Super Micro's (SMCI) financial statements passed. Its internal controls failed for a third year.
Key points
- BDO issues third straight adverse controls opinion
- Same auditor signed off on the financial statements
- Unfixed weakness covers access to financial systems
- Net sales up 78% to $39.06 billion
Super Micro Computer (SMCI) filed its fiscal 2026 annual report with the SEC on Monday, August 31. In the filing, the company said its internal control over financial reporting "was not effective as of June 30, 2026 due to the existence of a material weakness in such controls." Management reached the same judgment about its disclosure controls and procedures.
The company's independent registered public accounting firm, BDO USA, P.C., reached the same conclusion. In its controls report, BDO wrote: "In our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of June 30, 2026, based on the COSO criteria." That constitutes an adverse opinion, the finding an auditor gives when it determines that a company's controls were ineffective.
BDO reached a different verdict on the financial results produced through those controls. In a separate report bearing the same date, the firm said it "expressed an unqualified opinion thereon" regarding the consolidated financial statements, the clean sign-off.
This marks Super Micro's third straight fiscal year with an adverse opinion on its controls. BDO used the same wording for fiscal 2025 in the annual report filed August 28, 2025, and for fiscal 2024 in the delayed report submitted February 25, 2025.
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What remains unresolved?
The outstanding material weakness involves information technology general controls. These controls determine who may access the systems that feed data into a company's financial reporting process. Super Micro said controls covering certain systems "did not operate for a sufficient period of time." It also said the company "did not perform controls in a consistent and timely manner to monitor user access to certain financial applications, system infrastructure and programs."
Super Micro said in the filing that the weakness "could have increased the risk of unauthorized access to certain information technology systems that support our financial reporting processes, manipulation of data that we use to produce our financial statements, and/or lack of complete and accurate information, which could lead to financial misstatements and affect our ability to report our information on a timely basis."
Management maintains the reported figures are accurate despite the control problem. "Notwithstanding the material weakness in internal control over financial reporting described above, management believes and has concluded that the consolidated financial statements included in this Annual Report fairly present, in all material respects, our financial condition, results of operations, and cash flows for the periods presented in conformity with U.S. GAAP," the filing reads.
During fiscal 2026, Super Micro remediated three other material weaknesses that had carried over from fiscal 2025. Those involved conflicts in segregation of duties, the completeness and accuracy of information produced by the company, and the way transactions were recorded and disclosed across several areas of the financial statements.
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How did the business do?
Net sales reached $39.06 billion in fiscal 2026 against $21.97 billion the year before, growth of 77.8%, which Super Micro tied to "fulfillment and shipment of orders to support our customers' data center deployment, including large design wins from a few customers." Net income more than doubled to $2.23 billion.
| Fiscal year ended June 30 | 2026 | 2025 |
|---|
| Net sales | $39.06 billion | $21.97 billion |
| Gross profit | $4.23 billion | $2.43 billion |
| Gross margin | 10.8% | 11.1% |
| Income from operations | $2.77 billion | $1.25 billion |
| Net income | $2.23 billion | $1.05 billion |
Gross margin slipped to 10.8% from 11.1%. Margin was also the sore point when the June quarter came in at the low end of the company's own guidance in July, alongside more than $60 billion of new orders.
Shares closed Tuesday at $36.71, down from Monday's $37.28, and the stock's 52-week range runs from $19.48 to $58.78.
When does Super Micro expect to fix it?
During fiscal 2027. The company listed three steps already under way: a review of its overall IT architecture, a more centralized process for granting and removing user access, and targeted improvements to its IT service management tool. Those actions "will likely allow us to remediate this material weakness, subject to the completion of operating effectiveness testing during fiscal year 2027," Super Micro said.
The company stopped short of promising it. Super Micro said it cannot assure investors that its remediation efforts "will be adequate to allow us to conclude that such controls will be effective in the future," or that further material weaknesses "will not arise or be identified in the future."
BDO attached a limit of its own. The firm wrote that it does "not express an opinion or any other form of assurance on management's statements referring to any corrective actions taken by the Company after the date of management's assessment."
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