SMCI, Super Micro Computer, Inc.
We are a Silicon Valley-based provider of total IT solutions which address demanding workloads from the enterprise and cloud to the intelligent edge.
Read top to bottom, the owner's questions in the order an owner asks them: what the business is, whether the record holds, whether it survives and is any good, and what you would be paying. New to the questions? Start with the Method.
The business in brief
read the 10-K →What this business is and what moves its needle, read from the numbers in its filings. The quantitative detail is in the sections below; the verdict is left to you.
- What it is
- Revenue is led by Server and storage systems (97%) and Subsystems and accessories (3%), with 2 more lines behind.
- What moves the needle
- Volume against price, and shelf position. What decides it: whether it can raise prices without losing the customer, and whether the brand still commands its margin.
- Is it a good business?
- Return on capital has sat near the cost of capital (median 12%). Owner earnings, the cash-based check, have been thin too. This is price-taker territory, where the balance sheet and the cycle matter more than any multiple; the 10-K is where you look.
Every line here is arithmetic from the company's own filings, not a model's opinion, and each figure appears in full in the sections below.
Where the money comes from
read the 10-K →Server and storage systems is 97% of revenue, so this is largely a single-line business.
- Server and storage systems97%$21.3B
- Subsystems and accessories3%$660M
- Service and Software2%$331M
- Services1%$223M
From the segment footnote of the company's own 10-K. Shares are of total revenue; the profit bar shows each segment's share of segment operating profit, before unallocated corporate costs.
The record, 2016–2025
realized figures from each filing, no estimates| 2016’16 | 2017’17 | 2018’18 | 2019’19 | 2020’20 | 2021’21 | 2022’22 | 2023’23 | 2024’24 | 2025’25 | TTMTTMMar 2026 | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| RevenueRevenue | $2.2B | $2.5B | $3.4B | $3.5B | $3.3B | $3.6B | $5.2B | $7.1B | $15.0B | $22.0B | $33.7B |
| Gross marginGross mgn | 15% | 14% | 13% | 14% | 16% | 15% | 15% | 18% | 14% | 11% | 8% |
| Operating marginOp. mgn | 4.8% | 3.8% | 2.8% | 2.8% | 2.6% | 3.5% | 6.5% | 10.7% | 8.1% | 5.7% | 4.5% |
| Net incomeNet inc. | $72M | $67M | $46M | $72M | $84M | $112M | $285M | $640M | $1.2B | $1.0B | $1.2B |
| EPS (diluted)EPS | $0.14 | $0.13 | $0.09 | $0.14 | $0.16 | $0.21 | $0.53 | $1.14 | $1.91 | $1.67 | $1.85 |
| Owner earningsOwner earn. | $74M | ($126M) | $60M | $238M | ($75M) | $65M | ($486M) | $627M | ($2.6B) | $1.5B | ($6.8B) |
| ROICROIC | 12% | 8% | 7% | 11% | 9% | 12% | 16% | 36% | 27% | 88% | 12% |
| Cash & investmentsCash+inv | $179M | $111M | $115M | $248M | $211M | $232M | $267M | $440M | $1.7B | $5.2B | $1.3B |
| Net debt / (cash)Net debt | ($85M) | $51M | ($115M) | ($225M) | ($181M) | ($134M) | $329M | ($150M) | ($1.2B) | ($5.1B) | $2.8B |
| Book value / shareBVPS | $1.34 | $1.49 | $1.61 | $1.82 | $2.01 | $2.04 | $2.66 | $3.52 | $9.00 | $10.03 | $11.25 |
Owner’s Scorecard
Will it survive?
- Can it pay its interest? 21.0×ComfortableOperating income $1.3B ÷ interest expense $60M
Operating profit covers interest with the kind of margin Graham wanted for a defensive holding. Necessary, not sufficient, it says solvent, not cheap.
- ConservativeTotal debt $282M ÷ operating income $1.3B
Years of operating profit it would take to repay all debt. A first read, not a credit rating: it's gross debt (not netted against cash) over EBIT (not EBITDA), and a cyclical year distorts it.
- Debt, net of cash +$4.9BNet cashCash $5.2B − debt $282M
Cash and short-term investments exceed every dollar of debt by $4.9B, on net the company owes nothing, and can act from strength when others can't. Net debt is the leverage figure that matters; the gross ratio above ignores the cash already set against it. Strategic or illiquid investments aren't counted here.
- Capital-hungryDSO 37 + DIO 87 − DPO 24 days
Days cash is tied up between paying suppliers and collecting from customers. Lower is better; a long cycle means growth itself eats cash.
Is it a good business?
- ExceptionalNOPAT $1.1B ÷ invested capital $1.4B (debt + equity − cash)
The rate the business earns on the money tied up in it, Buffett's north star, because over time a stock tracks the ROIC beneath it. Above ~15% sustained hints at a moat; below ~8% the company may destroy value as it grows. Asset-light businesses (R&D expensed, little capital) read artificially high, pair this with Owner Earnings.
- SolidOwner Earnings $1.5B = operating cash $1.7B − capex $127M
What an owner could take out without starving the business. That's 7% of revenue. Treating stock comp as the real expense it is (less $314M of SBC) leaves $1.2B. Honest caveat: capex here blends maintenance and growth, so steady-state Owner Earnings may run higher (see capex vs. depreciation).
- Cash-backedCash from ops $1.7B ÷ net income $1.0B
How much of reported profit showed up as operating cash. Above 1× is reassuring; well below suggests earnings lean on accruals. One year is noisy, growth and working-capital swings distort it, and this is operating cash, not free cash. Watch the multi-year trend.
How is the cash used?
- Reinvests most of itDividends + buybacks $0 ÷ Owner Earnings $1.5B
Of $1.5B Owner Earnings, $0 (0%) went back to shareholders, $0 dividends, $0 buybacks. Returning most of it signals a mature cash machine; reinvesting most could mean a long runway, or empire-building. The split doesn't say which; the return earned on it (see ROIC) does.
- Investing or harvesting? 3.10×ExpandingCapex $127M ÷ depreciation $41M
Descriptive, not a grade. Above ~1× means investing faster than assets wear out (growth, or, sustained for years, today's earnings carrying less depreciation than tomorrow's will). Below means spending less than it's wearing out (efficiency, or a melting asset base). The ratio won't tell you which; the filings will.
Durability & moat, 2016–2025
A moat is a high return that doesn’t fade, reinvested at high returns. Here is what the record says, judgments, not another chart of the numbers.
- Profitable years 10 of 10
Never lost money over the record, the earnings stability Graham insisted on.
- Return on capital ≥ 15% 4 of 9 yrs
A moat shows up as a high return on invested capital that holds year after year, not one good vintage.
- Operating margin 5% (FY2016) → 6% (FY2025)
Margins held roughly steady across the record.
- Reinvestment, incremental ROIC 52%
Every extra dollar the company reinvested earned a high return, it is still compounding, not coasting on an old moat.
- Worst year 2020 · 2.6% op. margin
Stayed profitable even in its hardest year, the resilience that survives recessions.
Solvent is not the same as cheap; growing is not the same as good. These are vital signs, not a verdict, the judgment is yours, and the filing is one click away.
Management & pay
Two questions Buffett actually asks about pay: is stock compensation, a real expense, whatever the income statement pretends, quietly large, and is the top wildly out of line with the floor. He's no populist about it; he just wants pay that's rational and earned, and comp committees that aren't lapdogs.
- Stock-based compensation$314M
The slice of the business handed to employees in shares this year, 1% of revenue, equal to 25% of operating profit. Buffett's oldest accounting fight: this is compensation, compensation is an expense, real whether or not the headline earnings admit it. And note the trap, the cash-flow statement adds SBC back, so the operating cash, and the owner earnings drawn from it, are flattered by exactly this amount; counted as the cost it is, what an owner keeps is lower.
Graham’s defensive-investor test
5 of 6 metGraham gave the defensive investor seven numerical criteria in The Intelligent Investor. Here they are, run mechanically on the filings, his framework, not our verdict. Meeting them is a floor of safety, not a reason to buy; missing one is no veto, since many fine modern businesses fail his strictest liquidity tests by design. The worth is in seeing exactly where a company stands against the canon, every number sourced.
- Adequate size PassRevenue ≥ $2B · $22.0B
Big enough to weather a storm. Graham's 1972 floor was ~$100M of sales (≈ $700M today); we use a $2B revenue line as a conservative modern stand-in.
- Strong liquidity PassCurrent ratio ≥ 2× · 5.25×
Current assets at least twice current liabilities, near-term bills covered without touching the business. Strict by design: many cash-rich modern firms run leaner and miss it, holding their cushion in longer-dated securities.
- Conservative debt PassDebt ≤ working capital · $282M vs $10.0B WC
Graham's rule that borrowings not exceed net current assets. Capital-heavy and buyback-heavy firms routinely fail it, read it next to interest coverage, not alone.
- Earnings stability PassA profit every year (10-yr record) · no losses
Graham wanted earnings in each of the past ten years, the stability a defensive owner leans on.
- Dividend record MissUninterrupted dividends · none paid
An unbroken dividend was Graham's mark of durability. He wanted twenty years; the filings show about ten, and a single suspension breaks the streak. Non-payers, many fine modern compounders, fall outside his defensive net by design.
- Earnings growth PassEarnings +33% over the record · +1435%
At least a third more earnings than a decade ago, averaging three years at each end. Net income (not per-share), so stock splits don't distort it, buybacks and dilution show up in the share-count line instead.
- Moderate price —P/E ≤ 15 and P/E × P/B ≤ 22.5 · decided by the price
Graham's valuation gate, the wall he kept between a sound business and a sound investment. Earnings are $1.67/share and book value $10.03/share. Enter a price in “What the price implies” just below for the P/E, P/B, and whether it clears. But this is the rule Buffett outgrew: there's no hard P/E law, and a wonderful business can deserve a far richer multiple if the thesis holds, treat it as the bargain-hunter's floor, not a verdict on the price.
Graham would be the first to say a checklist is a starting point, not an answer. These are his defensive, bargain-hunter's tests, the cigar-butt lens. Buffett and Munger grew past it, paying fair prices for wonderful businesses; that lens lives in the moat and owner-earnings work above, and both still matter. Clearing Graham’s tests earns a closer look; failing them earns harder questions, not a dismissal.
What the price implies
reverse-DCFOwner earnings are negative today, so the usual reverse-DCF has nothing to grow. But that's exactly when a price makes its boldest promise. So we flip the question: type a price, and see the future profitability you'd have to believe to justify it.
Enter a price to run it.
It flips the reverse-DCF: the company must reach owner earnings that, valued at a mature multiple and discounted back at your rate, equal today's market cap, shown as the margin it must earn on revenue grown at your rate, from negative today. For a deep cyclical at a trough, normalized through-cycle earnings are the better lens; this is for the genuinely unprofitable.
What the filing emphasizes, FY2025
read the 10-K →Each year a 10-K must name what could go wrong, in the company's own words. Here are the ones Graham and Buffett would stop on, each set against the figure from the same filings that bears on it, anchored to a period you can find in the record above. We point; the judgment is yours.
- Customer concentrationBusiness
Who the revenue leans on. When one buyer is a large slice of sales, that buyer holds the pricing power, and its troubles become the company's.
“Four customers each accounted for 10% or more of our net sales in fiscal year 2025 and one single customer accounted for 10% or more of net sales in fiscal year 2024.”
From the recordRevenue exposed (TTM)$33.7B - Pricing power & competitionMD&A
Whether the company sets its price or takes it. Durable pricing power is the surest mark of a moat; price competition is the surest mark there isn't one.
“Gross margin decreased to 11.1% in fiscal year 2025 from 13.8% in fiscal year 2024, primarily due to our strategy to offer competitive pricing to gain market share, change in product and customer mix, and higher manufacturing related expenses.”
From the recordOperating margin4.5% now (TTM), off a 10.7% peak (FY2023) - Supplier & input dependenceRisk Factors
A choke point upstream. A sole or limited supplier can dictate terms, and a single shortage can stop the line.
“We rely on a limited number of suppliers for certain components used to manufacture our products.”
From the recordGross-margin cushion (TTM)8% - Concentrated dependenceRisk Factors
What the whole business leans on, a product, a platform, a partner. Concentration cuts both ways, and the filing is where management has to admit it.
“The markets in which we operate are dynamic and complex, and our success depends upon our ability to deliver both our current product offerings and new products and technologies on time and at acceptable prices to our customers.”
From the recordOwner-earnings margin at stake (TTM)−20% - Debt terms & refinancingRisk Factors
The fine print behind the debt. Covenants and near-term maturities decide who is really in control when a year goes badly.
“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.”
From the recordBalance sheet (TTM)+$4.9B net cash · interest covered 21.0× - Litigation & contingenciesRisk Factors
Claims an owner inherits. Most disclosure is boilerplate; this fires only on an actual matter, a named suit, a settlement, a contingency, a number.
“From time to time, we are involved in lawsuits or other legal proceedings alleging patent infringement or other IP rights violations by us, our employees or parties that we have agreed to indemnify.”
A judgment, not a number, weigh it against the filing yourself. - DilutionRisk Factors
Whether your slice quietly shrinks. New shares fund the company at the existing owner's expense.
“If we raise additional capital through additional future issuances of equity or equity-linked securities, our existing stockholders could suffer significant dilution, and any new equity securities we may issue could have rights, preferences and privileges superior to those holders of our common stoc…”
A judgment, not a number, weigh it against the filing yourself.
What changed, FY2025 vs FY2024
read the 10-K →Most of a 10-K is boilerplate carried over verbatim; the signal is in what's new. These lines appear this year and weren't there last, figure updates filtered out, so only the language shift remains.
- “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…”
- “These increases in expense were partially offset by a $15.7 million or 119.5% net movement in investment gains/(loss), as we incurred a loss in prior year of $13.1 million and a gain in the current year of $2.6 million, and a $31.0 million or 104.8% increase in interest income due to higher average …”
- “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 …”
- “The increase in cash flows from operating activities during fiscal 2025 compared to fiscal 2024, was due to an increase in cash collection from our customers driven by the increase in revenue reduction in inventory purchase, partially offset by higher cash paid for interest and other operational spe…”
- “Any actual or alleged disruption to, or security breach or incident affecting, our systems or those of our third-party partners could damage our reputation, lead to theft or misappropriation of our intellectual property and trade secrets, result in regulatory investigations, claims or litigation, af…”
Classic text analysis over the filing itself, no model wrote a word of this, and every quote is the company's own.
Peers, Computers & devices
The same industry, side by side on owner economics, compare, don't rank by a single number.● marks best in the group.
| Company | Revenue | Gross margin | Op. margin | ROIC | Owner earn. margin |
|---|---|---|---|---|---|
| HPQHP Inc. | $55.3B | 21% | 5.7% | 53% | 5% |
| HPEHewlett Packard Enterprise Company | $34.3B | 59% | -1.3% | -1% | 2% |
| SMCISuper Micro Computer, Inc. | $22.0B | 11% | 5.7% | 77% | 7% |
| WDCWestern Digital Corporation | $9.5B | 39% | 24.5% | 14% | 13% |
| PANWPalo Alto Networks, Inc | $9.2B | 73% | 13.5% | 12% | 38% |
| STXSeagate Technology Holdings PLC | $9.1B | 35% | 20.8% | 50% | 9% |
| ANETArista Networks, Inc. | $9.0B | 64% | 42.8% | 30% | 47% |
| FTNTFortinet, Inc. | $6.8B | 80% | 30.7% | — | 33% |