Dive Brief:

• San Jose, California-based Super Micro Computer said it had received subpoenas late last year from the Department of Justice and the Securities and Exchange Commission which were “seeking certain documents following the publication of allegations in a short seller report” published in August, according to a securities filing and release Tuesday. The company disclosed the requests as part of an announcement on preliminary unaudited results for its Q2.
• The AI server maker’s accounting has drawn scrutiny in the wake of a highly critical report from the now defunct Hindenburg Research on Aug. 27. Subsequently, the company delayed its 10-K filing for its fiscal 2024 to assess internal controls and its auditor EY resigned and was replaced with BDO. In December, the outlook appeared to brighten when the SEC granted it an extension to file this month without risking delisting and separately, an internal probe of the integrity of the company’s audit committee and management found “no evidence of misconduct” even as it recommended the company “transition to a new CFO.”  
• The company did not respond to a request for comment on the subpoenas, but noted in the filing it was cooperating with the agencies’ request for documents. Nicole Wright, an associate professor at James Madison University’s School of Accounting, said it is “highly likely that an investigation has been launched by both the SEC and DOJ. “Subpoenas don’t always mean an investigation is underway, but given the high publicity, the resignation of the independent auditors, and the impact on investors when EY walked away — I would be very surprised if the SEC and DOJ aren’t investigating,” she wrote in an email.

Dive Insight:

In a Tuesday conference call on preliminary unaudited results for the company’s fiscal Q2 period ended Dec. 31, Super Micro CEO Charles Liang said he was “confident” that the 10-K and 10-Qs of two quarters of fiscal 2025 would be filed by the Feb. 25 extended deadline. He also asserted the company will “continue to add more top experienced leaders to build a stronger corporate foundation for our rapidly growing and expanding global business, including the CFO, CCO and other positions.”

The company also reported mixed preliminary financial information for its Q2 that included some signs of strong growth. It expects fiscal Q2 net sales to be in $5.6 billion to $5.7 billion range, reflecting 54% year-over-year growth. Looking ahead, Liang expects fiscal year 2025 revenue in the $23.5 billion to $25 billion range, rising to $40 billion in 2026. 

“With our leading direct-liquid cooling (DLC) technology and over 30% of new data centers expected to adopt it in the next 12 months, Super Micro is well positioned to grow AI infrastructure,” Liang said in a statement included in the release. 

At the same time, the company’s filing also revisited some previous accounting, saying it needed to make “adjustments” to preliminary unaudited results in the Q4 of fiscal 2024 announced in August, including a charge related to an increase in inventory reserves of about $45 million related to an unexpected decline in the market value of certain components. 

“Collectively, these changes resulted in a downward adjustment to the previously announced preliminary unaudited fiscal year 2024 and fourth quarter of fiscal year 2024 GAAP and non-GAAP diluted net income per common share of approximately $0.09 based on post-split diluted shares outstanding,” the filing states. “The foregoing adjustments are to previously announced preliminary unaudited financial results and, as such, do not constitute a restatement.”

JPMorgan analysts writing in a Tuesday report said the fiscal Q2 earnings fell short in terms of revenue and margins, but called the updated outlook for fiscal Q425 and fiscal 2026 “a nice upside surprise.” Super Micro “remains in a strong position in the AI server market with next-generation GPUs and broader technical capabilities encompassing areas like liquid cooling, but the SEC compliance issues raise challenges around working capital that the company has to manage while looking to preserve their market leadership,” the report states. 

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