The Six Five team discusses Dell Q3 FY 24 Earnings.
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Transcript:
Patrick Moorhead: So big EPS beat. Okay. Almost 30% EPS beat. A miss on revenue and a tepid outlook. And listen, PC was down in a weak market and like we saw with HP and like we saw with Lenovo, the forecast for the next quarter doesn’t look great and Dell doesn’t do annual forecasts, but we did get a quarterly forecast. Data center group hit their numbers. Okay.
In fact, server networking group were up 9%. And while some people might not get super excited by a single digit increase, I think it absolutely leads to Dell is hitting what they said they were going to hit with their server line with AI and Dell seems to be able to get the GPUs that some of the manufacturers aren’t able to get. And this would make sense to me given their supply chain prowess. And, Dan, for that analyst day, they were very clear. What’s our generative AI opportunity? It’s an infrastructure. Not in software, it’s not in services, it’s in absolute hardware. And quite frankly, if it weren’t for the softness in the PC market, I think that people would’ve considered that they crushed it.
Profit was up partially because PCs were down. I know that sounds weird, but the profit structure of infrastructure is a lot better than the profit structure for PCs and I believe that they’re getting a premium for their AI infrastructure because Dell can actually ship. Storage was down. Now typically storage growth will come maybe a quarter after server growth. So I am expecting that to go up. We saw softness in large storage arrays as opposed to mid-range and low end. So there we have it.
Daniel Newman: Yeah. I think it was a solid example of Dell’s operating prowess. Once again, operating really well within the constraints of the numbers. Growth has been harder to come by for the company. There’s growth in pockets and that growth is good. The AI outlook and of course the backlog on AI for the GPU is huge and if they could actually fulfill that backlog, the numbers would look very different. But there’s a few companies that could say that. So I don’t want it to be necessarily a unique thing just to Dell. Like HP, it will be a huge beneficiary of this AIPC boom. Having said that, Dell actually I think could be an even bigger beneficiary in that particular area.
But overall, Pat, I think Dell continues to just sort of deal with this macro headwind, deal with it effectively, be very good at managing the operation, delivering value to shareholders, dividends and buybacks, and doing the right things to make sure it keeps its investors happy while we wait for the next sort of boom across infrastructure and PC buying. And that overall makes Dell a consistent value play, but that’s also why it probably doesn’t ever get the growth play even as it did break 100 billion in revenue last year.
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
