Dell Technologies ((DELL)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Dell Technologies’ recent earnings call painted a picture of robust growth and optimism, despite some challenges. The company reported record third-quarter revenue and earnings per share (EPS), largely driven by a surge in demand for AI servers and improved performance in its Infrastructure Solutions Group (ISG) and Client Solutions Group (CSG). While there were concerns about declining consumer revenue and rising commodity costs, the overall sentiment was positive, with a strong focus on AI growth and shareholder returns.
Record Revenue and Earnings
Dell Technologies achieved a remarkable milestone in the third quarter, reporting record revenue of $27 billion, an 11% increase year-over-year, and a record EPS of $2.59, up 17%. This impressive financial performance underscores the company’s ability to capitalize on market opportunities and deliver value to its shareholders.
AI Server Orders Surge
The demand for AI servers has been a significant driver of Dell’s success, with orders reaching $12.3 billion in the third quarter alone. This brings the year-to-date total to $30 billion, with a record backlog of $18.4 billion, highlighting the growing importance of AI in Dell’s business strategy.
ISG and CSG Growth
Dell’s ISG and CSG divisions also reported strong growth, with ISG revenue hitting a Q3 record of $14.1 billion, up 24%, and CSG revenue increasing by 3% to $12.5 billion. These results reflect Dell’s strategic focus on expanding its infrastructure and client solutions offerings.
Strong Cash Flow and Shareholder Returns
The company generated $1.2 billion in cash flow from operations and returned $1.6 billion to shareholders, including share repurchases. This demonstrates Dell’s commitment to delivering value to its investors while maintaining a strong financial position.
Improved Storage Demand
PowerStore storage demand has grown for seven consecutive quarters, indicating strong demand across Dell’s IP portfolio. This consistent growth underscores the company’s ability to meet customer needs in the storage segment.
Consumer Revenue Decline
Despite a decline in consumer revenue by 7% year-over-year, Dell noted that demand has returned to growth, suggesting potential recovery in this segment.
Storage Revenue Decline
While there was strong demand for Dell’s IP portfolio, storage revenue experienced a slight decline of 1% year-over-year, highlighting a need for continued focus on this area.
Commodity Cost Pressures
Dell is facing increased costs across DRAM, NAND, and other components, which could impact pricing and profitability. This is a challenge the company will need to navigate carefully to maintain its margins.
Forward-Looking Guidance
Looking ahead, Dell Technologies provided optimistic guidance for the upcoming quarter and beyond. For Q4, the company anticipates revenue between $31 and $32 billion, with significant growth expected in ISG and CSG. AI server shipments are projected to reach $9.4 billion in Q4, contributing to a 150% year-over-year growth. Dell’s fiscal year 2026 revenue target is set at $111.7 billion, up 17%, with a non-GAAP EPS of $9.92, up 22% at the midpoint. The company expressed strong confidence in its AI business, supported by a robust backlog and expanding customer base.
In summary, Dell Technologies’ earnings call highlighted a period of strong growth and strategic focus on AI and infrastructure solutions. Despite some challenges, the company’s positive outlook and robust financial performance suggest a promising future. Investors and market watchers will be keen to see how Dell navigates the evolving landscape and capitalizes on its strengths in the coming quarters.