- Buys
- 1 of 4
- Three are needed, so it stays out of the basket. Investor D did not answer.
- Net income, fiscal year to June 30, 2026
- $2.23B
- What the 9.6 times multiple sits on.
- Free cash flow, same year
- -$6.97B
- Operating cash flow less $162M of capex.
- Purchase commitments off the balance sheet
- $34.20B
- Larger than the $21.33B market cap.
Quality, decade-long holdingReal demand, no moat, and growth that eats cash.
Deep value, balance sheet firstAbout 20 times five-year average earnings. No margin of safety.
Macro and reflexivityThe preannouncement challenges the distrust, and a 10-Q tests it within weeks.
GrowthTimed out before answering.
Session of October 21, 2026. Three seats voted; Investor D ran past its time limit without answering. The committee last reviewed Super Micro on August 12, 2026, in our AI buildout cash review: Watch, Avoid, Buy and Hold.
Bottom line
On October 20, 2026, Super Micro said its September quarter would bring $18.5B to $19.5B of revenue against its own $14.5B to $15.5B guide, at a 12.0% to 12.5% gross margin against 10.4% to 10.8% (8-K, Exhibit 99.1, October 20, 2026). Not one seat doubted the demand.
The argument was about cash. Investors A and B read that gap as the business model: an integrator on a 10.8% gross margin funding inventory ahead of every dollar of growth. Investor C reads it as a growth spurt one filing can test, and voted Buy on the test.
We side with the majority on today's evidence. The price asks little of reported earnings and much of conversion, and no seat models enough year-three cash to clear even the lowest hurdle. The cash flow statement in the 10-Q due by November 9, 2026, is the first test.
The business in 60 seconds
Super Micro designs and assembles servers and rack-scale systems, mostly for AI. It buys accelerators made by others, integrates them and ships to a few very large buyers. The 10-K says its sales "are concentrated in a few large customers" (10-K Item 1A, filed August 31, 2026). No segment revenue is tagged.
Each $100 of fiscal 2026 revenue left about $10.80 of gross profit and $7.10 of operating income. Capex was only $162M; the cash goes into working capital. Operations lean on Taiwan, including related-party ties to two private Taiwan companies, Ablecom and Compuware (10-K Item 1A).
On control, the 10-K warns that "the concentration of our capital stock ownership may limit your ability to influence corporate matters." We did not source holders above 10% from the proxy for this review.
| Fiscal year | Revenue | Operating margin | Free cash flow | Diluted shares |
|---|---|---|---|---|
| 2022 | $5.2B | 6.4% | -$486M | 536.2M |
| 2023 | $7.1B | 10.7% | $627M | 559.7M |
| 2024 | $15.0B | 8.0% | -$2.6B | 602.1M |
| 2025 | $22.0B | 5.9% | $1.5B | 628.4M |
| 2026 | $39.1B | 7.1% | -$7.0B | 697.3M |
Fiscal years end June 30. Each year's 10-K on SEC EDGAR. Free cash flow here means operating cash flow minus capex.
What changed
- The preannouncement. Both September-quarter figures are unaudited and subject to revision, in the company's words. Full results come on a call set for November 3, 2026 (8-K, October 20, 2026).
- The June quarter. Revenue was $11.12B, up 93.2%, and operating income $1.49B against $228M (10-K less the nine-month 10-Q).
- The competitors. In the quarter to July 31, 2026, Dell grew revenue 57.7% to $46.97B with operating income up 203.7%, and Hewlett Packard Enterprise grew revenue 33.7% to $12.21B with operating income up 464.0% (each company's filings on SEC EDGAR).
- Finance leadership. Reuters reported on October 15, 2026, that the company named an outside chief financial officer. We did not find the 8-K, so it stands as reported, not filed.
The bull case on Super Micro
- Demand is broad. The preliminary $19.0B midpoint is about 71% above the June quarter, and two rivals show the same acceleration in filed numbers.
- Margin rose with volume. The preliminary gross margin beats fiscal 2026's 10.8%, which the company puts down to mix.
- The multiple measures a weak start. The first nine months of fiscal 2026 earned about $1.28B of operating income on $27.94B of revenue. The June quarter alone earned $1.49B.
- Liquidity covers the next maturity. Cash and short-term investments of $7.69B sit against $2.04B of debt principal due within a year (10-K).
the demand signal is industry-wide, two independent peers accelerated in the same window
Investor C, Buy, on the peer filings
The negative cash flow may be the honest cost of hypergrowth, not a structural flaw.
Investor A, Avoid, arguing against itself
The bear case on Super Micro
- Profit has not become cash. Five years of free cash flow sum to about -$8.0B against roughly $5.3B of net income.
- The commitments outweigh the company. Purchase commitments exceed total assets of $29.95B.
- Owners fund the gap. Diluted shares rose 24.6% from fiscal 2023, with no buybacks tagged and stock compensation at $412M.
- The record is in the 10-K. A 2024 short-seller report alleging accounting manipulation and sanctions evasion, and an unsealed indictment of three people tied to the company, including a former director, over alleged export control violations.
Profits that never become cash are not owner earnings.
Investor A, Avoid 8
The trust discount may be information rather than sentiment.
Investor C, Buy, on its own weakest point
Where the committee splits
Two seats voted Avoid and one voted Buy, and two figures carry the split.
Is the cash drain the price of a growth spurt, or the business itself?
| Position | Seats | The figure it rests on |
|---|---|---|
| Structural | A, B | Free cash flow negative in three of five years; -$6.97B in fiscal 2026 (10-K) |
| Timing | C | Operating cash flow of +$1.7B in fiscal 2025, a year revenue still grew about 46% (10-K) |
What settles it. Operating cash flow for the quarter to September 30, 2026, in the 10-Q due by November 9, 2026. Investor A's line is any positive figure. Investor C's is -$1.70B, last year's average quarterly burn. Between the two, both verdicts stand.
From the chair, to Investor C. Your bull case funds working capital through customer prepayments and Taiwan credit lines, neither of them a figure on the sheet. If the 10-Q shows operating cash flow between -$1.70B and zero, which balance sheet line tells you the burn is narrowing rather than deferred? It turns on fiscal 2026 operating cash flow.
Which earnings does the multiple actually sit on?
| Position | Seats | The figure it rests on |
|---|---|---|
| A five-year average | B | Mean net income of about $1.07B, so about 20 times earnings |
| The exit rate | C | June-quarter operating margin of 13.4%, against 7.1% for the year |
What settles it. The fiscal 2027 10-K, where Investor B reassesses at net income and free cash flow of at least $2.85B each. Our analyst cautions that a quarterly operating margin above the full-year gross margin is unusual and needs checking against the 10-K.
From the chair, to Investor B. Your base averages five years in which revenue grew more than sevenfold. Is a simple mean of net income right for a company that changed size that much, and what fiscal 2027 figure would make you replace it? It turns on net income in the five-year history.
| Investor | Verdict | What breaks its thesis |
|---|---|---|
| A | Avoid 8 | Positive September-quarter operating cash flow (10-Q by November 9, 2026), or fiscal 2027 operating cash flow above $2.0B. Conversion through a slowdown moves it to Watch. |
| B | Avoid 8 | Fiscal 2027 net income and free cash flow each at least $2.85B. Growth that produces cash moves it toward Watch or Buy. |
| C | Buy 7 | September-quarter operating cash flow worse than -$1.70B; gross margin below 11.0% or a December-quarter guide midpoint below $18.5B on November 3, 2026; high-yield spread above 4.50% before December 31, 2026. An AI capex turn moves it toward Avoid. |
| D | No response | Did not answer. |
Valuation
What the price requires. The arithmetic is ours, and no seat saw it. Trailing free cash flow is negative, so we solve on net income instead. The $21.33B market cap needs it to shrink 3.6% a year for ten years, then grow 3%, discounted at 9.65%, the 10-year yield plus 4.5 points. Year three lands at $2.00B. At 8.65% the market cap needs a 5.5% annual decline and $1.88B in year three. At 10.65% it needs a 1.8% decline and $2.11B. Earnings reach a holder only as cash, so we set this hurdle against each seat's year-three free cash flow. The free cash flow yield is negative against a 5.15% 10-year; enterprise value cannot be built because total debt is not tagged.
Hatched bars: year-three net income the market cap needs at each rate. Seat bars: year-three free cash flow, weighted by the seat's own probabilities.
| Investor | Bear | Base | Bull | Weighted, year 3 | Against the price |
|---|---|---|---|---|---|
| A | 35%, near zero | 45%, near zero | 20%, above $3B | about $0.60B | below the band |
| B | 30%, -$1.67B | 50%, $1.19B | 20%, $4.29B | $0.95B | below the band |
| C | 20%, -$4B to -$8B | 55%, $1B to $3B | 25%, above $3B | $0.65B | below the band |
Only the weighted column takes a range midpoint. It counts "near zero" as zero and "above $3B" as $3B.
All three seats sit below the band, and the company gives no cash guidance. Investor C is the telling case: below the lowest hurdle on its own figures, it voted Buy because its case rests on a dated test, not the long-run cash path: "My trade is not that this is a great business forever, it is that the market's assigned probability of confirmation is too low".
| Investor | Entry discipline |
|---|---|
| A | A three-year average free cash flow yield of 10% or more, or price to tangible book near 1.0 times |
| B | At most 7.5 times verified normalized earnings, with cash conversion shown |
| C | Price to sales of 0.4 times or less, or a 12% earnings yield on audited fiscal 2027 earnings |
Comparables
| Company | Market cap | Growth last FY | Operating margin | P/E | FCF yield |
|---|---|---|---|---|---|
| Super Micro (SMCI) | $21.3B | 77.8% | 7.1% | 9.6x | negative |
| Dell (DELL) | $295.4B | 18.8% | 7.2% | 26.0x | 2.9% |
| Hewlett Packard Enterprise (HPE) | $74.5B | 13.8% | -1.3% | 26.7x | 5.6% |
| NetApp (NTAP) | $41.2B | 5.4% | 24.2% | 29.1x | 4.0% |
SEC filings and one market price, one method on every row. Fiscal year ends differ. No sheet could be built for Pure Storage.
Dell matches the operating margin at a quarter of the growth and nearly three times the multiple. Dell converts; Super Micro does not. NetApp's 24.2% margin is what pricing power looks like in this industry. Lenovo and the Taiwan manufacturers that build servers for the largest buyers do not file with the SEC.
Key risks
Ranked by the desk, most severe first. Raised by names the source.
| Risk | Why it matters | Raised by | First signal |
|---|---|---|---|
| High. Commitments in a demand break | Components arrive whether or not orders do | 10-K; Analyst; Investors A, B, C | An excess and obsolete inventory charge in a 10-Q |
| High. Earnings that do not convert | Owners fund growth through dilution | Analyst; Investors A, B, C | September-quarter operating cash flow, 10-Q by November 9, 2026 |
| High. Accounting and governance | Allegations, an indictment, related parties | 10-K Item 1A; Analyst; Investors A, C | A late filing, an auditor change or a material weakness |
| High. Export controls and sanctions | Rules could close whole markets | 10-K Item 1A; Analyst; Investors A, B, C | Any enforcement 8-K naming the company itself |
| Medium. Funding in wider credit | Refinancing a cash burn as spreads widen | Investor C; desk arithmetic | High-yield spread above 4.50% on FRED |
| Medium. Prior auditor exit and filing delays | A repeat hits financing and listing | Analyst (general knowledge, not in the filings we read); forum (unverified) | A change of auditor or a late 10-Q |
No seat raised the 2024 auditor exit and delayed filings. It matters most to Investor C, whose weakest link is whether the preliminary figures survive the audited close.
What to watch
| Date | Event | What it decides |
|---|---|---|
| November 3, 2026 | Earnings call, scheduled in the 8-K filed October 20, 2026 | Reported margin against the preliminary range; December-quarter guidance |
| November 9, 2026 | 10-Q for the September quarter, last day under SEC rules | Operating cash flow, inventory, receivables and share count |
| Ongoing | High-yield spread on FRED | Investor C's credit line at 4.50% |
| August 30, 2027 | Fiscal 2027 10-K, last day under SEC rules for a large accelerated filer | Investor A's and Investor B's full-year cash tests |
Owning it onchain
Super Micro has two tokenized versions. Backpack's SMCI.US is not investable: it is not verified on Jupiter. We have not judged xStocks' SMCIx: when we checked, before regular US trading opened on October 21, 2026, no market maker would quote a sale back.
Data
| Item | Figure | Source |
|---|---|---|
| Price | $32.47, October 20, 2026 close | Yahoo Finance |
| Shares outstanding | 656,965,384 at July 31, 2026 | 10-K cover, SEC EDGAR |
| Market cap | $21.33B | Price times shares |
Method. Four investors with different philosophies, each on a different AI model, read one identical fact sheet and voted independently. A name needs three Buys to enter a basket. How the committee works.
Correction. This article first said neither token cleared our bar, counting a missing sell quote for SMCIx taken before regular US trading opened as a failure. Market makers quote thinly or not at all at that hour. We now judge that cost only during regular US market hours, and we have removed that verdict.
As of October 21, 2026, BagsCapital manages no outside capital and holds no position in Super Micro. Nothing here is investment advice.