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 Supermicrocomputer, Inc. SMCI U.S. Third Quarter Full Year 2025 Earnings Call. With us today are Charles Weyang, Founder, President, and Chief Executive Officer, David Weigand, CFO, and Michael Stager, Senior Vice President of Corporate Development. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, please press star followed by one on your telephone keypad. I would now like to pass the conference over to Michael Seeger.

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 Wiegand, chief financial officer by now you should have received a copy of the news released from the company that was distributed at the close of regular trading 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 and presentations tab we've also published management 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 10K 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 March, we'll have a Q&A session for SELFA analysts. I will now turn the call over to Charles.

Thank you, Michael, and thank you, everyone, for joining us. As previously announced, our physical Q3 net revenue total $4.6 billion, coming in lower than our original forecast. This decline was primarily due to our customer weighting and evaluating AI platforms between the current Harper and the upcoming BlackWare GPUs leading to a delay commitment. We expect many of these engagements to materialize in 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 remain strong on the earning firm our physical q3 non-gap eps stood at 31 cents per share compared to 66 and last year this kind was largely driven by an inventory write down of all generation gpu and related components while the new platforms are finally ramping quickly about now although our quarterly performance did not align exactly with our expectation we successfully fulfill our commitment to regain financial regulatory compliance at the same time we continue to enhance technical innovation and development which results 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 coming soon dc dbs with the clear time to market advantage super micro once again leads the ai infrastructure technology and dlc solutions this strong position enable 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 both are exactly the first to the market again as well as gb200 MVL72 regs. Additionally, we start to offer AMD MI325x solutions to further broaden our AI portfolio. Leveraging our system building blocks, we will again offer time to market on the upcoming new platform such as NVIDIA B300, GB300, and AMD MI350 platforms this summer for customers seeking leading the technology more optimized higher density and greener ai solutions built on our strong foundation of technology leadership building block solution and green computing dna we have been deeply focused on developing in 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 data center building block solution. 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 better quality and performance. greener and with higher availability dc pbs consolidates critical components including ai server systems storage rack pardon play all different kinds of switches dlc systems water tower or dry tower chill door power shelf 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 9 its ability to reduce power consumption optimize space and decrease water usage delivering up to 30 percent lower tco More importantly, it accelerates new data center deployments and upgrades existing data centers in a matter of months or even weeks, rather than many quarters or years. Driven significantly improvement in data center time to deployments, we call TTD, and time to online tto one of the key components of dc bbs is our industry leading dlc solutions shibu michael remains at a full front of driven uh industry adoption of dlc technology direct cooling technology setting new standard for performance efficiency and sustainability Last year, we shipped 4,100 kW AI-REX equipment with DLLC, helping our customers reduce energy cost by up to 25 or even 30 percent. 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 percent 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 detail in the coming days green computing can be everywhere and with our dlc cool 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 our competition our global operation continue to expand with our new malaysia campus begin shipping product to partners meanwhile our facility in taiwan and europe are scaling up their capacity and capability, providing customers with flexible options for their logistical choice, and minimize their cost during the market and tariff uncertainties. To further strengthen support for key partners and align with the government initiatives, We continue to expand our U.S. domestic manufacturing capacity, including new facilities in the Middle West and other locations. These strategic expansions will allow us to meet rising demand while continuing to enhance our commitment in quality, security, and TCO, TTD, and TTO. In summary, Physical Q3 was dynamic and productive. We successfully navigated financial challenges while continuing to strengthen our leadership in product and technology innovation. Our force to market advantage in AI infrastructure along with the expanded reach of DECBBS data center building block solution and and advancement in the dlc technology further so uh solidify our industry position i've been highly confident and optimistic about our long-term strong growth and market share again however near-term macroeconomic economic 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 the 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 super mega team members and express my deep appreciation for their continuous support with that, I will now turn the call over to Debbie.

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. AIGPU platforms again represented more than 70% of revenues with AIGPU 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 u.s technology company we focus on extensive rack scale and dcbbs technology and capacity investments in the u.s 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-involving 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 a 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-slash-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 comprise 97% of Q3 revenue and subsystems and accessories, the remaining 3%. By geography, the U.S. represented 60% of Q3 revenues, Asia 30%, Europe 6%, and the rest of the world 4%. On a year-over-year basis, U.S. revenues increased 3%, Asia increased 77%, Europe decreased 3%, and the rest of the world increased 83%. On a quarter-over-quarter basis, U.S. revenues decreased 28%, Asia increased 76 percent, Europe decreased 69 percent, and the rest of the world increased 45 percent. China continued to represent less than 1 percent of sales in Q3. The Q3 non-GAAP gross margin was 9.7 percent, which was down 220 basis points quarter over quarter from 11.9 percent 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 gap 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 gap fully diluted share count for q3 was 622 million and the non-gap 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 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 dollars 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 million, 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 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 payable outstanding decreased by eight days to 13 days we are closely monitoring the macro environment tariffs and the tech the technology transition to new platforms the outlook for the fourth quarter of fiscal 2025 into June 30, 2025. We expect net sales in the range of $5.6 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 include 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 to $22.6 billion. Michael, we're now ready for Q&A.

Great. Victoria, let's go to Q&A.

Of course. We will now begin the question and answer session. We ask that participants only ask one question and one follow-up. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, press star one. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking a question. Our first question comes from the line of Samek Chatterjee with Jay Your line is now open.

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 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 we would have more sort of visibility into the June quarter rather than having to put sort of some level of consumerism 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 have a follow-up, please. Thank you.

Yeah, a very good question. Basically, June will be our traditional strong quarter, and for sure, tariff and macroeconomy uncertainty that concerns some customers. 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 will be even stronger. Because our new product, especially black whale, is full in volume production now. So we get more and more order for black whale and expect strong growth start from now.

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 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?

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

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?

That's correct. So 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.

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

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

Hi, good afternoon. Thank you very much for the question. I was just wondering if you could talk a little bit more midterm about your demand outlook. And I apologize if I missed it, but are you reiterating the $40 billion revenue target for fiscal 26 and perhaps you can talk a little bit about um you know any changes that you might be seeing from a demand perspective aside from the uh you know timing of the technology platform transition and the background uncertainty thank you yeah we remain very competent with our mid-term and long-term growth so especially blackware product line we have a very strong demand and also our commission dcbbs data center building blocks total solution we see a lot of customer

really interested in our data center total solution so the demand that grows will keep strong And yes, the tariffs and some macroeconomic uncertainty, we at this moment do not provide the guidance for fiscal year 26. But when the visibility becomes more clear, we will share at that time.

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 MVL72 racks? Any differences there, either in customer demand or your ability to fulfill demand on either product?

Thank you. yeah we see a strong demand for uh kind of gp200 mvro 72 and uh p200 liquid cooling but the customer liquid cooling data center basically a little bit dead so that's why they are uh waiting there um uh waiting that it'd be more than what we expect So, but however, the solution, the data center will be ready very soon, and we do see our schedule is getting much more exciting now.

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

Oh, hey, hey.

Hey, guys, thanks for taking my question. Hey, Charles, just a kind of question on the GB300. You know, any differences in terms of value-added from Supermicro just in terms of customizations and potentially more services attached, you know, with the presumed, you know, as Invidia potentially open up the components kind of for more open standards for the GB300 that could lead to a better margin for Supermicro? I mean, do you agree?

Just any kind of pleasant taste there? yeah I guess whenever the new technology it always putting a more chance to super macro as you know our B 200 HGX system for example we are the first have a product available and the many strong so B 300 and GB 300 for sure we expect a very strong demand and with our very mature liquid cooling solution. You know, we have a DLC solution start to ship last year, 4,000 ROAC, and this year with our DLC 2, DLC revision 2, it offers even better power saving, water saving, and also much better in terms of noise level, right?

So we believe GB300, B300, our technology advantage will be even more clear and we are exciting to see the b3 and the gp3 and the combination uh in the summer right the coming summer just quickly if i can squeeze in um maybe for david and also for charles just uh in terms of um top two customers this quarter combined the percentage was a bit lower uh versus last quarter so is this because of quarter to quarter kind of lumpiness you know volatility or is there anything else kind of you want to call out in terms of who is popular customer contribution a bit lower yeah i don't i don't think there's any uh trend uh george it's just a timing of uh of shipments but we don't we don't have any concern about yeah yeah yeah just kind of follow up any um outlook uh for for the for the top two customers kind of in the next few quarters any high level thoughts and uh any other kind of customer staff uh you guys are you know expanding to kind of you can talk about yeah we believe our business will continue uh to uh grow much faster uh in the coming quarters um i hate to mention but still

i mean uh uh in december quarter last year and march quarter we got some impact from the cash flow from the 10k 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 thank you for your questions george our next question comes from the line of acr merchant with citigroup your line is now great thank you for taking okay great thank you for taking my question So I know there's a lot of uncertainty with tariffs, et cetera, but is there something that you can, you know, 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, you know, your visibility and how the order should flow through, given AI diffusion could impact or possibly could impact your revenues? And then I have a follow-up. Thank you.

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 didn't age, especially. I mean, we do continue to see that demand will continue to grow stronger. Okay, great. And then on growth margin… Yeah, sorry. I didn't mean to interrupt. I mean, Terry may impact the demand a little bit, but overall, we will continue to get much share.

Okay. Okay.

And then if I may on gross margins again, can you just help us understand like how you're thinking about, you know, the margins, especially as you expand on your DLC version 2, just how we should think about those margins in 20, you know, calendar 20, fiscal 26, sorry. yeah so we're not we're not going to give forecasts uh for for next year at at this meeting but what i can tell you is is that we have um you know we we have published before what our our target margins are so right now we've got some the headwinds of of uh like you mentioned that the diffusion rule is coming up in mid-may uh we have tariffs that we're that uh we have to we have to find our way through. And so those things are certainly headwinds. But on the other hand, we still have the majority of our business from U.S. customers. And so we're a U.S.-based manufacturer. And so we think that we're well-positioned in the marketplace on all of those fronts. But we 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.

Thank you for your question.

Our next question comes from the line of Amanda Barra with Loop capital your lines now open hey hey guys yeah thanks for taking the questions really appreciate it uh i guess yes too if i could i guess um you know this would be for charles and and for dave you guys made mention of ongoing ramp uh 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 uh you had like you know you had multiple quarters that's not accurate you had two quarters of 70 sequential growth you had a 40 sequential growth quarter you know during the hopper ramp so So not like a forecast, but are those, you have 30% up here in June off of the sophomore. So I guess the question is, is order of magnitude, you know, can you be up, you say you'll be up September quarter again as Blackwell Rams. And like those sort of upper order of magnitude, sequential increases, Charles, sort of through cycle, is that the type of thing that you sound so excited 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? But then I have a quick follow-up as well.

Yeah, thank you for your question. Yes, you are right. I believe March quarter we were solved as a major reason because of technology transition. Not just people waiting for a black whale solution, but also we have a lot of write down for the upper product line, right? So, looking for a wall, I hope we can repeat the upper history, kind of start to grow from June and September and December quarter. I believe so. I hope so.

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 comment about the B200, how many HGXs are you actually seeing you can stack and liquid cool? and i guess i'm wondering like how many gpus are folks able to stack and liquid cool with hgx uh i'm interested in seeing how close you can get folks are getting that to the uh to the mbl 72 thanks that's it for me thanks yeah yeah for half for half as you know uh air cooler work fine but we like to prove we want to establish the liquid cooling uh technology so So we try to promote a place of the deep cooling for Harper.

And we successfully ship about 4,000 REC TRC to the market. And so far the 4,000 REC run very reliable, customer adapt our TRC solution a lot. So we get lots of experience and now our TRC solution is much more 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 Black Whale, our DLC solution is fully ready. And we will provide the best DRC solution to the world to help 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 blackware and future product.

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

Thank you. um just want to make sure i understand the inventory reserve that occurred in the march quarter and then is there any um expectation that there will be inventory reserve in the june quarter and is that part of 10 gross margin guidance yes so the uh as mentioned in our pre-release uh and and also in this release the inventory reserve um you know reduced our uh our margin by about 220 basis points most of that was was caused by taking a reserve for some of the older um inventory products and so the um certainly uh we're watching very closely you know our uh our inventory uh products however as mentioned the main the substantial reason for the for the expected reduction in margin is uh is really uh caution or our prudence regarding uh tariffs i want to i want to point out that uh by the way that we've uh through three quarters we have uh we have 16.2 billion in revenues and that was that was versus you know last year's four quarters of 15 billion and so we uh we know we're very we're very happy with where we are and the performance cycle, and even though we expect even better.

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

Okay.

And so just this inventory reserve that you're taking as a charge, that basically means, I mean, you look at the impact of 200 basis points for a 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, you know, some percent of that shortfall just isn't finding a new home? Or does that mean that that shortfall is being resold into June and September quarter at a lower price?

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. okay and so what that means is that you know in cases where people change their minds on platforms we have to uh you know we have to um you know write the expected um realizable value of those uh and take a reserve for those and and uh and do our best to sell them uh at uh more competitive prices thank you for your questions our next question comes from the line of john tanwanting with CJS Security.

Your line is now open.

Thank you for taking my questions. I was wondering if you could expound on that platform decision a little bit more. Is it customers declined to take Hopper and decided to move to Blackwell? 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?

Yeah, you know, our customer base is a little bit different from the other competitors, right? Most of our customers are kind of a technology-leading company. So that's why new product is very sensitive to them. And Gixing is now a black whale solution is fully ready. So we are excited to ramp up stuff now.

Okay, great. Charles, I also wanted to touch on something you mentioned before, just with, you know, one of the biggest, you know, U.S. server manufacturing operations. Can you just talk about your relative strength there in positioning in U.S. domestic manufacturing versus your competitive set? And how much of an advantage is that, you know, when you are seeing tariffs going up across, you know, multiple industries?

And is that providing you any more additional demand or is that too hard to see right now? 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 right and as to our tariff impact because the tariff program is not quite settled down yet so we are watching carefully and try to adjust our logistic our uh operation uh as efficient as possible a good thing is we have a huge operation in usa and in taiwan and in malaysia now as well so uh uh when the target program settle down we should be able to quickly uh response to optimize the best solution for customer thank you for your questions our next question comes to the line of nicholas doyle with needham and company your men is now open hey guys uh 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 has your supply changed as more competitors enter the

market. Thank you.

Yeah, still some allocation matter, right? Kind of some customer one break away right away and we had to wait for allocation. So that situation is a little bit better than a half of time frame, but still some constraint there. Thank you.

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

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

Yeah, our capacity remains very huge, 5,000 regs per month, and then 2,000 regs can be a GB200, MVL72 kind of type performance reg. and so we are very fully ready for when that demand ramp up and that's why when blackware become more mature much better airway and we are we are fully ready for that especially for our DLC to much better deep cooling solution but Charles how does that five thousand drag per month uh today compared to like six months ago um indeed for usa uh we have a five thousand right per month i think six months ago but now we are growing in uh uh taiwan and malaysia national as well okay thank you for clarification I was just going to say, we haven't fully enabled Malaysia as of yet, which, you know,

we will be, by the end of this year, it will be fully enabled for ragged, larger scale ragged production. I think that's what you were driving toward. You have the facility.

Now, I'm about to, right? To that way, we're very ready, yeah.

OK. Where are we with the CFO search?

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

Thank you for your questions. That concludes today's call. Thank you for your participation and enjoy the rest of your day.