and minimize the risk of inventory obsolescence.
In addition to cash and equity compensation, we also offer U.S. employees benefits such as life and health (medical, dental & vision) insurance, paid time off, sick leave, holiday pay, and a 401(k) plan. Outside of the U.S., we provide benefits based on local requirements and needs.
In addition to cash and equity compensation, we provide U.S. employees with a range of benefits, including life and health insurance (medical, dental, and vision), paid time off, sick leave, holiday pay, and a 401(k) plan. For employees outside of the U.S., we offer benefits based on local requirements.
They may be able to devote greater resources to the development, promotion and sale of their products than we can, which could allow them to respond more quickly to new technologies and changes in customer needs. In addition, it is possible that new competitors could emerge and acquire significant market share.
They may be able to allocate more resources to the development, promotion, and sale of their products, which could allow them to respond more quickly to new technologies and changes in customer needs. In addition, it is possible that new competitors could emerge and gain significant market share.
We work with distributors, value-added resellers, system integrators, and original equipment manufacturers ("OEMs") to market and sell our optimized solutions to their end customers in our indirect sales channels. Strategy Our objective is to be the world’s leading provider of Rack Scale Total IT Solutions leveraging our broad portfolio of platforms that are application-optimized high-performance server, storage and networking solutions.
We work with distributors, value-added resellers, system integrators, and original equipment manufacturers (“OEMs”) to market and sell our optimized solutions to their end customers in our indirect sales channels. Strategy Our objective is to be the world’s leading provider of Rack Scale Total IT Solutions, offering a comprehensive portfolio of high-performance, application-optimized server, storage and networking solutions.
Financial Information about Segments and Geographic Areas Please see Note 15, “Segment Reporting” in the Notes to the Consolidated Financial Statements in this Annual Report for information regarding segment reporting and Note 3, “Revenue - Disaggregation of Revenue” in the Notes to the Consolidated Financial Statements in this Annual Report for information regarding our net sales by geographic region.
Financial Information about Segments and Geographic Areas Please see Note 15, “Segment Reporting” in the notes to the consolidated financial statements in this Annual Report for information regarding segment reporting, and Note 4, “Revenue” in the notes to the consolidated financial statements in this Annual Report for information regarding our net sales by geographic region.
Server Software Management Solutions Our open industry-standard remote system management solutions, such as our Server Management suite, including Supermicro Server Manager (“SSM”), Supermicro Power Management software (“SPM”), Supermicro Update Manager (“SUM”), SuperCloud Composer and SuperDoctor 5, have been designed to help manage large-scale heterogeneous data center environments, including liquid cooling.
Server Software Management Solutions Our open industry-standard remote system management solutions, such as our Server Management suite, including Supermicro Server Manager, Supermicro Power Management software, Supermicro Update Manager, SuperCloud Composer and SuperDoctor 5, are designed to efficiently manage large-scale heterogeneous data center environments, including liquid cooling.
The principal competitive factors in our market include the following: SMCI | 2024 Form 10-K | 6 • Rack Scale Total IT Solutions to reduce TCO for our customers; • First to market with new emerging technologies; • High product performance, efficiency and reliability; • Early identification of emerging opportunities; • Cost-effective design and manufacturing; • Sufficient manufacturing capacity necessary to support market demand; • Energy efficient (Green Computing) product designs that reduce environmental impact, overall power consumption, and costs; and • Localized and responsive customer support on a worldwide basis.
SMCI | 2025 Form 10-K | 6 Table of Contents The principal competitive factors in our market include the following: • rack Scale Total IT Solutions to reduce TCO for our customers; • first to market with new emerging technologies, offered at a competitive price; • broad product portfolio providing customers more options to optimize for their workload and environment; • high product performance, efficiency and reliability; • early identification of emerging opportunities; • cost-effective design and manufacturing; • sufficient manufacturing capacity necessary to support market demand; • energy efficient (Green Computing) product designs that reduce environmental impact, overall power consumption, and costs; and • localized and responsive customer support on a worldwide basis.
We believe that the combination of our focus on internal research and development activities, our close working relationships with local customers and vendors and our modular design approach allows us to decrease time-to-market, improve quality and deliver superior product designs.
This approach enhances communication and collaboration between our design teams, streamlining the development process and reducing time-to-market. We believe that the combination of our focus on internal research and development activities, our close working relationships with local customers and vendors and our modular design approach allows us to decrease time-to-market, improve quality and deliver superior product designs.
If we fail to comply with laws and regulations restricting dealings with sanctioned countries or companies and/or persons on restricted lists, we may be subject to enforcement actions, including civil or criminal penalties.
If we fail to comply with laws and regulations restricting dealings with sanctioned countries, companies and/or persons subject to restricted party lists or parties engaged in restricted end uses, we may be subject to enforcement actions, including civil or criminal penalties.
We believe that a compensation program with both short-term and long-term awards provides fair and competitive compensation and aligns employee and stockholder interests, including by incentivizing business and individual performance (pay for performance), motivating based on long-term company performance and integrating compensation with our business plans.
We believe that a compensation program with both short-term and long-term awards provides fair and competitive compensation, aligns employee and stockholder interests, incentivizes business and individual performance (pay for performance), motivates based on long-term company performance, and integrates compensation with our business plans.
Marketing SMCI | 2024 Form 10-K | 5 Our marketing programs are designed to create a global awareness and branding for our company and products, as well as an understanding of the significant value we bring to customers.
SMCI | 2025 Form 10-K | 5 Table of Contents Marketing Our marketing programs are designed to create global awareness and brand-recognition for our company and products, as well as an understanding of the significant value we bring to customers.
The process to obtain licenses required under recently adopted export control regulations is complicated and time-consuming in the event we determine to pursue them, and there are no assurances they may be granted at all.
The process to obtain licenses required under the recently adopted export control regulations is complicated and time-consuming in the event we determine to pursue them, and there is no guarantee that they will be granted.
In addition to our server and storage platforms business, we offer a large array of modular server subsystems and accessories, such as server boards, chassis, power supplies and other accessories. These subsystems are the foundation of platform solutions and span product offerings from the entry-level single and dual-processor server segment to the high-end multiprocessor market.
In addition to our server and storage platforms business, we offer a large array of modular server subsystems and accessories, including server boards, chassis, power supplies and other accessories. These subsystems serve as the foundation for platform solutions, covering a range of product offerings from entry-level single and dual-processor servers to high-end multiprocessor markets.
Our Compensation Committee provides oversight of various matters related to human capital management, such as incentive compensation plans and equity compensation plans and the administration of such plans, compensation matters outside of the ordinary course, and compensation policies. Corporate Information We were founded in and maintain our worldwide headquarters and approximately half of our employees in San Jose, California.
Our Compensation Committee oversees various aspects of human capital management, such as incentive and equity compensation plans, the administration of these plans, compensation matters outside the ordinary course of business, and compensation policies. Corporate Information We were founded and maintain our worldwide headquarters in San Jose, California, where approximately half of our employees are based.
We consider our highly qualified and motivated employees to be a key factor in our business success. Our employees are not represented by any collective bargaining organization, and we have never experienced a work stoppage.
Of these employees, 2,948 employees are based in our San Jose, California facilities. We consider our highly qualified and motivated employees to be a key factor in our business success. Our employees are not represented by any collective bargaining organization, and we have never experienced a work stoppage.
Additionally, during fiscal year 2024, the computer server industry experienced global supply chain shortages, which requires us to carry more inventory to fulfill demand from our customers and partners.
Additionally, during fiscal year 2025, the computer server industry experienced global supply chain shortages, which resulted in a need to carry more inventory to fulfill demand from our customers and partners.
SMCI | 2024 Form 10-K | 2 Liquid Cooling To reduce the high cost of operating and address constraints on power and cooling in data centers, IT managers increasingly turn to suppliers of high-performance products that can also be cost-effective, energy-efficient, and green. Our resource saving architecture supports our efforts to lead in green IT innovation.
SMCI | 2025 Form 10-K | 2 Table of Contents Liquid Cooling To reduce the high cost of operating and address constraints on power and cooling in data centers, IT managers increasingly turn to suppliers that offer high-performance, cost-effective, energy-efficient, and environmentally friendly products. Our resource saving architecture supports our leadership in green IT innovation.
See Part I, Item 1A, “Risk Factors” for further information on risks associated with our international operations. Working Capital We focus considerable attention on managing our inventories and other working capital related items. We manage inventories by communicating with our customers and partners and using our industry experience to forecast demand.
See Part I, Item 1A, “Risk Factors” for further information on risks associated with our international operations. Working Capital We place significant emphasis on managing our inventories and other working capital related items. We manage inventories through active communication with our customers and partners, using our industry experience to accurately forecast demand.
Manufacturing and Quality Control We manufacture the majority of our systems at our San Jose, California headquarters. We believe we are the only major server, storage and accelerated compute platform vendor that designs, develops, and manufactures a significant portion of their systems in the United States.
We believe we are the only major server, storage, and accelerated compute platform vendor that designs, develops, and manufactures a significant portion of their systems in the United States. Global assembly, test and quality control of our servers are performed at our manufacturing facilities in San Jose, California, Taiwan, the Netherlands, and Malaysia.
We are one of the largest employers in the City of San Jose and an active member of the San Jose and Silicon Valley community. SMCI | 2024 Form 10-K | 9 We were incorporated in California in September 1993. We reincorporated in Delaware in March 2007.
As one of the largest employers in the City of San Jose, we are proud to be an active member of the San Jose and Silicon Valley communities. SMCI | 2025 Form 10-K | 9 Table of Contents We were incorporated in California in September 1993 and subsequently reincorporated in Delaware in March 2007.
Server and Storage Systems We offer platforms in rackmount, blade, multi-node and embedded form factors, which support single, dual, and multiprocessor architectures.
SMCI | 2025 Form 10-K | 3 Table of Contents Server and Storage Systems We offer platforms in rackmount, blade, multi-node and embedded form factors, which support single, dual, and multiprocessor architectures.
Health, Safety & Wellness Throughout our history, we have maintained our commitment to providing a safe workplace that protects against and limits personal injury and environmental harm. We follow international standards and regulations for product safety and security.
Health, Safety & Wellness Throughout our history, we have remained committed to providing a safe workplace that protects against personal injury and minimizes environmental harm. We adhere to international standards and regulations to ensure product safety and security.
New license exceptions were added to the regulations and allow us to export in some cases without the need for an export license, thus SMCI | 2024 Form 10-K | 7 expanding upon previous authorizations.
New license exceptions were added to the regulations, allowing us to export in some cases without the need for an export license, thus expanding upon previous authorizations.
Our storage systems are also designed for maximum performance for AI training environments; • Twin family of multi-node server systems designed for density, performance, and power efficiency; including FlexTwin™, GrandTwin®, and BigTwin®; SMCI | 2024 Form 10-K | 3 • Hyper, CloudDC, and WIO rackmount optimized systems deliver entire clusters of racks, with both liquid-cooled and air-cooled options, per customer requirements; • Embedded (5G/IoT/Edge) systems optimized for evolving networks and intelligent management of connected devices; and • MicroCloud server systems that deliver node density in environments with space and power constraints.
Our storage systems are also designed for maximum performance for AI training environments; • Hyper, CloudDC, and WIO an extensive rackmount system family that provides optimization for a broad range of workloads and environments that deliver entire clusters of racks, with both liquid-cooled and air-cooled options, per customer requirements; • Embedded (5G/IoT/Edge) systems optimized for evolving networks and intelligent management of connected devices; and • MicroCloud server systems that deliver node density in environments with space and power constraints.
In addition to providing a large volume of contract manufacturing services to us, Ablecom warehouses multiple components and subassemblies manufactured by various suppliers before shipment to our facilities in the United States, Europe and Asia.
We work with Ablecom to optimize modular designs for our chassis and several other components. Ablecom also coordinates the manufacturing of chassis for us. In addition to providing a large volume of contract manufacturing services to us, Ablecom warehouses multiple components and subassemblies manufactured by various suppliers before shipping them to our facilities in the United States, Europe, and Asia.
We believe our approach of leveraging an overall architecture that balances data center power requirements, cooling, shared resources and refresh cycles helps the environment and provides total cost of ownership (“TCO”) savings for our customers. Supermicro anticipated the need for rack-scale integration and liquid cooling capabilities.
We believe our approach of leveraging an overall architecture that balances data center power requirements, cooling, shared resources and refresh cycles helps reduce environmental impact while providing TCO savings for our customers. Liquid cooling necessitates the need for rack-scale integration of the power and cooling infrastructure.
Similarly, we work very closely with our customers to identify their needs and develop our new product plans accordingly. Customers During fiscal year 2024, we sold to over 1,100 direct customers in over 110 countries.
Similarly, we work very closely with our customers to understand their needs and develop our new product plans accordingly. Customers During each of the fiscal years ended June 30, 2025, 2024, and 2023, we sold to over 1,000 customers in over 100 countries.
As a result of regulatory changes, we may be required to obtain licenses or other authorizations to continue supporting existing customers or to supply existing products to new customers in China, eastern Europe and elsewhere. Further escalations in trade restrictions or hostilities, particularly between the United States and China, could impede our ability to sell or support our products.
As a result of regulatory changes, we may be required to obtain licenses or other authorizations to continue supporting existing customers or to supply existing products to new customers in China, Eastern Europe, Southeast Asia, and elsewhere.
Item 1. Business Our Company We are a Silicon Valley-based provider of total IT solutions which address demanding workloads from the enterprise and cloud to the intelligent edge.
Item 1. Business Our Company We are a Silicon Valley-based provider of total IT solutions which address demanding workloads from the enterprise and cloud to the intelligent edge. We deliver rack-scale solutions optimized for various workloads, including artificial intelligence (“AI”) and high-performance computing (“HPC”), where acceleration is critical.
Information contained on our website is not incorporated by reference in, or made part of, this Annual Report or our other filings with, or reports furnished to, the SEC. The SEC also maintains a website that contains our SEC filings. SMCI | 2024 Form 10-K | 10
Information contained on our website is not incorporated by reference in, or made part of, this Annual Report or our other filings with, or reports furnished to, the SEC. The SEC’s website, www.sec.gov , contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
We also actively utilize our suppliers’ cooperative marketing programs and jointly benefit from their marketing development funds to which we are entitled. Intellectual Property We seek to protect our intellectual property rights with a combination of patents, trademarks, copyrights, trade secret laws, and disclosure restrictions.
We also leverage our suppliers’ cooperative marketing programs to jointly benefit from their marketing development funds. Intellectual Property We seek to protect our intellectual property rights with a combination of patents, trademarks, copyrights, trade secret laws, and disclosure restrictions. We rely primarily on trade secrets, technical know-how, and other unpatented proprietary information relating to our design and product development activities.
These restrictions impact exports of software, hardware, equipment and technology used to develop, produce or manufacture certain chips in China (including Hong Kong). At the same time, export restrictions and export license requirements were also imposed on certain GPUs and advanced integrated circuits, as well as computing equipment containing such components, with a focus on China (including Hong Kong).
At the same time, export restrictions and export license requirements were also imposed on certain GPUs and advanced integrated circuits, as well as computing equipment containing such components, with a focus on China (including Hong Kong). These restrictions impacted certain of our products, including products that contain the NVIDIA A100 and H100 integrated circuits, among others.
These products are designed to serve a variety of markets, such as enterprise data centers, cloud computing, AI and 5G/edge computing. We complement our accelerated compute platforms inclusive of server and storage system offerings with software management/security solutions, global services and support, the revenue for which is included in our server and storage systems revenue.
We complement our accelerated compute platforms inclusive of server and storage system offerings with software management, global services and support, the revenue for which is included in our server and storage systems revenue.
This enables data center operators to closely monitor the entire IT infrastructure to identify issues before failures. By offering management software and worldwide onsite and remote services to our customers we also increase our total IT solution revenue. These software products and services are required for large-scale deployments, help meet service level agreements and address uptime requirements.
This enables data center operators to closely monitor their entire IT infrastructure, identify potential issues, and address them before they lead to failures. By offering management software and worldwide onsite and remote services to our customers, we also drive additional revenue for our total IT solutions.
Compliance with ever-changing regulations is complex and time consuming. We may experience delays in implementing procedures to address the changing regulatory requirements. In January 2025, the U.S. export control regulations targeting advanced integrated circuits and computing were further revised to include a worldwide authorization requirement for certain of our advanced computing products.
SMCI | 2025 Form 10-K | 7 Table of Contents In January 2025, the U.S. export control regulations targeting advanced integrated circuits and computing were further revised to include a worldwide authorization requirement for certain of our advanced computing products.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe costs to us to eliminate or mitigate cyber or other security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be significant and, if our efforts to address these problems are not successful, could result in material interruptions, delays, cessation of service and loss of existing or potential customers that may impede our sales, manufacturing, distribution or other critical functions.
Biggest changeIn addition, we may be required to incur significant costs to protect against or mitigate damage caused by disruptions or security breaches or incidents. Our costs incurred in efforts to prevent, detect, alleviate or otherwise address cyber or other security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be significant and such efforts may not be successful.
Our indebtedness could have significant negative consequences for our security holders and our business, results of operations and financial condition by, among other things: • Increasing our vulnerability to adverse economic and industry conditions; • Limiting our ability to obtain additional financing; • Requiring the dedication of a substantial portion of our cash flow from operations to service our indebtedness, which will reduce the amount of cash available for other purposes • Limiting our flexibility to plan for, or react to, changes in our business; • Diluting the interests of our existing stockholders as a result of issuing shares of our common stock upon conversion of the 2029 Convertible Notes or 2028 Convertible Notes, as applicable; and • Placing us at a possible competitive disadvantage with competitors that are less leveraged than us or have better access to capital.
Our indebtedness could have significant negative consequences for our security holders and our business, results of operations and financial condition by, among other things: • Increasing our vulnerability to adverse economic and industry conditions; • Limiting our ability to obtain additional financing; • Requiring the dedication of a substantial portion of our cash flow from operations to service our indebtedness, which will reduce the amount of cash available for other purposes • Limiting our flexibility to plan for, or react to, changes in our business; • Diluting the interests of our existing stockholders as a result of issuing shares of our common stock upon conversion of the 2029 Convertible Notes, 2028 Convertible Notes or 2030 Convertible Notes or 2030 Convertible Notes, as applicable; and • Placing us at a possible competitive disadvantage with competitors that are less leveraged than us or have better access to capital.
Our competitive position and future results may be harmed, over the long-term, if there are further changes in export controls, including further expansion of the geographic, customer, end use, deemed export, or product scope of the controls, if customers purchase product from competitors, if customers develop their own internal solution, if we are unable to provide contractual warranty or other extended service obligations, if licenses are not granted in a timely manner or denied to significant customers or if we incur significant transition costs.
Our competitive position and future results may be harmed, over the long-term, if there are further changes in import and export controls, including further expansion of the geographic, customer, end use, deemed export, or product scope of the controls, if customers purchase product from competitors, if customers develop their own internal solution, if we are unable to provide contractual warranty or other extended service obligations, if licenses are not granted in a timely manner or denied to significant customers or if we incur significant transition costs.
If economic conditions, including inflation, increased interest rates, economic output and currency exchange rates, in these markets and other key potential markets for our Total IT Solutions remain uncertain or deteriorate, including as a result of a downturn in the global economy, regional conflicts, trade restrictions, or other reasons, customers may delay or reduce their spending.
If economic conditions, including inflation, increased interest rates, economic output and currency exchange rates, in these markets and other key potential markets for our Total IT Solutions remain uncertain or deteriorate, including as a result of a downturn in the global economy, regional conflicts, tariffs, trade restrictions, or other reasons, customers may delay or reduce their spending.
Many governments, regulators, investors, employees, customers and other stakeholders are increasingly focused on environmental, social and governance considerations relating to businesses, including climate change and greenhouse gas emissions, human capital and diversity, equity and inclusion. We make statements about our environmental, social and governance goals and initiatives through information provided on our website, press statements and other communications.
Many governments, regulators, investors, employees, customers and other stakeholders are increasingly focused on environmental, social and governance considerations relating to businesses, including climate change and greenhouse gas emissions, human capital, equity and inclusion. We make statements about our environmental, social and governance goals and initiatives through information provided on our website, press statements and other communications.
In either case, and in other cases, our obligations under the 2029 Convertible Notes, the 2028 Convertible Notes, the 2029 Convertible Notes Indenture, and the 2028 Convertible Notes Indenture could increase the cost of acquiring us or otherwise discourage a third party from acquiring us or removing incumbent management, including in a transaction that noteholders or holders of our common stock may view as favorable.
In either case, and in other cases, our obligations under the 2029 Convertible Notes, the 2028 Convertible Notes, the 2030 Convertible Notes, the 2029 Convertible Notes Indenture, the 2028 Convertible Notes Indenture, and the 2030 Convertible Notes Indenture could increase the cost of acquiring us or otherwise discourage a third party from acquiring us or removing incumbent management, including in a transaction that noteholders or holders of our common stock may view as favorable.
Certain provisions in the 2029 Convertible Notes, the 2028 Convertible Notes, and the indentures governing such convertible notes could make a third-party attempt to acquire us more difficult or expensive. For example, if a takeover constitutes a fundamental change, then noteholders will have the right to require us to repurchase their convertible notes for cash.
Certain provisions in the 2029 Convertible Notes, the 2028 Convertible Notes, and the 2030 Convertible Notes indentures governing such convertible notes could make a third-party attempt to acquire us more difficult or expensive. For example, if a takeover constitutes a fundamental change, then noteholders will have the right to require us to repurchase their convertible notes for cash.
In addition, if a takeover constitutes a make-whole fundamental change (as defined in the 2029 Convertible Notes Indenture and the 2028 Convertible Notes Indenture, as applicable), then we may be required to temporarily increase the conversion rate of the 2029 Convertible Notes or 2028 Convertible Notes, as applicable, which could increase the cash cost of acquiring us or increase dilution to the potential acquiror.
In addition, if a takeover constitutes a make-whole fundamental change (as defined in the 2029 Convertible Notes Indenture, the 2028 Convertible Notes Indenture, and the 2030 Convertible Notes Indenture as applicable), then we may be required to temporarily increase the conversion rate of the 2029 Convertible Notes, the 2028 Convertible Notes, or the 2030 Convertible Notes, as applicable, which could increase the cash cost of acquiring us or increase dilution to the potential acquiror.
Larger customers may also request larger amounts of credit or longer payment terms, which, if granted, increases our risks in the event customers to do not pay or make timely payment, which risk is exacerbated in the event our payment terms with major suppliers of necessary components for such orders do not match the payment terms of our customers.
Larger customers may also request larger amounts of credit or longer payment terms, which, if granted, increases our risks in the event customers do not pay or make timely payment, which risk is exacerbated in the event our payment terms with major suppliers of necessary components for such orders do not match the payment terms of our customers.
Each of Ablecom and Compuware are also developing campuses in close proximity to the campus we are developing in Malaysia to expand our manufacturing. Steve Liang, Ablecom’s Chief Executive Officer and largest shareholder, is the brother of Charles Liang, our President, Chief Executive Officer and Chairman of our Board of Directors (the “Board”).
Each of Ablecom and Compuware are also developing campuses in close proximity to the campus we developed in Malaysia to expand our manufacturing. Steve Liang, Ablecom’s Chief Executive Officer and largest shareholder, is the brother of Charles Liang, our President, Chief Executive Officer and Chairman of our Board of Directors (the “Board”).
Similarly, if Ablecom’s facility in Asia is subject to damage, destruction or other disruptions, our inventory may be damaged or destroyed, and we may be unable to find adequate alternative providers of contract manufacturing services in the time that we or our customers require.
Similarly, if Ablecom’s or Compuware's facility in Asia is subject to damage, destruction or other disruptions, our inventory may be damaged or destroyed, and we may be unable to find adequate alternative providers of contract manufacturing services in the time that we or our customers require.
We are subject to U.S. and other applicable trade control regulations that restrict with whom we may transact business, including the trade sanctions enforced by the U.S. Treasury, Office of Foreign Assets Control and the export controls enforced by the U.S. Commerce Department’s Bureau of Industry and Security.
We are subject to U.S. and other applicable trade control regulations that restrict with whom we may transact business, including the trade sanctions enforced by the U.S. Treasury, Office of Foreign Assets Control and the import and export controls enforced by the U.S. Commerce Department’s Bureau of Industry and Security.
Export controls could disrupt our supply chain and distribution channels, negatively impacting our ability to serve demand, including in markets outside China. Repeated changes in the export control rules are likely to impose compliance burdens on our business and our customers, negatively and materially impacting our business.
Import and export controls could disrupt our supply chain and distribution channels, negatively impacting our ability to serve demand, including in markets outside China. Repeated changes in the export control rules are likely to impose compliance burdens on our business and our customers, negatively and materially impacting our business.
The AI industry involves significant risks and uncertainties, and the use of AI by our workforce may present risks to our business. A portion of the recent success of our server and storage solutions has been dependent on the integration of our products and services within the AI industry.
The AI industry has driven a portion of our recent success. The AI industry involves significant risks and uncertainties, and the use of AI by our workforce may present risks to our business. A portion of the recent success of our server and storage solutions has been dependent on the integration of our products and services within the AI industry.
The United States and other countries continually update their lists of export-controlled items and technologies, and may impose new or more-restrictive export requirements on our products in the future.
The United States and other countries continually update their lists of import and export-controlled items and technologies, and may impose new or more-restrictive import and export requirements on our products in the future.
Negative publicity about our company or our products, even if inaccurate or untrue, could adversely affect our reputation and confidence in our products, which could harm our business and operating results. For example, on August 27, 2024, a news article was published by a short seller alleging evidence of accounting manipulation, sibling self-dealing and sanctions evasion (the “Report”).
Negative publicity about us or our products, even if inaccurate or untrue, could adversely affect our reputation and confidence in our products, which could harm our business and operating results. For example, on August 27, 2024, a news article was published by a short seller alleging evidence of accounting manipulation, sibling self-dealing and sanctions evasion (the “Report”).
While we are charging an additional monthly charge to the party to whom we are sublicensing the data center space, on top of the estimated over $600.0 million financial obligation we have to the supplier for the term of the lease for the data center space, no assurances can be given that this arrangement will be successful or profitable, particularly if the party to whom we are sublicensing the data center space defaults on its obligations to us.
While we are charging an additional monthly charge to the party to whom we are sublicensing the data center space, on top of the estimated over $292.0 million financial obligation we have to the supplier for the term of the lease for the data center space, no assurances can be given that this arrangement will be successful or profitable, particularly if the party to whom we are sublicensing the data center space defaults on its obligations to us.
The capped call transactions are expected generally to reduce the potential dilution to our common stock upon any conversion of the 2029 Convertible Notes or offset any potential cash payments we are required to make in excess of the principal amount of converted 2029 Convertible Notes, as the case may be, with such reduction or offset subject to a cap.
The capped call transactions are expected generally to reduce the potential dilution to our common stock upon any conversion of the 2029 Convertible Notes and the 2030 Convertible Notes or offset any potential cash payments we are required to make in excess of the principal amount of converted 2029 Convertible Notes and the 2030 Convertible Notes, as the case may be, with such reduction or offset subject to a cap.
While recently moderating, inflation in the U.S. had increased at a rate not seen in several decades. A recurrence of high inflation may result in decreased demand for our Total IT Solutions, increases in our operating costs including our labor costs, constrained credit and liquidity, reduced spending and volatility in financial markets.
While recently moderating, inflation in the U.S. had increased to a rate not seen in several decades. A recurrence of high inflation may result in decreased demand for our Total IT Solutions, increases in our operating costs including our labor costs, constrained credit and liquidity, reduced spending, and volatility in financial markets.
Following such amendment of the capped call transactions, the capped call counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the 2029 Convertible Notes (and are likely to do so during any observation period related to a conversion of 2029 Convertible Notes or following any repurchase of the 2029 Convertible Notes by us to the extent we elect to unwind a corresponding portion of the capped call transactions in connection with such repurchase).
Following these transactions, the capped call counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the 2029 Convertible Notes and the 2030 Convertible Notes (and are likely to do so during any observation period related to a conversion of the 2029 Convertible Notes and 2030 Convertible Notes or following any repurchase of the 2029 Convertible Notes and the 2030 Convertible Notes by us to the extent we elect to unwind a corresponding portion of the capped call transactions in connection with such repurchase).
As a result, if we are unable to obtain such products from Ablecom on terms acceptable to us, we may need to discontinue a product or develop substitute products, identify a new supplier, change our design and acquire new tooling, all of which could result in delays in our product availability and increased costs.
As a result, if we are unable to obtain such products from Ablecom on terms acceptable to us, we may need to discontinue a product or develop substitute products, identify a new supplier, change our design and acquire new tooling, all of which could result in delays in our product availability and increase costs.
Steve Liang owned no shares of our common stock as of June 30, 2024, 2023 or 2022. Charles Liang and his spouse, Sara Liu, our Co-Founder, Senior Vice President and Director, jointly owned approximately 10.5% of Ablecom’s capital stock, while Mr. Steve Liang and his family members owned approximately 35.0% of Ablecom’s outstanding common stock as of June 30, 2024.
Steve Liang owned no shares of our common stock as of June 30, 2025, 2024, or 2023. Charles Liang and his spouse, Sara Liu, our Co-Founder, Senior Vice President and Director, jointly owned approximately 10.5% of Ablecom’s capital stock, while Mr. Steve Liang and his family members owned approximately 35.0% of Ablecom’s outstanding common stock as of June 30, 2025.
We also anticipate that we will continue to lease office space from Ablecom in Taiwan to support our research and development efforts. We operate a joint management company with Ablecom to manage the common areas shared by us and Ablecom for our separately constructed manufacturing facilities in Taiwan.
We also anticipate that we will continue to lease office space from Ablecom and/or Compuware in Taiwan to support our research and development efforts. We operate a joint management company with Ablecom to manage the common areas shared by us and Ablecom for our separately constructed manufacturing facilities in Taiwan.
We market and sell our systems and subsystems and accessories both inside and outside the United States. We intend to expand our international sales efforts, especially into Asia, and we are expanding our business operations in Europe and Asia, particularly in Taiwan, Malaysia, the Netherlands and Japan.
We market and sell our systems and subsystems and accessories both inside and outside the United States. We intend to expand our international sales efforts, especially into Asia, and we are expanding our business operations in Europe and Asia, particularly in Taiwan, Malaysia, the Netherlands, Japan, Mexico and India.
We anticipate we may continue to have customers account for 10% or more of net sales in the future, and the loss of such customers could have a material adverse effect on our business and results of operations.
We anticipate we may continue to have customers account for 10% or more of net sales in the future, and any subsequent loss of such customers could have a material adverse effect on our business and results of operations.
In October 2018, our Chief Executive Officer, Charles Liang, personally borrowed approximately $12.9 million from Chien-Tsun Chang, the spouse of Steve Liang. The loan is unsecured, has no maturity date and bore interest at 0.8% per month for the first six months, increased to 0.85% per month through February 28, 2020, and reduced to 0.25% effective March 1, 2020.
In October 2018, our Chief Executive Officer, Charles Liang, personally borrowed approximately $12.9 million from Chien-Tsun Chang, the spouse of Steve Liang. The loan was unsecured, had no maturity date and bore interest at 0.8% per month for the first six months, increased to 0.85% per month through February 28, 2020, and reduced to 0.25% effective March 1, 2020.
If our largest customers do not purchase our products, or we are unable to supply such customers with products, at the levels, in the timeframes or within the geographies that we expect, including as a result of a global economic downturn, excessive credit risk, or a belief by such customers of excessive dependency upon us as a supplier, our ability to maintain or grow our net sales will be adversely affected.
If our largest customers do not purchase our products, or we are unable to supply such customers with products, at the levels, in the timeframes or within the geographies that we expect, including as a result of a global economic downturn, excessive credit risk, or a desire by such customers to limit their dependency upon us as a supplier, our ability to maintain or grow our net sales will be adversely affected.
Our international operations expose us to risks and challenges that we would otherwise not face if we conducted our business only in the United States, such as: • Heightened price sensitivity from customers in emerging markets; • Our ability to establish local manufacturing, support and service functions, and to form channel relationships with value added resellers in non-United States markets; • Localization of our systems and components, including translation into foreign languages and the associated expenses; • Compliance with multiple, conflicting and changing governmental laws and regulations (including rapid developments in the area of export control particularly for high-end restricted GPU products); • Foreign currency fluctuations and inflation; • Limited visibility into sales of our products by our channel partners; • Greater concentration of competitors in some foreign markets than in the United States; • Laws favoring local competitors; • Weaker legal protections of intellectual property rights and mechanisms for enforcing those rights; • Market disruptions created by world events, such as a global economic downturn, regional conflicts, or by other public health crises (such as COVID-19, avian flu, SARS and other diseases); • Import and export tariffs; • Difficulties in staffing and the costs of managing foreign operations, including challenges presented by relationships with workers’ councils and labor unions; and • Changing regional economic and political conditions.
Our international operations expose us to risks and challenges that we would otherwise not face if we conducted our business only in the United States, such as: • Heightened price sensitivity from customers in emerging markets; • Our ability to establish local manufacturing, support and service functions, and to form channel relationships with value added resellers in non-United States markets; • Localization of our systems and components; • Compliance with multiple, conflicting and changing governmental laws and regulations (including rapid developments in the area of export control particularly for high-end restricted GPU products); • Foreign currency fluctuations and inflation; • Limited visibility into sales of our products by our channel partners; SMCI | 2025 Form 10-K | 25 Table of Contents • Greater concentration of competitors in some foreign markets than in the United States; • Laws favoring local competitors; • Weaker legal protections of intellectual property rights and mechanisms for enforcing those rights; • Market disruptions created by world events, such as a global economic downturn, regional conflicts, or by other public health crises (such as COVID-19, avian flu, SARS and other diseases); • Import and export tariffs; • Difficulties in staffing and the costs of managing foreign operations, including challenges presented by relationships with workers’ councils and labor unions; and • Changing regional economic and political conditions.
We outsource to Compuware a portion of our design activities and a significant part of our manufacturing of subassemblies, particularly power supplies. Our purchases of products from Ablecom and Compuware represented 4.3%, 6.6% and 8.3% of our cost of sales for fiscal years 2024, 2023 and 2022, respectively.
We outsource to Compuware a portion of our design activities and a significant part of our manufacturing of subassemblies, particularly power supplies. Our purchases of products from Ablecom and Compuware represented 3.3%, 4.3%, and 6.6% of our cost of sales for fiscal years 2025, 2024, and 2023, respectively.
In addition, if we fail to meet our contractual commitments or otherwise fail to comply with our contractual obligations, then we could be subject to breach of contract or other claims.
If we fail to meet our contractual commitments or otherwise fail to comply with our contractual obligations, then we could be subject to breach of contract or other claims.
SMCI | 2024 Form 10-K | 19 If we were to lose any of our current supply or contract manufacturing relationships, the process of identifying and qualifying a new supplier or contract manufacturer who meets our quality and delivery requirements, and who will appropriately safeguard our intellectual property, may require a significant investment of time and resources (if an alternative supplier is available at all), adversely affecting our ability to satisfy customer purchase orders and warranty claims and delaying our ability to rapidly introduce new products to market.
SMCI | 2025 Form 10-K | 17 Table of Contents If we were to lose any of our current supply or contract manufacturing relationships, the process of identifying and qualifying a new supplier or contract manufacturer who meets our quality and delivery requirements, and who will appropriately safeguard our intellectual property, may require a significant investment of time and resources (if an alternative supplier is available at all), adversely affecting our ability to satisfy customer purchase orders and warranty claims and delaying our ability to rapidly introduce new products to market.
In connection with the amendment of the 2029 Convertible Notes, we entered into agreements to amend certain terms of the capped call transactions.
In connection with the amendment of the old 2029 Convertible Notes in March, we entered into agreements to amend certain terms of the capped call transactions.
Jurisdictions outside of the European Union are also considering and/or enacting comprehensive data protection legislation. For example, on July 8, 2019, Brazil enacted the General Data Protection Law, or the LGPD, and on June 5, 2020, Japan passed amendments to its Act on the Protection of Personal Information, or the APPI.
Jurisdictions outside of the European Union are also considering and/or enacting comprehensive data protection legislation. For example, on July 8, 2019, Brazil enacted the General Data Protection Law (“LGPD”), and on June 5, 2020, Japan passed amendments to its Act on the Protection of Personal Information (“APPI”).
Export controls targeting products containing GPUs and semiconductors associated with AI, which have been imposed and are increasingly likely to be further tightened, would further restrict our ability to export our technology, products, or services even though competitors may not be subject to similar restrictions, creating a competitive disadvantage for us and negatively impacting our business and financial results.
Import and export controls targeting products containing GPUs and semiconductors associated with AI, which have been imposed and are increasingly likely to be further tightened, would further restrict our ability to export our technology, products, or services given that competitors may not be subject to similar restrictions, creating a competitive disadvantage for us and negatively impacting our business and financial results.
If our commercial relationship with Ablecom deteriorates, we may experience delays in our ability to fulfill customer orders.
If our commercial relationship with Ablecom and Compuware deteriorates, we may experience delays in our ability to fulfill customer orders.
For example, in connection with the MCSA we entered into in June 2024, we executed a long-term data center space from a supplier and concurrently sublicensed all of our rights and obligations related to such data center space to another party.
For example, in connection with the Master Colocation Service Agreement (MCSA) we entered into in June 2024, we executed a long-term data center space from a supplier and concurrently sublicensed all of our rights and obligations related to such data center space to another party.
In response to inflation, the Federal Reserve had significantly raised, and may again raise, interest rates, which may increase our own borrowing costs and/or reduce our clients’ access to debt financing, reduce technology expenditures and demand for our Total IT Solutions.
In response to inflation, the Federal Reserve has significantly raised, and may again raise, interest rates, which may increase our own borrowing costs, limit our clients’ access to debt financing, and reduce technology expenditures and demand for our Total IT Solutions.
As a result of the above factors, our quarter-to-quarter results of operations may be subject to greater fluctuation and our stock price may be adversely affected. SMCI | 2024 Form 10-K | 18 We may be unable to secure additional financing on favorable terms, or at all, which in turn could impair the rate of our growth.
As a result of the above factors, our quarter-to-quarter results of operations may be subject to greater fluctuation and our stock price may be adversely affected. We may be unable to secure additional financing on favorable terms, or at all, which in turn could impair the rate of our growth.
Our ability to mitigate these risks will depend on our continued effective training, monitoring and enforcement of appropriate policies and procedures governing the use of AI technology, and compliance by our workforce. Our results of operations may be subject to fluctuations based upon our investment in corporate ventures and other investments we make.
Our ability to mitigate these risks will depend on our continued effective training, monitoring and enforcement of appropriate policies and procedures governing the use of AI technology, and compliance by our workforce. Our results of operations may be subject to fluctuations based upon certain investments we make.
We have made, and continue to make, substantial investments for the purchase of land and the development of new facilities in Taiwan and Malaysia to accommodate our expected growth and the migration of a substantial portion of our contract manufacturing operations. SMCI | 2024 Form 10-K | 29 Our international expansion efforts may not be successful.
We have made, and continue to make, substantial investments for the purchase of land and the development of new facilities in Taiwan and Malaysia to accommodate our expected growth and the migration of a substantial portion of our contract manufacturing operations. Our international expansion efforts may not be successful.
SMCI | 2024 Form 10-K | 14 We have concluded that our internal control over financial reporting was not effective as of June 30, 2024 due to the existence of material weaknesses in such controls, and we have also concluded that our disclosure controls and procedures were not effective as of June 30, 2024 due to material weaknesses in our internal control over financial reporting, all as described in Part II, Item 9A, “Controls and Procedures” of this Annual Report.
We have concluded that our internal control over financial reporting was not effective as of June 30, 2025 due to the existence of material weaknesses in such controls, and we have also concluded that our disclosure controls and procedures were not effective as of June 30, 2025 due to material weaknesses in our internal control over financial reporting, all as described in Part II, Item 9A, “Controls and Procedures” of this Annual Report.
The loan was originally made at Mr. Liang's request to provide funds to repay margin loans to two financial institutions, which loans had been secured by shares of our common stock that he held.
The loan was originally made at Mr. Liang’s request to provide funds to repay margin loans from two financial institutions that were secured by shares of our common stock he held.
We plan to continue to maintain our manufacturing relationship with Ablecom in Asia. In order to provide a larger volume of contract manufacturing services for us, we anticipate that Ablecom will continue to warehouse for us an increasing number of components and subassemblies manufactured by multiple suppliers prior to shipment to our facilities in the United States and Europe.
In order to provide a larger volume of contract manufacturing services for us, we anticipate that Ablecom and/or Compuware will continue to warehouse for us an increasing number of components and subassemblies manufactured by multiple suppliers prior to shipment to our facilities in the United States and Europe.
The lenders called the loans in October 2018, following the suspension of our common stock from trading on NASDAQ in August 2018 and the decline in the market price of our common stock in October 2018. As of June 30, 2024, the amount due on the unsecured loan (including principal and accrued interest) was approximately $16.4 million.
The lenders called the loans in October 2018, following the suspension of our common stock from trading on Nasdaq in August 2018 and the subsequent decline in its market price that October. As of June 30, 2025, the amount due on the unsecured loan (including principal and accrued interest) was approximately $16.8 million.
We believe that our current cash, cash equivalents, borrowing capacity available from our credit facilities and internally generated cash flows will be sufficient to support our operating businesses and maturing debt and interest payments for the 12 months following the issuance of the financial statements included in this Annual Report.
SMCI | 2025 Form 10-K | 16 Table of Contents We believe that our current cash, cash equivalents, borrowing capacity available from our credit facilities and internally generated cash flows will be sufficient to support our operating businesses and maturing debt and interest payments for the 12 months following the issuance of the financial statements included in this Annual Report.
SMCI | 2024 Form 10-K | 12 While we filed all of the Delinquent Reports on or before February 25, 2025, we expect to continue to face many of the risks and challenges related to previously being delinquent in our SEC reporting obligations, including the following: • We may fail to remediate material weaknesses in our internal control over financial reporting and other material weaknesses may be identified in the future, which could adversely affect the accuracy and timing of our financial reporting; • Failure to timely file our SEC reports and make our current financial information available has placed downward pressure on our stock price, which has adversely affected, and may continue adversely affect, hiring and employee retention; • Litigation and claims as well as regulatory examinations, investigations, proceedings and orders arising out of our failure to file SEC reports on a timely basis, including the reasons and causes for such failure to file, will continue to divert management attention and resources from the operation of our business; • We may not be able to recapture lost business or business opportunities due to ongoing reputational harm; and • Negative reports or actions on our commercial credit ratings would increase our costs of, or reduce our access to, future commercial credit arrangements and limit our ability to refinance existing indebtedness.
While we filed all of the Delinquent Reports within the extension period granted by Nasdaq, we expect to continue to face many of the risks and challenges related to previously being delinquent in our SEC reporting obligations, including the following: • We may fail to remediate material weaknesses in our internal control over financial reporting and other material weaknesses may be identified in the future, which could adversely affect the accuracy and timing of our financial reporting; • Failure to timely file our SEC reports and make our current financial information available in the past has placed downward pressure on our stock price, which has adversely affected, and may continue adversely affect, hiring and employee retention; • Litigation and claims as well as regulatory examinations, investigations, proceedings and orders arising out of our failure to file SEC reports on a timely basis in the past, including the reasons and causes for such failure to file, will continue to divert management attention and resources from the operation of our business; • We may not be able to recapture lost business or business opportunities due to ongoing reputational harm; and • We continue to receive negative reports or actions related to our commercial credit ratings due to our past failure to file SEC reports on time, which could increase the cost of, or reduce our access to, future commercial credit arrangements and limit our ability to refinance existing indebtedness.
Costs to comply with and implement these privacy-related and data protection measures could be significant. SMCI | 2024 Form 10-K | 33 Global privacy legislation, enforcement, and policy activity for privacy and data protection are rapidly expanding and creating a complex regulatory compliance environment. Costs to comply with and implement these privacy-related and data protection measures could be significant.
Global privacy legislation, enforcement, and policy activity for privacy and data protection are rapidly expanding and creating a complex regulatory compliance environment. Costs to comply with and implement these privacy-related and data protection measures could be significant.
SMCI | 2024 Form 10-K | 37 Our business may not generate sufficient funds, and we may otherwise be unable to maintain sufficient cash reserves to pay amounts due under our indebtedness, including the Convertible Notes, as well as other contractual obligations.
Our business may not generate sufficient funds, and we may otherwise be unable to maintain sufficient cash reserves to pay amounts due under our indebtedness, including the Convertible Notes, as well as other contractual obligations.
Our future effective income tax rates could be affected by changes in the relative mix of our operations, our relative income among different geographic regions and domestic and foreign income tax laws, which could affect our future operating results, financial condition and cash flows. We receive significant tax benefits from sales to our non-U.S. customers.
Our future effective income tax rates could be affected by changes in the relative mix of our operations, our relative income among different geographic regions and domestic and foreign income tax laws, which could affect our future operating results, financial condition and cash flows. We derive significant tax benefits from non‑U.S. operations under current tax laws and incentives.
These regulations may deter customers from using services such as ours and may inhibit our ability to expand into those markets or prohibit us from continuing to offer services in those markets without significant financial burden. In addition, numerous states in the U.S. are also expanding data protection through legislation.
These regulations may deter customers from using services such as ours and may inhibit our ability to expand into those markets or prohibit us from continuing to offer services in those markets without significant financial burden. SMCI | 2025 Form 10-K | 29 Table of Contents In addition, numerous states in the U.S. are also expanding data protection through legislation.
Ablecom and Compuware’s sales to us constitute a substantial majority of Ablecom’s and Compuware’s net sales. Ablecom and Compuware are both privately held Taiwan-based companies. In addition, we have appointed Compuware as a nonexclusive authorized distributor of our products in Taiwan, China and Australia.
Ablecom and Compuware’s sales to us constitute a majority of Ablecom’s and Compuware’s net sales. Ablecom and Compuware are both privately held Taiwan-based companies. In addition, we have appointed Compuware as a nonexclusive authorized distributor of our products in Taiwan, China and Australia, in addition to acting as our sales representative on certain transactions in Asia.
We could also lose orders, be unable to develop or sell some products cost-effectively or on a timely basis, if at all, and have significantly decreased revenues, margins and earnings, which would have a material adverse effect on our business, results of operations and financial condition.
We could also lose orders, be unable to develop or sell some products cost-effectively or on a timely basis, if at all, and have significantly decreased revenues, margins and earnings, which would have a material adverse effect on our business, results of operations and financial condition. We face risks related to recessions, inflation, stagflation, and other macroeconomic conditions.
Given the increasing strategic importance of AI and rising geopolitical tensions, the export control rules may change again at any time and further subject a wider range of our products to export restrictions and licensing requirements, negatively impacting our business and financial results.
SMCI | 2025 Form 10-K | 28 Table of Contents Given the increasing strategic importance of AI and rising geopolitical tensions, the export control rules may change again at any time and further subject a wider range of our products to export restrictions and licensing requirements, negatively impacting our business and financial results.
We had one customer account for 10% or more of our net sales in fiscal year 2024, while we had no single customer account for 10% or more of net sales in fiscal years 2023 or 2022.
We had four customers account for 10% or more of our net sales in fiscal years 2025 and one customer account for 10% or more of our net sales in fiscal 2024, while we had no single customer account for 10% or more of net sales in fiscal year 2023.
His experience in leading our business and his personal involvement in key relationships with suppliers, customers and strategic partners are extremely valuable to our company. We currently do not have a succession plan for the replacement of Mr. Liang if it were to become necessary.
Liang co-founded our company and has been our Chief Executive Officer since our inception. His experience in leading our business and his personal involvement in key relationships with suppliers, customers and strategic partners are extremely valuable to us. We currently do not have a succession plan for the replacement of Mr. Liang if it were to become necessary.
SMCI | 2024 Form 10-K | 42 Expectations and evolving laws and regulations relating to environmental, social and governance considerations expose us to potential liabilities, reputational harm and other unforeseen adverse effects on our business.
Expectations and evolving laws and regulations relating to environmental, social and governance considerations expose us to potential liabilities, reputational harm and other unforeseen adverse effects on our business.
However, despite these statements related to the allegations in the Report, and the announcement of the results of Special Committee investigation, the publication of the Report and the circumstances discussed in the Explanatory Note in this Annual Report contributed to a substantial negative impact on the trading price of our common stock and our reputation, and may continue to have a negative impact in the future.
However, despite these statements related to the allegations in the Report, and the announcement of the results of Special Committee investigation, the publication of the Report and our previous Delinquent Reports contributed to a substantial negative impact on the trading price of our common stock and our reputation, and may continue to have a negative impact in the future.
Similar future events may cause additional interruptions in the global supply chain. Two of our suppliers accounted for 65.4% and 6.3% of total purchases for fiscal year 2024. The same two suppliers accounted for 30.7% and 13.5% of total purchases for fiscal year 2023. The same two suppliers accounted for 11.4% and 18.1% of total purchases for fiscal year 2022.
Similar future events may cause additional interruptions in the global supply chain. Two of our suppliers accounted for accounted for a significant portion of our total purchases: 64.4% and 5.1% in fiscal year 2025, 65.4% and 6.3% in fiscal year 2024, and 30.7% and 13.5% in fiscal year 2023.
If negative publicity arises with respect to us, our employees, our third-party service providers or our partners, our business and operating results could be adversely affected, regardless of whether the negative publicity is true.
SMCI | 2025 Form 10-K | 23 Table of Contents If negative publicity arises with respect to us, our employees, our third-party service providers or our partners, our business and operating results could be adversely affected, regardless of whether the negative publicity is true.
Charles Liang's personal relationship with Ablecom’s Chief Executive Officer and Compuware's Chief Executive Officer. We may not negotiate or enforce contractual terms as aggressively with Ablecom or Compuware as we might with an unrelated party, and the commercial terms of our agreements may be less favorable than we might obtain in negotiations with third parties.
We may not negotiate or enforce contractual terms as aggressively with Ablecom or Compuware as we might with an unrelated party, and the commercial terms of our agreements may be less favorable than we might obtain in negotiations with third parties.
In addition, during fiscal year 2024, we made investments into additional companies, many of which are early stage companies or private companies still defining their strategic direction, several of which are also in emergent markets (such as AI). We may continue to invest in private companies to further our strategic objectives and to support certain key business initiatives.
During the last few years, we made investments in various companies, many of which are early stage companies or private companies still defining their strategic direction, several of which are also in emergent markets (such as AI). We may continue to invest in private companies to further our strategic objectives and to support certain key business initiatives.
The capped call transactions entered into in connection with the issuance of the 2029 Convertible Notes may affect our common stock. In connection with the offering of the 2029 Convertible Notes, we entered into privately negotiated capped call transactions with the capped call counterparties.
The capped call transactions entered into in connection with the issuance of the 2029 Convertible Notes and the 2030 Convertible Notes subject us to counterparty risk and may affect our common stock. In connection with the offering of the 2029 Convertible Notes and the 2030 Convertible Notes, we entered into privately negotiated capped call transactions with the capped call counterparties.
You should not interpret our disclosure of any of the following risks to imply that such risks have not already materialized. Risk Factor Summary The following is a summary of the most significant risks and principal factors that make an investment in our common stock speculative or risky.
You should not interpret our disclosure of any of the following risks to imply that such risks have not already materialized. Risk Factor Summary The following summarizes the principal factors that make an investment in the Company speculative or risky.
SMCI | 2024 Form 10-K | 20 Global events may present challenges and risks to us. For example, the crises in eastern Europe and the Middle East continues to pose challenges to global companies, including us, which have customers in the impacted regions.
SMCI | 2025 Form 10-K | 18 Table of Contents Global events may present challenges and risks to us. For example, the crises in Eastern Europe and the Middle East continue to pose challenges to global companies, including us, which have customers in the impacted regions.
If we are unsuccessful in recovering our costs related to our lease of data center space, or if we are otherwise unable to meet our obligations under the MCSA, our business, financial condition, and results of operations may be adversely affected. For more information about the MCSA and the data center space lease arrangements, see Part I, Item 1.
If we are unsuccessful in recovering our costs related to our lease of data center space, or if we are otherwise unable to meet our obligations under the MCSA, our business, financial condition, and results of operations may be adversely affected.
Bill Liang is also the Chief Executive Officer of Compuware, Chairman of Compuware’s Board of Directors and a holder of equity interest in Compuware. Steve Liang is also a member of Compuware’s Board of Directors and is an equity holder of Compuware. Mr.
Bill Liang, a brother of both Charles Liang and Steve Liang, is also a member of the Board of Directors of Ablecom. In addition, Bill Liang is the Chief Executive Officer of Compuware, Chairman of Compuware’s Board of Directors and a holder of equity interest in Compuware.
We have incurred and expect to continue to incur significant expenses related to the circumstances discussed in the Explanatory Note in this Annual Report, the remediation of deficiencies in our internal control over financial reporting and disclosure controls and procedures, and any resulting litigation.
We have incurred and expect to continue to incur significant expenses related to the circumstances discussed in Item 9. “Changes in and Disagreements with Accountants on Accounting and Financial Disclosure” of this Annual Report and the remediation of deficiencies in our internal control over financial reporting and disclosure controls and procedures, and any resulting litigation.
We manufacture and sell our products in several countries outside of the United States, both to direct and OEM customers as well as through our indirect sales channel. Our operations are subject to the U.S. Foreign Corrupt Practices Act (the “FCPA”) as well as the anti-corruption and anti-bribery laws in the countries where we do business.
Foreign Corrupt Practices Act, other applicable anti-corruption and anti-bribery laws, and applicable trade control laws could subject us to penalties and other adverse consequences. We manufacture and sell our products in several countries outside of the United States, both to direct and OEM customers as well as through our indirect sales channel. Our operations are subject to the U.S.
Many of these laws and regulations, which can be particularly restrictive outside of the U.S., are subject to change and uncertain interpretation.
Many of these laws and regulations, which can be particularly restrictive or onerous, are subject to change and uncertain interpretation.
There are a number of reasons why we have at times failed to meet guidance in the past and might fail again in the future, including, but not limited to, the factors described in these Risk Factors.
There are a number of reasons why we have at times failed to meet guidance in the past and might fail again in the future, including, but not limited to, the factors described in these Risk Factors. Failure to meet the evolving needs of our industry and markets may adversely impact our financial results.
Charles Liang is our Chief Executive Officer and Chairman of the Board, is a significant stockholder of our company, and has considerable influence over the management of our business relationships. Accordingly, we may be disadvantaged by the economic interests of Mr. Charles Liang and his spouse, Ms. Sara Liu, as stockholders of Ablecom and Mr.
Charles Liang and Sara Liu are both significant stockholders of our company, and have considerable influence over the management of our business relationships. Accordingly, we may be disadvantaged by the economic interests of Mr. Charles Liang and his spouse, Ms. Sara Liu, as stockholders of Ablecom and Mr.
As a result, our operations could be negatively impacted or costs could increase, either of which could adversely affect our margins and the results of operations. Our reliance on Ablecom could be subject to risks associated with our reliance on a limited source of contract manufacturing services and inventory warehousing.
Such changes could negatively impact our operations or increase our costs, thereby adversely affecting our margins and the results of operations. Our reliance on Ablecom and Compuware could be subject to risks associated with our reliance on a limited source of contract manufacturing services and inventory warehousing.
Our operations are impacted by complex laws, rules and regulations related to export control to which our business is subject, and rapid changes in such laws, rules, and regulations as well as political and other actions related thereto may adversely impact our business.
SMCI | 2025 Form 10-K | 26 Table of Contents Our operations are impacted by complex laws, rules and regulations related to import and export controls to which our business is subject, and rapid changes in such laws, rules, and regulations as well as political and other actions related thereto may adversely impact our business.
These include a broad range of potential actions that may be taken against us by the SEC or other regulatory agencies, including a cease-and-desist order and/or the assessment of possible civil monetary penalties. Any such further actions could be expensive and damaging to our business, the results of operations, and financial condition.
These include a broad range of potential actions that may be taken against us by the SEC or other regulatory agencies, including a cease-and-desist order and/or the assessment of possible civil monetary penalties.
Export controls targeting products containing GPUs and semiconductors associated with AI have subjected and may in the future subject downstream users of our products to additional restrictions on the use, resale, repair, or transfer of our products, negatively impacting our business and financial results. Controls could negatively impact our cost and/or ability to provide services.
In addition, such controls may subject downstream users to additional restrictions on the use, resale, repair, or transfer of our products, negatively impacting our business and financial results. Controls could negatively impact our cost and/or ability to provide services.
As of January 31, 2025, we had approximately $1.9 billion of consolidated indebtedness, including $1.7 billion principal amount of our 2029 Convertible Notes and on February 20, 2025, we issued $700.0 million aggregate principal amount of our 2028 Convertible Notes. We may also incur additional indebtedness to meet future financing needs.
As of June 30, 2025, we had approximately $4.8 billion of consolidated indebtedness, including $1.7 billion aggregate principal amount of our 2029 Convertible Notes, $700.0 million aggregate principal amount of our 2028 Convertible Notes, and $2.3 billion aggregate principal amount of our 2030 Convertible Notes. We may also incur additional indebtedness to meet future financing needs.
Additionally, negative publicity with respect to our partners or service providers could also affect our business and operating results to the extent that we rely on these partners or if our customers or prospective customers associate our company with these partners.
Additionally, negative publicity with respect to our partners or service providers could also affect our business and operating results to the extent that we rely on these partners or if our customers or prospective customers associate us with these partners. We rely on a limited number of suppliers for certain components used to manufacture our products.
Global financial developments and downturns seemingly unrelated to us or our industry may harm us.
Global financial developments and downturns, even if not directly unrelated to us or our industry, may adversely harm us.
We have been and could continue to be the subject of negative publicity focused on the matters underlying the circumstances discussed in the Explanatory Note in this Annual Report.
We have been and could continue to be the subject of negative publicity focused on the matters underlying the circumstances discussed in Item 9. “Changes in and Disagreements with Accountants on Accounting and Financial Disclosure” of this Annual Report.
In addition, we borrowed $500.0 million under our term loan facility in July 2024. Our Taiwan subsidiary, where we maintain significant operations, also increased their lines of credit, or entered into new lines of credit, with various commercial banks in Taiwan.
Our Taiwan subsidiary, where we maintain significant operations, also increased their lines of credit, or entered into new lines of credit, with various commercial banks in Taiwan.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

7 edited+3 added−1 removed2 unchanged
Biggest changeSMCI | 2024 Form 10-K | 43 We have a vendor risk assessment process to oversee and identify risks from cybersecurity threats associated with our use of third-party service providers. These processes consist of the distribution and review of questionnaires designed to identify cybersecurity risks associated with the engagement of third parties.
Biggest changeWe also use third parties to assist our risk management processes by conducting security assessments. SMCI | 2025 Form 10-K | 34 Table of Contents We also have a vendor risk assessment process to oversee and identify risks from cybersecurity threats associated with our use of third-party service providers.
The Committee is also informed of our responses to such risks, incidents and threats. Our cybersecurity incident response plan also contains mechanisms to notify executive management of cybersecurity incidents. As part of the plan, an executive-level leadership team may be activated and can act to direct our response efforts, to include mitigation and remediation activities, when appropriate.
Our cybersecurity incident response plan also contains mechanisms to notify executive management of cybersecurity incidents. As part of the plan, an executive-level leadership team may be activated and can act to direct our response efforts, to include mitigation and remediation activities, when appropriate.
These individuals have decades of experience in managing cybersecurity risk for public companies. Additionally, we have established a cross-functional Cybersecurity Committee, consisting of executive-level leadership, including representatives from the Finance, Marketing, IT, Legal, Internal Audit, and other teams, that meets periodically to review cybersecurity risks, incidents, and assess emerging threats.
Additionally, we have established a cross-functional Cybersecurity Committee, consisting of executive-level leadership, including representatives from Finance, IT, Legal, and other teams, that meets periodically to review cybersecurity risks, incidents, and assess emerging threats. The Cybersecurity Committee is also informed of our responses to such risks, incidents and threats.
We consult with external parties, such as third-party cybersecurity firms, to provide, among other things, monitoring of systems, threat intelligence, and employee cybersecurity training. We also use third parties to assist our risk management processes by conducting security assessments.
The identification, assessment and management of cybersecurity risk is integrated into our overall enterprise risk management program that is ultimately overseen by the Board. We consult with external parties, such as third-party cybersecurity firms, to provide, among other things, monitoring of systems, threat intelligence, and employee cybersecurity training.
We also periodically audit cybersecurity practices of certain third-party service providers. We employ a number of protective measures, including firewalls, anti-virus and endpoint detection and response technologies, regular annual training of employees with respect to cybersecurity and testing employee competence with anti-phishing policies followed up by additional remedial training as needed.
We routinely assess our high-risk suppliers’ conformance to industry standards and evaluate them for additional information, product, and physical security requirements. We employ a number of protective measures, including firewalls, endpoint detection and response technologies, regular annual training of employees with respect to cybersecurity and testing employee competence with anti-phishing policies followed up by additional remedial training as needed.
The Audit Committee receives updates relating to cybersecurity risk from management, including from our Director of Information Security. The Board also periodically receives reports on risks from cybersecurity threats from our Director of Information Security. Cybersecurity risk is primarily managed by our Directors of Information Security and Information Technology.
The Audit Committee and the Board receive regular information security updates relating to cybersecurity risk from management, including from our Director of Information Security. Cybersecurity risk is primarily managed by our Directors of Information Security and Information Technology. These individuals have decades of experience in managing cybersecurity risk for public companies.
Item 1C. Cybersecurity Risk Management and Strategy We have in place certain infrastructure, systems, policies, and procedures that are designed to proactively and reactively address risks from cybersecurity threats. Our information security management program seeks to follow processes set forth in recognized industry standards, and we evaluate and evolve our security measures as appropriate.
Item 1C. Cybersecurity Risk Management and Strategy We have in place certain infrastructure, systems, policies, and procedures that are designed to proactively and reactively address risks from cybersecurity threats. This includes processes for assessing, identifying, and managing material risks from cybersecurity threats.
Removed
We maintain a cybersecurity incident response plan that we periodically practice and update as needed. The identification, assessment and management of cybersecurity risk is integrated into our overall enterprise risk management program that is ultimately overseen by the Board.
Added
Our information security management program seeks to follow processes set forth in recognized industry standards, and we evaluate and evolve our security measures as appropriate. We maintain a cybersecurity incident response plan that we practice and update as needed.
Added
These processes consist of the distribution and review of questionnaires designed to identify cybersecurity risks associated with the engagement of third parties.
Added
We also audit cybersecurity practices of certain third-party service providers, and take steps designed to ensure that such vendors have implemented data privacy and security controls that help mitigate the cybersecurity risks associated with these vendors, depending on the nature and sensitivity of the supplier and data it processes on our behalf.

Item 2. Properties

Properties — owned and leased real estate

9 edited+0 added−3 removed1 unchanged
Biggest changeWe lease approximately 259,000 square feet of warehouse space in San Jose, California under a lease that expires in October 2030, lease approximately 246,000 square feet of warehouse space in Fremont, California under a lease that expires in July 2025, lease approximately 46,000 square feet of office space in San Jose, California under a lease that expires in January 2028, lease approximately 28,000 square feet of warehouse space in Milpitas, California under a lease that expires in March 2027, and lease approximately 5,000 square feet of office space in Jersey City, New Jersey under a lease that expires in July 2025.
Biggest changeWe lease approximately 459,479 square feet of warehouse space in San Jose, California under a lease that expires in October 2030, lease approximately 246,000 square feet of warehouse space in Fremont, California under a lease that expires in October 2030, lease approximately 46,000 square feet of office space in San Jose, California under a lease that expires in January 2028, lease approximately 28,000 square feet of warehouse space in Milpitas, California under a lease that expires in March 2027, lease approximately 5,000 square feet of office space in Jersey City, New Jersey under a lease that expires in May 2027, lease approximately 63,000 square feet of office space in Milpitas, California under a lease that expires in August 2035, and lease approximately 72,000 square feet of data center space in Vernon, California under a lease that expires in October 2035.
Our principal executive offices, research and development center and production operations are in San Jose, California where we own approximately 1,517,000 square feet of office and manufacturing space.
Our principal executive offices, research and development center, and production operations are in San Jose, California where we own approximately 1,601,000 square feet of office and manufacturing space.
We are also adding a new manufacturing facility in Malaysia. We believe that our existing facilities in San Jose, California, Taiwan, and Netherlands and the development of our new facility in Malaysia are suitable and adequate for our present purposes and that the productive capacity of such facilities is substantially being utilized or we have plans to utilize such capacity.
We believe that our existing facilities in San Jose, California, Taiwan, and the Netherlands, in addition to our new facility in Malaysia, are suitable and adequate for our present purposes, and that the productive capacity of such facilities is substantially being utilized or we have plans to utilize such capacity.
Item 2. Properties As of June 30, 2024, we owned approximately 2,483,000 square feet and leased approximately 1,046,000 square feet of office and manufacturing space, which does not include any leases executed but not commenced. Our long-lived assets, excluding leases, located outside of the United States represented 31.9% of total value of long-lived assets in fiscal year 2024.
Item 2. Properties As of June 30, 2025, we owned approximately 3,157,000 square feet and leased approximately 1,539,000 square feet of office and manufacturing space, which does not include any leases executed but not commenced. Our long-lived assets, excluding leases, located outside of the United States represented 37.8% of total value of long-lived assets in fiscal year 2025.
Our research and development center, service operations, and warehouse space in Asia are in an approximately 133,000 square feet facility in Taipei and Hsinchu, Taiwan under sixteen leases that expire at various dates ranging from February 2025 through March 2029 and an approximately 93,000 square feet facility in Taoyuan, Taiwan under four leases that expire from at various dates ranging from June 2026 through December 2028.
Our research and development center, service operations, and warehouse space in Asia are in an approximately 153,000 square feet facility in Taipei and Hsinchu, Taiwan under nineteen leases that expire at various dates ranging from January 2026 through March 2029 and approximately 93,000 square feet facilities in Taoyuan, Taiwan under three leases that expire at various dates ranging from June 2026 through December 2028.
These manufacturing facilities are pledged as security under the existing loans with $55.7 million remaining outstanding as of June 30, 2024.
These manufacturing facilities are pledged as security under the existing loans with $28.8 million remaining outstanding as of June 30, 2025.
SMCI | 2024 Form 10-K | 44 Our European headquarters for manufacturing and service operations is located in Den Bosch, the Netherlands where we own approximately 12,000 square feet of office space and lease approximately 203,000 square feet of office and manufacturing space under five leases, which expire in June 2026.
Our European headquarters for manufacturing and service operations is located in Den Bosch, the Netherlands where we own approximately 12,000 square feet of office space and lease approximately 350,000 square feet of office and manufacturing space under six leases, which expire at various dates ranging from June 2026 to June 2035.
As of August 1, 2024, we took possession of an additional approximately 147,000 square feet of office and warehouse space under a new lease that expires in August 2029. In Asia, our manufacturing facilities are in Taoyuan County, Taiwan where we own approximately 954,000 square feet of office and manufacturing space on 6.77 acres of land.
SMCI | 2025 Form 10-K | 35 Table of Contents In Asia, our manufacturing facilities are located in Taoyuan County, Taiwan where we own approximately 954,000 square feet of office and manufacturing space across 6.77 acres of land, and in Malaysia where we own approximately 590,000 square feet of dormitory, office, and manufacturing space on 30 acres of land.
On September 18, 2024, we entered into an agreement for approximately 63,177 square feet of office and manufacturing space in Milpitas, California under a new lease that expires in August 2035. Additionally, we own 36 acres of land in San Jose, California that would allow us to expand our Green Computing Park.
Additionally, we own 36 acres of land in San Jose, California that would allow us to expand our Green Computing Park.
Removed
On February 9, 2024, we consummated the purchase of certain real estate for $80.0 million in San Jose, California. Such purchased real estate was previously under lease, leading to the de-recognition of the related ROU asset of $7.9 million and lease liability of $8.3 million.
Removed
We completed the construction of our third new manufacturing and warehouse building with approximately 209,000 square feet of space in June 2021. We financed this development through our operating cash flows and borrowings from banks.
Removed
See Note 7, “Lines of Credit and Term Loans” in the Notes to the Consolidated Financial Statements in this Annual Report for a discussion of our debt.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeStock Performance Graph This performance graph shall not be deemed “soliciting material” or to be "filed" with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of Super Micro Computer, Inc. under the Securities Act of 1933, as amended, (the “Exchange Act”).
Biggest changeStock Performance Graph This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of Super Micro Computer, Inc. with the SEC, whether made before or after the date of this Annual Report and irrespective of any general incorporation language in those filings, except to the extent that such filing specifically states that such graph and related information are incorporated by reference into such filing.
Holders As of January 31, 2025, there were 19 registered stockholders of record of our common stock. Because most of our shares are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of beneficial stockholders represented by these holders of record.
Holders As of July 31, 2025, there were 22 registered stockholders of record of our common stock not including those shares held in street or nominee name. Because most of our shares are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of beneficial stockholders represented by these holders of record.
Equity Compensation Plan Please see Part III, Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” of this Annual Report for disclosure relating to our equity compensation plans.
We intend to retain any future earnings and do not expect to pay any dividends in the foreseeable future. Equity Compensation Plan Please see Part III, Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” of this Annual Report for disclosure relating to our equity compensation plans.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information We became a public company in March 2007, prior to which there was no public market for our common stock. On January 14, 2020, our common stock was relisted on the NASDAQ Global Select Market under the symbol “SMCI".
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is traded on the Nasdaq Global Select Market under the symbol SMCI. Public trading of our common stock began on March 29, 2007. Prior to that, there was no public market for our common stock.
The following graph compares our cumulative five-year total stockholder return on our common stock with the cumulative return of the Nasdaq Computer Index and Nasdaq Composite Index.
The following graph shows a comparison of the cumulative total return for our common stock, the Nasdaq Computer Index and the Nasdaq Composite Index for the five years ended June 30, 2025.
Dividend Policy We have never declared or paid cash dividends on our capital stock. We intend to retain any future earnings and do not expect to pay any dividends in the foreseeable future.
Unless noted, all references to shares of common stock and per share amounts contained in this Annual Report on Form 10-K have been retroactively adjusted to reflect the Stock Split. Dividend Policy We have never declared or paid cash dividends on our capital stock.
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The graph reflects an investment of $100 (with reinvestment of all dividends, if any) in our common stock, the Nasdaq Computer Index and the Nasdaq Composite Index on June 30, 2019, and our relative performance tracked through June 30, 2024.
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Forward Stock Split On September 30, 2024, we filed the Amendment to effect the Stock Split of our common stock. The Amendment also effected a proportionate increase in the number of shares of authorized common stock from 100,000,000 to 1,000,000,000.
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The stockholder return shown on the graph below is not necessarily indicative of future performance, and we do not make or endorse any predictions as to future stockholder returns.
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Pursuant to Section 242(d) of the General Corporation Law of the State of Delaware, stockholder approval was not required in connection with the foregoing. The Stock Split became effective at 5:00 p.m. Eastern Time on September 30, 2024.
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SMCI | 2024 Form 10-K | 46 6/30/2019 6/30/2020 6/30/2021 6/30/2022 6/30/2023 6/30/2024 Super Micro Computer, Inc. 100.00 146.72 181.81 208.53 1,288.11 4,234.37 Nasdaq Composite Index 100.00 125.64 181.16 137.75 172.21 221.48 Nasdaq Computer Index 100.00 143.26 215.38 175.67 241.06 348.47 Recent Sales of Unregistered Securities None.
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Trading in the common stock on the Nasdaq Global Select Market commenced on a Stock Split-adjusted basis at the market open on October 1, 2024, under the existing trading symbol “SMCI.” As a result of the Stock Split, every one (1) share of common stock issued and outstanding was automatically divided into ten (10) shares of common stock.
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Issuer Purchases of Equity Securities During the three months ended June 30, 2024, we did not repurchase any shares of our common stock. SMCI | 2024 Form 10-K | 47 Item 6. [Reserved] SMCI | 2024 Form 10-K | 48
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The Stock Split did not modify any rights or preferences of the shares of the common stock. Proportionate adjustments were automatically made to the number of shares of common stock underlying our outstanding equity awards, equity incentive plans, and other existing agreements, as well as exercise or conversion prices, as applicable.
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The annual changes for the five-year period shown in the graph assume that $100 was invested in our common stock and each index at the market close on the last trading day for the fiscal year ended June 30, 2020, and that all dividends (if any were issued) were reinvested.
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The stock price performance of the following graph is not indicative of future stock price performance. SMCI | 2025 Form 10-K | 37 Table of Contents *$100 invested on 6/30/2020 in stock and in indices, including reinvestment of dividends.
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Source: FactSet financial data and analytics. 6/30/2020 6/30/2021 6/30/2022 6/30/2023 6/30/2024 6/30/2025 Super Micro Computer, Inc. 100.00 123.94 141.90 877.46 2,884.86 1,725.70 Nasdaq Composite Index 100.00 144.19 109.64 137.07 176.29 202.51 Nasdaq Computer Index 100.00 150.23 122.62 168.27 243.25 276.13 Recent Sales of Unregistered Securities From November 1, 2024 through November 5, 2024, we issued 11,360 shares of our common stock to two current employees and one former employee, upon exercise of vested stock options granted to them in 2018-2023, as compensatory awards under the 2016 Equity Incentive Plan and the 2020 Equity and Incentive Compensation Plan, as amended and restated.
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The aggregate proceeds from the exercise of the stock options was approximately $33,000. The issued shares represented less than 0.1% of our outstanding common stock and were not issued in a public offering.
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Issuer Purchases of Equity Securities During the three months ended June 30, 2025 , we repurchased the following shares of our common stock: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs Month 1 (April 1, 2025 to April 30, 2025) — — — Month 2 (May 1, 2025 to May 31, 2025) — — — Month 3 (June 1, 2025 to June 30, 2025) 4,891,171 $40.89 4,891,171 — Total 4,891,171 $40.89 4,891,171 SMCI | 2025 Form 10-K | 38 Table of Contents In June 2025, we repurchased 4,891,171 shares of our common stock for an aggregate purchase price of approximately $200.0 million.
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The repurchased shares were subsequently retired. The repurchase was conducted concurrently with our offering of the 2030 Convertible Notes, in privately negotiated transactions with certain purchasers of the 2030 Convertible Notes. The transactions were effected through one of the initial purchasers of the 2030 Convertible Notes or our affiliates, in each case, acting as our agent.
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The repurchase price was $40.89 per share, which represented the closing trading price of our common stock on June 23, 2025, the date on which the 2030 Convertible Notes were priced.
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This repurchase was conducted outside of a publicly announced repurchase plan or program, and was not made pursuant to a Rule 10b5-1 trading plan or under the Rule 10b-18 safe harbor. We have not adopted any publicly announced repurchase plans or programs, and no such plans were in effect during fiscal year 2025.
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SMCI | 2025 Form 10-K | 39 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following table presents net sales by product type for fiscal years 2024, 2023 and 2022 (dollars in millions): Years Ended June 30, 2024 over 2023 Change 2023 over 2022 Change 2024 2023 2022 $ % $ % Server and storage systems $ 14,185.2 $ 6,569.8 $ 4,463.8 $ 7,615.4 115.9 % $ 2,106.0 47.2 % Percentage of total net sales 94.6 % 92.2 % 85.9 % Subsystems and accessories 804.0 553.7 732.3 250.3 45.2 % (178.6) (24.4) % Percentage of total net sales 5.4 % 7.8 % 14.1 % Total net sales $ 14,989.2 $ 7,123.5 $ 5,196.1 $ 7,865.7 110.4 % $ 1,927.4 37.1 % Fiscal Year 2024 Compared with Fiscal Year 2023 During fiscal year 2024 we experienced increased net sales from server and storage systems, particularly from our large enterprise and datacenter customers.
Biggest changeThe following table presents certain items of our consolidated statements of operations expressed as a percentage of net sales for the years ended June 30, 2025, 2024, and 2023: Years Ended June 30, 2025 2024 2023 Net sales 100.0 % 100.0 % 100.0 % Cost of sales 88.9 % 86.2 % 82.0 % Gross profit 11.1 % 13.8 % 18.0 % Operating expenses: Research and development 2.9 % 3.1 % 4.3 % Sales and marketing 1.2 % 1.3 % 1.6 % General and administrative 1.3 % 1.3 % 1.4 % Total operating expenses 5.4 % 5.7 % 7.3 % Income from operations 5.7 % 8.1 % 10.7 % Other income, net 0.1 % 0.1 % 0.1 % Interest expense (0.3) % (0.1) % (0.1) % Income before income tax provision 5.5 % 8.1 % 10.7 % Income tax provision (0.7) % (0.4) % (1.6) % Share of income (loss) from equity investee, net of taxes — % — % (0.1) % Net income 4.8 % 7.7 % 9.0 % SMCI | 2025 Form 10-K | 46 Table of Contents Net Sales by Product Type The following table presents net sales by product type for fiscal years 2025, 2024, and 2023 (dollars in millions): Years Ended June 30, 2025 over 2024 Change 2024 over 2023 Change 2025 2024 2023 $ % $ % Server and storage systems $ 21,311.6 $ 14,185.2 $ 6,569.8 $ 7,126.4 50.2 % $ 7,615.4 115.9 % Percentage of total net sales 97.0 % 94.6 % 92.2 % Subsystems and accessories $ 660.4 804.0 553.7 (143.6) (17.9) % 250.3 45.2 % Percentage of total net sales 3.0 % 5.4 % 7.8 % Total net sales $ 21,972.0 $ 14,989.2 $ 7,123.5 $ 6,982.8 46.6 % $ 7,865.7 110.4 % Fiscal Year 2025 Compared with Fiscal Year 2024 During fiscal year 2025, we experienced increased net sales from server and storage systems, particularly from our large enterprise and datacenter customers.
General and administrative expenses consist primarily of general corporate costs, including personnel expenses such as salaries, benefits, stock-based compensation and incentive bonuses, and related expenses for our general and administrative personnel, financial reporting, corporate governance and compliance, outside legal, audit, tax fees, insurance and credit losses on accounts receivable.
General and Administrative General and administrative expenses consist primarily of general corporate costs, including personnel expenses such as salaries, benefits, stock-based compensation and incentive bonuses, and related expenses for our general and administrative personnel, financial reporting, corporate governance and compliance, outside legal, audit, tax fees, insurance and credit losses on accounts receivable.
The year-over-year increase in net sales of server and storage systems was primarily due to the strong demand for GPU based rack-scale solutions, including liquid-cooled and air-cooled servers which are generally more complex and of higher value, resulting in an increase of average selling prices ("ASP").
The year-over-year increase in net sales of server and storage systems was primarily due to the strong demand for GPU based rack-scale solutions, including liquid-cooled and air-cooled servers which are generally more complex and of higher value, resulting in an increase of average selling prices.
Revenue is recognized either over time or at a point in time, depending on when control of the underlying products or services are transferred to the customer, which may require judgment. Revenue is recognized at a point in time for products. Revenue is recognized over time for services provided.
Revenue is recognized either over time or at a point in time, depending on when control of the underlying products or services are transferred to the customer, which may require judgment. Revenue is recognized at a point in time for products.
The year-over-year increase in sales and marketing expenses was driven by a $64.8 million increase in employee related costs primarily due to stock-based compensation increases of $16.6 million, salary increases and higher headcount as we expanded our workforce and invested in key talent, a $10.6 million increase in advertising and other expenses offset by a $0.7 million increase in marketing development funds received.
The year-over-year increase in sales and marketing expenses was driven by a $64.8 million increase in employee related costs primarily due to stock-based compensation increases of $16.6 million, salary increases and higher headcount as we expanded our workforce and invested in key talent, a $10.6 million increase in advertising and other expenses offset by a $0.7 million increase in marketing development fees received.
Our purchases of products from Ablecom and Compuware combined represented 4.3%, 6.6% and 8.3% of our cost of sales for fiscal years 2024, 2023 and 2022, respectively. For further details on our dealings with related parties, see Note 10, “Related Party Transactions” in the Notes to the Consolidated Financial Statements.
Our purchases of products from Ablecom and Compuware combined represented 3.3%, 4.3%, and 6.6% of our cost of sales for fiscal years 2025, 2024, and 2023, respectively. For further details on our dealings with related parties, see Note 10, “Related Party Transactions” in the notes to the consolidated financial statements.
Provision for Income Taxes Our income tax provision is based on our taxable income generated in the jurisdictions in which we operate, which primarily include the United States, Taiwan, and the Netherlands.
Income Tax Provision Our income tax provision is based on our taxable income generated in the jurisdictions in which we operate, which primarily include the United States, Taiwan, and the Netherlands.
Share of income (loss) from equity investee, net of taxes for fiscal years 2024, 2023 and 2022 are as follows (dollars in millions): Years Ended June 30, 2024 over 2023 Change 2023 over 2022 Change 2024 2023 2022 $ % $ % Share of income (loss) from equity investee, net of taxes $ 1.8 $ (3.6) $ 1.2 $ 5.4 (150.0) % $ (4.8) (400.0) % Percentage of total net sales — % * (0.1) % — % * * Represents an amount less than 0.1%.
Share of income (loss) from equity investee, net of taxes for fiscal years 2025, 2024 and 2023 are as follows (dollars in millions): Years Ended June 30, 2025 over 2024 Change 2024 over 2023 Change 2025 2024 2023 $ % $ % Share of income (loss) from equity investee, net of taxes $ (6.2) $ 1.8 $ (3.6) $ (8.0) (444.4) % $ 5.4 (150.0) % Percentage of total net sales — % * — % * (0.1) % * Represents an amount less than 0.1%.
Share of Income (Loss) from Equity Investee, Net of Taxes Share of income (loss) from equity investee, net of taxes represents our share of income (loss) from the Corporate Venture in which we have a 30% ownership.
S hare of Income (Loss) from Equity Investee, Net of Taxes Share of income (loss) from equity investee, net of taxes represents our share of income (loss) from the Corporate Venture in which we have a 30% ownership.
We determine standalone selling prices based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, we apply judgment to estimate the SSP.
We determine SSP based on the price at which the performance obligation is sold separately. If the SSP is not observable through past transactions, we apply judgment to estimate the SSP.
The year-over-year increase in research and development expenses was driven by a $140.4 million increase in employee related costs primarily due to stock-based compensation increases of $84.2 million, salary increases and higher headcount as we expanded our workforce and invested in key talent, a $17.1 million increase in product development costs to support next generation products and technologies, offset by a $1.3 million increase in research and development credits received from certain suppliers and customers.
The year-over-year increase in research and development expenses was driven by a $140.4 million increase in employee related costs primarily due to stock-based compensation increases of $84.2 million, salary increases and higher headcount as we expanded our workforce and invested in key talent, a $17.1 million increase in product development costs to support next generation products and technologies, offset by a $1.3 million increase in research and development fees.
Recent Accounting Pronouncements For a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on our consolidated financial statements, see Note 1, “Organization and Summary of Significant Accounting Policies” in the Notes to the Consolidated Financial Statements in this Annual Report. SMCI | 2024 Form 10-K | 61
Recent Accounting Pronouncements For a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on our consolidated financial statements, see Note 1, “Organization and Summary of Significant Accounting Policies” in the notes to the consolidated financial statements in this Annual Report. SMCI | 2025 Form 10-K | 53 Table of Contents
We measure our financial success based on various indicators, including growth in net sales, gross profit margin, operating margin, and growth in net income per common share. Among the key non-financial indicators of our success is our ability to rapidly introduce new products and deliver the latest application-optimized server and storage solutions.
We measure our financial success based on various key indicators, including growth in net sales, gross profit margin, operating margin, and net income per common share. In additional to these financial metrics, a critical non-financial indicator of our success is our ability to rapidly introduce new products and deliver the latest application-optimized server and storage solutions.
From time to time, we receive marketing development funding from certain suppliers. Under these arrangements, we are reimbursed for certain marketing costs that we incur as part of the joint promotion of our products and those of our suppliers. These amounts offset a portion of the related expenses and have the effect of reducing our reported sales and marketing expenses.
Under these arrangements, we are reimbursed for certain marketing costs that we incur as part of the joint promotion of our products and those of our suppliers. These amounts offset a portion of the related expenses and have the effect of reducing our reported sales and marketing expenses.
Contractual Obligations Our estimated future obligations as of June 30, 2024, include both current and long-term obligations. For our long-term debt as noted in Note 7, “Lines of Credit and Term Loans” in the Notes to the Consolidated Financial Statements, we have a current obligation of $402.3 million and a long-term obligation of $74.1 million.
Contractual Obligations Our estimated future obligations as of June 30, 2025, include both current and long-term obligations. For our long-term debt as noted in Note 7, “Lines of Credit and Term Loans” in the notes to the consolidated financial statements, we have a current obligation of $75.1 million and a long-term obligation of $37.4 million.
Additionally, as noted in Note 8, “Convertible Notes” in the Notes to the Consolidated Financial Statements, we have a convertible debt obligation of $1,725.0 million. Under our operating leases as noted in Note 9, "Leases", in the Notes to the Consolidated Financial Statements we have a current obligation of $9.3 million and a long-term obligation of $26.1 million.
Additionally, as noted in Note 8, “Convertible Notes” in the notes to the consolidated financial statements, we have a convertible debt obligation of $4,725.0 million. Under our operating leases as noted in Note 9, “Leases” in the notes to the consolidated financial statements, we have a current obligation of $21.2 million and a long-term obligation of $280.4 million.
Operating Expenses Research and development expenses consist of personnel expenses, including salaries, benefits, stock-based compensation and incentive bonuses, and related expenses for our research and development personnel, as well as product development costs such as materials and supplies, consulting services, third-party testing services and equipment and facility expenses related to our research and development activities.
SMCI | 2025 Form 10-K | 44 Table of Contents Research and Development Research and development expenses consist of personnel expenses including salaries, benefits, stock-based compensation and incentive bonuses, and related expenses for our research and development personnel, as well as product development costs such as materials and supplies, consulting services, third-party testing services and equipment and facility expenses related to our research and development activities.
We believe that research and development expenses will continue to increase as we continue to expand our workforce and invest in key talent to stay at the forefront of development of next generation products and technologies. Sales and marketing expenses.
We believe that research and development expenses will continue to increase as we continue to expand our workforce and invest in key talent to stay at the forefront of development of next generation products and technologies. SMCI | 2025 Form 10-K | 49 Table of Contents Sales and marketing expenses.
We do not expect restrictions or potential taxes incurred on repatriation of amounts held outside of the U.S. to have a material effect on our overall liquidity, financial condition or results of operations.
We do not expect restrictions or potential taxes on the repatriation of amounts held outside the U.S. to materially affect our overall liquidity, financial condition, or results of operations.
Fiscal Year 2024 Compared with Fiscal Year 2023 The period-over-period increase of $5.4 million in share of income from equity investee, net of taxes was primarily due to improvement in profitability from increased sales of the Corporate Venture.
Refer to Note 10, “Related Party Transactions” for more details. Fiscal Year 2024 Compared with Fiscal Year 2023 The period-over-period increase of $5.4 million in share of income from equity investee, net of taxes was primarily due to improvement in profitability from increased sales of the Corporate Venture.
SMCI | 2024 Form 10-K | 58 Liquidity and Capital Resources We have financed our growth primarily with funds generated from operations, utilizing borrowing facilities, selling our common stock, and issuing convertible notes.
SMCI | 2025 Form 10-K | 51 Table of Contents Liquidity and Capital Resources We have financed our growth primarily with funds generated from operations, as well as utilizing borrowing facilities, selling our common stock, and issuing convertible notes.
Our future capital requirements will depend on many factors including our growth rate, the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced software and services offerings and investments in our office facilities and our IT system infrastructure.
Our future capital requirements will depend on a variety of factors, including our growth rate, the timing and scale of investments to support product development, the expansion of sales and marketing efforts, the launch of new and enhanced software and services offerings, and continued investments in our office facilities and IT system infrastructure.
During fiscal year 2024 we experienced increased revenue from server and storage systems, particularly from our large enterprise and datacenter customers.
Fiscal Year 2024 Compared with Fiscal Year 2023 During fiscal year 2024, we experienced increased net sales from server and storage systems, particularly from our large enterprise and datacenter customers.
Refer to Note 16, “Subsequent Events,” in the Notes to the Consolidated Financial Statements in this Annual Report for further information on the issuance of the 2028 Convertible Notes and the amendment of the terms of the 2029 Convertible Notes.
Refer to Note 8, “Convertible Notes”, in the notes to the consolidated financial statements in this Annual Report for further information on the amendment of the terms of the 2029 Convertible Notes, and the issuance of the 2028 Convertible Notes and the 2030 Convertible Notes.
Operating expenses for fiscal years 2024, 2023 and 2022 are as follows (dollars in millions): SMCI | 2024 Form 10-K | 55 Years Ended June 30, 2024 over 2023 Change 2023 over 2022 Change 2024 2023 2022 $ % $ % Research and development $ 463.5 $ 307.3 $ 272.3 $ 156.2 50.8 % $ 35.0 12.9 % Percentage of total net sales 3.1 % 4.3 % 5.2 % Sales and marketing 189.7 115.0 90.1 74.7 65.0 % 24.9 27.6 % Percentage of total net sales 1.3 % 1.6 % 1.7 % General and administrative 197.4 99.6 102.4 97.8 98.2 % (2.8) (2.7) % Percentage of total net sales 1.3 % 1.4 % 2.0 % Total operating expenses $ 850.6 $ 521.9 $ 464.8 $ 328.7 63.0 % $ 57.1 12.3 % Fiscal Year 2024 Compared with Fiscal Year 2023 Research and development expenses.
SMCI | 2025 Form 10-K | 48 Table of Contents Operating Expenses Operating expenses for fiscal years 2025, 2024, and 2023 are as follows (dollars in millions): Years Ended June 30, 2025 over 2024 Change 2024 over 2023 Change 2025 2024 2023 $ % $ % Research and development $ 636.6 $ 463.5 $ 307.3 $ 173.1 37.3 % $ 156.2 50.8 % Percentage of total net sales 2.9 % 3.1 % 4.3 % Sales and marketing 273.1 189.7 115.0 83.4 44.0 % 74.7 65.0 % Percentage of total net sales 1.2 % 1.3 % 1.6 % General and administrative 267.2 197.4 99.6 69.8 35.4 % 97.8 98.2 % Percentage of total net sales 1.3 % 1.3 % 1.4 % Total operating expenses $ 1,176.9 $ 850.6 $ 521.9 $ 326.3 38.4 % $ 328.7 63.0 % Fiscal Year 2025 Compared with Fiscal Year 2024 Research and development expenses.
SMCI | 2024 Form 10-K | 50 We allocate the transaction price of each customer contract to each performance obligation based on the relative standalone selling price ("SSP") for each performance obligation within each contract.
We allocate the transaction price of each customer contract to each performance obligation based on the relative Standalone Selling Price (“SSP”) for each performance obligation within each contract.
We believe that general and administrative expenses will continue to increase as we continue to expand our workforce and invest in key talent. Fiscal Year 2023 Compared with Fiscal Year 2022 Research and development expenses.
We believe that general and administrative expenses will continue to increase as we continue to expand our workforce and invest in key talent.
As part of determining the transaction price in contracts with customers, we estimate reserves for future sales returns based on a review of our history of actual returns for each major product line.
We apply judgment in determining the transaction price as we may be required to estimate variable consideration when determining the amount of revenue to recognize. As part of determining the transaction price in contracts with customers, we estimate reserves for future sales returns based on our history of actual returns for each major product line.
Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Annual Report, particularly under the heading "Risk Factors." Overview We are a Silicon Valley-based provider of Rack Scale Total Solutions built from our extensive portfolio of server and storage systems.
Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Annual Report, particularly under the heading “Risk Factors.” Overview We are a global leader in Application-Optimized Total IT Solutions.
SMCI | 2024 Form 10-K | 54 Cost of sales and gross margin for fiscal years 2024, 2023 and 2022 are as follows (dollars in millions): Years Ended June 30, 2024 over 2023 Change 2023 over 2022 Change 2024 2023 2022 $ % $ % Cost of sales $ 12,927.8 $ 5,840.5 $ 4,396.1 $ 7,087.3 121.3 % $ 1,444.4 32.9 % Gross profit 2,061.4 1,283.0 800.0 778.4 60.7 % 483.0 60.4 % Gross margin 13.8 % 18.0 % 15.4 % (4.2) % 2.6 % Fiscal Year 2024 Compared with Fiscal Year 2023 The year-over-year increase in cost of sales was primarily attributed to an increase of $7,006.7 million in costs of components, materials and contract manufacturing expenses primarily related to the increase in shipments of GPU servers, HPC, and rack scale solutions which have higher costs, a $52.3 million increase in inventory write-down adjustments, a $19.6 million increase in overhead costs which includes labor costs attributed to increase of operation activities and a $8.7 million increase in freight charges.
Cost of Sales, Gross Profit, and Gross Margin Cost of sales and gross margin for fiscal years 2025, 2024, and 2023 are as follows (dollars in millions): Years Ended June 30, 2025 over 2024 Change 2024 over 2023 Change 2025 2024 2023 $ % $ % Cost of sales $ 19,542.1 $ 12,927.8 $ 5,840.5 $ 6,614.3 51.2 % $ 7,087.3 121.3 % Gross profit 2,429.9 2,061.4 1,283.0 368.5 17.9 % 778.4 60.7 % Gross margin 11.1 % 13.8 % 18.0 % (2.7) % (4.2) % Fiscal Year 2025 Compared with Fiscal Year 2024 The year-over-year increase in cost of sales was primarily attributed to an increase of $6,353.2 million or 50.6% in costs of components, materials, and contract manufacturing expenses primarily due to increases in shipments of GPU servers, HPC, and rack-scale solutions which have higher costs and a $86.5 million or 493.6% increase in tariff expense related to new trade policies enacted during the year, a $149.6 million or 179.2% increase in inventory write-down adjustments from aged inventory, a $67.9 million or 28.6% increase in overhead costs which includes higher labor costs attributed to increase of operating activities, and a $43.6 million or 75.5% increase in freight charges.
SMCI | 2024 Form 10-K | 53 The following table presents percentages of net sales by geographic region for fiscal years 2024, 2023 and 2022 (dollars in millions): Years Ended June 30, 2024 over 2023 Change 2023 over 2022 Change 2024 2023 2022 $ % $ % United States $ 10,187.2 $ 4,834.1 $ 3,035.5 $ 5,353.1 110.7 % $ 1,798.6 59.3 % Percentage of total net sales 68.0 % 67.9 % 58.4 % Asia 2,912.6 1,050.8 1,139.9 1,861.8 177.2 % (89.1) (7.8) % Percentage of total net sales 19.4 % 14.7 % 21.9 % Europe 1,294.0 1,003.1 825.2 290.9 29.0 % 177.9 21.6 % Percentage of total net sales 8.6 % 14.1 % 15.9 % Others 595.4 235.5 195.5 359.9 152.8 % 40.0 20.5 % Percentage of total net sales 4.0 % 3.3 % 3.7 % Total net sales $ 14,989.2 $ 7,123.5 $ 5,196.1 $ 7,865.7 110.4 % $ 1,927.4 37.1 % Fiscal Year 2024 Compared with Fiscal Year 2023 The year-over-year increase in overall net sales is driven by an increase in demand from customers for GPU servers, HPC and rack-scale solutions which have higher ASPs, especially for large enterprise and data center customers from the United States.
Net Sales by Geography The following table presents percentages of net sales by geographic region for fiscal years 2025, 2024, and 2023 (dollars in millions): Years Ended June 30, 2025 over 2024 Change 2024 over 2023 Change 2025 2024 2023 $ % $ % United States $ 13,052.6 $ 10,187.2 $ 4,834.1 $ 2,865.4 28.1 % $ 5,353.1 110.7 % Percentage of total net sales 59.4 % 68.0 % 67.9 % Asia 5,494.1 2,912.6 1,050.8 2,581.5 88.6 % 1,861.8 177.2 % Percentage of total net sales 25.0 % 19.4 % 14.7 % Europe 2,727.0 1,294.0 1,003.1 1,433.0 110.7 % 290.9 29.0 % Percentage of total net sales 12.4 % 8.6 % 14.1 % Others 698.3 595.4 235.5 102.9 17.3 % 359.9 152.8 % Percentage of total net sales 3.2 % 4.0 % 3.3 % Total net sales $ 21,972.0 $ 14,989.2 $ 7,123.5 $ 6,982.8 46.6 % $ 7,865.7 110.4 % SMCI | 2025 Form 10-K | 47 Table of Contents Fiscal Year 2025 Compared with Fiscal Year 2024 The year-over-year increase in total net sales is driven by an increase in demand from customers for GPU servers, HPC and rack-scale solutions which have higher average selling prices, especially from large enterprise and data center customers resulting in increased sales of 28.1% in the United States, 85.9% in Thailand and Japan, and 111.9% in the United Kingdom, Sweden, and Spain, where we have experienced significant growth.
Interest expense and other income, net for fiscal years 2024, 2023 and 2022 are as follows (dollars in millions): Years Ended June 30, 2024 over 2023 Change 2023 over 2022 Change 2024 2023 2022 $ % $ % Other income, net $ 22.7 $ 3.6 $ 8.1 $ 19.1 530.6 % $ (4.5) (55.6) % Interest expense (19.4) (10.5) (6.4) (8.9) 84.8 % (4.1) 64.1 % Interest expense and other income (expense), net $ 3.3 $ (6.9) $ 1.7 $ 10.2 (147.8) % $ (8.6) (505.9) % Fiscal Year 2024 Compared with Fiscal Year 2023 The increase in Other income, net of $19.1 million was driven by an increase of $26.1 million in interest income due to higher balances held in interest-bearing deposit accounts during the year, and an increase in foreign currency exchange gain of $6.1 million due to a strong US dollar, offset by a $13.1 million investment and impairment loss in equity securities.
Fiscal Year 2024 Compared with Fiscal Year 2023 The increase in Other income, net of $19.1 million was driven by an increase of $26.1 million in interest income due to higher balances held in interest-bearing deposit accounts during the year, and an increase in foreign currency exchange gain of $6.1 million due to a strong US dollar, offset by a $13.1 million investment and impairment loss in equity securities.
The year-over-year decrease in net sales of subsystems and accessories was primarily due to our emphasis on selling full systems and servers. Our services and software revenue, included in server and storage systems revenue, increased by $28.0 million year-over-year.
Our services and software net sales, included in server and storage systems net sales, increased by $102.2 million year-over-year. The year-over-year decrease in net sales for our subsystems and accessories is primarily due to our strategic shift to focus on prioritizing sales of our server and storage systems.
Fiscal Year 2023 Compared with Fiscal Year 2022 The year-over-year decrease in the effective tax rate is attributable to higher tax deductions from disqualified disposition of stock-based compensation of $20.8 million, an increase in the R&D tax credit of $11.5 million, and a $4.1 million increase in foreign-derived income.
Fiscal Year 2024 Compared with Fiscal Year 2023 The year-over-year decrease in the effective tax rate is attributable to higher tax deductions from stock-based compensation, an increase in the R&D tax credit.
Other Factors Affecting Liquidity and Capital Resources Refer to Note 7, “Lines of Credit and Term Loans” in the Notes to the Consolidated Financial Statements in this Annual Report for further information on our outstanding debt.
SMCI | 2025 Form 10-K | 52 Table of Contents Material Cash Requirements Refer to Note 7, “Lines of Credit and Term Loans” in the notes to the consolidated financial statements in this Annual Report for further information on our outstanding debt.
Our recent drivers of liquidity changes have included an increase in the need for working capital due to higher levels of inventory required by growing revenues and to a lesser extent longer supply chain lead times on certain key components. Our cash and cash equivalents were $1,669.8 million and $440.5 million as of June 30, 2024 and 2023, respectively.
Recent drivers of liquidity changes included an increase in the need for working capital due to higher levels of inventory required by growing revenues, greater requests for longer payment terms from customers due to increasing system costs and to a lesser extent longer supply chain lead times on certain key components.
SMCI | 2024 Form 10-K | 60 Capital Expenditure Requirements We anticipate our capital expenditures for the fiscal year 2025 will be in range of $140.0 million to $150.0 million, relating primarily to costs associated with our global manufacturing capabilities, including tooling for new products, new information technology investments including a major upgrade of our ERP system and automating certain key internal controls, and facilities upgrades and expansion.
Capital Expenditure Requirements We anticipate our capital expenditures for the fiscal year 2026 will be in range of $180.0 million to $200.0 million, primarily relating to costs associated with our global manufacturing capabilities, including tooling for new products, new information technology investments, and facilities upgrades and expansion. We will also continue to evaluate new business opportunities and new markets.
Provision for income taxes and effective tax rates for fiscal years 2024, 2023 and 2022 are as follows (dollars in millions): Years Ended June 30, 2024 over 2023 Change 2023 over 2022 Change 2024 2023 2022 $ % $ % Income tax provision $ 63.3 $ 110.7 $ 52.9 $ (47.4) (42.8) % $ 57.8 109.3 % Percentage of total net sales 0.4 % 1.6 % 1.0 % Effective tax rate 5.2 % 14.7 % 15.7 % SMCI | 2024 Form 10-K | 57 Fiscal Year 2024 Compared with Fiscal Year 2023 The year-over-year decrease in the effective tax rate is attributable to higher tax deductions from stock-based compensation, an increase in the R&D tax credit.
Income Tax Provision Provision for income taxes and effective tax rates for fiscal years 2025, 2024, and 2023 are as follows (dollars in millions): Years Ended June 30, 2025 over 2024 Change 2024 over 2023 Change 2025 2024 2023 $ % $ % Income tax provision $ (156.8) $ (63.3) $ (110.7) $ (93.5) 147.7 % $ 47.4 (42.8) % Effective tax rate (12.9) % (5.2) % (14.7) % SMCI | 2025 Form 10-K | 50 Table of Contents Fiscal Year 2025 Compared with Fiscal Year 2024 The year-over year increase in the effective tax rate is attributable to a decrease in the stock compensation tax deduction and lower research and development tax credits, both driven by the decrease in our stock price.
As a result, we monitor the product introduction cycles of NVIDIA Corporation, Intel Corporation, Advanced Micro Devices, Inc., Broadcom Inc., Samsung Electronics Company Limited, Micron Technology, Inc. and others closely and carefully. This also impacts our research and development expenditures as we continue to invest more in our current and future product development efforts.
Accordingly, we closely monitor the product introduction cycles of industry leaders, including NVIDIA Corporation, Intel Corporation, Advanced Micro Devices, Inc., Broadcom Inc., Samsung Electronics Company Limited, Micron Technology, Inc. and others. This strategic focus directly informs our research and development investments, as we continue to allocate resources toward both our current initiatives and future product innovation.
We evaluate capital expenditure projects based on a variety of factors, including expected strategic impacts (such as forecasted impact on net sales growth, productivity, expenses, service levels and customer retention) and our expected return on investment. We intend to continue to focus our capital expenditures in fiscal year 2025 to support the growth of our operations.
As a result, our future growth within the existing business or new opportunities and markets may dictate the need for additional facilities and capital expenditures to support that growth. We evaluate capital expenditure projects based on a variety of factors, including expected strategic impacts (such as forecasted impact on net sales growth, productivity, expenses, service levels and customer retention).
Where local restrictions prevent intercompany transfer of funds, our intent is to keep cash balances outside of the U.S. and to meet liquidity needs through operating cash flows, external borrowings, or both.
Repatriations of these funds are generally not subject to U.S. federal income tax, though state income or foreign withholding taxes may apply. In cases where local restrictions prevent the intercompany transfer of funds, our strategy is to retain cash balances outside the U.S. and meet liquidity needs through operating cash flows, external borrowings, or both.
SMCI | 2024 Form 10-K | 52 Net Sales Net sales primarily consist of sales of our server and storage solutions, including systems and related services, subsystems and accessories. The main factors that impact net sales of our server and storage systems are the number of servers and racks sold and the average selling prices per server or rack.
The key factors that impact net sales of our server and storage systems are the number of servers and racks sold, as well as the average selling prices per server or rack. For subsystems and accessories, the main drivers of net sales are the number of units shipped and the average selling price per unit.
Our key cash flow metrics were as follows (dollars in millions): Years Ended June 30, 2024 over 2023 2023 over 2022 2024 2023 2022 Net cash (used in) provided by operating activities $ (2,486.0) $ 663.6 $ (440.8) $ (3,149.6) $ 1,104.4 Net cash used in investing activities $ (194.2) $ (39.5) $ (46.3) $ (154.7) $ 6.8 Net cash provided by (used in) financing activities $ 3,911.7 $ (448.3) $ 522.9 $ 4,360.0 $ (971.2) Effect of exchange rate fluctuations on cash $ (2.2) $ (3.4) $ (0.7) $ 1.2 $ (2.7) Net increase in cash, cash equivalents and restricted cash $ 1,229.3 $ 172.4 $ 35.1 $ 1,056.9 $ 137.3 SMCI | 2024 Form 10-K | 59 Operating Activities Net cash used in operating activities increased by $3,149.6 million for fiscal year 2024 as compared to fiscal year 2023.
Our key cash flow metrics were as follows (in millions): Years Ended June 30, 2025 over 2024 2024 over 2023 2025 2024 2023 Net cash provided by (used in) operating activities $ 1,659.5 $ (2,486.0) $ 663.6 $ 4,145.5 $ (3,149.6) Net cash used in investing activities (183.2) (194.2) (39.5) 11.0 (154.7) Net cash provided by (used in) financing activities 2,024.0 3,911.7 (448.3) (1,887.7) 4,360.0 Effect of exchange rate fluctuations on cash 1.7 (2.2) (3.4) 3.9 1.2 Net increase in cash, cash equivalents and restricted cash $ 3,502.0 $ 1,229.3 $ 172.4 $ 2,272.7 $ 1,056.9 Operating Activities Net cash provided by operating activities during fiscal 2025 mostly consisted of $1,048.9 million net income adjusted for certain non-cash items, such as $314.5 million of share-based compensation expense, $58.3 million of depreciation and amortization expense, and changes in working capital.
Our services and software net sales, included in server and storage systems net sales, increased by $53.8 million year-over-year. Fiscal Year 2023 Compared with Fiscal Year 2022 During fiscal year 2023 we experienced increased revenue from server and storage systems, particularly from our large enterprise and datacenter customers.
Our services and software net sales, included in server and storage systems net sales, increased by $53.8 million year-over-year.
The main factors that impact net sales of our subsystems and accessories are units shipped and the average selling price per unit. The prices for our server and storage systems range widely depending upon the configuration, including the speed, functionality and performance of key components such as CPUs, GPUs, SSDs and memory.
The prices for our server and storage systems can vary widely depending on the configuration, including factors such as speed, functionality and performance of key components, including CPUs, GPUs, SSDs, cooling systems, and memory.
As noted in Note 13, "Commitments and Contingencies" in the Notes to the Consolidated Financial Statements, we have current obligations related to non-cancelable purchase commitments of $6.2 billion. We have not provided a detailed estimate of the payment timing of unrecognized tax benefits due to the uncertainty of when the related tax settlements will become due.
As noted in Note 13, “Commitments and Contingencies” in the notes to the consolidated financial statements, we have current obligations related to non-cancelable purchase commitments of $1.6 billion.
We evaluate inventory on a quarterly basis for lower of cost or net realizable value and excess and obsolescence and, as necessary, write down the valuation of inventories based upon our inventory aging, forecasted sales, anticipated selling price, product obsolescence and other factors. Once inventory is written down, its new value is maintained until it is sold or scrapped.
We evaluate inventory on a quarterly basis for lower of cost or net realizable value and excess and obsolescence and, as necessary, write down the valuation of inventories.
The year-over-year increase in sales and marketing expenses was driven by a $23.8 million increase in employee related costs primarily due to stock-based compensation increases, salary increases and higher headcount as we expanded our workforce and invested in key talent and a $4.6 million increase in travel and trade show expenses to drive new sales opportunities for our products and customer support, offset by a $3.5 million increase in marketing development funds received.
The year-over-year increase in sales and marketing expenses was primarily driven by a $53.5 million or 30.9% increase in employee-related costs, mainly due to a $30.9 million or 23.0% increase in salaries and a $16.6 million or 78.3% increase in stock-based compensation, similarly to our research and development expenses as we expanded our workforce and invested in key talent company-wide.
We believe that time to market, quality and optimized design of our AI products meet the unique needs of the AI market, which differentiates us from many of our competitors and will lead us to secure an even greater market share going forward.
We believe that our ability to tailor certain products to the unique needs of these sectors sets us apart from many competitors and positions us to capture an even greater market share going forward.
These amounts offset a portion of the related research and development expenses and have the effect of reducing our reported research and development expenses. Sales and marketing expenses consist primarily of personnel expenses, including salaries, benefits, stock-based compensation and incentive bonuses, and related expenses for our sales and marketing personnel, cost for tradeshows, sales representative fees and marketing programs.
Sales and Marketing Sales and marketing expenses consist primarily of personnel expenses including salaries, benefits, stock-based compensation and incentive bonuses, and related expenses for our sales and marketing personnel, cost for trade shows, sales representative fees and marketing programs. From time to time, we receive marketing development funding from certain suppliers.
Fiscal Year 2023 Compared with Fiscal Year 2022 The period-over-period decrease of $4.8 million in share of income from equity investee, net of taxes was primarily due to lower net income recognized by the Corporate Venture.
Fiscal Year 2025 Compared with Fiscal Year 2024 The period-over-period decrease of $8.0 million in share of income from equity investee, net of taxes was primarily due to reduction in profitability from reduced sales of the Corporate Venture. During the year ended June 30, 2025, we recognized an impairment of $6.7 million on this investment.
Inventories consist of raw materials (principally electronic components), work in process (principally products being assembled) and finished goods (principally finished products and products ready for sale).
Net realizable value is the estimated selling price of our products in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Inventories consist of raw materials (principally electronic components), work in process (principally products being assembled) and finished goods (principally finished products and products ready for sale).
We receive various rebate incentives from certain suppliers based on our contractual arrangements, including volume-based rebates. The rebates earned are recognized as a reduction of cost of inventories and reduce the cost of sales in the period when the related inventory is sold.
The rebates earned are recognized as a reduction of cost of inventories and reduce the cost of sales in the period when the related inventory is sold. Income Taxes We are subject to income taxes in the United States and numerous foreign jurisdictions.
Inventories Inventories are stated at lower of cost, using weighted average cost method, or net realizable value. Net realizable value is the estimated selling price of our products in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.
Net realizable value is the estimated selling price of our products in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Our inventory and capacity purchase commitments are based on forecasts of future customer demand and consider our third-party manufacturers’ lead times and constraints.
Fiscal Year 2023 Compared with Fiscal Year 2022 The year-over-year increase in cost of sales was primarily attributed to an increase of $1,379.6 million in costs of components, materials and contract manufacturing expenses primarily related to the increased shipments of our products, a $59.2 million increase in overhead costs which includes labor costs attributed to increase of operation activities, a $36.6 million increase in inventory reserves, and a $13.6 million increase in other cost of sales partially offset by a $44.6 million decrease in freight charges due to a reduced need to expedite shipments caused by disruptions in the supply chain caused by the COVID-19 pandemic.
Fiscal Year 2024 Compared with Fiscal Year 2023 The year-over-year increase in cost of sales was primarily attributed to an increase of $7,006.7 million in costs of components, materials and contract manufacturing expenses primarily related to the increase in shipments of GPU servers, HPC, and rack scale solutions which have higher costs, a $52.3 million increase in inventory write-down adjustments, a $19.6 million increase in overhead costs which includes labor costs attributed to increase of operation activities and a $8.7 million increase in freight charges.
The year-over-year increase in net sales of server and storage systems was primarily due to the strong demands from such customers for GPU, HPC, and rack-scale solutions which are generally more complex and of higher value, resulting in an increase of average selling prices.
The year-over-year increase in net sales of server and storage systems was primarily due to the strong demand and increased billings for GPU & Super Racks of $5,804.0 million or 52% compared to prior year, including liquid-cooled and air-cooled servers which are generally more complex and of higher value, primarily related to our H200, H100, and B200 systems, resulting in an increase of average selling price of 34%.
The year-over-year increase in research and development expenses was driven by a $43.5 million increase in employee related costs primarily due to stock-based compensation increases, salary increases and higher headcount as we expanded our workforce and invested in key talent, a $2.6 million increase in product development costs to support the development of next generation products and technologies, offset by a $11.1 million increase in research and development credits received from certain suppliers and customers.
The year-over-year increase in research and development expenses was primarily driven by a $153.2 million or 34.7% increase in employee-related costs, mainly comprised of a $81.0 million or 70.0% increase in stock-based compensation, and $60.2 million or 20.2% increase in salaries, as we expanded our workforce and invested in key talent.
Artificial Intelligence and Data Centers The increased use of AI, which has required increased datacenter capabilities, has substantially increased demand for our products in the recent past.
AI and Data Centers The growing use of AI, which requires enhanced datacenter capabilities, has substantially increased demand for our products. We expect this trend to continue, with further demand for datacenter expansion driven by the AI market.
In order to increase our sales and profits, we believe that we must continue to develop flexible and application optimized server and storage solutions and be among the first to market with new features and products and deliver Total IT Solutions that combine server, storage, networking and software that is integrated, validated and delivered at the rack and cluster (multi-rack) level.
For fiscal years 2025, 2024, and 2023, our net income was $1,048.9 million, $1,152.7 million, and $640.0 million, respectively. In order to increase our sales and profits, we believe that we must continue to develop flexible application optimized server and storage solutions while being among the first to market with new features and products.
Our cash and cash equivalents in foreign locations was $337.3 million and $192.3 million as of June 30, 2024 and 2023, respectively. Amounts held outside of the U.S. are generally utilized to support non-U.S. liquidity needs. Repatriations generally will not be taxable from a U.S. federal tax perspective but may be subject to state income or foreign withholding tax.
Our cash and cash equivalents were $5,169.9 million and $1,669.8 million as of June 30, 2025 and 2024, respectively. Our cash and cash equivalents held in foreign locations was $607.2 million and $337.3 million as of June 30, 2025 and 2024, respectively. Amounts held outside of the United States are typically used to meet non-U.S. liquidity needs.
Financial Highlights The following is a summary of financial highlights of fiscal years 2024 and 2023: • Net sales increased by 110.4% in fiscal year 2024 as compared to fiscal year 2023. • Gross margin declined to 13.8% in fiscal year 2024 from 18.0% in fiscal year 2023, primarily due to our strategy to offer competitive pricing to gain market share, change in product and customer mix, and higher manufacturing related expenses.
The year-over-year decrease of 2.7% in gross margin percentage was primarily due to our strategy to offer competitive pricing to gain market share, increased competition and a change in product and customer mix.
The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amount of assets, liabilities, net sales and expenses.
Critical Accounting Estimates General Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures.
We expect that the AI market, and thus the need for additional datacenter capabilities and liquid cooling, will continue to strengthen, and we will continue to enhance our product capabilities and breadth of our service offerings to meet the demand of the AI market and datacenters.
As a result, we will continue to enhance our product capabilities and expand our service offerings, including DCBBS to address the growing demand in the AI market and datacenter markets.
The prices for our subsystems and accessories can also vary widely based on whether a customer is purchasing power supplies, server boards, chassis or other accessories.
Similarly, the prices for our subsystems and accessories fluctuate depending on the relative value of the specific item being purchased. such as power supplies, server boards, chassis or other accessories.
Interest Expense and Other Income, Net Other income, net consists primarily of interest earned on our investment and cash deposits and foreign exchange gains and losses. SMCI | 2024 Form 10-K | 56 Interest expense represents interest expense on our term loans and lines of credit and amortization of the 2029 Convertible Notes issuance costs.
Other Income, Net and Interest Expense Other income, net and interest expense consists of interest earned on our investments and cash balances, interest incurred on our debt, and foreign exchange gains and losses.
We recognize tax liabilities for uncertain income tax positions on the income tax return based on the two-step process. The first step is to determine whether it is more likely than not that each income tax position would be sustained upon audit.
We recognize the benefit from a tax position only if it is more-likely-than-not that the position would be sustained upon audit based solely on the technical merits of the tax position. Our policy is to include interest and penalties related to unrecognized tax benefits as a component of income tax expense.
Years Ended June 30, 2024 2023 2022 Net sales 100.0 % 100.0 % 100.0 % Cost of sales 86.2 % 82.0 % 84.6 % Gross profit 13.8 % 18.0 % 15.4 % Operating expenses: Research and development 3.1 % 4.3 % 5.2 % Sales and marketing 1.3 % 1.6 % 1.7 % General and administrative 1.3 % 1.4 % 2.0 % Total operating expenses 5.7 % 7.3 % 8.9 % Income from operations 8.1 % 10.7 % 6.5 % Other income, net 0.1 % 0.1 % 0.2 % Interest expense (0.1) % (0.1) % (0.1) % Income before income tax provision 8.1 % 10.7 % 6.6 % Income tax provision (0.4) % (1.6) % (1.0) % Share of income (loss) from equity investee, net of taxes — % * (0.1) % — % * Net income 7.7 % 9.0 % 5.6 % * Represents an amount less than 0.1%.
SMCI | 2025 Form 10-K | 45 Table of Contents The following table presents certain items of our consolidated statements of operations for the years ended June 30, 2025, 2024, and 2023 (in millions): Years Ended June 30, 2025 2024 * 2023 * Net sales $ 21,972.0 $ 14,989.2 $ 7,123.5 Cost of sales 19,542.1 12,927.8 5,840.5 Gross profit 2,429.9 2,061.4 1,283.0 Operating expenses: Research and development 636.6 463.5 307.3 Sales and marketing 273.1 189.7 115.0 General and administrative 267.2 197.4 99.6 Total operating expenses 1,176.9 850.6 521.9 Income from operations 1,253.0 1,210.8 761.1 Other income, net 18.5 22.7 3.6 Interest expense (59.6) (19.4) (10.5) Income before income tax provision 1,211.9 1,214.1 754.3 Income tax provision (156.8) (63.3) (110.7) Share of income (loss) from equity investee, net of taxes (6.2) 1.8 (3.6) Net income $ 1,048.9 $ 1,152.7 $ 640.0 * Totals may not sum due to rounding.
We must also continue to expand our software and customer service and support offerings, particularly as we increasingly focus on larger enterprise and large data center customers. Additionally, we must focus on development of our sales partners and distribution channels to further expand our market share.
Our focus is on delivering Total IT Solutions that integrate, validate, and deliver server, storage, networking and software at the rack and cluster (multi-rack) level. Additionally, we will continue to expand our software offerings and enhance customer service and support, particularly as we increase our focus on large enterprise and data center customers.
On November 20, 2024, we prepaid in full and terminated the 2018 Bank of America Credit Facility, the Cathay Bank Credit Agreement and the Bridge Term Loan Facility. We continue to evaluate financing options that may be required to support the growth of our business.
We continue to assess financing options that may be necessary to support the growth of our business.
In June 2024, we executed a data center lease agreement and concurrently sublicensed it to another unrelated party (the “Sublicensee”) which is not reflected in the Consolidated Balance Sheets as the lease has not commenced. The future undiscounted fixed non-cancelable payment obligations pertaining to the data center lease is approximately $411.8 million.
Pursuant to the data center lease agreement dated June 14, 2025, we anticipate making an approximately $117.7 million lease payment subject to the remaining tranches expected to commence on October 2, 2025, which is not reflected in the consolidated balance sheets as the lease has not commenced.
Investing Activities Net cash used in investing activities increased by $154.7 million for fiscal years 2024 as compared to fiscal year 2023 primarily due to an increase in property, plant and equipment of $87.5 million, and an increase in investments in equity securities of early stage companies of $67.3 million.
The decrease in cash used in investing activities during fiscal 2025 compared to fiscal 2024 was mostly due to decreases in net purchases of non-marketable equity securities, partially offset by higher purchases of property, plant, and equipment.
We evaluate our estimates on an on-going basis based on a) historical experience, and b) assumptions we believe to be reasonable under the circumstances and are not readily apparent from other sources, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
On an ongoing basis, we regularly evaluate our accounting estimates based on historical experience and on various other assumptions that we believe are reasonable under the circumstances. The actual impact on our financial performance could differ from these estimates under different assumptions or conditions.
Fiscal Year 2023 Compared with Fiscal Year 2022 The year-over-year increase in overall net sales is the result of increased selling prices and units shipped of product sold especially to large enterprise and datacenter customers. The United States experienced the highest percentage growth among all regions.
Fiscal Year 2024 Compared with Fiscal Year 2023 The year-over-year increase in total net sales is driven by an increase in demand from customers for GPU servers, HPC and rack-scale solutions which have higher average selling prices, especially for large enterprise and data center customers from the United States.
Revenue Recognition We generate revenue from the sale of server and storage systems, including systems and related services, subsystems and accessories. We apply judgment in determining the transaction price as we may be required to estimate variable consideration when determining the amount of revenue to recognize.
“Organization and Summary of Significant Accounting Policies” in the notes to the consolidated financial statements in this Annual Report. SMCI | 2025 Form 10-K | 42 Table of Contents Revenue Recognition We generate revenue from the sale of server and storage systems, including systems and related services, subsystems and accessories.
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Our systems are application-optimized high performance and high-efficiency server and storage systems developed for a variety of markets, including the cloud service provider market, the enterprise market, the OEM appliance and large data center market, and the emerging 5G/Telco/Edge/IOT market.
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Founded and operating in San Jose, California, we are committed to delivering first-to-market innovation for Enterprise, Cloud, AI, and 5G Telco/Edge IT Infrastructure. As a Total IT Solutions manufacturer, our offerings include server, AI systems, storage, IoT devices, switches, software, and support services.
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Our Total IT Solutions include direct liquid-cooled and air-cooled rack-scale solutions, complete servers, storage systems, modular blade servers, blades, workstations, networking devices, server sub-systems, server management and security software. We also provide global support and services to help our customers install, upgrade and maintain their computing infrastructure. We commenced operations in 1993 and have been profitable every year since inception.
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Supermicro's expertise in motherboard, power, and chassis design expertise drives our ability to develop and produce next-generation innovations, from cloud to edge, for our global customers. Our products are designed and manufactured in-house across facilities in the United States, Taiwan, and the Netherlands.
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For fiscal years 2024, 2023 and 2022, our net income was $1.15 billion, $640.0 million and $285.2 million, respectively.
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Leveraging our global operations for scale and efficiency, we optimize solutions to improve TCO while reducing environmental impact through Green Computing initiatives. Our award-winning portfolio of Server Building Block Solutions empowers customers to tailor systems precisely to their exact workloads and applications.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeForeign Currency Risk To date, our international customer and supplier agreements have been denominated primarily in U.S. dollars and accordingly, we have limited exposure to foreign currency exchange rate fluctuations from customer agreements, and do not currently engage in foreign currency hedging transactions. The functional currency of our subsidiaries in the Netherlands and Taiwan is the U.S. dollar.
Biggest changeForeign Exchange Rate Risk We consider our direct exposure to foreign exchange rate fluctuations to be minimal as substantially all of our sales and purchases are in United States dollars. To date, our international customer and supplier agreements have been denominated primarily in U.S. dollars and accordingly, we have limited exposure to foreign currency exchange rate fluctuations from customer agreements.
As of June 30, 2024, our investments were in money market funds, certificates of deposits and auction rate securities. We are exposed to changes in interest rates as a result of our borrowings under our term loan and revolving lines of credit.
As of June 30, 2025, our investments were in money market funds, certificates of deposits and auction rate securities. We are exposed to changes in interest rates as a result of our borrowings under our term loan and revolving lines of credit.
The interest rates for the term loans and the revolving lines of credit ranged from 1.33% to 7.33% at June 30, 2024. Based on the outstanding principal indebtedness of $476.4 million under our credit facilities as of June 30, 2024, we believe that a 10% change in interest rates would not have a significant impact on the results of operations.
The interest rates for the term loans and the revolving lines of credit ranged from 1.3% to 5.8% at June 30, 2025. Based on the outstanding principal indebtedness of $112.5 million under our credit facilities as of June 30, 2025, we believe that a 10% change in interest rates would not have a significant impact on the results of operations.
However, certain loans and transactions in these entities are denominated in a currency other than the U.S. dollar, and thus we are subject to foreign currency exchange rate fluctuations associated with re-measurement to U.S. dollars.
The functional currency of our subsidiaries in the Netherlands, Taiwan and Malaysia is the U.S. dollar. However, certain loans and transactions in these entities are denominated in a currency other than the U.S. dollar, and thus we are subject to foreign currency exchange rate fluctuations associated with re-measurement to U.S. dollars.
Our investment in an auction rate security has been classified as non-current due to the lack of a liquid market for these securities.
To minimize this risk, we maintain our portfolio of cash equivalents and short-term investments in money market funds and certificates of deposit. Our investment in an auction rate security has been classified as non-current due to the lack of a liquid market for these securities.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk Interest Rate Risk The primary objectives of our investment activities are to preserve principal, provide liquidity and maximize income without significantly increasing the risk. Some of the securities we invest in are subject to market risk.
The primary objectives of our investment activities are to preserve principal, provide liquidity and maximize income without significantly increasing the risk. Some of the securities we invest in are subject to market risk. This means that a change in prevailing interest rates may cause the fair value of the investment to fluctuate.
Such fluctuations have not been significant historically, and a 10% change in foreign currency exchange rates would not have a significant impact on the results of operations. Realized and unrealized foreign exchange gain for fiscal years 2024, 2023 and 2022 was $6.3 million, $0.2 million and $7.7 million, respectively. SMCI | 2024 Form 10-K | 62
Such fluctuations have not been significant historically, and a 10% change in foreign currency exchange rates would not have a significant impact on the results of operations. Gains or losses from foreign currency remeasurement are included in other income or expenses. SMCI | 2025 Form 10-K | 54 Table of Contents
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This means that a change in prevailing interest rates may cause the fair value of the investment to fluctuate. To minimize this risk, we maintain our portfolio of cash equivalents and short-term investments in money market funds and certificates of deposit.
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Item 7A. Quantitative and Qualitative Disclosure About Market Risk Investment and Interest Rate Risk We are exposed to interest rate risk related to our fixed-rate investment portfolio and outstanding debt. The investment portfolio is managed consistent with our overall liquidity strategy in support of both working capital needs and growth of our businesses.

Other SMCI 10-K year-over-year comparisons