Release Date: November 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Dell Technologies Inc (DELL, Financial) reported a 10% year-over-year increase in revenue, reaching $24.4 billion, driven by strong ISG revenue growth.
- The company achieved a 14% increase in diluted EPS, reaching $2.15, indicating improved profitability.
- Dell Technologies Inc (DELL) saw substantial expansion in its AI server pipeline, with orders demand reaching a record $3.6 billion, up 11% sequentially.
- The company launched several innovative products, including the 21-inch Orv3 Integrated Rack 7000 and the XE9712 server rack with direct liquid cooling, showcasing its engineering leadership.
- Dell Technologies Inc (DELL) maintained strong cash flow from operations at $1.6 billion, reflecting effective financial management.
Negative Points
- The consumer segment faced challenges, with consumer revenue down 18% to $2 billion, indicating weak demand and profitability.
- The PC refresh cycle is delayed, pushing expected demand into future quarters, impacting short-term revenue expectations.
- The storage demand environment continues to lag behind traditional servers, with only a 4% increase in storage revenue.
- Dell Technologies Inc (DELL) experienced a more competitive pricing environment in the consumer space, affecting CSG operating income margins.
- The unpredictability of AI shipments, particularly with the transition to Blackwell, poses challenges for revenue forecasting.
Q & A Highlights
Q: Can you explain the factors behind the impressive ISG margins of 13.3% and discuss their sustainability?
A: ISG revenue grew 34% year-over-year, with server and networking up 58% and storage up 4%. The ISG operating income improved due to better gross margins, especially in servers, and reduced operating expenses. Customers are buying more richly configured servers, focusing on consolidation and power efficiency. AI server and storage margins were stable, and cost efficiencies helped operating income. We expect ISG operating income rates to continue improving in Q4. - Yvonne McGill, CFO
Q: Why has the full-year revenue guidance midpoint decreased from $97 billion to $96.1 billion despite a strong AI pipeline?
A: The PC refresh cycle is moving out, affecting Q3 and pushing demand into next year. Additionally, there's a shift in AI demand towards Blackwell, impacting our fiscal year and Q4 guidance. The AI pipeline remains strong, but timing differences have influenced our guidance. - Jeffrey Clarke, COO and Yvonne McGill, CFO
Q: How do you view the AI server dynamics and the impact of Blackwell on your pipeline and margins?
A: The AI pipeline grew over 50%, with a significant shift towards Blackwell designs like the GB200. This shift is reflected in our backlog and guidance. We are the first to ship a GB200 design, and Blackwell is ramping up. The AI opportunity is immense, and we are well-positioned with differentiated solutions. - Jeffrey Clarke, COO
Q: Can you provide an update on federal and sovereign spending impacts on your business?
A: The federal government business was strong in Q3, with demand across all product types. The AI pipeline does not yet include a significant sovereign component, indicating further opportunities. We are actively engaged globally in these opportunities. - Jeffrey Clarke, COO and Yvonne McGill, CFO
Q: How do you see the storage and services opportunity evolving with AI server sales?
A: The AI opportunity extends beyond individual nodes to full rack-scale integration, including networking, storage, cooling, and power management. This allows us to expand margins and differentiate our solutions. We are seeing increased opportunities in storage and services as AI deployments grow. - Jeffrey Clarke, COO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
