Super Micro Computer Inc. (NASDAQ:SMCI)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes has demonstrated a consistent upward trend from 2020 through 2025. Starting at approximately $70.4 million in 2020, it increased steadily each year, reaching over $1.2 billion by 2025. This substantial growth suggests improved operational efficiency and profitability over the period.

Cost of Capital

The cost of capital fluctuated within a moderate range across the years, beginning at 18.05% in 2020, slightly declining in subsequent years, and settling at 15.69% by 2025. This downward trend in cost of capital indicates a potential reduction in the company's required return rate, which may be due to improved risk profile or favorable capital market conditions.

Invested Capital

Invested capital showed significant growth, particularly after 2022. From about $1.24 billion in 2020, it more than doubled by 2022 and surged dramatically to nearly $11.5 billion by 2025. This rapid increase implies heavy investment in the firm's assets and operations, reflecting an aggressive expansion strategy during this time frame.

Economic Profit

Economic profit figures reveal a volatile pattern over the years. Initial values were negative in 2020 and 2021, indicating that the company was not generating returns above its cost of capital. A positive economic profit was recorded in 2023, suggesting the company created value during that year. However, this was followed by a return to negative economic profit in 2024 and a further deepening of losses by 2025. The negative economic profit despite rising NOPAT and invested capital implies that returns on the invested capital did not consistently exceed the cost of capital, especially during the later years.

Summary Insights

Overall, the company experienced strong growth in operating profits and invested capital, supported by a slightly declining cost of capital. However, the inability to sustain positive economic profit in most years indicates challenges in generating value beyond capital costs. The data suggests that while operational performance has improved, efficient capital utilization to create shareholder value remains an area for further attention.

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 exhibits significant fluctuations over the observed periods. Initially, there is a persistent negative economic profit from 2020 through 2022, with values improving from -153,349 thousand USD in 2020 to -40,788 thousand USD in 2022. A positive shift occurs in 2023, reaching 182,461 thousand USD, indicating a temporary period of value creation. However, this is followed by a sharp reversal, with economic profit declining drastically to -213,934 thousand USD in 2024 and further worsening to -596,835 thousand USD in 2025. This pattern reflects volatility in the company’s ability to generate returns exceeding its cost of capital.

Invested Capital

The invested capital shows a strong upward trend over the entire period. Starting at approximately 1,239,197 thousand USD in 2020, it gradually increases to 2,437,425 thousand USD by 2023. A notable surge occurs in 2024 to 7,676,769 thousand USD, continuing upward to 11,494,019 thousand USD in 2025. This substantial growth in invested capital could suggest aggressive expansion, increased asset acquisition, or larger operational scale, which may be influencing the variability in economic profit.

Economic Spread Ratio

The economic spread ratio, representing the return spread relative to capital cost, fluctuates in line with economic profit. It remains negative initially, moving from -12.37% in 2020 toward a less negative ratio of -1.83% in 2022, before turning positive to 7.49% in 2023. Afterward, it reverses back to negative values, -2.79% in 2024 and worsening to -5.19% in 2025. This pattern indicates that the company briefly achieved returns above its cost of capital in 2023 but subsequently declined, aligning with the trends observed in economic profit.

Adjusted Net Sales

Adjusted net sales exhibited a strong upward trajectory over the observed period, increasing steadily from approximately 3.34 billion USD in mid-2020 to over 22.29 billion USD by mid-2025. This indicates substantial revenue growth, with notable acceleration beginning from mid-2022 onward.

Economic Profit

Economic profit started negatively at around -153 million USD in mid-2020 and showed gradual improvement up to mid-2023, reaching a positive figure of approximately 182 million USD. However, a sharp decline followed in the subsequent years, plunging to around -597 million USD by mid-2025. This pattern reflects an initial recovery phase turning into significant losses in the later years.

Economic Profit Margin

The economic profit margin, mirroring the economic profit trend, improved from negative values near -4.59% in mid-2020 to a positive 2.54% in mid-2023, indicating enhanced profitability relative to adjusted sales. After this peak, the margin declined back into negative territory, falling to -2.68% by mid-2025, which suggests that despite growing sales, the company faced increasing challenges in generating economic profit on sales later in the period.

Overall Insights

The data reveals robust revenue growth over the five-year span, suggesting successful sales expansion strategies. Nevertheless, economic profit and its margin reveal volatility and a negative trend in the latter years, indicating that increased revenues did not translate into sustained profitability improvements. This divergence points to rising costs, inefficiencies, or other economic factors adversely impacting profitability despite growing sales volumes.