Dell Beats Wall Street Expectations with 80% Increase in Server Sales
Dell Technologies reported quarterly results on Thursday that exceeded Wall Street’s expectations, driven by an impressive 80% surge in server sales. As a result, Dell’s stock rose more than 3% in extended trading.
Quarterly Financial Performance
For the fiscal second quarter, Dell’s net income climbed 85% to $841 million, or $1.17 per share, from $455 million, or 63 cents per share, in the same period last year. Revenue increased by approximately 9% from $22.93 billion to $24.99 billion, surpassing LSEG consensus estimates.
Despite the positive results, Dell’s stock dipped slightly after the company revised its full-year guidance to a range of $95.5 billion to $98.5 billion, a modest upward revision from the previous forecast of $93.5 billion to $97.5 billion.
Future Outlook
For the current quarter, Dell anticipates revenue between $24 billion and $25 billion, aligning with the StreetAccount estimate of $24.6 billion. The company has positioned itself as a leading vendor for servers capable of handling artificial intelligence (AI) workloads, particularly those utilizing Nvidia chips, amid skyrocketing demand from cloud providers.
Nvidia CEO Jensen Huang highlighted Dell founder Michael Dell as the go-to person for orders involving the company’s new chips earlier this year.
Business Unit Performance
AI sales are housed within Dell’s Infrastructure Solutions Group (ISG), the company’s fastest-growing unit. Overall, ISG sales rose by 38% to $11.65 billion, beating StreetAccount expectations of $10.44 billion. The standout performer in this category was Servers and Networking revenue, which includes AI-oriented servers based on GPUs from Nvidia and AMD, as well as traditional servers. This segment reported $7.76 billion in sales, an 80% increase year-over-year, surpassing StreetAccount expectations of $6.37 billion. Of this, $3.1 billion was attributed to AI server sales, up from $1.7 billion in the previous quarter.
Operating Chief Jeff Clarke attributed the revenue increase to rising server demand and noted a growing backlog of $3.8 billion in AI server orders yet to be fulfilled, along with a multibillion-dollar pipeline of AI server deals from enterprises and cloud providers that are still being finalized.
However, Dell’s storage business, also part of ISG, saw a 5% decline in sales to $4 billion.
The Client Solutions Group, focusing on PCs and laptops, experienced a 4% annual decline to $12.41 billion in revenue. Consumer sales fell by 22% to $1.86 billion, while the enterprise PC business remained flat at $10.55 billion in sales.
Share Repurchases and Dividends
During the quarter, Dell spent $1 billion on share repurchases and dividends, reflecting its commitment to returning value to shareholders.
