Dell's Q2 Results Soar as AI Server Demand Fuels Record Infrastructure Sales

Dell's sparkling Q2 results are all about AI

Few companies have tied their fortunes to AI as much as Dell Technologies has, with the technology giant seeing a rise in server and networking revenue of 80 percent thanks to AI infrastructure sales, while eyeing potential AI PC dividends coming down the pike. The Texas titan has done its best to position itself as a key supplier of AI infrastructure over the past year or so, forming a close relationship with GPU supremo Nvidia to use its accelerators and software stack for its turnkey enterprise offerings. This move has clearly paid off for the Round Rock outfit. Its reported revenue for the second quarter of fiscal year 2025 ended in Aug 2 was $25 billion, up 9 percent on a year ago. Concealed within that overall figure was the growth of 38 percent for Dell's Infrastructure Solutions Group (ISG), driven by record server and networking revenue up 80 percent to $7.7 billion. Speaking on an analyst conference call to discuss the results, Vice Chairman and COO Jeff Clarke made no bones about the company's success being due to the current industry hysteria over AI, which was mentioned over 140 times during the call. "Our unique capability to deliver leading-edge air and liquid cooled AI servers, networking and storage tuned and optimized for maximum performance at the node and rack level combined with leading ecosystem partners and world-class services and support continues to resonate with customers," he said, adding that orders in the quarter were primarily driven by Tier-2 cloud service providers. One notable win came in June, when it was announced that Dell and Supermicro had been picked to help build an AI supercomputer for Elon Musk's xAI startup. However, Clarke said that Dell continues to see an increase in the number of enterprise customers buying AI solutions each quarter, which he flagged as a significant opportunity, as many are still in the early stages of AI adoption. The Texan tech purveyor reported about $3.2 billion worth of AI-optimized server orders in Q2, according to Clarke, but its backlog still stands at $3.8 billion. "As we begin the second half of the year, we have optimized our sales coverage to better focus on AI opportunities across CSPs, and both large and small customer segments and geographies," he stated. Things were not quite so rosy for Dell's Client Solutions Group (CSG), which makes PCs and peripherals. FYQ2 revenue for this division was down 4 percent to $12.4 billion, with commercial client revenue flat at $10.6 billion and consumer revenue down 22 percent to $1.9 billion. But even here, the Round Rock firm is eyeing the AI opportunity, seeing a potential windfall from buyers replacing their Windows 10 boxes with AI PCs or Copilot+ PCs, or whatever they are called. "We expect growth in the second half of the year, particularly in the fourth quarter. The coming PC refresh cycle and the longer-term impact of AI will create tailwinds for the PC market," predicted Chief Financial Officer Yvonne McGill. "So we have a Windows 10 end-of-life date. We have an aging installed base of machines bought during the COVID era, all mounting to be refreshed with exciting new products built around AI and more AI applications are coming. And we remain optimistic about that recovery," added Clarke. "If you think about the extension of AI out to the Edge in inferencing and what inferencing will be done on the Edge on PCs, that opportunity is immense as well," he said. Looking ahead to Q3 for fiscal year 2025, McGill said that Dell expects revenue to be in the range of $24 billion and $25 billion, the midpoint of which would represent a 10 percent increase. With its prosperity pegged to customers continuing to spend big on AI products, the Texan tech titan had best hope that increasing talk of AI being a bubble that may soon burst would turn out to be wrong. ®

Dell Technologies Infrastructure Sales Hit Record, AI Server Revenue Surges 80 Percent

'We are offering customers choice, flexibility and control of how and where they build, train and run artificial intelligence,' Dell Vice Chairman and COO Jeff Clarke said on the company's second fiscal quarter earnings call. Dell Technologies revenue surged to $25 billion in its second fiscal quarter, coming in 9 percent higher than the same quarter last year as the company's lineup of infrastructure products reached record sales and demand for its AI servers continued to rise. "Our industry has always been competitive. I do not expect that to change," Dell Technologies Vice Chairman and COO Jeff Clarke told investors on the Round Rock, Texas-based company's earnings call Thursday. "I go back to what makes Dell special, why we win, and I think continue to win. We have the broadest coverage model in the industry, a combination of direct sellers and our partner programs. We're going to invest in coverage. We're going to continue to broaden in channel programs to cover customers who want to continue to buy Dell gear and those who don't yet know they want to buy Dell gear." Dell shipped $3.1 billion of AI-optimized servers in the last quarter alone, which accounts for about half of the $6 billion in AI servers it has sold in the past four quarters. Sales of its AI-optimized servers were up 80 percent quarter to quarter. The current AI server backlog is $3.8 billion, Clarke said. "We are offering customers choice, flexibility and control of how and where they build, train and run artificial intelligence," he said on the earnings call. But there was softness inside the earnings as well, with PC revenue down 4 percent across commercial and consumer segments. [RELATED: Dell Cuts Jobs, Restructures To Become 'A Leaner Company' For AI Era] Dell's Infrastructure Solutions Group (ISG), which makes servers in addition to storage and networking offerings, saw revenue of $11.6 billion, up 38 percent year over year, led by servers. "Server demand continues to outpace shipments with strong growth across traditional and AI servers," Dell Technologies CFO Yvonne McGill said on the earnings call. Those server numbers came with better financial discipline as well. The ISG operating income rate increased by 3 percent, bringing it to 11 percent of revenue. "We improved the margins in each of our PowerMax, PowerStore, PowerScale and PowerProtect data protection [offerings] quarter over quarter though price discipline," Clarke said. "We improved margins of our AI portfolio. And we did that with the same price discipline, but more importantly the engineering value-add and technical value-add that we're bringing to our customers and the expansion beyond the specific node to the rack-level deployment." Storage revenue was $4 billion, down 5 percent, across the core storage portfolio, including PowerMax, PowerScale, PowerStore and PowerProtect. However, Dell's organic portfolio of storage saw growth in that same time frame, Clarke said. "If you look at our Dell IP [storage] portfolio and the success we had in Q2, it was good to see," Clarke said. "We had double-digit growth on a demand basis across the high-end products, the midrange products, and the unstructured products and the data protection products. Those products from a margin point of view are significantly greater than the partner IP products."

Dell beats second-quarter results estimates on strong AI server demand

Dell has capitalized on increasing demand for its AI servers, which are powered by Nvidia's graphics processors. These servers are designed to meet the growing computing needs of AI systems, including training language models. Revenue for the second-quarter ended Aug 2 rose about 9% to $25.03 billion, beating analysts' average estimate of $24.14 billion, according to LSEG data. The company reported adjusted profit per share of $1.89 per share, compared with estimates of $1.71 per share. "AI-optimized server demand was $3.2 billion, up 23% sequentially, and $5.8 billion year to date. Backlog was $3.8 billion, and our pipeline has grown to several multiples of our backlog," Chief Operating Officer Jeff Clarke said in a statement. Dell's revenue for the infrastructure solutions group, which includes its storage, software and server offerings, rose about 38% to a record $11.65 billion. In contrast, revenue for the client solutions group - home to PCs - fell about 4% to $12.41 billion. Dell took a $328 million charge for workforce reductions in the second-quarter, CFO Yvonne Mcgill said. The global PC market continued to recover in the second quarter, with total shipments rising 3.4% from a year earlier to 62.8 million units, according to research firm Canalys. The results come after a Reuters exclusive report that said Dell is again exploring a possible sale of cybersecurity firm SecureWorks, following previous unsuccessful attempts to find a buyer. (Reporting by Jaspreet Singh in Bengaluru; Editing by Tasim Zahid)

Dell's server sales are riding high off of cloud and AI investment

Wall Street-smashing expectations follow similar results published this week by HP Dell's latest quarterly results have surpassed Wall Street's expectations, driven by an 80% rise in server sales largely attributed to business and cloud storage provider interest in artificial intelligence (AI). Per CNBC, Dell's net income has climbed to $841 million from $455 million versus last year, while overall revenue for the quarter, $25.06 billion, saw a 9% increase from $22.93 billion this time last year. These upward trends chime with AI's stranglehold on the tech industry, and Dell isn't the only company seeing them. Days previously, HP announced its own Q3 performance results, including a 2% rise in net revenue and "a return to revenue growth" for the company, citing the release of a range of AI-powered PCs. Dell has become one of the largest vendors for AI-equipped servers that use reliable hardware, such as Nvidia's own Blackwell chip range, set to suit "trillion-parameter scale generative AI" purposes. Back in May 2024 at this year's Dell Technologies World conference, Dell CEO Michael Dell and Nvidia CEO Jensen Huang made a joint announcement of an 'AI factory', combining server production with a "generative AI solution for digital assistants" to help businesses to deploy AI chatbots. Given the scale of this operation across hardware and software production and deployment, it's perhaps no surprise that Dell's Chief Operating Officer Jeff Clarke was, per CNBC, quoted on the latest earnings call as saying that "we are competing in all of the big AI deals and are winning significant deployments at scale," and going so far as to disclose a backlog of $3.8 billion's worth of unfulfilled AI server orders.

Dell Reports Sales That Top Estimates on AI Server Orders

(Bloomberg) -- Dell Technologies Inc. reported better-than-expected revenue due to an increase in the sales of its servers to handle artificial intelligence workloads. Orders of AI-optimized servers were $3.2 billion in the fiscal second quarter, up from $2.6 billion in the previous period, Dell said Thursday in a statement. The sales backlog for the equipment was $3.8 billion, with the pipeline of deals "several multiples" of that, Chief Operating Officer Jeff Clarke said in the statement. Most AI server business is with smaller cloud service providers, but enterprises and governments are an emerging opportunity, Clarke said on a conference call with analysts after the results. Revenue jumped 9% to $25 billion in the period ended Aug. 2. Analysts, on average, estimated $24.5 billion, according to data compiled by Bloomberg. Sales in the unit containing servers was $11.6 billion, compared with the average projection of $10.9 billion. In the fiscal third quarter, Dell expects sales of about $24.5 billion, in line with analyst estimates. The shares rose about 6.4% in premarket trading on Friday before New York exchanges opened. The stock has jumped 45% this year after closing at $110.74 in New York. The Texas-based hardware technology company has enjoyed a renaissance of investor interest over the past year due to its high-powered AI servers. Still, there is increasing concern about the profitability of the equipment sold by Dell and peers like Super Micro Computer Inc., and Hewlett Packard Enterprise Co. because it needs expensive computer chips made by companies like Nvidia Corp. Profit, excluding some items, was $1.89 a share, while analysts expected $1.71. Operating margin for Dell's business unit containing servers and other infrastructure was 11%, a step up from 8% in the prior quarter and ahead of the average analyst estimate of 10.7%. That improved figure "should lessen AI-server margin concerns," wrote Woo Jin Ho, an analyst at Bloomberg Intelligence. Still, margins were negatively impacted by a higher mix of AI servers and a more-competitive pricing environment, Chief Financial Officer Yvonne McGill said on the call. For its better-known business of selling personal computers, Dell reported $12.4 billion in revenue, down 4% from the same period a year earlier and slightly missing estimates. Sales of business PCs was little changed while revenue from consumer-oriented PCs declined 22% from a year earlier. The results contrasted with rival HP Inc., which on Wednesday reported its enterprise PC sales gained 8% in the quarter. The PC market has seen a historic decline over the last two years after many consumers, businesses and schools purchased laptops in the early months of the pandemic. A long-awaited rebound began to materialize this year. In the second quarter, industrywide shipments picked up 3% -- the second increase since the end of 2021 -- research firm IDC said in July. Still, recovery in the PC market for Dell "is a little further out" than previously thought, Clarke said during the call. In June, Dell cut jobs primarily in sales without disclosing how many workers would be affected. The company took a $328 million charge for severance expenses in the quarter. "A big part of this optimization effort is leveraging AI to reimagine our business processes and drive higher productivity," McGill said of the workforce reduction. Separately, Dell is exploring the possible sale of SecureWorks Corp., a cybersecurity company, Reuters reported earlier. Dell, which owns a majority of SecureWorks stock, unsuccessfully explored the sale of the company in 2019. SecureWorks has a market value of about $772 million. (Updates with premarket trading in sixth paragraph)

Dell shares jump as AI server demand boosts results, forecasts

(Reuters) - Shares of Dell Technologies rose 6% in premarket trading on Friday, after robust demand for its artificial intelligence-powered servers propelled the company to raise its full-year earnings and revenue forecasts. Dell, which supplies servers and related infrastructure to enterprises, bolstered its AI push through a partnership with chip giant Nvidia earlier this year. With Nvidia's tech stack, Dell is attracting mid-sized customers to upgrade their servers with AI capabilities. "Dell's beat was entirely due to AI servers, with storage and PC revenues both coming in below consensus," Bernstein analysts wrote in a note. They said 80% to 90% of the company's server customers appear to be tier 2 cloud services providers and new deal opportunities appear to be competitive bids against Super Micro Computer. Revenue from Dell's infrastructure solution group, which includes sale of servers, rose 38% over the year earlier in the second quarter. Demand for AI-optimized servers, including the flagship PowerEdge XE9680, rose 23% sequentially to $3.2 billion, the company said on Thursday. Its AI pipeline now appears to be $11 billion to $13 billion, up from an estimated $8 billion to $10 billion in the first quarter, according to Bernstein. Overall, Dell earned $1.89 per share on an adjusted basis and posted revenue of $25.03 billion, both exceeding LSEG estimates. At least three brokerages raised their price targets after Dell's results. The stock has a median target price of $155, with 19 of the 22 analysts rating it "buy" or higher, according to LSEG data. At $117.29, Dell shares are down 35% since their all-time high in May. (Reporting by Yuvraj Malik in Bengaluru; Editing by Shilpi Majumdar)

Dell raises annual forecasts on strong AI server demand

Analysts have said that AI PCs are lucrative for enterprise customers and would trigger a strong upgrade cycle next year amid Microsoft's upcoming end of support for Windows 10. The company now expects annual revenue outlook to be between $95.5 billion and $98.5 billion, compared with prior expectations of $93.5 billion and $97.5 billion. Dell also raised its annual adjusted profit per share forecast to $7.80, plus or minus 25 cents, compared with earlier expectations of $7.65, plus or minus 25 cents. Demand for its AI-optimized servers rose about 23% sequentially to $3.2 billion in the second quarter. The backlog for these AI servers was $3.8 billion. "Our pipeline has grown to several multiples of our backlog," Chief Operating Officer Jeff Clarke said in a statement. Revenue for the second quarter ended Aug. 2 rose about 9% to $25.03 billion, beating analysts' average estimate of $24.14 billion, according to LSEG data. It reported adjusted profit per share of $1.89 per share, compared with estimates of $1.71 per share. Dell's revenue for the infrastructure solutions group, which includes its storage, software and server offerings, rose about 38% to a record $11.65 billion. In contrast, revenue for the client solutions group - home to PCs - fell about 4% to $12.41 billion. The company took a $328 million charge for workforce reductions in the second-quarter, CFO Yvonne McGill said. The results come after a Reuters exclusive report that said Dell is again exploring a possible sale of cybersecurity firm SecureWorks, following previous unsuccessful attempts to find a buyer. (Reporting by Jaspreet Singh in Bengaluru; Editing by Tasim Zahid)

Dell shares jump as AI server demand boosts results, forecasts

"Dell's beat was entirely due to AI servers, with storage and PC revenues both coming in below consensus," Bernstein analysts wrote in a note. They said 80% to 90% of the company's server customers appear to be tier 2 cloud services providers and new deal opportunities appear to be competitive bids against Super Micro Computer. Revenue from Dell's infrastructure solution group, which includes sale of servers, rose 38% over the year earlier in the second quarter. Demand for AI-optimized servers, including the flagship PowerEdge XE9680, rose 23% sequentially to $3.2 billion, the company said on Thursday. Its AI pipeline now appears to be $11 billion to $13 billion, up from an estimated $8 billion to $10 billion in the first quarter, according to Bernstein. Overall, Dell earned $1.89 per share on an adjusted basis and posted revenue of $25.03 billion, both exceeding LSEG estimates. At least three brokerages raised their price targets after Dell's results. The stock has a median target price of $155, with 19 of the 22 analysts rating it "buy" or higher, according to LSEG data. At $117.29, Dell shares are down 35% since their all-time high in May. (Reporting by Yuvraj Malik in Bengaluru; Editing by Shilpi Majumdar)

Dell shares jump as record AI server revenue drives Q2 beat; annual forecast hiked By Investing.com

Investing.com -- Dell Technologies reported Thursday second-quarter results that topped Wall Street estimates, driven by record revenue in its infrastructure solution business as strong demand for its artificial intelligence-optimized servers boosted performance. The company also hiked its annual earnings forecast. Dell Technologies Inc (NYSE:DELL) jumped more than 6% in premarket trading Friday. For the three months ended Aug. 2, the company reported adjusted per-share earnings of $1.89 on revenue of $25.00 billion, beating analyst estimates for $1.68 per share and $24.14B, respectively Infrastructure Solutions Group (ISG), which include AI-optimized servers and networking hardware, reported record revenue of $11.6 billion, up 38% year over year, with record servers and networking revenue of $7.7 billion, up 80% from a year earlier. "Our momentum in ISG is a significant tailwind," the company said. Dell also raised its earnings per share (EPS) guidance for the full fiscal 2025 to $7.55 - $8.05, up from $7.40-$7.90 previously. Commenting on the report, Bernstein analysts noted Dell's AI Server metrics were strong, but the segment's profitability "remains challenged." They believe AI server gross margin improved "only marginally" during the quarter. Specifically, they estimate that AI server gross margins are between 8% and 14%, with operating profit margin around 5%. Meanwhile, analysts at Goldman Sachs (NYSE:GS) said Dell's improving AI server margins "should support its valuation multiple and mid-term growth outlook, and we're encouraged by early signs of a growth inflection in traditional servers and storage." "The PC demand recovery - like with HPQ - has been slower-than-expected, but should eventually emerge over the next 12-months."

Dell's stock rises on crushing earnings beat driven by AI server sales - SiliconANGLE

Dell's stock rises on crushing earnings beat driven by AI server sales Booming sales of servers for artificial intelligence workloads helped Dell Technologies Inc. to deliver a crushing earnings and revenue beat in its latest financial quarter, sending its stock higher in extended trading. The company reported second quarter earnings before certain costs such as stock compensation of $1.89 per share, blowing past the analysts' consensus estimate of $1.71. Meanwhile, revenue increased by 9% from a year earlier to $25.06 billion, well ahead of the $24.53 billion analyst target. It was a strong performance that helped to boost Dell's bottom line by a fairly wide margin. It reported net income for the quarter of $841 million, up 85% from the year-ago period, when it delivered just $455 million in profit. Dell also revised its full-year revenue guidance, saying it now sees total sales of between $95.5 billion and $98.5 billion, up from an earlier forecast of $93.5 billion to $97.5 billion. The midpoint is still lower than the Street's target of $96.34 billion, though. For the current quarter, Dell is looking for revenue of $24 billion to $25 billion, just a tad below the Street's forecast of $24.6 billion. Still, investors appeared to be impressed by the results and forecast, as Dell's stock rose more than 3% in extended trading, having declined by less than a percentage point during the regular trading session. The reason for Dell's hot streak is that it has emerged as one of the top sellers of so-called AI servers that incorporate graphics processing units from Nvidia Corp. The company is seeing sky-high demand from enterprises and cloud computing infrastructure providers, as everyone is clamoring to get generative AI workloads up and running. Dell has benefited from Nvidia Chief Executive Jensen Huang's comments earlier this year, when he said Dell founder Michael Dell (pictured) is the best person to talk to for anyone looking to buy server systems that contain his company's most powerful chips. Dell's AI server sales numbers are included in the company's Infrastructure Solutions Group, which is the business unit that makes servers, storage systems and other equipment for data centers. The ISG unit delivered revenue of $11.65 billion, rising 38% from a year earlier and easily beating the Street's target of $10.44 billion in sales. Dell Chief Operating Officer Jeff Clarke said in a statement that the company's AI momentum accelerated in the second quarter. "We've seen an increase in the number of enterprise customers buying AI solutions each quarter," he added. Digging deeper into the ISG unit's sales, not surprisingly the growth was driven by servers and networking revenue. That segment includes sales of AI servers that incorporate GPUs from Nvidia and Advanced Micro Devices Inc., as well as traditional servers based on central processing units. It delivered $7.76 billion in sales, up 80% from a year earlier. Within that segment, AI server sales accounted for $3.1 billion in revenue, up from $1.7 billion in the prior quarter. "We are competing in all of the big AI deals and winning significant deployments at scale," Clarke said in an earnings call with analysts. According to Clarke, the company has a growing backlog of orders for AI servers that have not yet been fulfilled. He said this backlog totals around $3.8 billion worth of equipment, before adding that its deals pipeline is even longer. Dave Vellante, chief research analyst of SiliconANGLE's sister organization theCUBE Research, said the latest results show that Dell is executing its plan perfectly. "The AI server business is growing dramatically and its pipeline is now several multiples of the backlog, which is approaching $4 billion," the analyst said. "This contributed to 9% year-over-year top-line revenue growth and puts Dell back into $100 billion revenue run-rate territory." Dell's earnings results came out just hours after a report from the U.S. investment research firm Hindenburg Research LLC, which revealed that Dell is increasingly taking customers away from rivals in the server market, such as Supermicro Computer Inc. "Tesla had been sourcing its servers exclusively from Super Micro," the Hindenburg report said. "But recent reports in May 2024 and posts by Elon Musk show Dell has now won major deals from Tesla and Musk's xAI, eroding Super Micro's exclusivity. " The report also cited a post on X by Michael Dell himself, who revealed that he's helping Musk's AI firm to train and power its popular Grok chatbot. The enormous demand for Dell's AI servers has helped to offset some worrying revenue declines elsewhere in the company's business. Dell's storage business, which is also a part of the ISG unit, saw revenue fall by 5% to $4 billion in the quarter. In addition, Dell's Client Solutions Group, which is focused on personal computers and laptops, saw revenue drop by 4% to $12.41 billion. Within that segment, consumer PC sales dropped 22% to $1.86 billion, while enterprise PC sales stayed flat at $10.55 billion. Like HP Inc., which reported its financial results 24 hours earlier, Dell is betting on a new generation of so-called "AI PCs" and it has big hopes that these new machines, designed to process AI workloads locally instead of the cloud, can reinvigorate PC sales. "The PC business is software than many had hoped for, as many customers are evaluating the next phase of their PC cycles," Vellante said. "AI PCs are alluring but they're also more expensive, so right now the market seems to be taking a wait and see posture." Vellante said that on balance, Dell is a "steady state business", with a roughly equal balance between PCs and enterprise infrastructure. He added that while the latter is more profitable, the former can throw off tons of cash for the company when PC cycles kick in. "Dell is extremely generous with its cash flow in terms of stock buybacks and dividends, and that will keep investors onboard," Vellante added. "I'm looking for continued momentum in AI servers, and an improvement in storage would be a welcome sign. When AI PCs kick in, the company should see continued success." Earlier this month, it was reported that Dell is laying off an unspecified number of employees in a reorganization of sales and marketing teams. One source told SiliconANGLE that the number could be as high as 12,000, around 10% of the company's workforce, though analysts said this might be an overestimation, as such a high number would probably trigger a filing with the U.S. Securities Exchange Commission, and that didn't happen. Meanwhile, a report from Reuters today said Dell is continuing to seek buyers for its cybersecurity business SecureWorks, having previously tried and failed to sell the unit last year. Reuters quoted unnamed sources as saying that the company has tapped investment bankers at Morgan Stanley and Piper Sandler to explore interest from prospective acquirers, which include private equity firms. SecureWorks has a market value of around $658 million, but a sale is far from guaranteed, as it would ultimately depend on what those prospective buyers are willing to pay. If it cannot negotiate a satisfactory price, Dell could instead decide to maintain ownership of the company, Reuters said. Prior to today's movements, Dell's stock had gained 48% in the year to date, though it had slumped 34% since its prior earnings call in May.