Super Micro's Cisco Deal Fails to Address Cash Flow Concerns
Shares of Super Micro Computer (SMCI) rose 9.4% on August 25, 2026, closing at $38.46 after a two-week wait for news that might halt their decline. The boost came when Cisco announced it would be using Super Micro's liquid-cooled servers in its Secure AI Factory product portfolio.
This endorsement is significant because it suggests Cisco trusts the quality and reliability of Super Micro's hardware. The company's complex builds, which combine data center infrastructure with management software, are a major draw for vendors like Cisco.
The real challenge facing Super Micro, however, lies in its cash flow. Despite generating $2.23 billion in revenue last fiscal year, the company burned through $6.81 billion in free cash flow. This is because orders of that scale must be purchased as inventory well before they're billed, resulting in a 149-day cash conversion cycle.
To justify their current valuation, Super Micro will need to deliver on its projected revenue range of $65 billion to $72 billion for fiscal 2027. If the company can meet this target and improve its cash flow, it may be able to close the gap to its previous high of $58.68.