At a Glance

  • Super Micro Computer, based in San Jose, California, said in securities filings and announcements on Tuesday that it received subpoenas from the U.S. Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) late last year, requesting specific documents "following the allegations in a short-seller report in August." The company disclosed this request while announcing its preliminary unaudited results for the second fiscal quarter.
  • The AI server maker's accounting issues came under scrutiny after the now-defunct Hindenburg Research released a scathing report on August 27. Subsequently, the company delayed filing its fiscal 2024 Form 10-K to evaluate internal controls; its auditor, Ernst & Young (EY), resigned and was replaced by BDO. In December, the situation seemed to improve as the SEC granted an extension to file this month, avoiding delisting risk. Meanwhile, an internal investigation into the company's audit committee and management integrity found "no evidence of misconduct," although it recommended that the company "bring in a new CFO."
  • The company did not respond to requests for comment regarding the subpoenas but stated in the filing that it is cooperating with the agencies' document requests. Nicole Wright, an associate professor of accounting at James Madison University, said, "It is highly likely that the SEC and DOJ have already launched an investigation." She wrote in an email: "Subpoenas do not always mean an investigation is underway, but given the high profile of this matter, the resignation of the independent auditor, and the impact on investors when EY exited—if the SEC and DOJ are not investigating, I would be very surprised."

Deeper Insights

During a conference call on Tuesday regarding preliminary unaudited results for the second fiscal quarter ended December 31, Super Micro CEO Charles Liang said he is "confident" in filing the 10-K and the 10-Q forms for the first two quarters of fiscal 2025 by the February 25 extended deadline. He also claimed the company will continue to "bring in more top-tier senior leaders to build a stronger corporate foundation for our rapidly growing and expanding global business, including CFO, CCO, and other positions."

The company also reported mixed preliminary financial results for the second fiscal quarter, which included some signs of strong growth. It expects net sales for the second quarter to be in the range of $5.6 billion to $5.7 billion, up 54% year-over-year. Looking ahead, Liang projects fiscal 2025 revenue between $23.5 billion and $25 billion, increasing to $40 billion by 2026.

"With our leading direct liquid cooling (DLC) technology, and with more than 30% of new data centers expected to adopt it over the next 12 months, Super Micro is well positioned for AI infrastructure growth," Liang said in a statement in the announcement.

Meanwhile, the company's filing also revisited some previous accounting treatments, stating that adjustments were needed to the preliminary unaudited results for the fourth quarter of fiscal 2024 announced in August, including a charge related to an approximately $45 million increase in inventory reserves tied to an unexpected decline in the market value of certain components.

"Overall, these changes result in a downward adjustment of approximately $0.09 to previously announced preliminary unaudited GAAP and non-GAAP diluted net income per share of common stock for fiscal 2024 and the fourth quarter of fiscal 2024 (calculated based on split-adjusted diluted shares outstanding)," the filing said. "The adjustments above pertain to previously announced preliminary unaudited financial results and therefore do not constitute a restatement."

JPMorgan analysts said in a report on Tuesday that second-quarter earnings missed expectations on both revenue and margins, but called the updated outlook for the fourth quarter of fiscal 2025 and fiscal 2026 "a nice positive surprise." The report said Super Micro "remains in a strong position in the AI server market with next-generation GPUs and broader technical capabilities including areas like liquid cooling, but SEC compliance issues present working capital challenges that the company must address while seeking to maintain market leadership."

An SEC spokesperson declined to comment, and the DOJ did not respond to a request for comment.