Super Micro Computer Inc (SMCI) Q3 2025 Earnings Call Transcript

Super Micro Computer Inc (NASDAQ: SMCI) Q3 2025 Earnings Call dated May. 06, 2025

Corporate Participants:

Michael Staiger — Vice President, Investor Relations

Charles Liang — Founder, President and Chief Executive Officer, Chairman

David Weigand — Senior Vice President, Chief Financial Officer

Analysts:

Samik Chatterjee — Analyst

Michael Ng — Analyst

George Wang — Analyst

Asiya Merchant — Analyst

Ananda Baruah — Analyst

Nehal Chokshi — Analyst

Jonathan Tanwanteng — Analyst

Nick Doyle — Analyst

Mehdi Hosseini — Analyst

Presentation:

Operator

Thank you for standing-by. My name is Victoria and I will be your conference operator today. At this time, I would like to welcome everyone to the Super Micro Computer Inc., SMCI US, Third Quarter Full-Year 2025 Earnings Call. With us today are Charles Liang, Founder, President and Chief Executive Officer; David Weigand, CFO, and Michael Staiger, Senior Vice President of Corporate Development. [Operator Instructions]

I would now like to pass the conference over to Michael Staiger.

Michael Staiger — Vice President, Investor Relations

Victoria, thank you. Good afternoon, and thank you for attending Supermicro’s call to discuss financial results for the third quarter, which ended March 31st 2025. With me today are Charles Liang, Founder, Chairman and Chief Executive Officer, and David Weigand, Chief Financial Officer. By now, you should have received a copy of the news release from the company that was distributed at the close of regular trading and is available on the company’s website.

As a reminder, during today’s call, the company will refer to a presentation that is available to participants in the Investor Relations section of the company’s website under the Events & Presentations tab. We’ve also published management’s scripted commentary on our website. Please note that some of the information you’ll hear during our discussion today will consist of forward-looking statements, including, without limitation, those regarding revenue, gross margin, operating expenses, other income and expenses, taxes, capital allocation, and future business outlook, including guidance for the fourth quarter and full fiscal year 2025. There are a number of risk factors that can cause Supermicro’s results to differ materially from our expectations. You can learn more about these risks in the press release we issued earlier this afternoon, our most recent 10-K filing for fiscal year 2024, and our other SEC filings.

All these documents are available on the Investor Relations page of Supermicro’s website. We assume no obligation to update any forward-looking statements. Most of today’s presentation will refer to non-GAAP financial results and business outlook. For an explanation of our non-GAAP financial measures, please refer to the company presentation or to our press release published earlier today. In addition, a reconciliation of GAAP to non-GAAP results is contained in today’s press release and in the supplemental information attached to today’s presentation. At the end of today’s prepared remarks, we’ll have a Q&A session for sell side analysts.

I will now turn the call over to Charles.

Charles Liang — Founder, President and Chief Executive Officer, Chairman

Thank you, Michael, and thank you everyone for joining us. As previously announced, our fiscal Q3 net revenue totaled $4.6 billion, coming in lower than our original forecast. This decline was primarily due to our customers waiting and evaluating AI platforms between the current Hopper and the coming — and upcoming Blackwell GPUs, leading to a delayed commitment.

We expect many of these engagements to materialize in the June and September quarters, strengthening our confidence in meeting our long-term growth target as we close out this demand for fiscal year. Despite macroeconomic economic conditions and the tariff impact, our ability to expand the market share in IT and AI remained strong.

On the earnings front, our fiscal Q3 non-GAAP EPS stood at $0.31 per share compared to $0.66 last year. This decline was largely driven by an inventory write-down of old generation GPU and related components, while the new platforms are finally ramping quickly.

Although our quarterly performance did not align exactly with our expectation, we successfully fulfilled our commitment to regain financial regulatory compliance. At the same time, we continued to enhance the technical innovation and development, which resulted in successful high-volume delivery of our new-generation AI platforms at the end of March.

Looking ahead, some major background new innovation are set to service the market in this quarter and the new fiscal year, especially our commission DCBBS. With a clear time-to-market advantage, Supermicro once again leads the AI infrastructure technology and DLC solutions. This strong position enabled us to explore new opportunities and expand the market share.

During the quarter, we achieved volume shipment of air-cooled 10U and liquid-cooled 4U NVIDIA B200-HGX systems. Those are exactly the first to the market again, as well as GB200 NVL72 racks. Additionally, we start to overall AMD MI325X solutions to further broaden our AI portfolio. Leveraging our system building blocks, we will again over time to market on the upcoming new platform, such as NVIDIA, B300, GB300, and AMD MI350 platforms this summer for customers seeking leading technology, more optimized, higher-density and greener AI solutions.

Building on our strong foundation of technology leadership, building block solution, and building computing DNA, we have been deeply focused on developing the industry’s first end-to-end AI IT data center total solution. We are now about fully ready to share this exciting news with the market in the coming days. By launching our brand-new Datacenter Building Block Solutions, we call it DCBBS, featuring our second-generation system liquid-cooling technology, we call it DLC2.

With DCBBS, we are able to dramatically shorten customers’ efforts to build a data center, reduce their cost, and most importantly, make their data center of better quality and performance — and with higher availability.

DCBBS consolidates critical components, including AI service systems, storage, rack, pattern play, all different kinds of switches, DLC systems, water tower or dry tower, cheer door, power share, battery backup unit, people call BBU, on-site deployment, networking design, cabling and data center end-to-end management software, and all different scopes of services into a streamlined process.

The true value of DCBBS lie in its ability to reduce power consumption, optimize space, and decrease water usage, delivering up to 30% lower TCO. More importantly, it accelerates new data center deployments and upgrades existing data center in a matter of months or even weeks, rather than many quarters or years, driven significant improvement in data center time-to-deployment, we call it TTD, and time-to-online, TTO.

One of the key components of DCBBS is our industry-leading DLC solutions. Supermicro remains at the forefront of driving industry adoption of DLC technology, Direct Liquid Cooling technology, setting new standards for performance, efficiency, and sustainability.

Last year, we shipped 4,100 kilowatt AI racks equipment with DLC, helping our customers reduce energy costs by up to 25% or even 30%. We are committed to double this volume in the coming year, further amplifying the impact of green computing.

With the upcoming DLC2 technology, Supermicro will be able to deliver even greater savings and benefits to our customers. For example, it will save power and water up to 40%, and reduce data center noise level down to about 50 DB. That is almost as quiet as a library. We are going to announce the details in the coming days. Green computing can be everywhere, and with our DLC2 solutions, we are making that vision a beautiful reality. Our long-term investment and leadership in DLC has solidified a sustainable competitive edge, providing economics of scale and keeping us far ahead of all our competition.

Our global operations continued to expand with our new Malaysia campus beginning shipping products to partners. Meanwhile, our facility in Taiwan and Europe are scaling up their capacity and capability, providing customers with flexible options for their logistic choice and minimize their cost building the market and tariff uncertainties.

To further strengthen the pool for key partners and align with government initiatives, we continue to expand our US domestic manufacturing capacity, including new facility in the Midwest and other locations. This strategic expansion will allow us to meet rising demand while continuing to enhance our commitment in quality, security, and TCO, TTD, and TTO.

In summary, fiscal Q3 was dynamic and productive. We successfully navigated financial challenge while continuing to strengthen our leadership in product and technology innovation. Our first-to-market advantage in AI infrastructure, along with the expanded reach of DCBBS, Data Center Building Block Solutions, and advancement in DLC technology, further solidifying our industry position.

I remain highly confident and optimistic about our long-term strong growth and market-share gain. However, near-term macroeconomic and market uncertainty make it difficult to precisely forecast the pace and the technology adoption. Despite this, I’m confident that we will close the fiscal year on a strong note. Given the current condition, we anticipate Q4 revenue of at least $6 billion and will resume providing a broader forecast range once we have better visibility.

Before passing the call to David for the financial overview, I want to thank you all for our partner, customers, investors, and Supermicro team members and express my deep appreciation for their continued support.

With that, I will now turn the call over to David.

David Weigand — Senior Vice President, Chief Financial Officer

Thank you, Charles. Fiscal Q3 2025 revenues were $4.6 billion. This was up 19% year-over-year and down 19% quarter-over-quarter. Q3 revenues were down quarter-over-quarter as certain new platform decisions by customers moved some sales into Q4 and later. AI GPU platforms again represented more than 70% of revenues with AI GPU customers in both the enterprise and cloud service provider markets.

Our design-win pipeline remains robust, and we expect continued growth in Q4 as we ramp up production of our Data Center Building Block Solutions, DCBBS based on new GPU platforms. As a leading US technology company, we focus on extensive rack-scale and DCBBS technology and capacity investments in the US, which is complemented by our investments in Taiwan, the Netherlands, and Malaysia. As Charles indicated, we have a flexible global manufacturing footprint to meet our customers’ needs, and we continue to closely monitor the rapidly evolving macro and tariff environment.

During Q3, we recorded $1.9 billion in the enterprise channel vertical, representing 42% of revenues versus 25% last quarter. This was up 3% year-over-year and up 38% quarter-over-quarter as we saw strengthened enterprise adoption of new AI and CPU platforms. The OEM appliance and large data center vertical revenues were $2.6 billion, which represented 57% of Q3 revenues versus 75% in the last quarter. This was up 35% year-over-year and down 38% quarter-over-quarter. Two existing CSP/large data center customers represented 22% and 14% of Q3 revenues. Emerging 5G telco Edge IoT revenues were $48 million or 1% of Q3 revenues.

Server and storage systems comprised 97% of Q3 revenue and subsystems and accessories, the remaining 3%. By geography, the US represented 60% of Q3 revenues, Asia 30%, Europe 6%, and the rest of the world 4%. On a year-over-year basis, US revenues increased 3%, Asia increased 77%, Europe decreased 3%, and the rest of the world increased 83%. On a quarter-over-quarter basis, US revenues decreased 28%, Asia increased 76%, Europe decreased 69%, and the rest of the world increased 45%. China continued to represent less than 1% of sales in Q3.

The Q3 non-GAAP gross margin was 9.7%, which was down 220 basis points quarter-over-quarter from 11.9% in Q2, primarily due to higher inventory reserves for older generation products, lower volume, and accelerated costs to enable time-to-market for new products.

Q3 operating expenses on a GAAP basis decreased 3% quarter-over-quarter and increased 34% year-over-year to $293 million. On a non-GAAP basis, operating expenses decreased 5% quarter-over-quarter and increased 30% year-over-year to $216 million. Q3 non-GAAP operating margin was 5% compared to 7.9% in Q2 due to lower revenues and gross margins.

Other income and expense for Q3 was a net expense of $31.7 million, consisting of $13.4 million in interest expense, principally from convertible bonds and other losses of $18.3 million, principally from a non-cash $30.3 million loss on the amendment of the 2029 convertible bond and adverse foreign exchange impact and other miscellaneous expenses offset by higher interest income.

The GAAP effective tax rate was 5.1%, resulting in a GAAP tax expense of $6 million for Q3. The non-GAAP effective tax rate for Q3 was 15.5%, resulting in Q3 non-GAAP tax expense of $36 million. Q3 GAAP-diluted EPS of $0.17 and Q3 non-GAAP diluted EPS of $0.31 was lower than our guidance due to lower revenues and gross margins. The GAAP fully-diluted share count for Q3 was $622 million, and the non-GAAP fully-diluted share count was $636 million.

Cash flow generated from operations for Q3 was $627 million compared to cash flow usage of $240 million during the previous quarter. The Q3 closing inventory was $3.9 billion, which increased by $7.6 billion quarter-over-quarter from $3.6 billion in Q2, as we prepare for higher shipments in Q4. Capex was $33 million for Q3, resulting in free cash flow of $594 million during the quarter.

During the quarter, we amended the terms of our existing 2029 convertible notes and raised $700 million in gross proceeds in a new 2028 convertible note from the existing convertible investor group. The proceeds from the new convertible note offering will be used to strengthen our working capital, enable continued investments in R&D, and expand global capacity as needed.

The closing Q3 balance sheet cash position was $2.54 billion, while bank and convertible note debt was $2.49 billion, resulting in a net cash position of $44 million versus a negative net cash position of $479 million last quarter.

Turning to the balance sheet and working capital metrics compared to last quarter, the Q3 cash conversion cycle was 124 days versus 104 days in Q2. Days of inventory increased by three days to 81 days compared to the prior quarter of 78 days due to key component purchases for higher expected Q4 shipments.

Days sales outstanding increased by nine days quarter-over-quarter to 56 days, while days payables outstanding decreased by eight days to 13 days. We are closely monitoring the macro environment, tariffs, and the technology transition to new platforms.

The outlook for the fourth quarter of fiscal 2025 ended June 30, 2025, we expect net sales in the range of $5.6 billion to $6.4 billion, GAAP-diluted net income per share of $0.30 to $0.40, and non-GAAP diluted net income per share of $0.40 to $0.50. Given this dynamic environment, we are being prudent and expect gross margins to be approximately 10%.GAAP operating expenses are expected to be approximately $319 million and includes $74 million in stock-based compensation expenses that are not included in non-GAAP operating expenses.

The outlook for Q4 of fiscal year 2025 fully diluted GAAP EPS includes approximately $63 million in expected stock-based compensation expenses, net of tax effects of $18 million, which are excluded from non-GAAP diluted net income per common share. We expect other income and expenses, including interest expense, to be a net expense of approximately $16 million.

The company’s projections for Q4 GAAP and non-GAAP diluted net income per common share assume a GAAP tax rate of 14.9%, a non-GAAP tax rate of 16.5% and a diluted share count — a fully-diluted share count of 628 million for GAAP and 642 million shares for non-GAAP.

We expect capex for Q4 to be in the range of $45 million to $55 million. For the fiscal year 2025 ending June 30, 2025, based on the Q4 guidance above, we are expecting revenues of $21.8 billion to $22.6 billion.

Michael, we’re now ready for Q&A.

Michael Staiger — Vice President, Investor Relations

Great. Victoria, let’s go to Q&A.

Questions and Answers:

Operator

Of course. We will now begin the question-and-answer session. We ask that participants only ask one question and one follow-up. [Operator Instructions] Our first question comes from the line of Samik Chatterjee with J.P. Morgan. Your line is now open.

Samik Chatterjee

Hi, thanks for taking my question. Maybe for the first one, I know in your prepared remarks, you mentioned that the macro is making forecasting a bit tougher, and you’re talking about prudence in your guidance itself. But maybe if you can sort of share what you’re hearing from your customers, are customers already talking about pulling back some orders, or is there any change in customer order trends that you’re seeing because of the macro?

And given just where we stand relative to the June quarter already, we are a month in, I would assume you would have more sort of visibility into the June quarter rather than having to put sort of some level of conservatism in. So have you seen a lot more volatility in terms of customer orders recently to drive that prudence in terms of the revenue outlook for June? And I have a follow-up, please. Thank you.

Charles Liang

Yeah. I mean, very good question. Basically, June will be our traditional strong quarter. And for sure, now tariff and the macroeconomic uncertainty, that concerns some customer. But at this moment, we see a strong order. So I believe we will have a strong quarter for June, and September, next fiscal year, maybe even stronger because our new product, especially Blackwell is floating volume production now. So we gain more and more order for Blackwell and expect a strong growth start from now.

Samik Chatterjee

Okay. Got it. And maybe for my follow-up, on the gross margin side, previously, you had talked about margins improving as you start ramping new products, whereas you sound — the guidance itself implies a bit more cautiousness on that front. Has there been a change in the pricing landscape for the new products that you’re seeing in the market or is this more about the tougher pricing environment for Hopper-based products? Thank you.

David Weigand

I think it’s a combination of concern about tariffs and so conservatism there. And also with some, obviously, also some impact from the changeover in technology platforms.

Samik Chatterjee

Sorry, just to clarify, so in terms of the changeover that is driving some headwinds to the gross margin, the changeover itself from Hopper to Blackwell?

David Weigand

That’s correct. So as you — as you come off of some of the older platforms, you have more price competition, and as we said, we had some delayed decisions because of these technology platform changes. And so that’s really impacting that along with tariff uncertainty, drives a little bit more prudence in setting margin expectations.

Samik Chatterjee

Got it. Thank you. Thanks for taking my questions.

Operator

Thank you for your question. Our next question comes from the line of Michael Ng with Goldman Sachs. Your line is now open.

Michael Ng

Hi. Good afternoon. Thank you very much for the question. I was just wondering if you could talk a little bit more mid-term about your demand outlook. Are you — and apologies if I missed it, but are you — are you reiterating the $40 billion revenue target for fiscal ’26? And perhaps you can talk a little bit about any changes that you might be seeing from a demand perspective, aside from the timing of the technology platform transition and the macro uncertainty. Thank you.

Charles Liang

Yeah. We remain very confident with our mid-term and long-term growth. So especially back away our product line, we have a very strong demand, and also our coming soon DCBBS Data Center Building Block Solutions, we see lots of customer really interested in our Data Center Building Block Solutions. So demand growth will keep strong. And yes, the tariff and some uncertainty, we at this moment, do not provide the guidance for fiscal year ’26. But when it’s now basically become more clear, we will share at that time.

Michael Ng

Great. Thanks, Charles. That’s very helpful. And just as a follow-up, can you talk about whether or not you’re seeing differences in demand between HGX versus NVL72 racks? Any differences there either in customer demand or your ability to fulfill demand on either products? Thank you.

Charles Liang

Yeah. We see a strong demand for a kind of GB200 NVL72 and B200 liquid cooling. But the customer data center, basically a little bit. So that’s why they are waiting, there are waiting more than what we expect. So — but however, our solution, the [indecipherable] LTL A will be ready very soon. And we do see our schedule is getting much more exciting now.

Operator

Thank you for your question, Michael. Our next question comes from the line of George Wang with Barclays. Your line is now open.

George Wang

Hey guys, thanks for taking my question. Hey, Charles. Just a couple of question on the GB300. Any differences in terms of value-adds from Super Micro just in terms of customization and potentially more services attached? And I would presume you guys potentially open up the components kind of for more open standards for the GB300 that could lead to a better margins for Super Micro? I mean, do you agree? Just any kind of puts and takes there?

Charles Liang

Yeah. I guess whenever the new technology it always putting a more chance to Super Micro. As you know, our B200 HGX system, for example, we are the first to have a product available, and the demand is strong. So, B300 and GB300 for sure, we expect very strong demand.

And with our very mature [indecipherable] solution, we have a DLC solution started to ship last year 4,000 rack. And this year, with our DLC2, the DLC Division 2, it will offer even better power saving, water saving, and also a much better in thermal noise level, right? So we believe GB300, B300, our technology advantage will be even more clear. And we are exciting to see the B300, GB300 combination in the summer, right, the coming summer.

George Wang

Okay. Great. Just quickly, if I can squeeze in, maybe for David and also for Charles. Just in terms of top two customers, this quarter combined the percentage, was a bit lower versus last quarter. So is this because of quarter-to-quarter kind of lumpiness, volatility? Or is there anything else? Kind of you also called out in terms of top two customer contribution a bit lower?

David Weigand

Yeah, I don’t think there’s any trend, George. It’s just timing of shipments, but we don’t have any concern about — yeah.

George Wang

Yeah. Just kind of a follow-up, any outlook for the top two customers kind of in the next few quarters? Any high-level thoughts and any other kind of customer set you guys are expanding to kind of you can talk about?

Charles Liang

Yeah. We believe our business will continue to grow much faster in the coming quarters. I hated to mention, but still, I mean, in December quarter last year and March quarter, we got some impact from the cash flow from the 10-K delay impact, but that’s already behind us. So now we have a much better cash flow, and we are ready to grow much quicker now, especially with the new technology.

George Wang

Thank you for your questions, George. Our next question comes from the line of Asiya Merchant with Citigroup. Your line is now.

Asiya Merchant

Great. Thank you for taking — okay, great. Thank you for taking my question. So I know there’s a lot of uncertainty with tariffs, etc., but is there something that you can talk to us or kind of see how investors — AI diffusion rules, there’s a lot of investor angst around that. How are you guys thinking about your visibility and how the orders should flow through given AI — in AI diffusion could impact or possibly could impact your revenues? And then I have a follow-up. Thank you.

Charles Liang

Yeah. At this moment, we see our demand continue to grow, and that’s why we continue to expand our facility in USA, in Taiwan, in Malaysia. So overall, our technology leading-edge, especially. I mean, we did the — we do continue to see that demand will continue to grow strongly.

Asiya Merchant

Okay. Great. And then on gross —

Charles Liang

[Speech Overlap] I mean, tariff may impact the demand a little bit, but overall we will continue to gain market share.

Asiya Merchant

Okay. And then if I may, on gross margins again, can you just help us understand like how you’re thinking about the margins, especially as you expand on your DLC version 2? Just how we should think about gross margins in ’20 — calendar ’20 — fiscal ’26, sorry.

David Weigand

Yeah. So we’re not going to give forecasts for next year at this meeting, but what I can tell you is that we have — we published before what our target margins are, but right now, we’ve got some of the headwinds of — like you mentioned, the diffusion rules coming up in mid-May. We have tariffs that we have to get — find our way through. And so those things are certainly headwinds, but on the other hand, we have — we still have the majority of our business from our US customers. And so we’re a US-based manufacturer. And so we think that we’re well positioned in the marketplace on all of those fronts, but we don’t — also being a first-to-market provider of the latest solutions, we also think we have an edge there. So we think that we’re as best positioned as someone in the marketplace can be.

Operator

Thank you for your questions. Our next question comes from the line of Ananda Baruah with Loop Capital. Your line is now open.

Ananda Baruah

Hey, guys. Yeah, thanks for taking the questions. Really appreciate it. I guess, yeah, two if I could. I guess this would be for Charles and for Dave. You guys made mention of ongoing ramp as Blackwell supply comes on. And so should we assume that that means September quarter looks up sequentially from the June quarter? And just along with that, this is not my follow-up, but just like along with that, like when the — during Hopper ramp, you had like — you had multiple quarters. That’s not accurate. You had two quarters of 70% sequential growth. You had a 40% sequential growth quarter during the Hopper ramp. So not like a forecast, but are those — you have 30% up here in June off of the soft March. So I guess the question is, is order of magnitude, can you be up — you say you’ll be up September quarter again as Blackwell ramps. And like, those sort of Hopper order of magnitude sequential increases, Charles, sort of through cycle, is that the type of thing? That — you sound so when you talk excitedly about the Blackwell potential. Is it that kind of order of magnitude that you think is possible to get back to at some point as you go through Blackwell cycle? And then I have a quick follow-up as well. Thanks.

Charles Liang

Yeah. Thank you for your question. Yes, you are right. I believe March quarter, we were soft, the major reason because technology transition; not just people waiting for a Blackwell solution, but also we have a lot of write-down for Hopper product line. So looking forward, I hope we can repeat the Hopper history, kind of start to grow from June and September and December quarter. I believe so. I hope so.

Ananda Baruah

Okay. That’s great. And my follow-up is actually more of a technical question. So you mentioned in your prepared remarks, Charles, about liquid cooling, the HGX B200s. And the question is how many HGXs B200, and then I guess if you want to give an early comments about the B200, the — how many HGXs are you actually seeing you can stack in liquid cool? And I guess I’m wondering like how many GPUs are folks able to stack in liquid cool with HGX? I’m interested in seeing how close you can get — how folks are getting that to the NVL72. Thanks. That’s it from me. Thanks.

Charles Liang

Yeah. For Hopper, as you know, air-cooled work fine, but we like to prove, we want to establish the liquid cooling technology. So we tried to promote aggressively liquid cooling for Hopper, and we successfully shipped about 4,000 rack DLC to the market. And so far the 4,000 rack run very reliable. Customers adopt our DLC solution a lot. So we gained lots of experience. And now our DLC solution is much mature than last year and that’s why we further prepare to promote DLC2.

Our DLC2, second-generation DLC, will outperform the first-generation and we will have a big promotion in next few days or next few weeks. So with the Blackwell, our DLC solution is fully ready and we will provide the best DLC solution to the world to have the customer save power, save water, save money, and also improve data center performance. So we have a very strong confidence for the liquid cooling, especially for Blackwell and future product.

Operator

Thank you for your questions. Our next question comes from the line of Nehal Chokshi with Northland. Your line is now open.

Nehal Chokshi

Hi. Thank you. Just want to make sure I understand the inventory reserve that occurred in the March quarter. And then is there any expectation that there will be nventory reserve in the June quarter and at that part of the 10% gross margin guidance?

David Weigand

Yeah. So the — as mentioned in our pre-release and also in this release, the inventory reserve reduced our margin by about 220 basis points. Most of that was caused by taking a reserve for some of the older inventory products. And so the — certainly, we’re watching very closely our inventory products. However, as mentioned, the main — the substantial reason for the expected reduction in margin is really caution or prudence regarding tariffs. I want to point out that by the way that we’ve — through three quarters, we had $16.2 billion in revenues. And that was versus last year’s four quarters of $15 billion, and so we’re very happy with where we are in the performance cycle and even though we expect even better.

Charles Liang

Yeah. To simplify, I would like to share, I mean, for March quarter, we have a 200-point impact from the reserve, but the June quarter may be, I hope only 100 point or less. And September quarter, I hope close to zero.

Nehal Chokshi

Okay. And so just this inventory reserve that you’re taking as a charge, that basically means, I mean, if you look at the impact of 200 basis points for the March quarter, that basically equates to $100 million. And then you had a billion-dollar shortfall on revenue. And so does that basically mean that some percent of that shortfall isn’t finding a new home, or does that mean that that shortfall is being resold in the June and September quarter at a lower price?

David Weigand

Yeah. So I mentioned that some of the revenues that we expected in Q3 were platform decision-based. So that means actually that people are moving to the newer platforms in the upcoming quarters. And so what that means is that in cases where people change their minds on platforms, we have to write the expected realizable value of those and take a reserve for those and do our best to sell them at more competitive prices.

Operator

Thank you for your questions. Our next question comes from the line of Jon Tanwanteng with CJS Securities. Your line is now open.

Jonathan Tanwanteng

Great. Thank you for taking my questions. I was wondering if you could expand on that platform decision a little bit more. Is it customers declined to take Hopper and decided to move to Blackwell? Or was it something else? Is that what I’m hearing? And was it due to design, or demand, or performance considerations, or was there something else going on with maybe like data center constraints or something like that?

Charles Liang

Yeah. Our customer base are little bit different from the other big competitor. Most of our customer kind of technology building company. So that’s why new product is very sensitive to them. And wishing is now Blackwell solution is fully ready. So we are excited to ramp it up start from now.

Jonathan Tanwanteng

Okay, great. Charles, I also wanted to touch on something you mentioned before, just with one of the biggest US server manufacturing operations. Can you just talk about your relative strength there and positioning in US domestic manufacturing versus your competitive set? And how much of an advantage is that when you are seeing tariffs going up across multiple industries? And is that providing you any more additional demand, or is that too hard to see right now?

Charles Liang

Yeah. I mean, as a USA company, we are able to — especially manufacture in Silicon Valley. We are able to respond to new technology much quicker and efficient than others, especially with a better performance, a better solution like a DLC2. And as to the tariff impact, because the tariff program is not quite settled down yet, so we are watching carefully and try to adjust our logistics and our operation as efficient as possible. Good thing is that we have a huge operation in USA and in Taiwan and in Malaysia now as well. So when the tariff programs settle down, we should be able to quickly respond to optimize the best solution for customers.

Operator

Thank you for your questions. Our next question comes from the line of Nicholas Doyle with Needham and Company. Your line is now open.

Nick Doyle

Hey, guys. On for Quinn Bolton. Thanks for taking my question. Can you just talk about your supplier allocations? Are you seeing the same GPU allocations for Blackwell as you have for Hopper? How is your supply changed as more competitors enter the market? Thank you.

Charles Liang

Yeah, still some allocation matter, kind of some customer one break away or right away and we had to wait for our allocation. So that situation is a little bit better than our Hopper frame, but still some constraint there.

Nick Doyle

Thank you.

Operator

Thank you for your question. Our last question comes from the line of Mehdi Hosseini with SIG. Your line is now open.

Mehdi Hosseini

Yes, thanks for taking my question. I’m a little bit confused with capacity. I see in the slides that capacity has remained around 5,000 racks per month, but your capex has been pretty aggressive. Can you help me reconcile the capacity and existing capacity? And I have a follow-up.

Charles Liang

Yeah, our capacity remained very huge, 5,000 racks per month, and then 2,000 racks can be GB200 NVL72 kind of high performance rack. And so we are very fully ready for when that demand ramp up, and that’s why when Blackwell become more mature, much better ER rate and we are fully ready for that, especially for our DLC2, much better liquid cooling solution.

Mehdi Hosseini

[indecipherable] 5,000 racks per month today compared to like six months ago?

Charles Liang

Indeed for USA, we have 5,000 racks per month since six months ago, but now we are growing in Taiwan and Malaysia, Netherlands as well.

Mehdi Hosseini

Okay. Thank you for the clarification. And then one update on — sorry, go ahead.

Charles Liang

Go ahead.

Mehdi Hosseini

Go ahead. Go ahead.

Charles Liang

I was going to say we haven’t we haven’t fully enabled Malaysia as of yet, which we will be — by the end of this year, they will be fully enabled for rack [Speech Overlap]

David Weigand

Larger scale racket production. Yes. I think that’s what you were driving towards.

Mehdi Hosseini

You have the flexibility.

Charles Liang

[indecipherable] we are fully ready. Yeah. Okay. Thank you.

Mehdi Hosseini

And Charles, where are we with the CFO search?

Charles Liang

When company continue to grow, for sure, we need more manpower. So we continue aggressively looking for more talent, including CFO position.

Operator

[Operator Closing Remarks]