Super Micro Computer, Inc. (NASDAQ:SMCI) Q2 2023 Earnings Call Transcript

Ananda Baruah: Yes, just a few if I could. So, maintaining — actually, I think, slightly raising the midpoint of the fiscal year guide, March is below where Street is, the implication is June is above where Street is. And so, is it really just a matter of, kind of Street, like we are — and I think I’m part of this, sort of had miss-modeled March to the low side? And subsequently, we’re also miss-modeling June? Well, we miss-modeled March to the high side, and we’re miss-modeling June to the low side? Just a clarification. Just your thoughts on that and I have a couple of follow-ups. Thanks.

David Weigand: Sure. So again, I’ll kind of go back and we’re — because things have been changing economically and we had some — we’ve seen some push-outs, not cancellations, again, push-outs, we feel like, we shouldn’t be adding more details on Q4 or annual guidance. And so, really, we feel like the guidance ranges that we gave allow for where we think performance will land. And so, to give more specificity to that, at a time when details are not easy to — are not as clear to see, we think is the wrong way to go. And so instead, we’re giving good guidance on what we see in the quarter ahead. But again, we’re still comfortable with our annual guidance.

Ananda Baruah: And it sounded — I think, I believe Charles mentioned, and actually just please clarify this for me if this is inaccurate, something about kind of macro software, but recovery in the second half of calendar year €˜23. And if I heard that accurately, is that to say, you guys envision the first half of the calendar year being sort of the softest part of macro for you? And you also made comments Dave about returning calendar €˜23 to seasonality. And so first half is the soft spot, second half, you guys think sort of normal seasonality plus quote unquote, recovery begins and that dovetails into your fiscal year €˜24 outlook? And so contextually, I just want to ask you, is that how you guys are thinking about it?

Charles Liang: Yes. Macroeconomic headwind issue is some concern to everyone now. So other than that, indeed, our demand is still pretty strong, especially as you know, Intel just announced Sapphire Rapids; AMD, Genoa; and NVIDIA, Hopper, H100. So we have very strong products available. And this time, we saw a customer very aggressively asking was simple for early seeding. So, we believe these were put in big growth. And — however the very big growth in model should be in about summer or even after summer timeframe. So long-term, we have a very strong confidence, especially after summer. Before summer, depends on macroeconomic headwinds. We try to be more cautious.

Ananda Baruah: Very helpful, Charles. And, Charles, last for me, I believe you mentioned potential for more large data centers in the second half of calendar €˜23. Did I hear that accurately? And are those incremental data centers, if I heard it accurately? And any more context you could provide around that? Thanks.

Charles Liang: Yes. I mean, as you know, we start to approach large accounts since maybe one year ago. So, we continue to gain interest from those CSP and larger accounts. And that’s why we increased having capacity for lower production cost to support those larger accounts. And we even started a big campus in Malaysia. So, the goal is to increase our production capacity and lower our operation and production costs, so that we are able to support those larger accounts with reasonable profitability. So, we continue to gain some engagement and interest from larger accounts around the world. And also at the same time, we also started to engage with lots of mini size accounts, especially those through B2B and B2C. So, we are engaging with much broader customer base now.

Operator: Our next question comes from Mehdi Hosseini with SIG.

Mehdi Hosseini: Couple of follow-ups. It seems like the price decline in the December quarter has more to do with the mix. And I am assuming that the OEM and large data center mix went down from 15, September to 42% in December. And in that context, my question to you is how should I think of the mix in the March quarter, and how will that impact unit and ASP trends?

Charles Liang: In March quarter, because of the market headwind, so we still tried to be cautious. But after summer, our feeling become much stronger, because a lot of good products, lots of engagement from larger accounts, middle sized account and even small — a lot of small accounts.