Supermicro Q4 FY2026 Earnings: Gross Margin Rebounds to 17.5%

Supermicro (NASDAQ: SMCI) reported preliminary Q4 FY2026 net sales of $11.12 billion, up about 93% from $5.76 billion a year earlier, while diluted GAAP EPS increased to $1.62 from $0.31. GAAP gross margin rose to 17.5% from 9.5%, helping net income reach $1.18 billion, and the quarter generated $747 million of operating cash flow. The quarter ended June 30, 2026, and the figures remain unaudited and subject to completion of the company’s closing and review procedures.

Core earnings data

Revenue nearly doubled year over year, but gross profit grew faster as GAAP gross margin expanded by 8.0 percentage points. The improvement was also pronounced sequentially: gross margin rose from 9.9% in Q3 FY2026 to 17.5% in Q4, while net income increased from $483 million to $1.18 billion.

Management attributed the profitability improvement to a richer enterprise customer mix and broader adoption of its Data Center Building Block Solutions architecture. Operating expenses rose about 44% year over year to $454.6 million, substantially slower than gross profit growth, resulting in higher operating leverage.

Non-GAAP results mainly exclude stock-based compensation. Q4 stock-based compensation totaled $106.6 million before taxes.

Q4 margin recovery contrasts with full-year working-capital pressure

The Q4 margin rebound was not representative of the entire fiscal year. FY2026 net sales rose to $39.06 billion from $21.97 billion and net income increased to $2.23 billion from $1.05 billion, but full-year GAAP gross margin slipped to 10.8% from 11.1%. The higher 17.5% fourth-quarter margin therefore reflects a late-year improvement rather than a full-year trend.

Cash flow presents a similar contrast. Q4 generated $747 million from operations, with capital expenditures and investments of $25 million. For the full year, however, operating activities used $6.81 billion of cash versus providing $1.66 billion in FY2025, despite the increase in annual net income.

Working capital was the primary reason. The cash flow statement recorded an $8.88 billion use of cash from inventory and a $3.92 billion use from accounts receivable. At year-end, inventory stood at $12.90 billion, up from $4.68 billion, while accounts receivable reached $6.13 billion from $2.20 billion. A $1.88 billion increase in deferred revenue and a $963 million contribution from accounts payable provided partial offsets.

Net financing inflows of $9.48 billion funded the operating cash deficit and helped lift cash and cash equivalents to $7.52 billion from $5.17 billion. Supermicro ended FY2026 with approximately $8.7 billion of bank debt and convertible notes.

Guidance points to higher Q1 revenue but lower sequential EPS

Supermicro expects Q1 FY2027 revenue to exceed the latest quarter, but both its GAAP and non-GAAP EPS ranges are below Q4 levels. The company did not provide a gross-margin forecast, making profitability and operating leverage important measures to monitor as sales scale.

The Q1 outlook assumes tax rates of approximately 20.1% under GAAP and 20.5% on a non-GAAP basis. It also assumes 745 million diluted GAAP shares and 761 million diluted non-GAAP shares. The GAAP outlook includes approximately $106 million of expected stock-based compensation expense, with related tax effects of $32 million excluded from non-GAAP EPS.

Management view

CEO Charles Liang said Supermicro added several hundred enterprise and other customers during FY2026, generated more than $60 billion in new orders, and entered FY2027 with a record backlog. Management linked the Q4 profitability improvement to the growing enterprise customer mix and adoption of its optimized data-center architecture.

The company also emphasized continued investment in technology, manufacturing capacity and global compliance. These investments are intended to support faster deployment of AI infrastructure, although the earnings release did not quantify their future cost or margin effects.

Risks investors should monitor

• Preliminary financial statements: The Q4 and FY2026 figures are unaudited and may change after management, audit committee and financial closing reviews are completed.
• Export-control review: The board is conducting an independent review of certain transactions related to export-control issues. The company stated that the outcome could affect its forecasts, preliminary results and prior-period results.
• Working-capital conversion: The expansion in inventory and receivables contributed to a substantial full-year operating cash outflow. Converting those balances into collections and sales will be important to cash generation.
• Revenue and earnings divergence in the outlook: Q1 guidance calls for higher sequential sales but lower EPS, putting attention on gross margin, customer mix and operating costs.
• Customer concentration and cost pressure: Supermicro said pursuing larger customers could increase concentration, raise cost of sales, reduce margins and make revenue less predictable. Tariffs and weaker demand for the latest product generations or added components could also pressure profitability.

Summary

Supermicro closed FY2026 with sharply higher Q4 sales and a significant margin recovery supported by enterprise customer mix and broader data-center solution adoption. The central questions now are whether that profitability can be sustained as revenue scales, whether accumulated inventory and receivables can be converted into cash, and how the company resolves its ongoing export-control review.