DELL Q2-25 - Dell's AI Revolution and Financial Triumphs

[Music] hey everyone welcome back to another episode of exposed earnings I'm Jackie your friendly Finance Enthusiast and with me is the ever brilliant Kira how are you doing today Kira I'm doing great Jackie excited to dive into Dell Technology's Q2 earnings call there's a lot to unpack especially with their AI momentum and financial performance absolutely so uh let's start with the basics Dell reported a revenue of $25 billion which is up 9% year-over-year that's pretty impressive right yes it is and what's even more interesting is their diluted EPS which stands at $189 also up 9% this indicates that Dell is not just growing in terms of Revenue but also in profitability right and they mentioned their AI momentum Jeff Clark one of the executives highlighted that their AI server orders and shipments increase sequentially they ship $3.1 billion worth of AI servers in Q2 alone that's correct and they have a healthy AI server backlog of $3.8 billion this backlog is essentially orders that have been placed but not yet fulfilled it shows strong future demand for our listeners who might not be familiar AI servers are specialized computers designed to handle the heavy computational tasks required for artificial intelligence applications these are not your regular office PCS they are high performance machines exactly andell's unique capability to deliver both air and liquid cooled AI servers along with networking and Storage Solutions makes them a strong player in this market they are also working with leading ecosystem Partners to enhance their offerings speaking of Partnerships Dell is also excited about the emerging Sovereign AI opportunity this involves working with governments around the world to implement AI Solutions it's a huge Market with a lot of potential yes and Jeff mentioned that they are optimizing their sales coverage to better focus on AI opportunities across different customer segments and geographies this means they are strategically positioning themselves to capture more market share that's right Dell's core storage demand including products like PowerMax power scale power store and power protect data domain grew double digits in the quarter this is a positive sign as they move into the second half of the year now let's talk about their Client Solutions group CSG they saw modest commercial PC demand growth in the quarter and expect growth in the second half of the year they are focusing on Commercial PCS high-end consumer and gaming segments yes and they are optimistic about the coming PC refresh cycle with Windows 10 Reaching end of life later next year many businesses will need to upgrade their systems which could drive significant demand for new PCS Ivon McGill another executive provided some detailed financials Dell's total revenue was up 9% to $25 billion and their combined CSG and isg business grew 12% however their gross margin was down 230 basis points due to an increase in their AI optimized server mix in a more competitive pricing environment operating expenses were down 4% to 3.4 billion doar which is 13.7% of Revenue this shows that Dell is managing its costs effectively while still driving growth they also took a $328 million charge for Workforce reduction to position their business for the long term and their operating income was up 3% to 2 billion or 88.1% of Revenue this was driven by higher revenue and lower operating expenses partially offset by a decline in their gross margin rate their net income was up 7% to $1.37 billion and their diluted EPS was up 9% to $189 these are strong financial metrics that indicate Dell's robust performance now let's dive into some of the Q&A highlights one of the analysts asked about the isg margins which improved from 8% in q1 to 11% in Q2 Jeff explained that this was driven by Improvement across the entire portfolio including AI servers and traditional servers yes and they also mentioned that their Dell IP core storage demand grew double digits which contributed to the margin Improvement they were more disciplined in their pricing and had a higher mix of D IP Storage Solutions another interesting point was about the AI server margins Jeff mentioned that they improved sequentially due to their ability to add value through engineering and Technical capabilities this includes services like Factory integration solution testing and on-site deployment another analyst asked about the CSG recovery and Jeff mentioned that they remain optimistic about the PC refresh cycle the Aging install base and the end of life for Windows 10 are key drivers for this expected recovery and they are also excited about the advancements in AI enabled architectures and applications which could drive further demand for new PCS in summary Dell is leveraging its strengths to extend its leadership positions and lean into new opport unities like AI they are offering customers Choice flexibility and control of how and where they build train and run artificial intelligence absolutely Dell is well positioned to capture the immense AI opportunity with tier 2 csps Enterprise and emerging Sovereign customers their AI hardware and services Tam is expected to grow at a 22% kager over the next few years well that's all the time we have for today we hope you enjoyed this deep dive into Del Tech Technology's Q2 earnings call stay tuned for more episodes of exposed earnings where we break down the latest in finance and investing and now we are taking a short break to hear about Zed thanks for listening everyone you know what's crazy there's finally an app that makes learning about and participating in the markets immersive simple and intelligent all at once it's called Zed this platform combines snackable video lessons embedded AI insights and automated portfolio tracking capabilities Trust me you do not want to miss out all right let's get back into it so Kira one of the analysts asked about the isg margins which improved from 8% in q1 to 11% in Q2 Jeff explained that this was driven by Improvement across the entire portfolio including AI servers and traditional servers yes and they also mentioned that their Dell IP core storage demand grew double digits which contributed to the margin Improvement they were more disciplined in their pricing and had a higher mix of Dell IP Storage Solutions another interesting point was about the AI server margins Jeff mentioned that they improved sequentially due to their ability to add value through engineering and Technical capabilities this includes services like Factory integration solution testing and on-site deployment and they're seeing an increase in the number of Enterprise customers buying AI Solutions each quarter this is significant because Enterprise customers typically have high higher margins compared to large cloud service providers one of the analysts asked about the storage Dynamics and Jeff explained that their Dell IP core storage products like PowerMax and power scale saw double digigit growth however this was offset by declines in their partner IP portion of the HCI portfolio yes and they are optimistic about the future of their storage business especially with the increasing demand for high performance storage solutions to support AI workloads another analyst asked about the CSG recovery and Jeff mentioned that they remain optimistic about the PC refresh cycle the Aging install base and the end of life for Windows 10 are key drivers for this expected recovery and they are also excited about the advancements in AI enabled architectures and applications which could drive further demand for new PCS in summary Dell is leveraging its strengths to extend its leadership positions and lean into New Opportunities like AI they are offering customers Choice flexibility and control of how and where they build train and run artificial intelligence absolutely Dell is well positioned to capture the immense AI opportunity with tier 2 csps Enterprise and emerging Sovereign customers their AI hardware and services Tam is expected to grow at a 22% kager over the next few years this podcast is generated completely using Ai and does not constitute Financial advice as with all investing your Capital will be at risk for more information visit z. aai