Sentences and paragraphs of SMCI's Risk Factors and MD&A, 10-K 2026-08-31 against 10-K 2025-08-28.
Each links to the text at sec.gov.
Show the other 58
AddedRisk Factors
Stakeholder groups may find us insufficiently responsive to the implications of climate change, and therefore we may face legal action or reputational harm. Our business could be negatively impacted by concerns around the high absolute energy requirements of our GPUs, despite their much more energy efficient design and operation relative to alternative computing platforms.
Read it in 10-K 2026-08-31 at sec.gov ↗
AddedRisk Factors
We were delinquent in certain SEC reporting obligations in prior fiscal years, which may increase the risk of SEC enforcement actions, damage investor confidence, and require significant resources to correct. We have since implemented enhanced compliance controls to prevent recurrence.
Read it in 10-K 2026-08-31 at sec.gov ↗
AddedRisk Factors
•We may be subject to increased audit fees and additional compliance costs, heightened regulatory scrutiny and potential operational disruptions as management and personnel incur significant time and resources to remediation activities;
Read it in 10-K 2026-08-31 at sec.gov ↗
AddedRisk Factors
We have been, are currently, and may in the future be subject to various lawsuits, stockholder derivative actions, class action lawsuits, individual or mass arbitration proceedings, and other types of legal proceedings, as well as other disputes, claims, and regulatory or governmental inquiries and investigations, including with regard to contract or commercial disputes, consumer protection, privacy, data protection, intellectual property, tax, employment, and corporate governance, among other matters.
Read it in 10-K 2026-08-31 at sec.gov ↗
RemovedRisk Factors
•We have incurred and expect to continue to incur significant expenses related to the circumstances discussed in Item 9. “Changes in and Disagreements with Accountants on Accounting and Financial Disclosure” section in this Annual Report, the remediation of deficiencies in our internal control over financial reporting and disclosure controls and procedures discussed in Item 9A. “Controls and Procedures” of this Annual Report, and any resulting litigation;
Read it in 10-K 2025-08-28 at sec.gov ↗
RemovedRisk Factors
•Matters relating to or arising from the circumstances discussed in Item 9. “Changes in and Disagreements with Accountants on Accounting and Financial Disclosure” section in this Annual Report, including adverse publicity and potential concerns from our customers, have had and could continue to have an adverse effect on our business and financial condition;
Read it in 10-K 2025-08-28 at sec.gov ↗
RemovedRisk Factors
•Changes in U.S. or foreign policies, geopolitical conditions, general economic conditions, and other factors beyond our control may adversely impact our business and operating results;
Read it in 10-K 2025-08-28 at sec.gov ↗
RemovedRisk Factors
•Our future effective income tax rates could be affected by changes in the relative mix of our operations, our relative income among different geographic regions, and domestic and foreign income tax laws, which could affect our future operating results, financial condition and cash flows;
Read it in 10-K 2025-08-28 at sec.gov ↗
RemovedRisk Factors
•Our products may not be viewed as supporting climate change mitigation in the IT sector;
Read it in 10-K 2025-08-28 at sec.gov ↗
RemovedRisk Factors
•Expectations and evolving laws and regulations relating to environmental, social and governance considerations expose us to potential liabilities, reputational harm and other unforeseen adverse effects on our business.
Read it in 10-K 2025-08-28 at sec.gov ↗
RemovedRisk Factors
Due to the circumstances discussed in Item 9. “Changes in and Disagreements with Accountants on Accounting and Financial Disclosure” of this Annual Report, our Annual Report on Form 10-K for the fiscal year ended June 30, 2024 (“FY2024 10-K”), and our Quarterly Reports on Form 10-Q for the quarterly periods ended September 30, 2024 and December 31, 2024 (the “Delinquent Reports”) were delinquent.
Read it in 10-K 2025-08-28 at sec.gov ↗
RemovedRisk Factors
We have incurred and expect to continue to incur significant expenses related to the circumstances discussed in Item 9. “Changes in and Disagreements with Accountants on Accounting and Financial Disclosure” of this Annual Report and the remediation of deficiencies in our internal control over financial reporting and disclosure controls and procedures, and any resulting litigation.
Read it in 10-K 2025-08-28 at sec.gov ↗
RemovedRisk Factors
We have devoted and expect to continue to devote substantial internal and external resources towards remediation efforts relating to the circumstances discussed in Item 9. “Changes in and Disagreements with Accountants on Accounting and Financial Disclosure” of this Annual Report, and management’s review of the circumstances and processes that led to those circumstances. As a result of these efforts, we have incurred and expect that we will continue to incur significant incremental fees and expenses for additional accounting, financial and other consulting and professional services.
Read it in 10-K 2025-08-28 at sec.gov ↗
RemovedRisk Factors
Matters relating to or arising from the circumstances discussed in Item 9. “Changes in and Disagreements with Accountants on Accounting and Financial Disclosure” of this Annual Report, including adverse publicity and potential concerns from our customers, have had and could continue to have an adverse effect on our business and financial condition.
Read it in 10-K 2025-08-28 at sec.gov ↗
RemovedRisk Factors
We have been and could continue to be the subject of negative publicity focused on the matters underlying the circumstances discussed in Item 9. “Changes in and Disagreements with Accountants on Accounting and Financial Disclosure” of this Annual Report. We may be adversely impacted by negative reactions to this publicity from our customers or others with whom we do business, who may have concerns including the time and effort required to address our accounting and control environment and our ability to be a long-term provider to our customers. The continued occurrence of any of the foregoing could harm our business and have an adverse effect on our financial condition.
Read it in 10-K 2025-08-28 at sec.gov ↗
RemovedRisk Factors
Changes in U.S. or foreign policies, geopolitical conditions, general economic conditions, and other factors beyond our control may adversely impact our business and operating results.
Read it in 10-K 2025-08-28 at sec.gov ↗
RewordedRisk Factors
AI technology may also produce inaccurate inaccurate, incomplete, biased, misleading or fabricated responses that could lead to errors in our decision-making, solution development development, financial reporting, compliance activities, customer communications or other business activities, which result in content that is biased, harmful or discriminatory, or otherwise not function as intended, and any of the foregoing could have a negative impact on our business, our reputation, operating results and financial condition. condition, or we could be subject to claims (including product liability claims), litigation (including class actions) or incur liability.
Read it in 10-K 2026-08-31 at sec.gov ↗
RewordedRisk Factors
Provisions in the our 2029 Convertible Notes Indenture, the 2028 Convertible Notes Indenture, and the 2030 Convertible Notes Indenture could delay Indenture, the conversion of our Mandatory Convertible Preferred Stock or prevent an otherwise beneficial takeover Depositary Shares, or the payment of us, dividends on Mandatory Convertible Preferred Stock in shares of common stock, may dilute the ownership interest of our existing stockholders or may otherwise depress the price of our common stock. stockholders.
Read it in 10-K 2026-08-31 at sec.gov ↗
RewordedRisk Factors
Two of our suppliers accounted for One supplier accounted for a significant portion of our total purchases: 64.4% and 5.1% purchases in fiscal year 2025, 2026 of 63.1%, and two suppliers accounted for a significant portion of our total purchases in fiscal year 2025 of 64.4% and 5.1%, and 65.4% and 6.3% in fiscal year 2024, and 30.7% and 13.5% in fiscal year 2023. respectively.
Read it in 10-K 2026-08-31 at sec.gov ↗
RewordedRisk Factors
Moreover, customers may hesitate to purchase, or not continue to purchase, our products due to ongoing reputational harm, negative publicity or other concerns related to our previously Delinquent Reports. late filings of our Annual Report on Form 10-K for the fiscal year ended June 30, 2024 and Quarterly Reports on Form 10-Q for the quarterly periods ended September 30, 2024 and December 31, 2024 (together the “Delinquent Reports”).
Read it in 10-K 2026-08-31 at sec.gov ↗
RewordedRisk Factors
We had one customer account for 10% or more of our net sales in fiscal year 2026, four customers account for 10% or more of our net sales in fiscal years 2025 year 2025, and one customer account for 10% or more of our net sales in fiscal 2024, while we had no single customer account for 10% or more of net sales in fiscal year 2023. 2024.
Read it in 10-K 2026-08-31 at sec.gov ↗
RewordedRisk Factors
Harm to our reputation can also has in the past, and may in the future, arise from many other sources, including employee misconduct, which we have experienced such as in connection with the alleged conduct described in the past, Indictment involving individuals associated with the Company at the time, and misconduct by our partners, consultants and outsourced service providers.
Read it in 10-K 2026-08-31 at sec.gov ↗
RewordedRisk Factors
Our employees, contractors, consultants, service providers or other members of our workforce have used and may continue to use internal or third-party AI tools and other machine learning technologies, including publicly available generative AI platforms, on an unauthorized basis or inappropriate basis, which poses additional risks relating to the protection of data, data including the potential exposure of our proprietary confidential information to unauthorized recipients and the misuse of our or third-party intellectual property.
Read it in 10-K 2026-08-31 at sec.gov ↗
RewordedRisk Factors
If Our sales are concentrated in a few large customers, and if we lose or experience a significant reduction in sales to any of these key customers, if customer, or any of these key customers experience customer experiences a significant decline in market share, or if any of these customers experience share or, significant financial difficulties, our revenue may decrease substantially and our results of operations and financial condition may be harmed.
Read it in 10-K 2026-08-31 at sec.gov ↗
RewordedRisk Factors
As of June 30, 2025, 2026, we had approximately $4.8 $8.7 billion of consolidated indebtedness, including $1.7 $2.0 billion of outstanding borrowings under our Revolving Credit Facility with JP Morgan, $1,763.5 million outstanding borrowings under our CTBC Revolving Credit Facilities, $1,725.0 million aggregate principal amount of our 2029 Convertible Notes, $700.0 million aggregate principal amount of our 2028 Convertible Notes, and $2.3 billion aggregate principal amount of our 2030 Convertible Notes.
Read it in 10-K 2026-08-31 at sec.gov ↗
RewordedRisk Factors
Further, our third-party service providers may have been and may be in the future subject to such attacks or otherwise may suffer security breaches or incidents. incidents, and if these third parties do not maintain adequate safeguards, a breach of their systems could in turn compromise our networks, products or customer data.
Read it in 10-K 2026-08-31 at sec.gov ↗
RewordedRisk Factors
While prior to the Leadtek Investment none of our related persons had a direct or indirect material interests interest in any transactions with Leadtek, following the closing as of the Leadtek Investment, June 30, 2026, Steve Liang, wife of Steve Liang (Chang Jian-Tsun), and Bill Liang have served serve as two three of the seven members of the Leadtek's Leadtek’s board of directors.
Read it in 10-K 2026-08-31 at sec.gov ↗
RewordedRisk Factors
Repeated changes in the export control rules are likely to impose compliance burdens on our business and our customers, including increased expenditures for legal counsel, compliance personnel, screening and classification tools, and external advisors, as well as potential delays in product launches and delivery timelines, negatively and materially impacting our business.
Read it in 10-K 2026-08-31 at sec.gov ↗
Quiet changesRisk Factors
The AI industry has driven a significant portion of our recent success.
Read it in 10-K 2026-08-31 at sec.gov ↗
AddedMD&A
The $127.1 million or 212.5% year-over-year increase in interest income was primarily driven by higher interest income as a result of increased cash deposits funded by the proceeds from our convertible notes issuance and financing arrangements with a customer.
Read it in 10-K 2026-08-31 at sec.gov ↗
AddedMD&A
The $135.0 million or 226.5% increase in interest expense was primarily driven by a $58.6 million or 160.5% increase in interest and amortization related to the amendment of the 2029 Convertible Notes and new issuance of the 2028 Convertible Notes and the 2030 Convertible Notes during the second half of fiscal 2025, as well as $83.0 million additional interest expense related to the drawdown on our revolving credit facilities during the second half of fiscal 2026. These increases were partially offset by a $10.6 million decrease in interest expense associated with our Bank of America and Cathay Bank line of credit and term loans, which were fully repaid during the first half of fiscal 2025.
Read it in 10-K 2026-08-31 at sec.gov ↗
AddedMD&A
The $40.2 million or 207.2% increase in interest expense was primarily due to a $34.6 million or 1774.1% increase in interest and amortization related to the amended 2029 Convertible Note and newly issued 2028 Convertible Notes and 2030 Convertible Notes.
Read it in 10-K 2026-08-31 at sec.gov ↗
AddedMD&A
Income tax provision increased by $399.5 million or 254.8% primarily due to an increase in worldwide income before income tax provision that increased tax expense by $331.2 million, a lower tax benefit from stock-based compensation of approximately $30.2 million, a lower tax benefit from U.S. federal research tax credit of $18.7 million, an increase of state tax expense by $35.1 million, an increase of unrecognized tax benefits by $10.0 million, and other miscellaneous immaterial tax items of approximately $5.4 million. These increases were partially offset by a higher tax benefit from foreign derived intangible income of $31.2 million.
Read it in 10-K 2026-08-31 at sec.gov ↗
AddedMD&A
On June 29, 2026, California enacted Senate Bill 122, which extends the existing limitation of $5 million on the utilization of California business tax credits, including research and development credits, through taxable years beginning before January 1, 2030. For taxable years beginning on or after January 1, 2030, business credits generally may not reduce California tax liability by more than 70% of the tax imposed or $5 million, whichever is greater. We have evaluated the impact of this legislation on our California deferred tax assets and the realizability of our state tax credit carryforwards and concluded that the enactment did not have a material impact on our consolidated financial statements as of June 30, 2026. We will continue to evaluate its ongoing impact on our future effective tax rate, tax liabilities, and cash taxes.
Read it in 10-K 2026-08-31 at sec.gov ↗
AddedMD&A
In addition, because a large portion of our future expenditures will be to fund our growth, we expect that if needed we will be able to adjust our capital and operating expenditures as necessary. We continually evaluate our cash needs and may decide it is best to raise additional capital or seek alternative financing sources to fund the rapid growth of our business, including through drawdowns on existing or new debt facilities or financing funds. Conversely, we may also from time to time determine that it is in our best interests to voluntarily repay certain indebtedness early.
Read it in 10-K 2026-08-31 at sec.gov ↗
AddedMD&A
Accordingly, we believe that our current and forecasted sources of funds will provide us with adequate liquidity during the 12-month period following the issuance of these consolidated financial statements, to meet our working capital, committed capital expenditures and contractual obligations.
Read it in 10-K 2026-08-31 at sec.gov ↗
AddedMD&A
Our largest source of operating cash flow is cash collections from our customers following the purchase of our products and service agreements. Our primary uses of cash from operating activities are typically for payments to suppliers for purchasing components for our inventory to support our manufacturing process, employee-related expenditures, expenses related to data center leases, taxes, and interest payments.
Read it in 10-K 2026-08-31 at sec.gov ↗
AddedMD&A
The changes in cash flows from investing activities primarily relate to our investments in capital assets including property, plant and equipment, to support the growth in business and purchases and sales of our investments in marketable securities and other instruments.
Read it in 10-K 2026-08-31 at sec.gov ↗
AddedMD&A
The changes in cash flows from financing activities primarily relate to borrowings and repayments related to our debt instruments, issuance of other financing or equity instruments, stock repurchases, dividend payments, and net proceeds related to employee stock programs.
Read it in 10-K 2026-08-31 at sec.gov ↗
RemovedMD&A
We receive various rebate incentives from certain suppliers based on our contractual arrangements, including volume-based rebates. The rebates earned are recognized as a reduction of cost of inventories and reduce the cost of sales in the period when the related inventory is sold.
Read it in 10-K 2025-08-28 at sec.gov ↗
RemovedMD&A
The year-over-year decrease in net sales for our subsystems and accessories is primarily due to our strategic shift to focus on prioritizing sales of our server and storage systems.
Read it in 10-K 2025-08-28 at sec.gov ↗
RemovedMD&A
The year-over-year increase in net sales for our subsystems and accessories is primarily due to increased demand of accessories sold to our larger enterprise and data center customers as more accessories and spares were purchased in conjunction with the increased volume of full systems and servers. Our services and software net sales, included in server and storage systems net sales, increased by $53.8 million year-over-year.
Read it in 10-K 2025-08-28 at sec.gov ↗
RemovedMD&A
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 from large enterprise and data center customers resulting in increased sales of 28.1% in the United States, 85.9% in Thailand and Japan, and 111.9% in the United Kingdom, Sweden, and Spain, where we have experienced significant growth.
Read it in 10-K 2025-08-28 at sec.gov ↗
RemovedMD&A
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 United States. The year-over-year increase of net sales in the regions outside the United States is mainly due to an increase in net sales in Singapore, Taiwan, South Africa and Germany, including the increase in demand from customers for GPU servers in those countries.
Read it in 10-K 2025-08-28 at sec.gov ↗
RemovedMD&A
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 million due to a strong US dollar, offset by a $13.1 million investment and impairment loss in equity securities. The increase in interest expense of $8.9 million was due to higher borrowing and higher interest rates on our outstanding line of credit and term loan balances.
Read it in 10-K 2025-08-28 at sec.gov ↗
RemovedMD&A
We believe that our current cash, cash equivalents, borrowing capacity available from our credit facilities and internally generated cash flows will be sufficient to support our operating businesses and maturing debt and interest payments for the 12 months following the issuance of these consolidated financial statements. We continue to assess financing options that may be necessary to support the growth of our business.
Read it in 10-K 2025-08-28 at sec.gov ↗
RewordedMD&A
These increases in expense were partially offset by a $15.7 The $30.8 million or 119.5% net movement 106.2% year-over-year increase 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 interest income was primarily attributable to a $31.0 million or 104.8% increase in interest income due to higher average monthly cash balances held in interest-bearing demand deposit accounts.
Read it in 10-K 2026-08-31 at sec.gov ↗
RewordedMD&A
The $134.6 million or 21.1% year-over-year increase in research and development expenses was primarily driven by a $153.2 million or 34.7% an increase in employee-related costs, costs of $128.2 million or 22.8%, mainly comprised of a $81.0 $74.5 million or 70.0% 38.1% increase in stock-based compensation, and $60.2 a $53.7 million or 20.2% 14.6% increase in salaries, salaries and benefits as we expanded our workforce and invested in key talent. talent to support our global growth across regions.
Read it in 10-K 2026-08-31 at sec.gov ↗
RewordedMD&A
The $79.5 million or 29.1% year-over-year increase in sales and marketing expenses was primarily driven by a $53.5 million or 30.9% an increase in employee-related costs, mainly due to a $30.9 costs of $112.7 million or 23.0% 54.1%, mainly comprised of a $105.5 million or 61.9% increase in salaries and benefits, and a $16.6 $7.2 million or 78.3% 19.0% increase in stock-based compensation, similarly similar to our research and development expenses as we expanded our workforce and invested in key talent company-wide.
Read it in 10-K 2026-08-31 at sec.gov ↗
RewordedMD&A
Share of (loss) income (loss) from equity investee, investees, net of taxes represents our share of income (loss) from the Corporate Venture in which we have had a 30% ownership. ownership, prior to the divestiture in fiscal 2026, as well as our investments in privately held companies without readily determinable fair values that are measured using the equity method.
Read it in 10-K 2026-08-31 at sec.gov ↗
RewordedMD&A
Recent drivers of liquidity changes included an increase in the need for working capital due to higher levels of inventory and accounts receivable required by growing revenues, greater requests for longer payment terms from customers due to increasing system costs and to a lesser extent longer supply chain lead times on certain key components. support future revenue growth.
Read it in 10-K 2026-08-31 at sec.gov ↗
RewordedMD&A
The increase decrease in cash flows from operating activities during fiscal 2025 2026, as compared to fiscal 2024, 2025, was due to an increase in cash collection inventory purchases, accounts receivable from our customers driven by the increase in revenue reduction in inventory purchase, partially offset by higher cash paid for interest customers, and other increased operational spending.
Read it in 10-K 2026-08-31 at sec.gov ↗
RewordedMD&A
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 fiscal 2024 of $13.1 million and a gain in the current year fiscal 2025 of $2.6 million, and a $31.0 million or 104.8% increase in interest income due to higher average monthly cash balances held in interest-bearing demand deposit accounts. million.
Read it in 10-K 2026-08-31 at sec.gov ↗
RewordedMD&A
The $17,091.1 million or 77.8% year-over-year increase in net sales of server and storage systems was primarily due to the strong demand and increased billings billing for Hyper Servers, GPU & Super Racks of $5,804.0 $15,261.5 million or 52% 83.4% compared to prior year, including liquid-cooled and air-cooled servers which that are generally more complex and of higher value, primarily related to our H200, H100, GB200, and B200 systems, resulting in an increase of average selling price of 34%. GB300 systems.
Read it in 10-K 2026-08-31 at sec.gov ↗
RewordedMD&A
The period-over-period decrease of $8.0 $3.7 million or 59.7% in share of income loss from equity investee, investees, net of taxes was primarily due to reduction in profitability from reduced sales the impairment of the Corporate Venture. Venture investment in fiscal year 2025, which did not recur in fiscal year 2026.
Read it in 10-K 2026-08-31 at sec.gov ↗
RewordedMD&A
We continue to monitor administrative guidance from the OECD and Malaysian tax authorities regarding the interaction between the 10-year tax holiday anticipated incentive and the 15% minimum tax requirement under Pillar Two and will evaluate the impact when the outcome of our application and such guidance when issued to determine whether adjustments to our income tax provision or financial statement disclosures are required. known.
Read it in 10-K 2026-08-31 at sec.gov ↗
RewordedMD&A
Refer to Note 7, “Lines of Credit and Term Loans” 13, “Stockholders’ Equity”, in the notes to the consolidated financial statements in this Annual Report for further information on our outstanding debt. equity offerings, including our Mandatory Convertible Preferred Stock, common stock offering, and the at-the-market equity offering program.
Read it in 10-K 2026-08-31 at sec.gov ↗
RewordedMD&A
Net cash (used in) provided by operating activities during fiscal 2025 2026 mostly consisted of $1,048.9 $2,230.5 million net income adjusted for certain non-cash items, such as $314.5 $412.1 million of share-based stock-based compensation expense, $58.3 $188.1 million of inventory valuation adjustment write-downs, $95.4 million of deferred income taxes, net, $53.7 million of depreciation and amortization expense, and changes in working capital.
Read it in 10-K 2026-08-31 at sec.gov ↗