Supermicro Q4 earnings “miss”

Being run up in price so much left it vulnerable to a correction, but there's more to it than that.

Cash flow went from strongly positive to just negative. Why?

Leadership talked at length about supply chain issues, implied to be Nvidia but not uniquely. They're having trouble getting enough components to make as many servers as they could otherwise. Cash flow going negative suggests paying more for components, maybe by sourcing from different places.

This is a company that last quarter came up short on earnings because they couldn't complete and ship enough servers. If they recognize revenue on shipment, then COGS are presumably matched in period to revenue, meaning any high component costs today would roll through costs next Q. (They actual recognize based on meeting performance obligations, so there is some judgement involved).

It's possible that revenue will also increase when they recognize it, if their own customers are paying up. But also possible costs will increase more than revenue. And, there was talk on the call about customers over-ordering to try and get allocation. If they do - will the order book flow out to revenue, or will SMCI be sitting on the cash costs for their components?

None of this is necessarily negative in the context of overall AI server demand being strong. It'll probably continue. But weakness in cash flow may have temporarily spooked investors.