The Six Five team discusses Dell Technology Earnings.
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Transcript:
Patrick Moorhead: Dell Tech. What can I say? Dell stock was up over 30% yesterday and Michael Dell got put in the $100 billion net worth club. It is a good day to be at Dell. And here’s the thing, it did not come from a big revenue boost because revenue was actually down year over year. It was a huge EPS beat, $2.20 cents versus $1.73. Revenue, they met expectations with a slight beat. They did increase their dividend by 20% for the year. But more than anything, it was the affirmation of the impact from AI and the communication that they could have done even more.
They shipped 800 million in AI optimized servers in the quarter and their backlog doubled quarter over quarter to $2.9 billion waiting on those pesky GPUs. Congratulations to everybody at Dell. You guys crushed it. You wake up and on a Saturday and you’re worth 30% more than you were two days ago. That’s got to be a good feeling. I had that feeling a few times when I was at AMD, but I don’t directly trade in any of these stocks, so I haven’t had that in a long time.
Daniel Newman: Yeah, so great day for the company. Michael joined the $100 billion club this week on the growth. I shared when it was up 15% after hours thinking what a pop. Only to see, I could have been more provocative at 1,000 or what, sorry, at a 30% just a little bit later. Pat, have you ever, I got to say it felt very 1999 to me. The internet’s here and there’s an infrastructure company and we’re going to. Listen, Dell’s doing some really good things, but it does have a diversified business. It didn’t actually grow on a revenue basis.
Patrick Moorhead: I know.
Daniel Newman: And so the excitement, the exuberance, people wanting another trade, maybe filling another company that’s going to benefit from this. No question Dell is going to be a very important company. Dell also has, they have the opportunity to be silicon-diverse. They’re going to be clearly partnering with AMD as AMD comes out with product. I think they will be of course one of the biggest resellers of the hardware. You saw that GPU number, and the fact is it was very easy to look at the order book and back out at the order book growth margin as availability comes down. And Pat, there has to be an indicator, right? We’ve seen the H100 timeline from 11 months to three to four months, which is indicative of the fact that they are going to be able to shorten that cycle to filling those orders.
Patrick Moorhead: I totally don’t believe it, by the way. I don’t believe-
Daniel Newman: I am not convinced. But I’m telling you, if I was trying to figure out why the exuberance came off these numbers, remember good numbers against what they committed to the street. These were adjusted guidance. They beat on revenue. They always, always, always figure out how to beat on profit. They skinnied the company this quarter. Again, not really a popular topic, but a real topic. There have been some substantial cost cuts. People love that though. Look, Meta’s stock exploded when the company showed that it was willing to do what it needed to do to beat earnings.
Now there’s always the very human element. You and I have talked about this now twice on the show. And I’m not addressing that. But I’m addressing the fact that why do investors get excited? Investors get excited when a company shows it can figure out how to perform even in a tough macro path. Here’s the other thing. They did what their peers didn’t do, they beat. Even if it was an adjusted number, they beat. They beat the adjusted number on the top while the others couldn’t beat a revenue number. Even after a guide down, they were able to do that, so that matters.
They were the best performer of their class against the expectations that were set. And Pat, they were able to show very prescriptive data on their AI. It’s simple. And look, the profitability per unit on those GPUs can be calculated and tabulated and figured out. And as they move the units and if they can move more units and move them faster, which is rumor, but there is some speculation that this cycle is being shortened and they can diversify across silicon.
This AI hardware business can grow. I just don’t know if this is going to be going back to the Benioff comments. Is this margin rich enough that people can really stay excited about selling AI servers? I think the complete set of Dell services and consumption-based private cloud, and by the way, selling into enterprises. All these servers are still so much of it’s cloud, so much of it’s just going to the 5, 10 companies that are buying.
Patrick Moorhead: I think it’s Supermicro, they are 100% box pushers, okay? That’s all they do. And they’re up 20 fold in two years, and 100% of what they do is slam infrastructure into cloud providers. And interesting exercise, go do the five-year stock valuation of Dell, and look at its appreciation, and then compare it to their contemporaries. Dell’s up 370% in the past five years and their competitors aren’t nearly there.
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.
