Super Micro Computer Inc. (NASDAQ:SMCI)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes shows a strong upward trend over the analyzed period. Starting at 70,352 thousand US dollars in mid-2020, it increased steadily, with a notable acceleration in growth between 2021 and 2024, reaching a peak of 1,116,783 thousand US dollars. The growth rate slows somewhat in the final year, with an NOPAT of 1,207,114 thousand US dollars in mid-2025.

Cost of Capital

The cost of capital has generally shown a slight downward trend, decreasing from 18.12% in mid-2020 to 15.75% in mid-2025. There are some fluctuations within this period, notably a rise to 18.34% in mid-2023 before declining thereafter. Overall, the trend suggests improving capital efficiency or reduced risk perception over time.

Invested Capital

Invested capital exhibits a significant increase, more than doubling between mid-2021 and mid-2022, continuing to grow substantially through mid-2025. Specifically, it grows from approximately 1,239,197 thousand US dollars in mid-2020 to 11,494,019 thousand US dollars in mid-2025. This reflects considerable capital investment or asset base expansion during this period.

Economic Profit

Economic profit shows considerable volatility throughout the years. Initially negative at -154,192 thousand US dollars in mid-2020, it improves consistently to reach a positive 180,780 thousand US dollars in mid-2023. However, subsequent years indicate a sharp decline, with economic profit falling back into negative territory, reaching -603,510 thousand US dollars in mid-2025. This suggests that despite increasing operating profits and invested capital, the returns may not have been sufficient to cover the cost of capital in the latter years, possibly due to the sharp increase in invested capital or changes in profitability relative to capital costs.

Summary Insights

The data reveals a dynamic financial performance characterized by strong growth in operating profit alongside substantial increases in invested capital. While the cost of capital has decreased modestly, the overall economic profitability has been inconsistent, suggesting challenges in maintaining value creation relative to the expanding capital base. The peak economic profit in mid-2023 followed by steep declines raises questions about operational efficiency or strategic investments made in the subsequent years, which may warrant further investigation to understand underlying drivers and potential risks.

The annual financial data reveals a robust and consistent upward trend in profitability metrics over the examined six-year period. Both Net Income and Net Operating Profit After Taxes (NOPAT) exhibit significant growth, indicating strong operational performance and effective cost management.

Net Income

Net Income increased steadily each year, starting at $84,308 thousand in 2020 and more than doubling to $111,865 thousand by 2021. The growth accelerated sharply in 2022 to $285,163 thousand, with further considerable increases reaching a peak of $1,152,666 thousand in 2024, before a slight decline to $1,048,854 thousand in 2025. This trajectory highlights substantial improvements in profitability and possibly increased revenue streams or enhanced efficiency.

Net Operating Profit After Taxes (NOPAT)

NOPAT displayed a closely aligned growth pattern with Net Income, reflecting consistent operational effectiveness. Beginning at $70,352 thousand in 2020, it rose to $103,035 thousand in 2021 and surged to $314,116 thousand in 2022. This upward momentum continued, reaching $1,116,783 thousand in 2024 and further increasing to $1,207,114 thousand in 2025. The increment in NOPAT underscores strengthened core operational profitability, potentially driven by improved operational leverage or cost optimization strategies.

Overall, the data indicates a strong and sustained increase in both net earnings and operating profitability over the referenced periods, which may reflect favorable market conditions, successful strategic initiatives, or enhanced operational efficiencies within the business.

The financial data reveals notable fluctuations in both income tax provision and cash operating taxes over the analyzed six-year period.

Income Tax Provision

The income tax provision exhibited a general upward trend with significant volatility. Starting from a relatively modest amount in mid-2020, there was a sharp increase in mid-2022, peaking in mid-2023. Following this peak, the provision declined notably in mid-2024 before rising again substantially by mid-2025. These fluctuations suggest variability in taxable income or changes in tax rates or regulations impacting the company’s tax liabilities over time.

Cash Operating Taxes

Cash operating taxes demonstrated a strong upward trajectory throughout the period. From mid-2020 to mid-2021, the amounts remained relatively stable, but starting mid-2022, there was a marked increase which accelerated further in the subsequent years. By mid-2025, the cash operating taxes were more than double those recorded in mid-2024, indicating increased cash outflows related to tax obligations, possibly reflecting higher taxable earnings or changes in tax payment schedules or rates.

Comparative Insights

Although both tax-related metrics have increased over time, cash operating taxes increased more consistently and dramatically compared to the income tax provision. This may indicate timing differences between tax expense recognition and actual cash payments or differences in deferred tax assets and liabilities. The disparity in trends between these two figures could merit further analysis to understand the underlying tax strategies and cash management practices.

The financial data reveals several key trends in the company’s capital structure over the analyzed periods.

Total Reported Debt & Leases

The total reported debt and leases have exhibited significant fluctuations, initially increasing from 53.8 million USD in 2020 to a peak of 620.6 million USD in 2022, followed by a reduction to 309.5 million USD in 2023. However, there is a marked and rapid increase thereafter, reaching 2.21 billion USD in 2024 and further surging to 5.06 billion USD in 2025. This indicates an aggressive leveraging strategy in the most recent years.

Total Stockholders’ Equity

Stockholders’ equity has shown steady growth throughout the period, beginning at approximately 1.07 billion USD in 2020 and rising consistently each year to reach 6.3 billion USD by 2025. The equity growth accelerated notably after 2023, suggesting substantial capital injections or retained earnings supporting equity expansion.

Invested Capital

Invested capital follows a similar upward trajectory as equity, starting from roughly 1.24 billion USD in 2020, and showing moderate growth until 2023. From 2023 onwards, the invested capital increases sharply, culminating at nearly 11.5 billion USD in 2025. This reflects a significant expansion in the company’s asset base and operational funding during the latter years.

Overall, the data demonstrates a strategic shift toward greater leverage and capital investment beginning in 2023, with both debt and equity increasing substantially. The simultaneous rise in both liabilities and equity suggests balanced financing decisions aimed at scaling operations or pursuing growth initiatives. The rapid increase in invested capital aligns with these funding changes, highlighting an expansion phase. Careful monitoring of the high debt levels in recent years would be advisable to assess financial risk and sustainability.

Economic Profit

The economic profit exhibited significant fluctuations over the analyzed period. Starting with a substantial negative value in 2020, the loss decreased in 2021 and 2022, approaching near breakeven in 2022. A positive economic profit was recorded in 2023, indicating improved value generation. However, the trend reversed in subsequent years, with sharp declines in 2024 and 2025, resulting in increasingly large negative figures. This suggests challenges in maintaining profitability and value creation beyond 2023.

Invested Capital

Invested capital showed a steady and substantial increase from 2020 through 2023, more than doubling over this period. A notable surge occurred between 2023 and 2024, where invested capital more than tripled, continuing its upward trajectory into 2025. This increasing investment base indicates aggressive growth or expansion efforts, representing a significant deployment of resources.

Economic Spread Ratio

The economic spread ratio, which measures returns relative to the cost of capital, remained negative for most of the period. It improved gradually from 2020 to 2023, turning positive in 2023 consistent with the positive economic profit observed. However, following 2023, the ratio declined again into negative territory, reflecting diminished operational efficiency or adverse cost of capital effects. The continued negative spread ratios in 2024 and 2025 correlate with the significant economic losses and suggest challenges in generating returns above the cost of invested capital.

Adjusted Net Sales

There has been a consistent and substantial increase in adjusted net sales over the observed periods. Starting at approximately $3.34 billion, sales rose steadily each year, reaching over $22.29 billion by the latest period. This represents significant revenue growth and indicates successful expansion or market demand enhancement.

Economic Profit

The economic profit displayed a volatile and concerning trend. Initially, the company recorded negative economic profit, with losses decreasing from -$154.2 million to -$42.1 million over three years, showing some improvement. However, the trend reversed in the subsequent period, achieving a positive economic profit of approximately $180.8 million, suggesting a brief phase of value creation. After this, economic profit sharply declined again, registering significant negative values of -$218.9 million and further worsening to -$603.5 million, indicating substantial destruction of economic value in recent years.

Economic Profit Margin

The economic profit margin followed a pattern broadly consistent with economic profit levels. Initially negative at -4.62%, it improved each year to nearly break even at -0.81%, and subsequently turned positive to 2.51%. This suggests an improvement in profitability relative to sales during that period. However, the margin then deteriorated sharply, moving back into negative territory at -1.45% and further down to -2.71%, confirming a decline in underlying economic profitability despite increasing sales.

Overall Analysis

While the company has achieved impressive growth in sales revenue, the economic profit and economic profit margin trends indicate challenges in converting these sales into sustainable economic value. The brief period of positive economic profit and margin in the middle suggests capacity for value creation, but the subsequent significant downturn implies rising costs, inefficiencies, or other financial pressures undermining profitability. This contrast highlights the importance of focusing not only on revenue growth but also on cost management and operational efficiency to improve long-term economic profitability.