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. ®