Supermicro (SMCI) reported its September quarter (Q1 of fiscal 2027) on 11/3. The headline numbers are huge: - Revenue $19.9bn, vs $5.0bn a year ago and $11.1bn last quarter - Net income $1.59bn, vs $168m a year ago - Original guide in August was $14.5–15.5bn. On 10/20 they pre-announced $18.5–19.5bn. Actual came in above that too. What the release doesn't put up front is the cash flow statement. Operating cash flow was −$434m on $1.59bn of net income. Two lines explain it: - Accounts receivable up $3.56bn (to $9.69bn from $6.13bn in June) - Inventory up $2.48bn (to $15.05bn from $12.90bn) What kept it from being much worse: deferred revenue, which is mostly customers paying ahead, rose $3.05bn. Current deferred revenue went from $1.58bn to $4.33bn in one quarter. Without that, operating cash flow would have been roughly −$3.5bn. To be fair to the company, this looks like growth eating cash rather than collection problems. Receivables were about 44 days of sales vs about 50 last quarter, and inventory turned faster too. But it means the record profit didn't turn into cash. Cash fell to $6.90bn from $7.52bn, against $8.6bn of bank debt and convertible notes. The guidance is the other thing worth reading closely: - Q2 (December quarter): $19.5–21.5bn, so roughly flat with Q1 at the midpoint ($20.5bn) - Full fiscal year 2027: $72–82bn Q1 actual plus the Q2 midpoint is about $40.5bn. At the $77bn full-year midpoint, that leaves about $36.6bn for the second half, or about $18.3bn a quarter, below the $19.9bn just reported. Even at the top of both ranges, the second half averages about $20.3bn a quarter, flat with Q2. So the guide doesn't assume growth continues past December. Margins also came down from last quarter: gross margin 12.7% vs 17.5% in the June quarter (which was unusually high; it was 9.9% the quarter before). On 10/20 the company attributed Q1 margin to customer and product mix. How I'd frame it: demand isn't the question this quarter, it's how much of each dollar of revenue Supermicro has to finance before it gets paid, and whether the second half really is flat. The 10-Q (not filed yet) should show customer concentration and the backlog detail. What I'm watching: - Operating cash flow turning positive as Q1 receivables are collected - Deferred revenue: does it keep rising (more prepaid orders) or start to fall as orders ship? - Whether the full-year range moves up or down at the December quarter For holders: what would you need to see in the 10-Q? Note: the release says its figures are preliminary and may change before the 10-Q. Not investment advice.
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