Earnings Digest | Dell won big!
After the U.S. market closed yesterday, $Dell Technologies Inc.(DELL)$ announced its Q2 earnings for FY2025, which exceeded expectations. The stock surged over 8% in after-hours trading.
Dell’s Q2 revenue reached $25 billion, up 9.1% year-over-year, beating analysts’ expectations of $24.1 billion.
Looking at the segments:
- Servers and Networking: Revenue was $7.67 billion, a massive 79.5% increase year-over-year, far surpassing the $5.96 billion forecast.
- Storage: Revenue was $3.97 billion, down 5.1% year-over-year, falling short of the $4.09 billion estimate.
- Client Solutions Group: Revenue was $12.4 billion, down 4.1% year-over-year, missing the $12.5 billion target.
Two Main Areas
Dell’s core businesses are divided into two main areas: traditional PC sales (Client Solutions Group) and servers/networking.
The PC sales segment has limited growth potential. Global PC shipments have peaked, and competition is fierce, leaving slim margins and minimal revenue growth.
In contrast, while server competition is also tough, the profitability is higher. In Q2, Dell’s Infrastructure Solutions Group (ISG), which includes servers and networking, had an operating profit margin of 11%, significantly better than the Client Solutions Group’s 6.2%.
Beyond better margins, the server and networking business is booming with AI. Dell’s AI server revenue hit $3.1 billion in Q2, up 82% from the previous quarter, exceeding the $2.3 billion forecast.
AI Drive
Current AI server orders stand at $3.2 billion, up from $2.6 billion last quarter. COO Jeff Clarke mentioned that backlogged sales are at $3.8 billion, with potential deals being "several times" that number.
Looking ahead, Dell expects Q3 revenue to range between $24 billion and $25 billion, implying a 10% year-over-year increase. ISG is projected to grow around 30%.
For FY2025, Dell anticipates revenue between $95.5 billion and $98.5 billion, with a midpoint of $97 billion, representing a 10% growth. ISG is expected to grow about 30%, while CSG may remain flat or see low single-digit growth. ISG’s full-year operating margin is forecasted between 11% and 14%, while CSG’s is expected to be between 5% and 7%.
Overall, Dell is thriving. With AI server growth strong and the PC segment facing challenges, the upcoming end of $Microsoft(MSFT)$ Windows 10 support in October 2025 and the rise of AI PCs could usher in a new upgrade cycle for the PC market.
Dell won big!
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