What changed in this filing

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Item 1A. Risk Factors

2025-08-28 compared with 2025-02-25 · 318 added, 568 removed, 349 unchanged (72% of the section changed)

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Risk Factor Summary

The following is a summary of the most significant risks and principal factors that make an investment in our common stock speculative or risky.

Risks Related to our Delinquent SEC Reporting Obligations

• Circumstances discussed in the Explanatory Note in this Annual Report;

• Our failure in timely filing our SEC reports;

• The outcome of litigation and other legal proceedings, disputes, claims, as well as regulatory examinations, investigations, proceedings and orders arising out of the circumstances discussed in the Explanatory Note in this Annual Report, and any orders, actions or rulings not in our favor;

• Significant expenses related to the circumstances discussed in the Explanatory Note in this Annual Report;

• The remediation of material weaknesses and deficiencies in our internal control over financial reporting and disclosure controls and procedures, and any resulting litigation;

• The absence of timely and accurate financial information has hindered and may in the future hinder our ability to effectively manage our business and the ability to issue stock-based compensation to our employees;

• Our availability to access outside financing;

• Negative publicity and potential customers’ concerns;

Operational and Execution Risks

• Volatility of our quarterly operating results;

• Our ability to meet publicly announced financial guidance or other expectations about our business;

• Timely development of new products and enhancements to our existing products;

• Our ability to maintain sufficient inventory;

• Shortfall in revenue or decline in margins;

• The exercise of security interests we take in products sold;

• Concentration of our customer base;

• Our ability to secure additional financing on favorable terms;

• Our cost structure, ability to deliver server solutions to customers, and ability to resolve warranty claims in a timely manner;

• Our ability to enhance or upgrade our enterprise resource planning (“ERP”) systems and other IT applications, including challenges related to automating internal controls utilizing our ERP systems and maintaining internal controls over processes in other IT applications;

• Increases in average selling prices for our solutions;

The following summarizes the principal factors that make an investment in the Company speculative or risky.

This summary should be read in conjunction with the remainder of this “Risk Factors” section and should not be relied upon as an exhaustive summary of the material risks facing our business.

The occurrence of any of these risks could harm our business, financial condition, results of operations and/or growth prospects or cause our actual results to differ materially from those contained in forward-looking statements we have made in this report and those we may make from time to time.

You should consider all of the risk factors described in our public filings when evaluating our business.

Risks Related to Previously being Delinquent in SEC Reporting Obligations

• We face risks related to previously being delinquent in our SEC reporting obligations;

• We have incurred and expect to continue to incur significant expenses related to the circumstances discussed in Item 9.

“Changes in and Disagreements with Accountants on Accounting and Financial Disclosure” section in this Annual Report, the remediation of deficiencies in our internal control over financial reporting and disclosure controls and procedures discussed in Item 9A.

“Controls and Procedures” of this Annual Report, and any resulting litigation;

• Matters relating to or arising from the circumstances discussed in Item 9.

“Changes in and Disagreements with Accountants on Accounting and Financial Disclosure” section in this Annual Report, including adverse publicity and potential concerns from our customers, have had and could continue to have an adverse effect on our business and financial condition;

• We have identified material weaknesses in our internal control over financial reporting, which could, if not remediated, adversely affect our ability to report our financial condition and results of operations in a timely and accurate manner.

Risks Related to our Global Operating Business and Industry

• Our operating results have in the past fluctuated and will likely fluctuate in the future, and if our operating results are below the expectations of securities analysts or investors, our stock price could decline;

• If we fail to meet any publicly announced financial guidance or other expectations about our business, it could cause our stock to decline in value;

• Failure to meet the evolving needs of our industry and markets may adversely impact our financial results;

• Our sales are concentrated in a few large customers.

If we lose or experience a significant reduction in sales to any of these key customers, if any of these key customers experience a significant decline in market share, or if any of these customers experience significant financial difficulties, our revenue may decrease substantially and our results of operations and financial condition may be harmed;

• We may be unable to secure additional financing on favorable terms, or at all, which in turn could impair the rate of our growth;

• Our cost structure, ability to deliver server solutions to customers, and ability to resolve warranty claims in a timely manner may be adversely affected by volatility of the market for core components and certain materials for our products;

• We face risks related to recessions, inflation, stagflation, and other macroeconomic conditions;

• Changes in U.S.

or foreign policies, geopolitical conditions, general economic conditions, and other factors beyond our control;

• System security violations, data protection breaches, cyber-attacks, and other related cyber-security issues;

• Failure to adequately expand or retain our sales force;

• Potential conflicts of interest with Ablecom and Compuware;

• Our reliance on a limited source of contract manufacturing services and inventory warehousing;

• Our ability to attract and retain key personnel;

or foreign policies, geopolitical conditions, general economic conditions, and other factors beyond our control may adversely impact our business and operating results;

• Any failure, disruption or security breach or incident of or impacting our information technology infrastructure or information management systems could have an adverse impact on our business and operations;

• We may be unable to attract, retain, and motivate our executives and key employees;

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• Our direct sales efforts and relationships with our indirect sales channel and with our OEMs;

• Our ability to maintain good publicity with respect to us, our employees, our third-party service providers or our partners;

Strategic and Industry Risks

• Our ability to work with suppliers to make timely new product introductions;

• Our ability to manage our business for growth and expansion, including the expansion of our international manufacturing capacity and business operations;

• Our reliance on a limited number of suppliers for certain components used to manufacture our products;

• Our suppliers’ ability to improve the functionality and performance of materials and key components for our products;

• Our ability to timely deliver high quality server and storage solutions;

• Increased competition and our ability to compete effectively;

• The AI industry has contributed to our success but also presents significant risks and uncertainties, including potential risks from its use by our workforce;

• Our investments in corporate ventures and other investments;

• Our growth into markets outside the United States;

• Our reliance on indirect sales channels;

Legal and Regulatory Risks

• Lawsuits and other legal proceedings, disputes, claims, and government inquiries and investigations;

• Compliance with laws, rules, regulations, as well as political and other actions related to export control to which our business is subject;

• Compliance with laws and regulations regarding privacy, data protection and other matters;

• Our ability to protect our intellectual property;

• Compliance with environmental, health and safety laws, U.S.

Foreign Corrupt Practices Act, other applicable anti-corruption and anti-bribery laws, outbound investment regulations, and other government regulation or laws related to our business;

• Anti-takeover provisions in our charter and bylaws;

Financial Risks

• Our indebtedness, liabilities, and contractual obligations;

• Our ability to raise the funds necessary to repurchase the convertible notes for cash following a fundamental change (including the delisting of our common stock), to repay the outstanding principal and accrued interest upon an event of default, or to pay any cash amounts due upon conversion;

• Provisions in the indentures governing our convertible notes making it harder for a third-party to acquire us;

• Risks associated with the capped call transactions;

• Potential dilution caused by conversion of our convertible notes;

• Our R&D expenditures, which are considerably higher than many of our competitors;

• Change in our future effective income tax rates;

• Our backlog amount;

Risks Related to Owning our Stock

• Volatility of the trading price of our common stock;

• A decline in our stock price caused by future sales by existing stockholders;

• Conflicts of interest may arise with Ablecom and Compuware, and they may adversely affect our operations;

• Our reliance on Ablecom and Compuware could be subject to risks associated with our reliance on a limited source of contract manufacturing services and inventory warehousing;

• If we lose Charles Liang, our President, Chief Executive Officer and Chairman, or any other key employee or are unable to attract additional key employees, we may not be able to implement our business strategy in a timely manner;

• We are subject to order and shipment uncertainties.

If we are unable to accurately predict customer demand, we may hold excess or obsolete inventory, which would reduce our gross margin.

Conversely, we may have insufficient inventory or be unable to obtain the supplies or contract manufacturing capacity to meet demand, which would result in lost revenue opportunities and potential loss of market share as well as damaged customer;

• If negative publicity arises with respect to us, our employees, our third-party service providers or our partners, our business and operating results could be adversely affected, regardless of whether the negative publicity is true;

• We rely on a limited number of suppliers for certain components used to manufacture our products;

• Changing technology and intense competition require us to continuously innovate while controlling product costs, and our failure to do so may result in decreased revenues and profitability;

• The AI industry has driven a portion of our recent success.

The AI industry involves significant risks and uncertainties, and the use of AI by our workforce may present risks to our business;

• Our results of operations may be subject to fluctuations based upon certain investments we make;

• Our growth into markets outside the United States exposes us to risks inherent in international business operations.

Risks Related to Regulatory, Legal, Our Stock, and Other Matters

• We have been, are currently, and may in the future be subject to various lawsuits and other legal proceedings, disputes, claims, and government inquiries and investigations, which could cause us to incur substantial costs or require us to change our business practices in a way that could seriously harm our business, and any orders, actions or rulings not in our favor could have a material adverse effect on our business, results of operations, and financial condition;

• Our operations are impacted by complex laws, rules and regulations related to export control to which our business is subject, and rapid changes in such laws, rules, and regulations as well as political and other actions related thereto may adversely impact our business;

• Because our products and services may store, process and use data, some of which contains personal information, we are subject to complex and evolving domestic and international laws and regulations regarding privacy, data protection and other matters, which are subject to change;

• Adequately protecting our intellectual property rights could be costly, and our ability to compete could be harmed if we are unsuccessful or if we are prohibited from making or selling our products;

• Failure to comply with the U.S.

Foreign Corrupt Practices Act, other applicable anti-corruption and anti-bribery laws, and applicable trade control laws could subject us to penalties and other adverse consequences;

• Provisions of our certificate of incorporation and bylaws and Delaware law and provisions in our governing documents could discourage, delay or prevent a change of control of our company or changes in our management and, as a result, depress the trading price of our common stock;

• The concentration of our capital stock ownership with insiders likely limits your ability to influence corporate matters.

• No expectation in paying dividends in the foreseeable future;

Financial Risks

• Our indebtedness, liabilities, and other contractual obligations could limit the cash flow available for our operations, expose us to risks that could adversely affect our business, financial condition and results of operations and impair our ability to meet those obligations;

• Provisions in the 2029 Convertible Notes Indenture, the 2028 Convertible Notes Indenture, and the 2030 Convertible Notes Indenture could delay or prevent an otherwise beneficial takeover of us, may dilute the ownership interest of existing stockholders or may otherwise depress the price of our common stock;

• The capped call transactions entered into in connection with the issuance of the 2029 Convertible Notes and the 2030 Convertible Notes subject us to counterparty risk and may affect our common stock;

• Our future effective income tax rates could be affected by changes in the relative mix of our operations, our relative income among different geographic regions, and domestic and foreign income tax laws, which could affect our future operating results, financial condition and cash flows;

• We do not expect to pay any cash dividends in the foreseeable future.

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General Risks

• Our products may not be viewed as supporting climate change mitigation in the IT sector;

• Enactment of or changes to government regulation or laws related to our business.

Risks Related to our Delinquent SEC Reporting Obligations

• Expectations and evolving laws and regulations relating to environmental, social and governance considerations expose us to potential liabilities, reputational harm and other unforeseen adverse effects on our business.

Risks Related to Previous Delinquent SEC Reporting Obligations

We face risks related to previously being delinquent in our SEC reporting obligations.

Due to the circumstances discussed in the Explanatory Note in this Annual Report, our recent SEC filings, including this Annual Report, our Quarterly Reports on Form 10-Q for the quarterly periods ended September 30, 2024 and December 31, 2024 (the “Delinquent Reports”) were delinquent.

On December 6, 2024, Nasdaq granted us an exception to Nasdaq’s Listing Rule 5250(c)(1), allowing us to file all the Delinquent Reports by February 25, 2025.

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While we filed all of the Delinquent Reports on or before February 25, 2025, we expect to continue to face many of the risks and challenges related to previously being delinquent in our SEC reporting obligations, including the following:

Due to the circumstances discussed in Item 9.

“Changes in and Disagreements with Accountants on Accounting and Financial Disclosure” of this Annual Report, our Annual Report on Form 10-K for the fiscal year ended June 30, 2024 (“FY2024 10-K”), and our Quarterly Reports on Form 10-Q for the quarterly periods ended September 30, 2024 and December 31, 2024 (the “Delinquent Reports”) were delinquent.

While we filed all of the Delinquent Reports within the extension period granted by Nasdaq, we expect to continue to face many of the risks and challenges related to previously being delinquent in our SEC reporting obligations, including the following:

• We may fail to remediate material weaknesses in our internal control over financial reporting and other material weaknesses may be identified in the future, which could adversely affect the accuracy and timing of our financial reporting;

• Failure to timely file our SEC reports and make our current financial information available has placed downward pressure on our stock price, which has adversely affected, and may continue adversely affect, hiring and employee retention;

• Litigation and claims as well as regulatory examinations, investigations, proceedings and orders arising out of our failure to file SEC reports on a timely basis, including the reasons and causes for such failure to file, will continue to divert management attention and resources from the operation of our business;

• Failure to timely file our SEC reports and make our current financial information available in the past has placed downward pressure on our stock price, which has adversely affected, and may continue adversely affect, hiring and employee retention;

• Litigation and claims as well as regulatory examinations, investigations, proceedings and orders arising out of our failure to file SEC reports on a timely basis in the past, including the reasons and causes for such failure to file, will continue to divert management attention and resources from the operation of our business;

• We may not be able to recapture lost business or business opportunities due to ongoing reputational harm;

• Negative reports or actions on our commercial credit ratings would increase our costs of, or reduce our access to, future commercial credit arrangements and limit our ability to refinance existing indebtedness.

The outcome of litigation and other legal proceedings, disputes, claims, as well as regulatory examinations, investigations, proceedings and orders arising out of the circumstances discussed in the Explanatory Note in this Annual Report, and any orders, actions or rulings not in our favor could have a material adverse effect on our business, results of operations and financial condition.

Our company and certain of our current and former executive officers and directors are defendants in certain legal proceedings and putative class actions.

Please see Part I, Item 3, “Legal Proceedings.” These proceedings have resulted in significant expenses and the diversion of management attention from our business.

In addition, the circumstances which gave rise to the circumstances discussed in the Explanatory Note in this Annual Report continue to create the risk of additional litigation and claims by investors and examinations, investigations, proceedings and orders by regulatory authorities.

These include a broad range of potential actions that may be taken against us by the SEC or other regulatory agencies, including a cease-and-desist order and/or the assessment of possible civil monetary penalties.

Any such further actions could be expensive and damaging to our business, the results of operations, and financial condition.

We have incurred and expect to continue to incur significant expenses related to the circumstances discussed in the Explanatory Note in this Annual Report, the remediation of deficiencies in our internal control over financial reporting and disclosure controls and procedures, and any resulting litigation.

We have devoted and expect to continue to devote substantial internal and external resources towards remediation efforts relating to the circumstances discussed in the Explanatory Note in this Annual Report, the management review process and other efforts to regain timely compliance with the filing of our future SEC periodic and other reports.

As a result of these efforts, we have incurred and expect that we will continue to incur significant incremental fees and expenses for additional accounting, financial and other consulting and professional services, as well as the implementation and maintenance of systems and processes that will need to be updated, supplemented or replaced.

Specifically, in connection with the circumstances discussed in the Explanatory Note in this Annual Report, audit and compliance efforts and related litigation and other proceedings, claims, governmental inquiries or investigation, and other demands, we have incurred professional fees totaling $18.6 million through January 31, 2025.

The expenses we are incurring in this regard, as well as the substantial time devoted by our management, could have a material adverse effect on our business, results of operations, and financial condition.

The circumstances discussed in the Explanatory Note in this Annual Report have diverted, and continue to divert, management and other human resources from the operation of our business.

The Board of Directors, members of management, and our accounting, legal, administrative and other staff have spent significant time on the circumstances discussed in the Explanatory Note in this Annual Report and will continue to spend significant time on related matters.

These resources have been, and will likely continue to be, diverted from the strategic and day-to-day management of our business and may have an adverse effect on our ability to accomplish our strategic objectives.

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Additionally, due to the delay in filing the Annual Report as discussed in the Explanatory Note, our registration statements on Form S-8 were ineffective until the Annual Report was filed with the SEC.

This hindered the Company’s ability to grant certain stock-based compensation under its existing compensation programs.

The delay also prevented the Company from holding its annual meeting of stockholders, which would have allowed an increase in the number of common stock shares available for grant under its amended and restated 2020 Equity and Incentive Compensation Plan.

The inability to issue sufficient stock-based compensation could negatively impact our ability to attract and retain talent, potentially affecting our business growth, results of operations, and financial conditions.

Our failure to file SEC reports timely has affected, and could continue to adversely affect our access to outside financing.

As a result of the circumstances discussed in the Explanatory Note in this Annual Report, we chose to terminate our obligations under certain loan agreements early.

The failure to timely file our Delinquent Reports also has resulted in an obligation to pay additional interest and special interest under the terms of the indenture governing our 0.00% Convertible Senior Notes due 2029 (the “2029 Convertible Notes”) (the “2029 Convertible Notes Indenture”), which was subsequently amended on February 20, 2025 to, among others, provide for the 2029 Convertible Notes to bear interest from February 20, 2025 at an annual rate of 3.50%.

Please see Note 16, “Subsequent Events” in the Notes to the Consolidated Financial Statements in this Annual Report for information regarding the amendment of the terms of the 2029 Convertible Notes.

While we have filed all the Delinquent Reports within the extension period granted by Nasdaq, if any of our SEC periodic or other reports becomes delinquent in the future, any sources of financing that may be available to us could also be at higher costs and require us to satisfy more restrictive covenants, which could limit or restrict our operations, cash flows and earnings.

We cannot ensure that additional financing will be available to us or be sufficient or available on satisfactory terms.

In addition, unless we have filed all required reports with the SEC, we will be precluded from registering our securities with the SEC for offer and sale, and the failure to timely file our SEC reports will limit our ability to use “short-form” Form S-3 registration statements for registering our securities for sale with the SEC until we again meet the timely filing requirements of Form S-3.

If we are unable to access outside financing in a timely manner, or we are not able to obtain additional financing on terms favorable to us, our business, results of operations, and financial condition could be adversely affected.

Matters relating to or arising from the circumstances discussed in the Explanatory Note in this Annual Report, including adverse publicity and potential concerns from our customers, have had and could continue to have an adverse effect on our business and financial condition.

We have been and could continue to be the subject of negative publicity focused on the matters underlying the circumstances discussed in the Explanatory Note in this Annual Report.

• We continue to receive negative reports or actions related to our commercial credit ratings due to our past failure to file SEC reports on time, which could increase the cost of, or reduce our access to, future commercial credit arrangements and limit our ability to refinance existing indebtedness.

We have incurred and expect to continue to incur significant expenses related to the circumstances discussed in Item 9.

“Changes in and Disagreements with Accountants on Accounting and Financial Disclosure” of this Annual Report and the remediation of deficiencies in our internal control over financial reporting and disclosure controls and procedures, and any resulting litigation.

We have devoted and expect to continue to devote substantial internal and external resources towards remediation efforts relating to the circumstances discussed in Item 9.

“Changes in and Disagreements with Accountants on Accounting and Financial Disclosure” of this Annual Report, and management’s review of the circumstances and processes that led to those circumstances.

Matters relating to or arising from the circumstances discussed in Item 9.

“Changes in and Disagreements with Accountants on Accounting and Financial Disclosure” of this Annual Report, including adverse publicity and potential concerns from our customers, have had and could continue to have an adverse effect on our business and financial condition.

We have been and could continue to be the subject of negative publicity focused on the matters underlying the circumstances discussed in Item 9.

“Changes in and Disagreements with Accountants on Accounting and Financial Disclosure” of this Annual Report.

We may be adversely impacted by negative reactions to this publicity from our customers or others with whom we do business, who may have concerns including the time and effort required to address our accounting and control environment and our ability to be a long-term provider to our customers.

The continued occurrence of any of the foregoing could harm our business and have an adverse effect on our financial condition.

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We have identified material weaknesses in our internal control over financial reporting, which could, if not remediated, adversely affect our ability to report our financial condition and results of operations in a timely and accurate manner.

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A failure to maintain adequate internal controls may adversely affect our ability to provide financial statements that accurately reflect our financial condition and report information on a timely basis.

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We have concluded that our internal control over financial reporting was not effective as of June 30, 2025 due to the existence of material weaknesses in such controls, and we have also concluded that our disclosure controls and procedures were not effective as of June 30, 2025 due to material weaknesses in our internal control over financial reporting, all as described in Part II, Item 9A, “Controls and Procedures” of this Annual Report.

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Restated financial statements and failures in internal controls may also cause us to fail to meet reporting obligations, negatively affect investor and customer confidence in our management or result in adverse publicity and concerns from investors and customers, any of which could have a negative effect on the price of our common stock, subject us to further regulatory investigations, potential penalties or stockholder litigation, and have a material adverse impact on our business and financial condition.

Operational and Execution Risks

Our quarterly operating results have fluctuated and will likely fluctuate in the future, which could cause rapid declines in our stock price.

We believe that our quarterly operating results will continue to be subject to fluctuation due to various factors, many of which are beyond our control.

Risks Related to our Global Operating Business and Industry

Our operating results have in the past fluctuated and will likely fluctuate in the future, and if our operating results are below the expectations of securities analysts or investors, our stock price could decline.

We believe that our financial and operating results will continue to be subject to fluctuation due to various factors, many of which are beyond our control.

Factors that may affect quarterly operating results include:

• The circumstances discussed in the Explanatory Note in this Annual Report;

• Fluctuations in demand for our products, in part due to factors such as changes in emergent and rapidly evolving markets (such as AI) and changes in the global economic environment;

• Fluctuations in availability and costs associated with key components, particularly semiconductors, memory, storage solutions, and other materials needed to satisfy customer requirements;

• The timing of the introduction of new products by leading microprocessor vendors and other suppliers;

• Fluctuations based upon seasonality, with the quarters ending March 31 and September 30 typically being weaker;

• The ability of our customers and suppliers to obtain financing or fund capital expenditures;

• Fluctuations in the timing and size of large customer orders, including with respect to changes in sales and implementation cycles of our products into our customers’ spending plans and associated revenue;

• Variability of our margins based on the mix of server and storage systems, subsystems and accessories we sell and the percentage of our sales to internet data center, cloud computing customers or certain geographical regions;

• The introduction and market acceptance of new technologies and products, and our success in emergent and rapidly evolving markets (such as AI), and incorporating emerging technologies in our products, as well as the adoption of new standards;

• Changes in our product pricing policies, including those made in response to new product announcements and fluctuations in availability and costs of key components;

• Mix of whether customer purchases are of partially or fully integrated systems or subsystems and accessories and whether made directly or through our indirect sales channel partners;

• The effect of mergers and acquisitions among our competitors, suppliers, customers, or partners;

• General economic conditions in our geographic markets;

• Geopolitical tensions, including regional conflicts, trade wars, tariffs and/or sanctions in our geographic markets;

• Our ability to adjust spending due to the multi-year development cycle for some of our products and services;

• Our ability to comply with our contractual obligations to customers;

• Our extended payment term arrangements with certain customers, the inability of some customers to make required payments, our ability to obtain credit insurance for customers with extended payment terms, and customer bad debt write-offs;

• Our vendors’ payment requirements;

• Changes in financial accounting standards or interpretations of existing standards;

• Fluctuations in the timing and size of large customer orders and revenue recognition from such orders, and whether those orders are paid timely or require us to extend credit, which may expose us to collection risks even where we pursue mitigation strategies such as third party insurance with respect to credit issued and taking a security interest in goods we have sold to customers pending collection of any credit given;

• Revenue and margin variability due to potential volatility in emergent and rapidly evolving markets (such as AI), increased competition, challenging and inconsistent global macroeconomic environment.

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• Impact of regulatory changes (including export control) on our cost of doing business.

Customers may hesitate to purchase, or not continue to purchase, our products based upon the circumstances discussed in the Explanatory Note in this Annual Report.

If we fail to meet expectations of investors or analysts, our stock price may fall rapidly and without notice.

Furthermore, the fluctuation of quarterly operating results may render less meaningful period-to-period comparisons of our operating results, and you should not rely upon them as an indication of future performance.

Moreover, customers may hesitate to purchase, or not continue to purchase, our products due to ongoing reputational harm, negative publicity or other concerns related to our previously Delinquent Reports.

Any of these factors could prevent us from achieving our anticipated financial results.

For example, we have granted and may continue to grant extended payment terms to some customers, particularly during macroeconomic downturns, which could impact our ability to collect payment.

Our vendors have requested and may continue to ask for shorter payment terms, which may impact our cash flow generation.

These arrangements reduce the cash we have available for general business operations.

In addition, the pace of growth in our operating expenses and investments may lag our revenue growth, creating volatility or periods where profitability levels may not be sustainable.

Failure to meet our expectations or the expectations of our investors or security analysts is likely to cause our stock price to decline, as it has in the past, or substantial price volatility.

If we fail to meet any publicly announced financial guidance or other expectations about our business, it could cause our stock to decline in value.

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There are a number of reasons why we have at times failed to meet guidance in the past and might fail again in the future, including, but not limited to, the factors described in these Risk Factors.

We depend upon the development of new products and enhancements to our existing products, and if we fail to predict or respond to emerging technological trends and our customers’ changing needs, our operating results and market share may suffer.

The markets for our products are characterized by rapidly changing technology, evolving industry standards, new product introductions, and evolving methods of operations.

While our revenues increased in fiscal year 2024, our operating results depend on our ability to develop and introduce new products into existing and emerging markets (such as AI) and to reduce the production costs of existing products.

If our customers do not purchase our products, our business will be harmed.

The process of developing products incorporating new technologies is complex and uncertain, and if we fail to accurately predict customers’ changing needs and emerging technological trends our business could be harmed.

We must commit significant resources, including the investments we have been making in our strategic priorities to developing new products before knowing whether our investments will result in products and services the market will accept and investments to purchase inventory of key components for which there have been periods of supply constraint.

If the industry does not evolve as we believe it will, or if our strategy for addressing this evolution is not successful, many of our strategic initiatives and investments may be of no or limited value.

Suppliers of our key components may introduce new technologies that are critical to the functionality of our products more quickly than anticipated, which may render components we have on hand obsolete, saddling us with excess inventory which we may not be able to utilize in our products or sell at prices we had anticipated.

Conversely, suppliers of our key components may also introduce new technologies that are critical to the functionality of our products at a slower rate than their competition, which could adversely impact our ability to timely develop and provide competitive offerings to our customers.

Similarly, our business could be harmed if we fail to develop, or fail to develop in a timely fashion, offerings to address other transitions, or if the offerings addressing these other transitions that ultimately succeed are based on technology, or an approach to technology, different from ours.

In addition, our business could be adversely affected in the periods surrounding our new product introductions if customers delay purchasing decisions to qualify or otherwise evaluate the new product offerings.

Furthermore, we may not execute successfully on our vision or strategy because of challenges with regards to product planning and timing, technical hurdles that we fail to overcome in a timely fashion, or a lack of appropriate resources.

This could result in competitors, some of which may also be our suppliers, providing those solutions before we do and loss of market share, revenue, and earnings.

The success of new products depends on several factors, including proper new product and service definition, component costs, timely completion and introduction of these products, differentiation of new products from those of our competitors, market acceptance of these products, and providing appropriate support of these products.

There can be no assurance that we will successfully identify new product opportunities, develop and bring new products to market in a timely manner, or achieve market acceptance of our products or that products and technologies developed by others will not render our products or technologies obsolete or noncompetitive.

The products and technologies in our other product categories and key priority and growth areas may not prove to have the market success we anticipate, and we may not successfully identify and invest in other emerging or new products.

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We may lose sales or incur unexpected expenses relating to insufficient, excess or obsolete inventory.

To offer greater choices and optimization of our products to benefit our customers, we maintain a high level of inventory.

If we fail to maintain sufficient inventory, we may not be able to meet demand for our products on a timely basis, and our sales may suffer.

If we overestimate customer demand for our products for whatever reason (including technology changing more rapidly than we anticipate), we could experience excess inventory of our products and be unable to sell those products at a reasonable price, or at all.

As a result, we may need to record higher inventory reserves.

In addition, from time to time we assume greater inventory risk in connection with the purchase or manufacture of more specialized components in connection with higher volume sales opportunities.

In the past, we have taken certain actions including our increased purchase of certain critical materials and components as a part of our response planning for various uncertainties and risks, such as periods of supply constraint of key components and those related to lingering effects of the COVID-19 pandemic.

Specifically, we sought to actively manage our supply chain for potential risks of shortage by building inventories of critical components required for our motherboards and other system printed circuit boards, as well as add to our inventories of key components such as GPUs, CPUs, memory, and solid state drives ("SSDs") so that customer orders can be fulfilled as rapidly as possible after they are received.

We may continue to take similar actions in the future based upon our assessment of uncertainties and risks.

Nevertheless, no assurances can be given that any such efforts will be successful to manage inventory, and we could be exposed to risks of insufficient, excess, or obsolete inventory.

We have from time-to-time experienced inventory write downs associated with higher volume sales that were not completed as anticipated.

We expect that we will experience such write downs from time-to-time in the future related to existing and future commitments, and potentially related to any proactive purchase of certain critical materials and components as part of our planning for uncertainties and risks.

Excess or obsolete inventory levels for these or other reasons could result in unexpected expenses or increases in our reserves against potential future charges which would adversely affect our business, results of operations and financial condition.

Our revenue and margins for a particular period are difficult to predict, and a shortfall in revenue or decline in margins may harm our operating results.

Our revenue and margins for a particular quarter are difficult to predict, especially in light of the potential volatility in emergent and rapidly evolving markets (such as AI), increased competition, challenging and inconsistent global macroeconomic environment, and steps we are taking in response to each of the foregoing.

Our revenue may grow at a slower rate than in past periods or decline.

Our ability to meet financial expectations could also be adversely affected if the nonlinear sales pattern seen in some of our past quarters recurs in future periods.

The timing of large orders can also have a significant effect on our business and operating results from quarter to quarter.

From time to time, we receive large orders that have a significant effect on our operating results in the period in which the order is recognized as revenue.

For instance, our larger customers may seek to fulfill all or substantially all of their requirements in a single or a few orders, and not make another significant purchase for a substantial period of time.

The timing of such orders is difficult to predict, and the timing of revenue recognition from such orders may affect period to period changes in revenue.

When we issue credit in connection with large orders, in the event customers do not pay or make timely payment, our ability to collect amounts owed to us creates risk.

We have in the past, and may continue in the future, on a case-by-case basis, take steps to mitigate collection risks, such as seeking third party insurance with respect to credit issued and taking a security interest in goods we have sold to customers pending collection of any credit given.

However, we cannot be assured that such measures will be effective to collect on all or part of any such credit issued.

As a result, our operating results could vary materially from quarter to quarter based on the receipt of such orders and their ultimate recognition as revenue.

We plan our operating expense levels based primarily on forecasted revenue levels.

These expenses and the impact of long-term commitments are relatively fixed in the short term.

A shortfall in revenue could lead to operating results being below expectations because we may not be able to quickly reduce these fixed expenses in response to short-term business changes.

Any of the above factors could have a material adverse impact on our operations and financial results.

Failure to meet the evolving needs of our industry and markets may adversely impact our financial results.

Our products experience rapid changes in technology, customer requirements, competitive products, and industry standards.

Our success depends on our ability to:

• Timely identify industry changes, adapt our strategies, and develop new or enhance and maintain existing products and technologies that meet the evolving needs of our markets, including addressing unexpected shifts in industry standards or disruptive technological innovations that could render our products incompatible with those developed by other companies;

• Develop or acquire new products and technologies through investments in research and development;

• Launch new offerings with new business models including software, services, and cloud solutions, as well as software, or infrastructure;

• Expand the ecosystem for our products and technologies;

• Meet evolving and prevailing customer and industry safety, security, reliability expectations, and compliance standards;

• Manage product and software lifecycles to maintain customer and end-user satisfaction;

• Develop, acquire, maintain, and secure access to the internal and external infrastructure needed to scale our business, including sufficient energy for powering data centers using our products, acquisition integrations, customer support, e-commerce, IP licensing capabilities, and cloud service capacity;

• Complete technical, financial, operational, compliance, sales and marketing investments for the above activities.

We have invested in research and development in markets where we have a limited operating history, which may not produce meaningful revenue for several years, if at all.

If we fail to develop or monetize new products and technologies, or if they do not become widely adopted, our financial results could be adversely affected.

Obtaining design wins may involve a lengthy process and depends on our ability to anticipate and provide features and functionality that customers will demand.

They also do not guarantee revenue.

Failure to obtain a design win may prevent us from obtaining future design wins in subsequent generations.

We cannot ensure that our products and technologies will provide value to our customers and partners.

If we fail any of these key success criteria, our financial results may be harmed.

SMCI | 2025 Form 10-K | 15

In some instances, we take security interests in the products sold.

The exercise of such security interests, and the resale of our products, could negatively affect the results of operations and operating cash flows.

To mitigate the collection risks associated with larger sales, we have, in some instances, taken security interests in our products sold pending the collection of outstanding accounts receivable.

These security interests grant us priority as a secured creditor and entitle us to the recapture of the products sold in the event of customer default or bankruptcy.

However, we cannot guarantee that we will be able to successfully recapture our products on exercise of our security interests.

Even if we can recapture our products, we may not be able to successfully re-sell such products at a favorable price.

The occurrence of any of these events could negatively affect the results of operations and operating cash flows.

As we increasingly target larger customers and sales opportunities, our customer base may become more concentrated, our cost of sales may increase, our margins may be lower, our borrowings to fund purchases of key components may be higher, we are exposed to inventory risks and increased credit risks, and our sales may be less predictable.

Our sales are concentrated in a few large customers.

We have become increasingly dependent upon larger sales to grow our business.

In recent years, we have completed larger sales to leading internet data center and cloud customers, large enterprise customers and OEMs.

We had one customer account for 10% or more of our net sales in fiscal year 2024, while we had no single customer account for 10% or more of net sales in fiscal years 2023 or 2022.

We anticipate we may continue to have customers account for 10% or more of net sales in the future, and the loss of such customers could have a material adverse effect on our business and results of operations.

We had four customers account for 10% or more of our net sales in fiscal years 2025 and one customer account for 10% or more of our net sales in fiscal 2024, while we had no single customer account for 10% or more of net sales in fiscal year 2023.

We anticipate we may continue to have customers account for 10% or more of net sales in the future, and any subsequent loss of such customers could have a material adverse effect on our business and results of operations.

If customers buy our products in greater volumes and their business becomes a larger percentage of our net sales, we may grow increasingly dependent on those customers to maintain our growth.

If our largest customers do not purchase our products, or we are unable to supply such customers with products, at the levels, in the timeframes or within the geographies that we expect, including as a result of a global economic downturn, excessive credit risk, or a belief by such customers of excessive dependency upon us as a supplier, our ability to maintain or grow our net sales will be adversely affected.

If our largest customers do not purchase our products, or we are unable to supply such customers with products, at the levels, in the timeframes or within the geographies that we expect, including as a result of a global economic downturn, excessive credit risk, or a desire by such customers to limit their dependency upon us as a supplier, our ability to maintain or grow our net sales will be adversely affected.

Increased sales to larger customers may also cause fluctuations in the results of operations.

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An actual or perceived inability to meet customer support demands may adversely affect our relationship with such customers, which may affect the likelihood of future purchases of our products.

Larger customers may also request larger amounts of credit or longer payment terms, which, if granted, increases our risks in the event customers to do not pay or make timely payment, which risk is exacerbated in the event our payment terms with major suppliers of necessary components for such orders do not match the payment terms of our customers.

Larger customers may also request larger amounts of credit or longer payment terms, which, if granted, increases our risks in the event customers do not pay or make timely payment, which risk is exacerbated in the event our payment terms with major suppliers of necessary components for such orders do not match the payment terms of our customers.

As a result of the above factors, our quarter-to-quarter results of operations may be subject to greater fluctuation and our stock price may be adversely affected.

SMCI | 2024 Form 10-K | 18

We may be unable to secure additional financing on favorable terms, or at all, which in turn could impair the rate of our growth.

We had net income of $1.15 billion, $640.0 million and $285.2 million in fiscal years 2024, 2023 and 2022, respectively.

During fiscal year 2024 we raised approximately $2.31 billion, after deducting underwriting discounts and commissions and offering expenses payable by us, in two equity offerings of our common stock and $1.55 billion, net of debt issuance costs and capped call transactions costs in an offering of convertible debt securities.

In addition, we borrowed $500.0 million under our term loan facility in July 2024.

We had net income of $1,048.9 million, $1,152.7 million, and $640.0 million in fiscal years 2025, 2024, and 2023, respectively.

During fiscal year 2025, we issued $700.0 million aggregate principal amount of our 2028 Convertible Notes in a private placement, and we issued $2.3 billion aggregate principal amount of our 2030 Convertible Notes in a private placement.

Our Taiwan subsidiary, where we maintain significant operations, also increased their lines of credit, or entered into new lines of credit, with various commercial banks in Taiwan.

In addition, on February 20, 2025, we issued $700.0 million aggregate principal amount of our 2.25% Convertible Senior Notes due 2028 (the “2028 Convertible Notes”) in a private placement.

SMCI | 2025 Form 10-K | 16

We believe that our current cash, cash equivalents, borrowing capacity available from our credit facilities and internally generated cash flows will be sufficient to support our operating businesses and maturing debt and interest payments for the 12 months following the issuance of the financial statements included in this Annual Report.

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We could also lose orders, be unable to develop or sell some products cost-effectively or on a timely basis, if at all, and have significantly decreased revenues, margins and earnings, which would have a material adverse effect on our business, results of operations and financial condition.

Challenges we encounter in enhancing and updating ERP systems and other IP applications, including automating internal controls through our ERP systems and maintaining internal controls over processes in other IT applications, could adversely impact our controls environment.

Many companies have experienced challenges with their ERP systems that have had a negative effect on their business.

We have incurred and expect to continue to incur additional expenses related to our ERP systems, particularly as we continue to further enhance and develop them, including by automating certain internal controls and updating systems which are approaching the end of their service life or may no longer be supported.

Any future disruptions, delays or deficiencies relating to automating internal controls utilizing our ERP systems, integrating processes that occur in other IT applications, or updating systems could adversely affect our ability to file reports with the SEC in a timely manner, deliver accurate financial statements and otherwise impact our controls environment.

Any of these consequences could have an adverse effect on our business, results of operations and financial condition.

Increases in average selling prices for our solutions have significantly contributed to increases in net sales in some of the periods covered by this Annual Report.

Such prices are subject to decline if customers do not continue to purchase our latest generation products or additional components, or key components become more widely available and commoditized, which could harm the results of operations.

Increases in average selling prices for our server solutions have significantly contributed to increases in net sales in some of the periods covered by this Annual Report.

The market for key components became, and continues to be, volatile.

As with most electronics-based products, average selling prices of server and storage products are typically highest at the time of introduction of new products, which utilize the latest technology, and tend to decrease over time as such products become commoditized and are ultimately replaced by even newer generation products.

We cannot predict the timing or amount of any decline in the average selling prices of our server solutions that we may experience in the future, which may be exacerbated by factors such as global economic conditions, regional conflicts, and rapid developments in trade restrictions.

In some instances, our agreements with our indirect sales channel partners limit our ability to reduce prices unless we make such price reductions available to them, or price protect their inventory.

If we are unable to either (i) decrease the average per unit manufacturing costs faster than the rate at which average selling prices decline or (ii) increase the average selling prices at the same pace at which average per unit manufacturing costs increase, our business, financial condition and results of operations will be harmed.

We face risks related to recessions, inflation, stagflation, and other macroeconomic conditions.

Customer demand for our products may be impacted by weak macroeconomic conditions, inflation, stagflation, recessionary or lower-growth environments, high or rising interest rates, equity market volatility or other negative economic factors in the U.S.

or other nations.

For example, under these conditions or expectation of such conditions, our customers may cancel orders, delay purchasing decisions or reduce their use of our services.

In addition, these economic conditions have resulted in the past, and could result in the future, in higher inventory levels, and thus additional excess and obsolescence charges.

Further, in the event of a recession or threat of a recession our manufacturing partners, suppliers, distributors, and other third-party partners may suffer their own financial and economic challenges and as a result they may demand pricing accommodations, delay payment, or become insolvent, which could harm our ability to meet our customer demands or generate revenue or otherwise could harm our business.

Similarly, disruptions in financial and/or credit markets may impact our ability to manage normal commercial relationships with our manufacturing partners, customers, suppliers and creditors and might cause us to not be able to continue to access preferred sources of liquidity when we would like, and our borrowing costs could increase.

Thus, if general macroeconomic conditions, or conditions in the semiconductor industry, or conditions in our customer end markets deteriorate or experience a sustained period of weakness or slower growth, our business and financial results could be materially and adversely affected.

In addition, we are also subject to risk from inflation and increasing market prices of certain components, supplies, and commodity raw materials, which are incorporated into our end products or used by our manufacturing partners or suppliers to manufacture our end products.

These components, supplies and commodities have from time to time become restricted, or general market factors and conditions have in the past and may in the future affect pricing of such components, supplies and commodities (such as inflation or supply chain constraints).

Changes in U.S.

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For example, tensions between the United States and China have led to the United States’ imposition of a series of tariffs, sanctions, and other restrictions on imports from China and sourcing from certain Chinese persons or entities, as well as other business restrictions.

Additionally, President Trump has indicated that his administration would potentially impose greater restrictions on trade with China through significant increases in tariffs on goods imported into the U.S., which could increase tensions and create greater uncertainty in our business dealings.

government has recently imposed tariffs on certain foreign goods, and some foreign governments have threatened or instituted retaliatory tariffs on certain U.S.

goods and have indicated a willingness to impose additional tariffs on U.S.

products, which could increase tensions and create greater uncertainty in our business dealings.

Further, such actions by the U.S.

could result in other retaliatory actions by those countries which could impact our ability to profitably commercialize our products in those jurisdictions.

Several countries are considering or have implemented tariffs or other trade barriers or restrictions, as well as other measures affecting cross-border commerce and the flow of information, which could have broad economic consequences, impact global supply chains and negatively affect our business, customers and partners.

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Global events may present challenges and risks to us.

For example, the crises in eastern Europe and the Middle East continues to pose challenges to global companies, including us, which have customers in the impacted regions.

For example, the crises in Eastern Europe and the Middle East continue to pose challenges to global companies, including us, which have customers in the impacted regions.

and other global governments have placed restrictions on how companies may transact with businesses in these regions, particularly Russia, Belarus and restricted areas in Ukraine.

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Our business depends on the overall demand for accelerated compute platforms.

Global financial developments and downturns seemingly unrelated to us or our industry may harm us.

If economic conditions, including inflation, increased interest rates, economic output and currency exchange rates, in these markets and other key potential markets for our Total IT Solutions remain uncertain or deteriorate, including as a result of a downturn in the global economy, regional conflicts, trade restrictions, or other reasons, customers may delay or reduce their spending.

Global financial developments and downturns, even if not directly unrelated to us or our industry, may adversely harm us.

If economic conditions, including inflation, increased interest rates, economic output and currency exchange rates, in these markets and other key potential markets for our Total IT Solutions remain uncertain or deteriorate, including as a result of a downturn in the global economy, regional conflicts, tariffs, trade restrictions, or other reasons, customers may delay or reduce their spending.

General economic weakness may also lead to longer collection cycles for payments due from our customers, an increase in customer bad debt, and impairment of investments.

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While recently moderating, inflation in the U.S.

had increased at a rate not seen in several decades.

had increased to a rate not seen in several decades.

A recurrence of high inflation may result in decreased demand for our Total IT Solutions, increases in our operating costs including our labor costs, constrained credit and liquidity, reduced spending, and volatility in financial markets.

In response to inflation, the Federal Reserve had significantly raised, and may again raise, interest rates, which may increase our own borrowing costs and/or reduce our clients’ access to debt financing, reduce technology expenditures and demand for our Total IT Solutions.

In response to inflation, the Federal Reserve has significantly raised, and may again raise, interest rates, which may increase our own borrowing costs, limit our clients’ access to debt financing, and reduce technology expenditures and demand for our Total IT Solutions.

These and other geopolitical tensions, political or economic uncertainty can disrupt supply chains and increase the cost of our and our partners’ products, and have a negative impact on consumer confidence, which could impair our future growth and adversely affect our international operations, business, financial condition, and results of operations.

Any failure, disruption or security breach or incident of or impacting our information technology infrastructure or information management systems could have an adverse impact on our business and operations.

Our business depends significantly on effective and efficient information management systems, and the reliability and security of our information technology infrastructure are essential to the operation, health and expansion of our business.

For example, the information gathered and processed by our information management systems assists us in managing our supply chain, financial reporting, monitoring customer accounts, and protecting our proprietary and confidential business information, plans, trade secrets, and intellectual property, among other things.

In addition, these systems may contain personal data or other confidential or otherwise protected information about our employees, our customers’ employees, or other business partners.

We must continue to expand and update this infrastructure in response to our changing requirements as well as evolving security standards and risks.

SMCI | 2025 Form 10-K | 19

System security violations, data protection breaches, cyber-attacks and other related cyber-security issues could materially disrupt our internal operations or compromise the security of our products, and any such disruption could materially reduce our expected revenues, increase our expenses, damage our reputation and adversely affect our stock price.

Malicious computer programmers, malicious insiders, criminals, hackers and sophisticated organizations (including nation states) may be able to penetrate our network and misappropriate or compromise our confidential information or that of third parties, create system disruptions or cause shutdowns that could have a material adverse effect on our business, operations, or products.

Such computer programmers, hackers, and organizations also may be able to develop and deploy ransomware, network intrusions, exploitation of zero-day vulnerabilities, distributed denial of service, man-in-the-middle, phishing, vishing, domain name system spoofing, password spraying, viruses, worms and other malicious software programs that attack our products or otherwise exploit any security vulnerabilities of our products that could likewise have a material adverse effect on our business.

There have been increases in the frequency and sophistication of such attacks, and we expect that these activities will continue.

We may also face cybersecurity threats due to error or intentional misconduct by employees, contractors or other third-party service providers.

Certain aspects of effective cybersecurity are dependent upon our employees, contractors and/or other third-party service providers safeguarding our sensitive information and adhering to our security policies and access control mechanisms.

While we employ a number of protective measures, including firewalls, anti-virus and endpoint detection and response technologies, regular annual training of employees with respect to cybersecurity, and testing employee competence with anti-phishing policies followed up by additional remedial training as needed, these measures may fail to prevent or detect significant attacks on our systems.

Additionally, the costs associated with cybersecurity tools and infrastructure and fierce competition for scarce cybersecurity and IT talent have at times limited, and may in the future limit, our ability to efficiently identify, eliminate, or remediate cyber or other security vulnerabilities or problems or enact changes to minimize the attack surface of our network.

While there have been unauthorized intrusions into our network in the past, none of these intrusions, individually or in the aggregate, had a material adverse effect on our business, operations, or products.

We have taken steps to enhance the security of our network and computer systems and we provide regular updates to our Board at our quarterly meetings with respect to cybersecurity matters.

Despite these efforts, we may experience future intrusions, which could materially and adversely affect our business, operations, or products.

In addition, our hardware and software or third-party components and software that we utilize in our products may contain defects in design or manufacture, including “bugs” and other problems that could unexpectedly interfere with the operation or security of the products, which could have a material adverse effect on our business, operations, or products.

The costs to us to eliminate or mitigate cyber or other security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be significant and, if our efforts to address these problems are not successful, could result in material interruptions, delays, cessation of service and loss of existing or potential customers that may impede our sales, manufacturing, distribution or other critical functions.

Any claim that our products or systems are subject to cybersecurity risk, whether valid or not, could damage our reputation and materially and adversely impact our revenues and results of operations.

We manage and store various proprietary information and sensitive or confidential data relating to our business as well as information from our suppliers and customers.

Breaches of our or any of our third party suppliers’ security measures or the accidental loss, inadvertent disclosure or unapproved dissemination of proprietary information or sensitive or confidential data about us or our customers or suppliers, including the potential loss or disclosure of such information or data as a result of fraud, trickery or other forms of deception, could expose us or our customers or suppliers to a material risk of loss or misuse of this information, result in litigation and potential material liability for us, materially damage our brand and reputation or otherwise materially harm our business.

To the extent we experience cyber-security incidents in the future, our relationships with our customers and suppliers may be materially impacted, our brand and reputation may be materially harmed and we could incur substantial costs in responding to and remediating the incidents and in resolving any investigations or disputes that may arise with respect to them, any of which would cause our business, operations, or products to be materially and adversely affected.

In addition, the cost and operational consequences of implementing and adding further data protection measures could be significant.

In some cases, we may rely upon third-party providers of hosting, support and other services to meet our information technology requirements.

Any failure to manage, expand and update our information technology infrastructure, including our ERP system and other applications, any failure in the extension implementation or operation of this infrastructure, or any failure by our hosting and support partners or other third-party service providers in the performance of their services could materially harm our business.

In addition, we have partnered with third parties to support our information technology systems and to help design, build, test, implement and maintain our information management systems.

Like other companies, we are subject to ongoing attempts by malicious actors, including through hacking, malware, ransomware, denial-of-service attacks, social engineering, exploitation of internet-connected devices, and other attacks, to obtain unauthorized access to, acquire or misuse confidential information, or to disrupt service reliability and threaten the confidentiality, integrity and availability of our systems and information we process.

Cyber threats have increased in recent years, in part due to increased remote work and frequent attacks, including in the form of phishing emails, malware attachments and malicious websites.

Additionally, cybersecurity researchers have warned of increased risks of cyber-attacks, in connection with the Russia-Ukraine war.

While we work to safeguard our internal network systems and validate the security of our third-party service providers to mitigate these potential risks, including through information security policies, employee awareness and training, there is no assurance that such actions have been or will be sufficient to prevent cyber-attacks or security breaches or incidents.

We have been in the past, and may be in the future, subject to social engineering and other cybersecurity attacks, and these attacks may become more prevalent with substantial portion of our workforce being distributed geographically, particularly given the increased remote access to our networks and systems as a result.

Further, our third-party service providers may have been and may be in the future subject to such attacks or otherwise may suffer security breaches or incidents.

In addition, actions by our employees, service providers, partners, contractors, or others, whether malicious or in error, could affect the security of our systems and information.

Further, a breach or compromise of our information technology infrastructure or that of our third-party service providers could result in the misappropriation of intellectual property, business plans, trade secrets or other information.

Additionally, while our security systems are designed to maintain the physical security of our facilities and information systems, accidental or willful security breaches or incidents or other unauthorized access by third parties to our facilities or our information systems could lead to unauthorized access to, or misappropriation, disclosure, or other processing of proprietary, confidential and other information.

Moreover, new laws and regulations, such as the European Union’s General Data Protection Regulation, the California Consumer Privacy Act (“CCPA”), add to the complexity of our compliance obligations and increase our compliance costs.

Although we have established internal controls and procedures intended to comply with such laws and regulations, any actual or alleged failure to fully comply could result in significant penalties and other liabilities, harm to our reputation and market position, business and financial condition.

Despite our implementation of security measures, our systems and those of our third-party service providers are vulnerable to damage from these or other types of attacks, errors or acts of omissions.

In addition, our systems may be impacted by natural disasters, terrorism or other similar disruptions.

Any system failure, disruption, accident or security breach or incident affecting us or our third-party service providers could result in disruptions to our operations and loss or unavailability of, or unauthorized access or damage to, inappropriate access to, or use, disclosure or other processing of confidential information and other information maintained or otherwise processed by us.

Any actual or alleged disruption to, or security breach or incident affecting, our systems or those of our third-party partners could damage our reputation, lead to theft or misappropriation of our intellectual property and trade secrets, result in regulatory investigations, claims or litigation, affect our relationships with our customers, require us to bear significant remediation and other costs, and ultimately harm our business, financial condition and operating results.

In addition, we may be required to incur significant costs to protect against or mitigate damage caused by disruptions or security breaches or incidents.

Our costs incurred in efforts to prevent, detect, alleviate or otherwise address cyber or other security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be significant and such efforts may not be successful.

All of these costs, expenses, liability and other matters may not be covered adequately by insurance and may result in an increase in our costs for insurance or insurance not being available to us on economically feasible terms, or at all.

Insurers may also deny us coverage as to any future claim.

Any of these results could harm our financial condition, business and reputation.

SMCI | 2025 Form 10-K | 20

Any failure to adequately expand or retain our sales force will impede our growth.

We expect that our direct sales force will continue to grow as larger customers increasingly require a direct sales approach.

Competition for direct sales personnel with the advanced sales skills and technical knowledge we need is intense, and we face significant competition for direct sales personnel from our competitors.

Our ability to grow our revenue in the future will depend, in large part, on our success in recruiting, training, retaining and successfully managing sufficient qualified direct sales personnel.

New hires require significant training and may take six months or longer before they reach full productivity.

Our recent hires and planned hires may not become as productive as we would like, we may be unable to hire enough qualified individuals in the future in the markets where we do business, and individuals we hire may not perform pursuant to our expectations in the event of inadequate supervision.

If we are unable to hire, develop and retain enough productive sales personnel, our customer relationships and resulting sales of our server solutions will suffer.

We may be unable to attract, retain, and motivate our executives and key employees.

To remain competitive and successfully execute our business strategy, we must attract, retain, and motivate our executives and key employees, as well as recruit and develop exceptional and diverse talent.

However, labor is subject to external factors that are beyond our control, including our industry’s highly competitive market for skilled workers and leaders, and workforce participation rates.

Changes in immigration and work permit regulations, or in their administration or interpretation, could impair our ability to attract and retain qualified employees.

Competition for talent drives up costs in the form of cash and stock-based compensation.

In times of stock price volatility, as we have experienced in the past and may experience in the future, the retentive value of our stock-based compensation may decrease.

Additionally, we are highly dependent on the services of our longstanding executive team.

Failure to ensure effective succession planning, transfer of knowledge, and smooth transitions involving executives and key employees could hinder our strategic planning, execution, and long-term success.

Conflicts of interest may arise with Ablecom and Compuware, and they may adversely affect our operations.

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Our purchases of products from Ablecom and Compuware represented 3.3%, 4.3%, and 6.6% of our cost of sales for fiscal years 2025, 2024, and 2023, respectively.

Ablecom and Compuware’s sales to us constitute a substantial majority of Ablecom’s and Compuware’s net sales.

Ablecom and Compuware’s sales to us constitute a majority of Ablecom’s and Compuware’s net sales.

Ablecom and Compuware are both privately held Taiwan-based companies.

In addition, we have appointed Compuware as a nonexclusive authorized distributor of our products in Taiwan, China and Australia.

Each of Ablecom and Compuware are also developing campuses in close proximity to the campus we are developing in Malaysia to expand our manufacturing.

In addition, we have appointed Compuware as a nonexclusive authorized distributor of our products in Taiwan, China and Australia, in addition to acting as our sales representative on certain transactions in Asia.

Each of Ablecom and Compuware are also developing campuses in close proximity to the campus we developed in Malaysia to expand our manufacturing.

Steve Liang, Ablecom’s Chief Executive Officer and largest shareholder, is the brother of Charles Liang, our President, Chief Executive Officer and Chairman of our Board of Directors (the “Board”).

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Steve Liang and his family members owned approximately 35.0% of Ablecom’s outstanding common stock as of June 30, 2025.

Bill Liang, a brother of both Charles Liang and Steve Liang, is a member of the Board of Directors of Ablecom as well.

In addition, a sibling of Yih-Shyan (Wally) Liaw, who is our Senior Vice President, Business Development and a director on our Board, owns approximately 11.7% of Ablecom’s capital stock and 8.7% of Compuware’s capital stock.

In October 2018, our Chief Executive Officer, Charles Liang, personally borrowed approximately $12.9 million from Chien-Tsun Chang, the spouse of Steve Liang.

The loan is unsecured, has no maturity date and bore interest at 0.8% per month for the first six months, increased to 0.85% per month through February 28, 2020, and reduced to 0.25% effective March 1, 2020.

The loan was originally made at Mr.

Liang's request to provide funds to repay margin loans to two financial institutions, which loans had been secured by shares of our common stock that he held.

The lenders called the loans in October 2018, following the suspension of our common stock from trading on NASDAQ in August 2018 and the decline in the market price of our common stock in October 2018.

As of June 30, 2024, the amount due on the unsecured loan (including principal and accrued interest) was approximately $16.4 million.

Bill Liang is also the Chief Executive Officer of Compuware, Chairman of Compuware’s Board of Directors and a holder of equity interest in Compuware.

Steve Liang is also a member of Compuware’s Board of Directors and is an equity holder of Compuware.

Charles Liang is our Chief Executive Officer and Chairman of the Board, is a significant stockholder of our company, and has considerable influence over the management of our business relationships.

Neither Charles Liang nor Sara Liu own any shares of Compuware.

In addition, neither Charles Liang nor Sara Liu serve on the board of directors of either Ablecom or Compuware.

Bill Liang, a brother of both Charles Liang and Steve Liang, is also a member of the Board of Directors of Ablecom.

In addition, Bill Liang is the Chief Executive Officer of Compuware, Chairman of Compuware’s Board of Directors and a holder of equity interest in Compuware.

Charles Liang and Sara Liu are both significant stockholders of our company, and have considerable influence over the management of our business relationships.

Accordingly, we may be disadvantaged by the economic interests of Mr.

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Charles Liang's personal relationship with Ablecom’s Chief Executive Officer and Compuware’s Chief Executive Officer.

In October 2018, our Chief Executive Officer, Charles Liang, personally borrowed approximately $12.9 million from Chien-Tsun Chang, the spouse of Steve Liang.

The loan was unsecured, had no maturity date and bore interest at 0.8% per month for the first six months, increased to 0.85% per month through February 28, 2020, and reduced to 0.25% effective March 1, 2020.

The loan was originally made at Mr.

Liang’s request to provide funds to repay margin loans from two financial institutions that were secured by shares of our common stock he held.

The lenders called the loans in October 2018, following the suspension of our common stock from trading on Nasdaq in August 2018 and the subsequent decline in its market price that October.

As of June 30, 2025, the amount due on the unsecured loan (including principal and accrued interest) was approximately $16.8 million.

SMCI | 2025 Form 10-K | 21

In October 2023, Ablecom and Compuware acquired an approximate 30% interest in Leadtek, a Taiwan company specializing in providing professional graphics cards and workstation solutions.

At the time of the Leadtek Investment (as defined herein), Leadtek was, and continues to be, an authorized reseller for us.

While prior to the Leadtek Investment none of our related persons had direct or indirect material interests in any transactions with Leadtek, following the closing of the Leadtek Investment, Steve Liang and Bill Liang have served as two of the seven members of the Leadtek's board of directors.

We may not negotiate or enforce contractual terms as aggressively with Ablecom or Compuware as we might with an unrelated party, and the commercial terms of our agreements may be less favorable than we might obtain in negotiations with third parties.

If our business dealings with Ablecom or Compuware are not as favorable to us as arms-length transactions, our results of operations may be harmed.

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If Ablecom or Compuware are acquired or sold, new ownership could reassess the business and strategy of Ablecom or Compuware, and as a result, our supply chain could be disrupted or the terms and conditions of our agreements with Ablecom or Compuware may change.

As a result, our operations could be negatively impacted or costs could increase, either of which could adversely affect our margins and the results of operations.

Our reliance on Ablecom could be subject to risks associated with our reliance on a limited source of contract manufacturing services and inventory warehousing.

We plan to continue to maintain our manufacturing relationship with Ablecom in Asia.

In order to provide a larger volume of contract manufacturing services for us, we anticipate that Ablecom will continue to warehouse for us an increasing number of components and subassemblies manufactured by multiple suppliers prior to shipment to our facilities in the United States and Europe.

We also anticipate that we will continue to lease office space from Ablecom in Taiwan to support our research and development efforts.

If Ablecom or Compuware are acquired or sold, new ownership could reassess the business and strategy of Ablecom or Compuware, which may disrupt our supply chain or alter the terms and conditions of our agreements.

Such changes could negatively impact our operations or increase our costs, thereby adversely affecting our margins and the results of operations.

Our reliance on Ablecom and Compuware could be subject to risks associated with our reliance on a limited source of contract manufacturing services and inventory warehousing.

We plan to continue to maintain our manufacturing relationship with Ablecom and Compuware in Asia.

In order to provide a larger volume of contract manufacturing services for us, we anticipate that Ablecom and/or Compuware will continue to warehouse for us an increasing number of components and subassemblies manufactured by multiple suppliers prior to shipment to our facilities in the United States and Europe.

We also anticipate that we will continue to lease office space from Ablecom and/or Compuware in Taiwan to support our research and development efforts.

We operate a joint management company with Ablecom to manage the common areas shared by us and Ablecom for our separately constructed manufacturing facilities in Taiwan.

If our commercial relationship with Ablecom deteriorates, we may experience delays in our ability to fulfill customer orders.

Similarly, if Ablecom’s facility in Asia is subject to damage, destruction or other disruptions, our inventory may be damaged or destroyed, and we may be unable to find adequate alternative providers of contract manufacturing services in the time that we or our customers require.

If our commercial relationship with Ablecom and Compuware deteriorates, we may experience delays in our ability to fulfill customer orders.

Similarly, if Ablecom’s or Compuware's facility in Asia is subject to damage, destruction or other disruptions, our inventory may be damaged or destroyed, and we may be unable to find adequate alternative providers of contract manufacturing services in the time that we or our customers require.

We could lose orders and be unable to develop or sell some products cost-effectively or on a timely basis, if at all.

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Pursuant to our agreements with Ablecom and subject to certain exceptions, Ablecom has the exclusive right to be our supplier of the specific products developed under such agreements.

As a result, if we are unable to obtain such products from Ablecom on terms acceptable to us, we may need to discontinue a product or develop substitute products, identify a new supplier, change our design and acquire new tooling, all of which could result in delays in our product availability and increased costs.

If we need to use other suppliers, we may not be able to establish business arrangements that are, individually or in the aggregate, as favorable as the terms and conditions we have established with Ablecom.

If any of these things should occur, our net sales, margins and earnings could significantly decrease, which would have a material adverse effect on our business, results of operations and financial condition.

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If we lose Charles Liang, our President, Chief Executive Officer and Chairman, or any other key employee or are unable to attract additional key employees, we may not be able to implement our business strategy in a timely manner.

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Liang co-founded our company and has been our Chief Executive Officer since our inception.

His experience in leading our business and his personal involvement in key relationships with suppliers, customers and strategic partners are extremely valuable to our company.

His experience in leading our business and his personal involvement in key relationships with suppliers, customers and strategic partners are extremely valuable to us.

We currently do not have a succession plan for the replacement of Mr.

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The loss of services of any of these executives or of one or more other key members of our team could seriously harm our business.

We are subject to order and shipment uncertainties.

If we are unable to accurately predict customer demand, we may hold excess or obsolete inventory, which would reduce our gross margin.

We typically sell products pursuant to purchase orders rather than long-term purchase commitments.

Some of our customers have, and others may in the future, cancel or defer purchase orders on short notice without incurring a significant penalty.

In addition, customers who have purchase commitments may not honor those commitments.

Due to their inability to predict demand or for other reasons, during the last few years some of our customers have accumulated excess inventories and, as a consequence, they either have deferred or they may defer future purchases of our products.

We cannot accurately predict what or how many products our customers will need in the future.

Anticipating demand is difficult because our customers face unpredictable demand for their own products and are increasingly focused more on cash preservation and tighter inventory management.

We place orders with our suppliers based on customer demand and forecast and, in some instances, may establish buffer inventories to accommodate anticipated demand.

Our forecasts are based on multiple assumptions, each of which may introduce error into our estimates.

For example, our ability to accurately forecast customer demand may be impaired by the delays inherent in our customer’s product development processes, which may include extensive qualification and testing of components included in their products, including ours.

In many cases, they design their products to use components from multiple suppliers.

This creates the risk that our customers may decide to cancel or change product plans for products incorporating our semiconductor solutions prior to completion, which makes it even more difficult to forecast customer demand.

In addition, while many of our customers are subject to purchase orders or other agreements that do not allow for cancellation, there can be no assurance that these customers will honor these contract terms and cancellation of these orders may adversely affect our business operations and demand forecast which is the basis for us to have products made.

If we overestimate customer demand, our excess or obsolete inventory may increase significantly, which would reduce our gross margin and adversely affect our financial results.

The risk of obsolescence and/or excess inventory is heightened for semiconductor solutions due to the rapidly changing market for these types of products.

Conversely, if we underestimate customer demand or if insufficient manufacturing capacity is available, we would miss revenue opportunities and potentially lose market share and damage our customer relationships.

In addition, any future significant cancellations or deferrals of product orders or the return of previously sold products could materially and adversely affect our profit margins, increase product obsolescence and restrict our ability to fund our operations.

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Our direct sales efforts may create confusion for our end customers and harm our relationships in our indirect sales channel and with our OEMs.

We expect our direct sales force to continue to grow as our business grows.

As our direct sales force becomes larger, our direct sales efforts may lead to conflicts in our indirect sales channel and with our OEMs, who may view our direct sales efforts as undermining their efforts to sell our products.

If an indirect sales channel partner or OEM deems our direct sales efforts to be inappropriate, they may not effectively market our products, may emphasize alternative products from competitors, or may seek to terminate our business relationship.

Disruptions in our indirect channels could cause our revenues to decrease or fail to grow as expected.

Our failure to implement an effective direct sales strategy that maintains and expands our relationships in our indirect sales channel and with our OEMs could lead to a decline in sales, harm relationships and adversely affect our business, results of operations and financial condition.

If negative publicity arises with respect to us, our employees, our third-party service providers or our partners, our business and operating results could be adversely affected, regardless of whether the negative publicity is true.

Negative publicity about our company or our products, even if inaccurate or untrue, could adversely affect our reputation and confidence in our products, which could harm our business and operating results.

Negative publicity about us or our products, even if inaccurate or untrue, could adversely affect our reputation and confidence in our products, which could harm our business and operating results.

For example, on August 27, 2024, a news article was published by a short seller alleging evidence of accounting manipulation, sibling self-dealing and sanctions evasion (the “Report”).

We indicated that such Report contained false or inaccurate statements about us, including misleading presentations of information we previously shared publicly.

However, despite these statements related to the allegations in the Report, and the announcement of the results of Special Committee investigation, the publication of the Report and the circumstances discussed in the Explanatory Note in this Annual Report contributed to a substantial negative impact on the trading price of our common stock and our reputation, and may continue to have a negative impact in the future.

However, despite these statements related to the allegations in the Report, and the announcement of the results of Special Committee investigation, the publication of the Report and our previous Delinquent Reports contributed to a substantial negative impact on the trading price of our common stock and our reputation, and may continue to have a negative impact in the future.

Harm to our reputation can also arise from many other sources, including employee misconduct, which we have experienced in the past, and misconduct by our partners, consultants and outsourced service providers.

Additionally, negative publicity with respect to our partners or service providers could also affect our business and operating results to the extent that we rely on these partners or if our customers or prospective customers associate our company with these partners.

If we are unable to attract and integrate additional key employees in a manner that enables us to scale our business and operations effectively, or if we do not maintain competitive compensation policies to retain our employees, our ability to operate effectively and efficiently could be limited.

To execute our growth plan, we must attract additional highly qualified personnel, including a Chief Financial Officer, a Chief Compliance Officer, a General Counsel and additional in-house attorneys, additional engineers and executive staff.

Competition for qualified personnel is intense, especially in Silicon Valley, where we are headquartered.

We have experienced and may continue to experience difficulty in hiring and retaining highly skilled employees with appropriate qualifications.

Strategic and Industry Risks

We must work closely with our suppliers to make timely new product introductions.

We rely on our close working relationships with our suppliers, including Intel, AMD and NVIDIA, to anticipate and deliver new products on a timely basis when new generation materials and key components are made available.

If we are not able to maintain our relationships with our suppliers or continue to leverage their research and development capabilities to develop new technologies desired by our customers, our ability to quickly offer advanced technology and product innovations to our customers would be impaired.

We have no long-term agreements that obligate our suppliers to continue to work with us or to supply us with products.

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If we do not successfully manage the expansion of our international manufacturing capacity and business operations, our business could be harmed.

Since inception, we have conducted the majority of our manufacturing operations in San Jose, California.

We continue to increase our manufacturing capacity in Taiwan and in the Netherlands and have sought to accelerate manufacturing in Taiwan to better diversify our geographical manufacturing concentration.

In order to continue to successfully increase our operations in Taiwan, we must efficiently manage our Taiwan operations from our headquarters in San Jose, California and continue to develop a strong local management team.

We are also pursuing an expansion of our manufacturing operations into Malaysia.

If we are unable to successfully ramp up our international manufacturing capacity in Taiwan, the Netherlands, Malaysia, or any other jurisdictions we pursue, including the associated construction, increased logistics and warehousing, we may incur unanticipated costs, difficulties in making timely delivery of products or suffer other business disruptions which could adversely impact our results of operations.

We may not be able to successfully manage our business for growth and expansion.

We expect to continue to make investments to pursue new customers, expand our product and service offerings to grow our business, and pursue new business markets and opportunities.

We also expect that our annual operating expenses will continue to increase as we invest in sales and marketing, research and development, manufacturing and production infrastructure, software and product service offerings, strengthen customer service and support resources for our customers, and pursue new business markets and opportunities.

Our failure to expand operational and financial or internal control systems timely or efficiently could result in additional operating inefficiencies, which could increase our costs and expenses more than we had planned and prevent us from successfully executing our business plan.

We may not be able to offset the costs of operation expansion by leveraging the economies of scale from our growth in negotiations with our suppliers and contract manufacturers.

Additionally, if we increase our operating expenses in anticipation of the growth of our business and this growth does not meet our expectations, our financial results will be negatively impacted.

There are also no assurances that investments we make to pursue new business markets and opportunities (such as ecommerce in B2B and B2C markets and data center offerings) will be successful or profitable, given the investment costs necessary to pursue these markets and opportunities, which includes investments in technology, people, time, and other overhead costs.

As our business continues to grow, we will have to manage additional product design projects, materials procurement processes and sales efforts and marketing for an increasing number of SKUs, provide and update an increasing amount of software utilized in our hardware offerings, provide more sophisticated product service offerings to support our customers, expand the number and scope of our relationships with suppliers, distributors and end customers, and (for new business markets and opportunities we pursue) manage different and increasingly complex regulatory landscapes they are subject to.

If we fail to manage these additional responsibilities and relationships successfully, we may incur significant costs, which may negatively impact our operating results.

Additionally, in our efforts to be first to market with new products with innovative functionality and features, we may devote significant research and development resources to products and product features for which a market does not develop quickly, or at all.

If we are not able to predict market trends accurately, we may not benefit from such research and development activities, and our results of operations may suffer.

Managing our business for long-term growth also requires us to successfully manage our employee headcount.

We must continue to hire, train and manage new employees as needed.

If our new hires perform poorly, or if we are unsuccessful in hiring, training, managing and integrating these new employees, or if we are not successful in retaining our employees, our business may be harmed.

A growth in headcount would continue to increase our cost base, which would make it more difficult for us to offset any future revenue shortfalls by offsetting expense reductions in the short term.

If we fail to successfully manage our growth, we will be unable to execute our business plan.

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We rely on a limited number of suppliers for certain components used to manufacture our products.

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Similar future events may cause additional interruptions in the global supply chain.

Two of our suppliers accounted for 65.4% and 6.3% of total purchases for fiscal year 2024.

The same two suppliers accounted for 30.7% and 13.5% of total purchases for fiscal year 2023.

The same two suppliers accounted for 11.4% and 18.1% of total purchases for fiscal year 2022.

Ablecom and Compuware, related parties, accounted for 4.3%, 6.6% and 8.3% of our total cost of sales for fiscal year 2024, 2023 and 2022, respectively.

Two of our suppliers accounted for accounted for a significant portion of our total purchases:

64.4% and 5.1% in fiscal year 2025, 65.4% and 6.3% in fiscal year 2024, and 30.7% and 13.5% in fiscal year 2023.

If any of our largest suppliers discontinue their operations, if our relationships with them are adversely impacted, or there are significant adverse changes to the terms upon which we do business, we could experience a material adverse effect on our business, results of operations and financial condition.

See also “— Our cost structure, ability to deliver server solutions to customers, and ability to resolve warranty claims in a timely manner may be adversely affected by volatility of the market for core components and certain materials for our products.”

Our suppliers’ failure to improve the functionality and performance of materials and key components for our products may impair or delay our ability to deliver innovative products to our customers.

We need our material and key component suppliers, such as Intel, AMD and NVIDIA, to provide us with components that are innovative, reliable and attractive to our customers.

Due to the pace of innovation in our industry, many of our customers may delay or reduce purchase decisions until they believe that they are receiving best of breed products that will not be rendered obsolete by an impending technological development.

Accordingly, demand for new server and storage systems that incorporate new products and features is significantly impacted by our suppliers’ new product introduction schedules and the functionality, performance and reliability of those new products.

If our materials and key component suppliers fail to deliver new and improved materials and components for our products, we may not be able to satisfy customer demand for our products in a timely manner, or at all.

If our suppliers’ components do not function properly, we may incur additional costs and our relationships with our customers may be adversely affected.

Our failure to deliver high quality server and storage solutions could damage our reputation and diminish demand for our products.

Our server and storage solutions are critical to our customers’ business operations.

Our customers require our server and storage solutions to perform at a high level, contain valuable features and be extremely reliable.

The design of our server and storage solutions is sophisticated and complex, and the process for manufacturing, assembling and testing our server solutions is challenging.

Occasionally, our design or manufacturing processes may fail to deliver products of the quality that our customers require.

For example, in the past certain vendors have provided us with defective components that failed under certain applications.

As a result, our products needed to be repaired, and we incurred costs in connection with the recall and diverted resources from other projects.

New flaws or limitations in our server and storage solutions may be detected in the future.

Part of our strategy is to bring new products to market quickly, and first-generation products may have a higher likelihood of containing undetected flaws.

If our customers discover defects or other performance problems with our products, our customers’ business, and our reputation, may be damaged.

Customers may elect to delay or withhold payment for defective or underperforming server and storage solutions, request remedial action, terminate contracts for untimely delivery, or elect not to order additional products, which could result in a decrease in revenue, an increase in our provision for doubtful accounts or in collection cycles for accounts receivable or subject us to the expense and risk of litigation.

We may incur expense in recalling, refurbishing or repairing defective server and storage solutions sold to our customers or remaining in our inventory.

If we do not properly address customer concerns about our products, our reputation and relationships with our customers may be harmed.

For all of these reasons, customer dissatisfaction with the quality of our products could substantially impair our ability to grow our business.

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The market in which we participate is highly competitive, and if we do not compete effectively, we may not be able to increase our market penetration, grow our net sales or improve our gross margins.

The market for server and storage solutions is intensely competitive and rapidly changing, particularly with the emergence of new markets (such as AI).

Barriers to entry in our market are relatively low and we expect increased challenges from existing as well as new competitors.

Some of our principal competitors offer server solutions at a lower price, which has resulted in pricing pressures on sales of our server solutions.

We expect further downward pricing pressure from our competitors and expect that we will have to price some of our server and storage solutions aggressively to increase our market share with respect to those products or geographies, particularly for data center and cloud customers and other large sale opportunities.

If we are unable to maintain the margins on our server and storage solutions, our operating results could be negatively impacted.

In addition, if we do not develop new innovative solutions, or enhance the reliability, performance, efficiency and other features of our existing server and storage solutions, our customers may turn to our competitors for alternatives.

In addition, pricing pressures and increased competition generally may also result in reduced sales, less efficient utilization of our manufacturing operations, lower margins or the failure of our products to achieve or maintain widespread market acceptance, any of which could have a material adverse effect on our business, results of operations and financial condition.

Our principal competitors include global technology companies such as Cisco, Dell, Hewlett-Packard Enterprise and Lenovo.

In addition, we also compete with a number of other vendors who also sell application optimized servers, contract manufacturers/OEMs and ODMs, such as Foxconn, Inspur, Quanta Computer and Wiwynn Corporation.

ODMs sell server solutions marketed or sold under a third-party brand.

Many of our competitors enjoy substantial competitive advantages, such as:

• Greater name recognition and deeper market penetration;

• Longer operating histories;

• Larger sales and marketing organizations and research and development teams and budgets;

• More established relationships with customers, contract manufacturers and suppliers and better channels to reach larger customer bases and larger sales volume allowing for better costs;

• Larger customer service and support organizations with greater geographic scope;

• A broader and more diversified array of products and services;

• Substantially greater financial, technical and other resources.

Some of our current or potential ODM competitors are also currently or have in the past been suppliers to us.

As a result, they may possess sensitive knowledge or experience which may be used against us competitively and/or which may require us to alter our supply arrangements or sources in a way which could adversely impact our cost of sales or results of operations.

Our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards or customer requirements.

Competitors may seek to copy our innovations and use cost advantages from greater size to compete aggressively with us on price.

Certain customers are also current or prospective competitors and as a result, assistance that we provide to them as customers may ultimately result in increased competitive pressure against us.

Furthermore, because of these advantages, even if our application optimized server and storage solutions are more effective than the products that our competitors offer, potential customers might accept competitive products in lieu of purchasing our products.

The challenges we face from larger competitors will become even greater if consolidation or collaboration between or among our competitors occurs in our industry.

Also, initiatives to establish more industry standard data center configurations, could have the impact of supporting an approach which is less favorable to the flexibility and customization that we offer.

These changes could have a significant impact on the market and impact the results of operations.

For all these reasons, we may not be able to compete successfully against our current or future competitors, and if we do not compete effectively, our ability to increase our net sales may be impaired.

Changing technology and intense competition require us to continuously innovate while controlling product costs, and our failure to do so may result in decreased revenues and profitability.

The markets in which we operate are dynamic and complex, and our success depends upon our ability to deliver both our current product offerings and new products and technologies on time and at acceptable prices to our customers.

The markets for our products are characterized by rapid technological change, frequent new product introductions and enhancements, substantial capital investment, changes in customer requirements, continued price pressures and a constantly evolving industry.

Historically, these pricing pressures have led to a continued decline of average selling prices across our business and we expect that these historical trends will continue.

The development of new, technologically advanced products is a complex and uncertain process requiring high levels of innovation and the accurate prediction of technology and market trends.

The introduction of new products also often requires significant investment to ramp up production capacity, the benefit of which may not be realized if we are not successful in the production of such products or if customer demand does not develop as expected.

Ramping of production capacity also entails risks of delays which can limit our ability to realize the full benefit of new product introductions.

We cannot assure that we will be able to identify, develop, manufacture, market or support new or enhanced products successfully, if at all, or on a timely basis.

We also cannot assure that potential markets for our new products will materialize on the timelines we anticipate, or at all, or that our technology will meet our customers’ specifications.

Our future performance will depend on the successful development, introduction, deployment and market acceptance of new and enhanced features and products that meet our customers’ current and future needs.

Future demand for our products is uncertain and will primarily depend on continued technological development and the introduction of new or enhanced products.

If this does not continue, sales of our products may decline which could adversely impact our business, results of operations and financial condition.

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Both legacy competitors as well as new entrants, predominantly Asia-based competitors, have intensified market competition in recent years leading to pricing pressure.

To preserve our revenues and product margin structures, we remain reliant on an integrated customer and market approach that anticipates end customer needs as requirements evolve.

We also must continue to develop more advanced, differentiated products that command a premium with customers, while conversely continuing to focus on streamlining product costs for established legacy products.

If we fail to continue to develop enhanced or new products that enable us to increase revenues while maintaining consistent margins, or over time are unable to adjust our cost structure to continue to competitively price more mature products, our financial condition and results of operations could be materially and adversely affected.

The AI industry has driven a portion of our recent success.

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Our ability to mitigate these risks will depend on our continued effective training, monitoring and enforcement of appropriate policies and procedures governing the use of AI technology, and compliance by our workforce.

Our results of operations may be subject to fluctuations based upon our investment in corporate ventures and other investments we make.

We have a 30% minority interest in a China corporate venture that was established to market and sell corporate venture branded systems in China based upon products and technology we supply.

We record earnings and losses from the corporate venture using the equity method of accounting.

Our loss exposure is limited to the remainder of our equity investment in the corporate venture which as of June 30, 2024 and 2023 was $4.6 million and $2.0 million, respectively.

We currently do not intend to make any additional investment in this corporate venture.

See Note 10, “Related Party Transactions” in the Notes to the Consolidated Financial Statements in this Annual Report.

We do not control this corporate venture and any fluctuation in the results of operations of the corporate venture or any other similar transaction that we may enter into in the future could adversely impact, or result in fluctuations in, our results of operations.

In June 2020, the third-party parent company that controls our corporate venture was placed on a U.S.

government export control list, along with several related entities.

In addition, the United States has further prohibitions on conducting business with certain entities in China, continued to impose additional tariffs, and has placed export control restrictions on products which contain high-end GPUs.

If economic conditions or trade disputes, including trade restrictions and tariffs such as those between the United States and China, in the areas in which we market and sell our products and other key potential markets for our products continue to remain uncertain or deteriorate, or if additional export control restrictions are placed on additional products, it may further affect the value of our investment in the corporate venture.

In addition, during fiscal year 2024, we made investments into additional companies, many of which are early stage companies or private companies still defining their strategic direction, several of which are also in emergent markets (such as AI).

Our results of operations may be subject to fluctuations based upon certain investments we make.

During the last few years, we made investments in various companies, many of which are early stage companies or private companies still defining their strategic direction, several of which are also in emergent markets (such as AI).

We may continue to invest in private companies to further our strategic objectives and to support certain key business initiatives.

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We market and sell our systems and subsystems and accessories both inside and outside the United States.

We intend to expand our international sales efforts, especially into Asia, and we are expanding our business operations in Europe and Asia, particularly in Taiwan, Malaysia, the Netherlands and Japan.

We have made, and continue to make, substantial investments for the purchase of land and the development of new facilities in Taiwan and Malaysia to accommodate our expected growth and the migration of a substantial portion of our contract manufacturing operations.

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Our international expansion efforts may not be successful.

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• Our ability to establish local manufacturing, support and service functions, and to form channel relationships with value added resellers in non-United States markets;

• Localization of our systems and components, including translation into foreign languages and the associated expenses;

• Localization of our systems and components;

• Compliance with multiple, conflicting and changing governmental laws and regulations (including rapid developments in the area of export control particularly for high-end restricted GPU products);

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• Limited visibility into sales of our products by our channel partners;

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• Greater concentration of competitors in some foreign markets than in the United States;

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These factors could limit our future international sales or otherwise adversely impact our operations or our results of operations.

Industry consolidation may lead to increased competition and may harm our operating results.

There has been a trend toward consolidation in our industry.

We expect this trend to continue as companies attempt to strengthen or hold their market positions in an evolving industry and as companies are acquired or are unable to continue operations.

Companies that are suppliers in some areas of our business may acquire or form alliances with our competitors, thereby reducing their business with us.

We believe that industry consolidation may result in stronger competitors that are more likely to compete as sole-source vendors for customers.

Additionally, at times in the past, our competitors have acquired certain customers of ours and terminated our business relationships with such customers.

As such, acquisitions by our competitors could also lead to more variability in our operating results and could have a material adverse effect on our business, operating results, and financial condition.

We rely on indirect sales channels and any disruption in these channels could adversely affect our sales.

We depend on our indirect sales channel partners to assist us in promoting market acceptance of our products.

To maintain and potentially increase our revenue and profitability, we will have to successfully preserve and expand our existing distribution relationships as well as develop new channel relationships.

Our indirect sales channel partners also sell products offered by our competitors and may elect to focus their efforts on these sales.

If our competitors offer our indirect sales channel more favorable terms or have more products available to meet the needs of their customers or utilize the leverage of broader product lines sold through the indirect sales channel, those channel partners may de-emphasize or decline to carry our products.

In addition, the order decision-making process in our indirect sales channel is complex and involves several factors, including end customer demand, warehouse allocation and marketing resources, which can make it difficult to accurately predict total sales for the quarter until late in the quarter.

We also do not control the pricing or discounts offered by our indirect sales channel partners to the end customers.

To maintain our participation in the marketing programs of our indirect sales channel partners, we have provided and expect to continue to offer cooperative marketing arrangements and offer short-term pricing concessions.

The discontinuation of cooperative marketing arrangements or pricing concessions could have a negative effect on our business, results of operations and financial condition.

Our indirect sales channel partners could also modify their business practices, such as payment terms, inventory levels or order patterns.

Our business may suffer if we are unable to maintain relationships or expand our indirect sales channel.

We may experience unexpected changes in payment terms, inventory levels or other practices.

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Legal and Regulatory Risks

Risks Related to Regulatory, Legal, Our Stock, and Other Matters

We have been, are currently, and may in the future be subject to various lawsuits and other legal proceedings, disputes, claims, and government inquiries and investigations, which could cause us to incur substantial costs or require us to change our business practices in a way that could seriously harm our business, and any orders, actions or rulings not in our favor could have a material adverse effect on our business, results of operations, and financial condition.

We have been, are currently, and may in the future be subject to various lawsuits, stockholder derivative actions, class action lawsuits, individual or mass arbitration proceedings, and other types of legal proceedings, as well as other disputes, claims, and regulatory or governmental inquiries and investigations, including with regard to contract or commercial disputes, consumer protection, privacy, data protection, intellectual property, tax, employment, and corporate governance, among other matters.

For example, in late 2024, the Company received subpoenas from the Department of Justice and the Securities and Exchange Commission seeking a variety of documents following the publication in a short seller report which was published in August 2024.

The Company is cooperating with these document requests and no charges have been brought as of the date of this filing.

In addition, if we fail to meet our contractual commitments or otherwise fail to comply with our contractual obligations, then we could be subject to breach of contract or other claims.

In addition, the circumstances underlying the matters discussed in Item 9.

“Changes in and Disagreements with Accountants on Accounting and Financial Disclosure” of this Annual Report continue to create the risk of additional litigation and claims by investors and examinations, investigations, proceedings and orders by regulatory authorities.

If we fail to meet our contractual commitments or otherwise fail to comply with our contractual obligations, then we could be subject to breach of contract or other claims.

Any claims, proceedings, individual or mass arbitration demands, or inquiries or investigations initiated by or against us, whether successful or not, may be time-consuming, subject us to damage awards, regulatory orders, consent decrees, injunctive relief, fines, or other penalties or sanctions, require us to change our policies or practices, result in increased operating costs, divert management’s attention, harm our reputation, and require us to incur significant legal fees, other litigation costs and settlement costs, as well as other expenses.

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Any of these factors could materially and adversely affect our business, financial condition, and results of operations.

Our operations are impacted by complex laws, rules and regulations related to export control to which our business is subject, and rapid changes in such laws, rules, and regulations as well as political and other actions related thereto may adversely impact our business.

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Our operations are impacted by complex laws, rules and regulations related to import and export controls to which our business is subject, and rapid changes in such laws, rules, and regulations as well as political and other actions related thereto may adversely impact our business.

We are subject to U.S.

and other applicable trade control regulations that restrict with whom we may transact business, including the trade sanctions enforced by the U.S.

Treasury, Office of Foreign Assets Control and the export controls enforced by the U.S.

Treasury, Office of Foreign Assets Control and the import and export controls enforced by the U.S.

Commerce Department’s Bureau of Industry and Security.

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Further, our association with these parties could subject us to greater scrutiny or reputational harm among current or prospective customers, partners, suppliers, investors, other parties doing business with us or using our products, government enforcement agencies, or the general public.

The United States and other countries continually update their lists of export-controlled items and technologies, and may impose new or more-restrictive export requirements on our products in the future.

The United States and other countries continually update their lists of import and export-controlled items and technologies, and may impose new or more-restrictive import and export requirements on our products in the future.

As a result of regulatory changes, we may be required to obtain licenses or other authorizations to continue supporting existing customers or to supply existing products to new customers in China, Eastern Europe and elsewhere.

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Such restrictions have limited and could in the future limit the ability of downstream customers and users worldwide to acquire, deploy and use systems that include our products, software, and services, and negatively impact our business and financial results.

SMCI | 2024 Form 10-K | 31

Such restrictions could include additional unilateral or multilateral export controls on certain products or technology, including but not limited to AI technologies and high-performance computing.

Such restrictions could include additional unilateral or multilateral import and export controls on certain products or technology, including but not limited to AI technologies and high-performance computing.

As geopolitical tensions have increased, products containing semiconductors associated with AI, including GPUs and associated products, are increasingly the focus of export control restrictions proposed by stakeholders in the U.S.

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Such controls have been and may again be very broad in scope and application, prohibit us from exporting our products to any or all customers in one or more markets, including but not limited to China, and could tangentially negatively impact our warehousing locations and options, or could impose other conditions that limit our ability to serve demand abroad and could negatively and materially impact our business, revenue and financial results.

Export controls targeting products containing GPUs and semiconductors associated with AI, which have been imposed and are increasingly likely to be further tightened, would further restrict our ability to export our technology, products, or services even though competitors may not be subject to similar restrictions, creating a competitive disadvantage for us and negatively impacting our business and financial results.

Export controls targeting products containing GPUs and semiconductors associated with AI have subjected and may in the future subject downstream users of our products to additional restrictions on the use, resale, repair, or transfer of our products, negatively impacting our business and financial results.

Import and export controls targeting products containing GPUs and semiconductors associated with AI, which have been imposed and are increasingly likely to be further tightened, would further restrict our ability to export our technology, products, or services given that competitors may not be subject to similar restrictions, creating a competitive disadvantage for us and negatively impacting our business and financial results.

In addition, such controls may subject downstream users to additional restrictions on the use, resale, repair, or transfer of our products, negatively impacting our business and financial results.

Controls could negatively impact our cost and/or ability to provide services.

Export controls could disrupt our supply chain and distribution channels, negatively impacting our ability to serve demand, including in markets outside China.

Import and export controls could disrupt our supply chain and distribution channels, negatively impacting our ability to serve demand, including in markets outside China.

Repeated changes in the export control rules are likely to impose compliance burdens on our business and our customers, negatively and materially impacting our business.

Increasing use of economic sanctions and export controls has impacted and may in the future impact demand for our products or services, negatively impacting our business and financial results.

Reduced demand due to export controls could also lead to excess inventory or cause us to incur related supply charges.

SMCI | 2025 Form 10-K | 27

Increasing use of economic sanctions and import and export controls has impacted and may in the future impact demand for our products or services, negatively impacting our business and financial results.

Reduced demand due to import and export controls could also lead to excess inventory or cause us to incur related supply charges.

Additional unilateral or multilateral controls are also likely to include deemed export control limitations that may also have negative impacts.

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If channel partners, or their customers, do not adhere to the applicable trade compliance requirements, this can subject us to greater scrutiny or reputational harm among current or prospective customers, partners, suppliers, investors, other parties doing business with us or using our products, government enforcement agencies, or the general public.

SMCI | 2024 Form 10-K | 32

In the event export controls require us to transition some operations out of certain geographies, such transitions could be costly and time consuming, and adversely affect our operations during any such transition period.

In the event import and export controls require us to transition some operations out of certain geographies, such transitions could be costly and time consuming, and adversely affect our operations during any such transition period.

To the extent that a customer requires products covered by the licensing requirements, we may seek a license for the customer.

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The process to obtain licenses required under recently adopted export control regulations is complicated and time consuming in the event we determine to pursue them, and there are no assurances they may be granted at all.

Our competitive position and future results may be harmed, over the long-term, if there are further changes in export controls, including further expansion of the geographic, customer, end use, deemed export, or product scope of the controls, if customers purchase product from competitors, if customers develop their own internal solution, if we are unable to provide contractual warranty or other extended service obligations, if licenses are not granted in a timely manner or denied to significant customers or if we incur significant transition costs.

Our competitive position and future results may be harmed, over the long-term, if there are further changes in import and export controls, including further expansion of the geographic, customer, end use, deemed export, or product scope of the controls, if customers purchase product from competitors, if customers develop their own internal solution, if we are unable to provide contractual warranty or other extended service obligations, if licenses are not granted in a timely manner or denied to significant customers or if we incur significant transition costs.

Even if requested licenses are granted, the licenses may be temporary or impose burdensome conditions that we or our customers or end users cannot or choose not to fulfill.

The licensing requirements may benefit certain of our competitors, as the licensing process will make our technical support efforts more cumbersome and less certain and encourage customers to pursue alternatives to our products.

SMCI | 2025 Form 10-K | 28

Given the increasing strategic importance of AI and rising geopolitical tensions, the export control rules may change again at any time and further subject a wider range of our products to export restrictions and licensing requirements, negatively impacting our business and financial results.

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Because our products and services store, process and use data, some of which contains personal information, we are subject to complex and evolving domestic and international laws and regulations regarding privacy, data protection, rights of publicity, content, protection of minors and consumer protection.

Many of these laws and regulations, which can be particularly restrictive outside of the U.S., are subject to change and uncertain interpretation.

Many of these laws and regulations, which can be particularly restrictive or onerous, are subject to change and uncertain interpretation.

Even our inadvertent failure to comply with such laws and regulations could result in investigations, claims, damages to our reputation, changes to our business practices, increased cost of operations and declines in user growth, retention or engagement, any of which could materially adversely affect our business, results of operations and financial condition.

Costs to comply with and implement these privacy-related and data protection measures could be significant.

SMCI | 2024 Form 10-K | 33

Global privacy legislation, enforcement, and policy activity for privacy and data protection are rapidly expanding and creating a complex regulatory compliance environment.

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Jurisdictions outside of the European Union are also considering and/or enacting comprehensive data protection legislation.

For example, on July 8, 2019, Brazil enacted the General Data Protection Law, or the LGPD, and on June 5, 2020, Japan passed amendments to its Act on the Protection of Personal Information, or the APPI.

For example, on July 8, 2019, Brazil enacted the General Data Protection Law (“LGPD”), and on June 5, 2020, Japan passed amendments to its Act on the Protection of Personal Information (“APPI”).

Both laws broadly regulate the processing of personal information in a manner comparable to the GDPR, and violators of the LGPD and APPI face substantial penalties.

We also continue to see jurisdictions, such as Russia, imposing data localization laws, which under Russian laws require personal information of Russian citizens to be, among other data processing operations, initially collected, stored, and modified in Russia.

Similarly, on November 1, 2021, China’s Personal Information Protection law came into effect, which places restrictions on the transfer of personal information to third parties within China or overseas.

These regulations may deter customers from using services such as ours and may inhibit our ability to expand into those markets or prohibit us from continuing to offer services in those markets without significant financial burden.

SMCI | 2025 Form 10-K | 29

In addition, numerous states in the U.S.

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Furthermore, applicable data privacy and security obligations may require us to notify relevant stakeholders, including affected individuals, customers, regulators and investors, of security incidents, and mandatory disclosure of such incidents could lead to negative publicity.

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Any failure to protect our intellectual property rights, trade secrets and technical know-how could impair our brand and our competitiveness.

Our ability to prevent competitors from gaining access to our technology is essential to our success.

If we fail to protect our intellectual property rights adequately, we may lose an important advantage in the markets in which we compete.

Trademark, patent, copyright and trade secret laws in the United States and other jurisdictions as well as our internal confidentiality procedures and contractual provisions are the core of our efforts to protect our proprietary technology and our brand.

Our patents and other intellectual property rights may be challenged by others or invalidated through administrative process or litigation, and we may initiate claims or litigation against third parties for infringement of our proprietary rights.

Such administrative proceedings and litigation are inherently uncertain and divert resources that could be put towards other business priorities.

We may not be able to obtain a favorable outcome and may spend considerable resources in our efforts to defend and protect our intellectual property.

Furthermore, legal standards relating to the validity, enforceability and scope of protection of intellectual property rights are uncertain.

Effective patent, trademark, copyright and trade secret protection may not be available to us in every country in which our products are available.

The laws of some foreign countries may not be as protective of intellectual property rights as those in the United States, and mechanisms for enforcement of intellectual property rights may be inadequate.

Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our intellectual property and using our technology for their competitive advantage.

Any such infringement or misappropriation could have a material adverse effect on our business, results of operations and financial condition.

Our operations could involve the use of regulated materials, and we must comply with environmental, health and safety laws and regulations, which can be expensive, and may affect our business, results of operations and financial condition.

We are subject to federal, state and local regulations relating to the use, handling, storage, disposal and human exposure to materials, including hazardous and toxic materials.

If we were to violate or become liable under environmental, health and safety laws in the future as a result of our inability to obtain permits, human error, accident, equipment failure or other causes, we could be subject to fines, costs or civil or criminal sanctions, face third-party property damage or personal injury claims or be required to incur substantial investigation or remediation costs, any of which could have a material adverse effect on business, results of operations and financial condition.

We also face increasing complexity in our product design as we adjust to new requirements relating to the materials composition, energy efficiency and recyclability of our products, including EU eco-design requirements for servers and data storage products (Commission Regulation (EU) 2019/424).

We are also subject to laws and regulations providing consumer warnings, such as California’s “Proposition 65” which requires warnings for certain chemicals deemed by the State of California to be dangerous.

We expect that our operations will be affected by other new environmental laws and regulations on an ongoing basis that will likely result in additional costs and could require that we change the design and/or manufacturing of products, and could have a material adverse effect on business, results of operations or financial condition.

We are also subject to the Section 1502 of the Dodd Frank Act concerning the supply of certain minerals coming from the conflict zones in and around the Democratic Republic of Congo and adhere to broader industry best practices to source minerals responsibly from all Conflict-Affected and High-Risk Areas ("CAHRA").

These requirements and best practices can affect the cost and ease of sourcing minerals used in the manufacture of electronics.

Adequately protecting our intellectual property rights could be costly, and our ability to compete could be harmed if we are unsuccessful or if we are prohibited from making or selling our products.

From time to time, we are involved in lawsuits or other legal proceedings alleging patent infringement or other IP rights violations by us, our employees or parties that we have agreed to indemnify.

An unfavorable ruling could include significant damages, invalidation of one or more patents, indemnification of third parties, payment of lost profits, or injunctive relief.

Claims that our products or processes infringe the IP rights of others, regardless of their merit, could technical personnel.

We may commence legal proceedings to protect our IP rights, which may increase our operating expenses.

We could be subject to countersuits as a result.

If infringement claims are made against us or our products are found to infringe a third party’s IP, we or one of our indemnitees may have to seek a license to the third party’s IP rights.

If we or one of our indemnitees is unable to obtain such a license on acceptable terms or at all, we could be subject to substantial liabilities or have to suspend or discontinue the manufacture and sale of one or more of our products.

We may also have to make royalty or other payments or cross license our technology.

If these arrangements are not concluded on commercially reasonable terms, our business could be negatively impacted.

Furthermore, the indemnification of a customer or other indemnitee may increase our operating expenses and negatively impact our operating results.

We rely on patents, trademarks, trade secrets, employee and third-party nondisclosure agreements, licensing arrangements and the laws of the countries in which we operate to protect our IP.

Foreign laws may not protect our products or IP rights to the same extent as United States law.

This makes the possibility of piracy of our technology and products more likely.

The theft or unauthorized use or publication of our trade secrets and other confidential information could harm our competitive position and reduce acceptance of our products;

as a result, the value of our investment in research and development, product development and marketing could be reduced.

We also may face risks to our IP if our employees are hired by competitors.

We continuously assess whether and where to seek formal protection for existing and new innovations and technologies but cannot be certain whether our applications for such protections will be approved, and, if approved, whether they will be enforceable.

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SMCI | 2025 Form 10-K | 31

Government implemented an outbound investment review mechanism effective January 2, 2025, which may prevent us from taking advantage of investment opportunities outside the United States that could otherwise be advantageous to our stockholders.

On October 28, 2024, the Office of Investment Security of the U.S.

Department of the Treasury issued a final rule to implement President Biden’s August 2023 Executive Order on Addressing United States Investments in Certain National Security Technologies and Products in Countries of Concern (the “EO”).

The EO provided for the establishment of a new and targeted national security regulatory framework directed at controlling outbound investment from the United States in certain sensitive industry sectors in China (including Hong Kong and Macau), effective January 2, 2025.

The new framework imposes notification requirements and prohibitions on specified investments by U.S.

persons in the semiconductor and microelectronics sector, quantum information technologies, and artificial intelligence systems.

Within the semiconductor and microelectronics sector, prohibited investments will include certain covered investments in electronic design automation software;

certain fabrication and advanced packaging tools;

the design, fabrication, or packaging of certain advanced integrated circuits, and supercomputers.

Notifiable investments will include any covered investments related to the design, fabrication, or packaging of integrated circuits not otherwise covered by the prohibition.

Given the breadth of the notification requirement as applicable within the semiconductor industry, we will likely be subject to increased regulatory burden to engage in certain investments in China.

Such a mechanism could negatively impact our ability to realize value from certain existing and future investments, including by limiting exit opportunities or causing us to favor buyers that may avoid complex notification requirements, even in circumstances where other buyers may offer better terms or more consideration.

There can be no assurances that we will be able to maintain or proceed with investments on terms acceptable to us.

It is possible that the outbound investment reporting requirements and prohibitions could adversely affect our business, financial condition, and operating results.

The concentration of our capital stock ownership may limit your ability to influence corporate matters.

As of July 31, 2025, our executive officers and directors together beneficially owned 16.2% of our common stock.

In addition, institutional stockholders who are not affiliated with our company and who each hold five percent or more of our common stock, hold an additional 17.4% percent of our common stock.

As a result, if our insiders and these institutional stockholders were to act together, they would have significant influence over matters that require approval by our stockholders, including the election of directors and approval of significant corporate transactions.

Corporate action might be taken even if other stockholders oppose the action.

This concentration of ownership might also have the effect of delaying or preventing a change of control of our company that other stockholders may view as beneficial.

Financial Risks

Our indebtedness, liabilities, and other contractual obligations could limit the cash flow available for our operations, expose us to risks that could adversely affect our business, financial condition and results of operations and impair our ability to meet those obligations.

As of June 30, 2024, we had approximately $2.2 billion of consolidated indebtedness, including $1.7 billion principal amount of the 2029 Convertible Notes.

As of January 31, 2025, we had approximately $1.9 billion of consolidated indebtedness, including $1.7 billion principal amount of our 2029 Convertible Notes and on February 20, 2025, we issued $700.0 million aggregate principal amount of our 2028 Convertible Notes.

As of June 30, 2025, we had approximately $4.8 billion of consolidated indebtedness, including $1.7 billion aggregate principal amount of our 2029 Convertible Notes, $700.0 million aggregate principal amount of our 2028 Convertible Notes, and $2.3 billion aggregate principal amount of our 2030 Convertible Notes.

We may also incur additional indebtedness to meet future financing needs.

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• Limiting our flexibility to plan for, or react to, changes in our business;

• Diluting the interests of our existing stockholders as a result of issuing shares of our common stock upon conversion of the 2029 Convertible Notes or 2028 Convertible Notes, as applicable;

• Diluting the interests of our existing stockholders as a result of issuing shares of our common stock upon conversion of the 2029 Convertible Notes, 2028 Convertible Notes or 2030 Convertible Notes or 2030 Convertible Notes, as applicable;

• Placing us at a possible competitive disadvantage with competitors that are less leveraged than us or have better access to capital.

SMCI | 2024 Form 10-K | 37

Our business may not generate sufficient funds, and we may otherwise be unable to maintain sufficient cash reserves to pay amounts due under our indebtedness, including the Convertible Notes, as well as other contractual obligations.

For example, in connection with the MCSA we entered into in June 2024, we executed a long-term data center space from a supplier and concurrently sublicensed all of our rights and obligations related to such data center space to another party.

For example, in connection with the Master Colocation Service Agreement (MCSA) we entered into in June 2024, we executed a long-term data center space from a supplier and concurrently sublicensed all of our rights and obligations related to such data center space to another party.

While we are charging an additional monthly charge to the party to whom we are sublicensing the data center space, on top of the estimated over $292.0 million financial obligation we have to the supplier for the term of the lease for the data center space, no assurances can be given that this arrangement will be successful or profitable, particularly if the party to whom we are sublicensing the data center space defaults on its obligations to us.

If we are unsuccessful in recovering our costs related to our lease of data center space, or if we are otherwise unable to meet our obligations under the MCSA, our business, financial condition, and results of operations may be adversely affected.

For more information about the MCSA and the data center space lease arrangements, see Part I, Item 1.

“Business - Data Center Space Lease” and Note 13, “Commitments and Contingencies” in the Notes to the Consolidated Financial Statements.

For more information about the MCSA and the data center space lease arrangements, see Note 9, “Leases” in the notes to the consolidated financial statements.

Additionally, we plan to continue making significant investments to support our business growth and may require additional funds to address business challenges.

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Failure to comply with these covenants or obligations, or to make required payments on time, could result in a default or material breach, potentially accelerating the repayment of that debt or resulting in the breach of contracts, which could in turn harm our business.

See also, “Risks Related to our Delinquent SEC Reporting Obligations.”

We may be unable to raise the funds necessary to repurchase the 2029 Convertible Notes or the 2028 Convertible Notes for cash following a fundamental change, to repay the outstanding principal and accrued interest upon an event of default, or to pay any cash amounts due upon conversion, and there may be other limits on our ability to repurchase the 2029 Convertible Notes or 2028 Convertible Notes or pay cash upon their conversion.

Noteholders may require us to repurchase their 2029 Convertible Notes or 2028 Convertible Notes, as applicable, following a fundamental change (as defined in the respective indenture for such notes, which includes the delisting of our common stock) at a cash repurchase price generally equal to the principal amount of the relevant series of convertible notes to be repurchased, plus accrued and unpaid interest.

Upon an event of default (as defined in the indenture for such notes), we may be required to repay the outstanding principal amount of the 2029 Convertible Notes or the 2028 Convertible Notes, plus accrued and unpaid interest.

In addition, upon conversion, we will satisfy part or all of our conversion obligations in cash unless we elect to settle conversions solely in shares of our common stock (other than cash in lieu of any fractional shares).

We may not have enough available cash or be able to obtain financing at the time we are required to repurchase the 2029 Convertible Notes or the 2028 Convertible Notes, repay the amounts owed under the relevant convertible notes in an event of default, or pay any cash amounts due upon conversion.

Our ability to pay cash upon conversion of the relevant series of convertible notes depends in part on our future performance, which is subject to economic, financial, competitive and other factors including, but not limited to, rising inflation, elevated interest rates, and other negative macroeconomic factors, some of which are out of our control.

Our business may not generate cash flow to service our debt.

If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive, which could have a material adverse effect on our financial condition.

In addition, applicable law, regulatory authorities and agreements governing our other indebtedness may restrict our ability to repurchase the 2029 Convertible Notes or 2028 Convertible Notes, as applicable, or pay any cash amounts due upon conversion.

Our failure to repurchase the 2029 Convertible Notes or 2028 Convertible Notes, as applicable, or pay any cash amounts due upon conversion when required will constitute a default under the 2029 Convertible Notes Indenture or the indenture governing the 2028 Convertible Notes (the “2028 Convertible Notes Indenture”), as applicable.

A default under the 2029 Convertible Notes Indenture or the 2028 Convertible Notes Indenture or the fundamental change itself could also lead to a default under agreements governing our other indebtedness, which may result in that other indebtedness becoming immediately payable in full.

We may not have sufficient funds to satisfy all amounts due under the other indebtedness and the 2029 Convertible Notes or the 2028 Convertible Notes.

See also, “Risks Related to our Delinquent SEC Reporting Obligations.”

See also, “Risks Related to Previous Delinquent SEC Reporting Obligations.”

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Provisions in the 2029 Convertible Notes Indenture and the 2028 Convertible Notes Indenture could delay or prevent an otherwise beneficial takeover of us.

Certain provisions in the 2029 Convertible Notes, the 2028 Convertible Notes, and the indentures governing such convertible notes could make a third-party attempt to acquire us more difficult or expensive.

Provisions in the 2029 Convertible Notes Indenture, the 2028 Convertible Notes Indenture, and the 2030 Convertible Notes Indenture could delay or prevent an otherwise beneficial takeover of us, may dilute the ownership interest of existing stockholders or may otherwise depress the price of our common stock.

Certain provisions in the 2029 Convertible Notes, the 2028 Convertible Notes, and the 2030 Convertible Notes indentures governing such convertible notes could make a third-party attempt to acquire us more difficult or expensive.

For example, if a takeover constitutes a fundamental change, then noteholders will have the right to require us to repurchase their convertible notes for cash.

In addition, if a takeover constitutes a make-whole fundamental change (as defined in the 2029 Convertible Notes Indenture and the 2028 Convertible Notes Indenture, as applicable), then we may be required to temporarily increase the conversion rate of the 2029 Convertible Notes or 2028 Convertible Notes, as applicable, which could increase the cash cost of acquiring us or increase dilution to the potential acquiror.

In either case, and in other cases, our obligations under the 2029 Convertible Notes, the 2028 Convertible Notes, the 2029 Convertible Notes Indenture, and the 2028 Convertible Notes Indenture could increase the cost of acquiring us or otherwise discourage a third party from acquiring us or removing incumbent management, including in a transaction that noteholders or holders of our common stock may view as favorable.

The capped call transactions entered into in connection with the issuance of the 2029 Convertible Notes may affect our common stock.

In connection with the offering of the 2029 Convertible Notes, we entered into privately negotiated capped call transactions with the capped call counterparties.

The capped call transactions are expected generally to reduce the potential dilution to our common stock upon any conversion of the 2029 Convertible Notes or offset any potential cash payments we are required to make in excess of the principal amount of converted 2029 Convertible Notes, as the case may be, with such reduction or offset subject to a cap.

In connection with the amendment of the 2029 Convertible Notes, we entered into agreements to amend certain terms of the capped call transactions.

Following such amendment of the capped call transactions, the capped call counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the 2029 Convertible Notes (and are likely to do so during any observation period related to a conversion of 2029 Convertible Notes or following any repurchase of the 2029 Convertible Notes by us to the extent we elect to unwind a corresponding portion of the capped call transactions in connection with such repurchase).

In addition, if a takeover constitutes a make-whole fundamental change (as defined in the 2029 Convertible Notes Indenture, the 2028 Convertible Notes Indenture, and the 2030 Convertible Notes Indenture as applicable), then we may be required to temporarily increase the conversion rate of the 2029 Convertible Notes, the 2028 Convertible Notes, or the 2030 Convertible Notes, as applicable, which could increase the cash cost of acquiring us or increase dilution to the potential acquiror.

In either case, and in other cases, our obligations under the 2029 Convertible Notes, the 2028 Convertible Notes, the 2030 Convertible Notes, the 2029 Convertible Notes Indenture, the 2028 Convertible Notes Indenture, and the 2030 Convertible Notes Indenture could increase the cost of acquiring us or otherwise discourage a third party from acquiring us or removing incumbent management, including in a transaction that noteholders or holders of our common stock may view as favorable.

The capped call transactions entered into in connection with the issuance of the 2029 Convertible Notes and the 2030 Convertible Notes subject us to counterparty risk and may affect our common stock.

In connection with the offering of the 2029 Convertible Notes and the 2030 Convertible Notes, we entered into privately negotiated capped call transactions with the capped call counterparties.

The capped call transactions are expected generally to reduce the potential dilution to our common stock upon any conversion of the 2029 Convertible Notes and the 2030 Convertible Notes or offset any potential cash payments we are required to make in excess of the principal amount of converted 2029 Convertible Notes and the 2030 Convertible Notes, as the case may be, with such reduction or offset subject to a cap.

In connection with the amendment of the old 2029 Convertible Notes in March, we entered into agreements to amend certain terms of the capped call transactions.

Following these transactions, the capped call counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the 2029 Convertible Notes and the 2030 Convertible Notes (and are likely to do so during any observation period related to a conversion of the 2029 Convertible Notes and 2030 Convertible Notes or following any repurchase of the 2029 Convertible Notes and the 2030 Convertible Notes by us to the extent we elect to unwind a corresponding portion of the capped call transactions in connection with such repurchase).

This activity could also cause or avoid an increase or a decrease in the market price of our common stock.

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In addition, we do not make any representation that the capped call counterparties will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.

We are subject to counterparty risk with respect to the capped call transactions, and the capped call transactions may not operate as planned.

The capped call counterparties are, or are affiliates of, financial institutions, and we will be subject to the risk that they might default under the capped call transactions.

Our exposure to the credit risk of the capped call counterparties will not be secured by any collateral.

Global economic conditions have from time to time resulted in the actual or perceived failure or financial difficulties of many financial institutions.

If a capped call counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at that time under our transactions with that capped call counterparty.

Our exposure will depend on many factors, but, generally, the increase in our exposure will be correlated with increases in the market price or the volatility of our common stock.

In addition, upon a default by a capped call counterparty, we may suffer adverse tax consequences and more dilution than we currently anticipate with respect to our common stock.

We can provide no assurances as to the financial stability or viability of any capped call counterparty.

In addition, the capped call transactions are complex, and they may not operate as planned.

For example, the terms of the capped call transactions may be subject to adjustment, modification or, in some cases, renegotiation if certain corporate or other transactions occur, including in connection with the amendment to the 2029 Convertible Notes, which lowered the applicable cap price to align with the amended terms of the 2029 Convertible Notes.

Accordingly, these transactions may not operate as we intend if we are required to adjust their terms as a result of transactions in the future or upon unanticipated developments that may adversely affect the functioning of the capped call transactions.

SMCI | 2024 Form 10-K | 39

Conversion of our 2029 Convertible Notes or 2028 Convertible Notes may dilute the ownership interest of existing stockholders or may otherwise depress the price of our common stock.

Despite the entry into the capped call transactions in connection with the 2029 Convertible Notes, the conversion of some or all of the 2029 Convertible Notes or the conversion of some or all of the 2028 Convertible Notes, to the extent we deliver shares upon conversion, will likely dilute the ownership interests of existing stockholders.

We did not enter into equivalent capped call transactions with respect to the 2028 Convertible Notes, so we do not have any protection against dilution or cash payments upon conversion of the 2028 Convertible Notes above the applicable conversion price.

Any sales in the public market of the 2029 Convertible Notes or the 2028 Convertible Notes or our common stock issuable upon conversion of the relevant convertible notes could adversely affect prevailing market prices of our common stock.

In addition, the existence of the 2029 Convertible Notes or the 2028 Convertible Notes may encourage short selling by market participants because the conversion of the 2029 Convertible Notes or the 2028 Convertible Notes could be used to satisfy short positions, or anticipated conversion of the 2029 Convertible Notes or the 2028 Convertible Notes into shares of our common stock could depress the price of our common stock.

Our research and development expenditures, as a percentage of our net sales, are considerably higher than many of our competitors and our earnings will depend upon maintaining revenues and margins that offset these expenditures.

One of our key strategies is to focus on being consistently first-to-market with flexible and application optimized server and storage systems that take advantage of our own internal development and the latest technologies offered by microprocessor manufacturers and other component vendors.

Consistent with this strategy, we believe we spend higher amounts, as a percentage of revenues, on research and development costs than many of our competitors.

If we cannot sell our products in sufficient volume and with adequate gross margins to compensate for such an investment in research and development, our earnings may be materially and adversely affected.

Our future effective income tax rates could be affected by changes in the relative mix of our operations, our relative income among different geographic regions and domestic and foreign income tax laws, which could affect our future operating results, financial condition and cash flows.

We receive significant tax benefits from sales to our non-U.S.

These benefits are contingent upon existing tax laws and regulations in the U.S.

and in the countries in which our international operations are located.

Future changes in domestic or international tax laws and regulations or a change in how we manage our international operations could adversely affect our ability to continue realizing these tax benefits.

In recent years, numerous legislative, judicial, and administrative changes have been made to tax laws applicable to us and similar companies.

The Organization for Economic Co-operation and Development (the “OECD”) has introduced a framework to implement a global minimum corporate tax of 15% applicable to large multinational corporations, referred to as Pillar Two or the minimum tax directive.

Many countries, including countries in which we operate, have enacted or are in the process of enacting laws based on the Pillar Two proposal that will start to become effective for our fiscal year ending June 30, 2025 (“fiscal year 2025”).

While we do not currently expect the minimum tax directive to have a material impact on our effective tax rate, our analysis is ongoing as the OECD continues to release additional guidance and countries implement legislation.

To the extent additional changes take place in the countries in which we operate, it is possible that these legislative changes and efforts may increase uncertainty and have an adverse impact on our effective tax rates or operations.

Our future effective tax rate may also be affected by a variety of factors, including changes in our business or statutory rates, our mix of earnings in countries with differing statutory tax rates, available tax incentives, credits and deductions, the expiration of statutes of limitations, changes in accounting principles, adjustments to income taxes upon finalization of tax returns, increases in expenses not deductible for tax purposes, the estimates of our deferred tax assets and liabilities and deferred tax asset valuation allowances, changing interpretation of existing laws or regulations, the impact of accounting for business combinations, as well as changes in the domestic or international organization of our business and structure.

Furthermore, the tax effects of accounting for stock-based compensation and volatility in our stock price may significantly impact our effective tax rate in the period in which they occur.

An increase in our stock price may result in increased future tax benefits from stock-based compensation, decrease our effective tax rate and positively affect our financial results.

Conversely, a decline in our stock price may result in reduced future tax benefits from stock-based compensation, increase our effective tax rate and adversely affect our financial results.

SMCI | 2024 Form 10-K | 40

Backlog does not provide a substantial portion of our net sales in any quarter.

While we had greater than normal backlog during certain periods of fiscal year 2024, historically, our net sales are difficult to forecast because we do not have sufficient backlog of unfilled orders or sufficient recurring revenue to meet our quarterly net sales targets at the beginning of a quarter.

Rather, a majority of our net sales in any quarter depend upon customer orders that we receive and fulfill in that quarter.

Because our expense levels are based in part on our expectations as to future net sales and to a large extent are fixed in the short term, we might be unable to adjust spending in time to compensate for any shortfall in net sales.

Accordingly, any significant shortfall of revenues in relation to our expectations would harm our operating results.

Risks Related to Owning Our Stock

The trading price of our common stock has been and is likely to be volatile.

The trading prices of technology company securities historically have been highly volatile.

In addition, the global markets have been volatile, and experienced volatility as a result of matters such as the prior COVID-19 pandemic, a global economic downturn and regional conflict.

The trading price of our common stock has been and is likely to continue to be subject to wide fluctuations.

Factors, in addition to those outlined elsewhere in this filing, that may affect the trading price of our common stock include:

• The circumstances discussed in the Explanatory Note in this Annual Report;

• If our common stock is delisted or the possibility thereof;

• False or misleading press releases or articles regarding our company or our products, including the Report and similar publications;

• Actual or anticipated variations in our operating results, including failure to achieve previously provided guidance;

• Announcements of technological innovations, new products or product enhancements, strategic alliances or significant agreements by us or by our competitors;

• Continued rapid evolution of the markets in which we compete, including AI;

• Changes in recommendations by any securities analysts that elect to follow our common stock;

• The financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;

• The loss of a key customer or supplier;

• The loss of key personnel;

• Technological advancements rendering our products less valuable;

• Lawsuits filed against us;

• Changes in laws or regulations applicable to us (including export control regulations) ;

• Increased scrutiny from stockholders, regulators, and others regarding our corporate sustainability practices;

• Changes in operating performance and stock market valuations of other companies that sell similar products;

• Price and volume fluctuations in the overall stock market;

• Market conditions in our industry, the industries of our customers and the economy as a whole;

• Other events or factors, including those resulting from war, incidents of terrorism, political instability, pandemics or responses to these events.

We derive significant tax benefits from non‑U.S.

operations under current tax laws and incentives.

Legislative changes, such as the OECD Pillar Two (15% minimum tax) framework, could reduce these benefits.

Malaysia joined Pillar Two effective January 1, 2025.

Although our Malaysian subsidiary has a 10‑year tax exemption beginning in fiscal year 2026, guidance on whether a top‑up tax will apply remains pending.

In the U.S., the One Big Beautiful Bill Act (“OBBBA”), enacted on July 4, 2025, permanently extends certain Tax Cuts and Jobs Act provisions, modifies the international tax framework, and restores favorable business tax provisions, with effective dates through 2027.

We are evaluating its impact on our consolidated results, along with other evolving global tax rules.

Our effective tax rate is also influenced by statutory rate changes, earnings mix, tax incentives and credits, audit resolutions, deferred tax asset valuation, non‑deductible expenses, business combinations, and interpretations of tax law.

Stock‑based compensation and related volatility in our stock price can further create significant period‑to‑period variability in our tax rate.

SMCI | 2025 Form 10-K | 33

Future sales of shares by existing stockholders, including any shares that have vested or may in the future vest under each of the 2021 CEO Performance Award and the 2023 CEO Performance Award, could cause our stock price to decline.

Attempts by existing stockholders to sell substantial amounts of our common stock on the public market could cause the trading price of our common stock to decline significantly.

All our shares are eligible for sale in the public market, including shares held by directors, executive officers and other affiliates, sales of which are subject to volume limitations and other requirements under Rule 144 under the Securities Act.

In addition, shares subject to outstanding options and reserved for future issuance under our stock option plans, including those underlying each of the 2021 CEO Performance Award and the 2023 CEO Performance Award that have vested or vest in the future, are eligible for sale in the public market to the extent permitted by the provisions of various vesting agreements.

See “Item 11.

Executive Compensation – Compensation Discussion and Analysis (“CD&A”) – Fiscal Year 2024 CEO Compensation – Discussion and Analysis of 2023 CEO Performance Award.” If these additional shares are sold, or if it is perceived that they will be sold in the public market, the trading price of our common stock could decline.

The 10,000,000 shares of our common stock underlying the 2021 CEO Performance Award have fully vested and are subject to the risks discussed above.

Furthermore, tranches of the 2023 CEO Performance Award may vest, subject to the achievement of specified annualized revenue milestones (the “Annualized Revenue Milestones”) and a matching stock price milestone, and if such tranches do vest, they would be subject to the risks discussed above.

In connection therewith, the Company has determined that all five Annualized Revenue Milestones specified in the 2023 CEO Performance Award are “probable of achievement,” for purposes of determining whether to recognize expense associated with the applicable tranche.

Such determination is based upon management’s subjective judgment and is not a guarantee that it will be achieved.

See Note 11, "Stock-based Compensation and Stockholders’ Equity" in the Notes to Consolidated Financial Statements.

The concentration of our capital stock ownership with insiders likely limits your ability to influence corporate matters.

As of January 31, 2025, our executive officers, directors, current five percent or greater stockholders and affiliated entities together beneficially owned 38.5% of our common stock, net of treasury stock.

As a result, these stockholders, acting together, have significant influence over all matters that require approval by our stockholders, including the election of directors and approval of significant corporate transactions.

Corporate action might be taken even if other stockholders oppose them.

This concentration of ownership might also have the effect of delaying or preventing a change of control of our company that other stockholders may view as beneficial.

We continue to monitor evolving global tax legislation and related administrative guidance.

These developments may increase complexity, affect our effective tax rate, deferred tax assets, and cash tax obligations, and adversely impact our financial results.

We do not expect to pay any cash dividends in the foreseeable future.

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If we do not satisfy customer requirements for products that help mitigate climate change, and document how they contribute to such change, it could have a material adverse impact on our business, operating results, and financial conditions.

SMCI | 2024 Form 10-K | 42

Expectations and evolving laws and regulations relating to environmental, social and governance considerations expose us to potential liabilities, reputational harm and other unforeseen adverse effects on our business.

Many governments, regulators, investors, employees, customers and other stakeholders are increasingly focused on environmental, social and governance considerations relating to businesses, including climate change and greenhouse gas emissions, human capital and diversity, equity and inclusion.

We make statements about our environmental, social and governance goals and initiatives through information provided on our website, press statements and other communications.

5 unchanged sentences

Any failure, or perceived failure, by us to achieve our goals, further our initiatives, adhere to our public statements, make complete or accurate statements with respect to such matters, comply with federal, state or international environmental, social and governance laws and regulations, or meet evolving and varied stakeholder expectations and views could materially adversely affect our business, reputation, results of operations, financial position and stock price.

Our business and operations may be impacted by natural disaster events, including those brought on by climate change.

Land, sea and air routes between economic centers are subject to weather events exacerbated by climate change and can disrupt commercial activity.

Our most significant business offices, research and development, and manufacturing locations, are in the San Jose, California area and in Taiwan.

We are also in the process of developing manufacturing operations in Malaysia.

Each region is subject to climate change events and is known for earthquakes.

For example, extreme heat and wind coupled with dry conditions in Northern California may lead to power safety shut offs due to wildfire risk, which can have adverse implications for our San Jose, California headquarter offices, including impairing the ability of our employees to work effectively.

While we have adopted a business continuity plan and are taking steps to further diversify our manufacturing locations, there is no certainty it will be effective for significant natural disasters, which could have a material adverse impact on business, operating results, and financial condition.

Growing concerns over climate change may also lead to transition risks, such as changes in customer preferences or changing regulatory and legal requirements.

Shifts in customer preferences could increase demand for more sustainable solutions and services, potentially forcing us to incur additional costs or alter our operations to meet these demands.

Additionally, we may face increased costs for supplies or components that meet specific regulatory standards, potentially affecting the pricing of our products.

If we fail to manage these transition risks, customer demand for our products and services could decrease.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors