AI Sales Lift Dell To Record Quarter, Even As Storage And PC Sales Stumble

‘Customers are getting real value out of AI. They have deployed it into real, difficult problems. There is a return on those investments,’ said Dell Vice Chairman and COO Jeff Clarke on the company’s second-quarter earnings call.

Dell Technologies scored record sales during its second quarter with sales of $29.8 billion, up 19 percent year over year, despite downturns in its storage and consumer PC businesses, problems that Jeff Clarke, Dell vice chairman and COO, has vowed to address going forward.

Even with the challenges in storage, traditional servers and PCs, Clarke said the company’s enterprise AI business is bigger than anything it has seen before.

“It’s the single largest number of customers that we sold to in a quarter,” he said on the company’s earnings call. “We now have eight consecutive quarters of quarter-over-quarter growth of the buyer base. The mix now is roughly 50 percent new customers and 50 percent returning customers. We’re seeing that across a broad base of segments, whether it’s tech firms, manufacturing firms, financial services firms, engineering firms, higher education, health care.”

He said among those AI customers, the number of proofs of concept are up, and the number of those proofs of concept heading to production are also up, all of which are positive demand indicators for Dell’s server, storage and networking businesses going forward.

“Customers are getting real value out of AI. They have deployed it into real, difficult problems. There is a return on those investments,” he said. “I would look at our own company as an example of getting [a return] on investment, of investing in AI infrastructure.”

Dell expects to see a better second half for the rest of its business, Clarke said, with seasonal trends taking hold that should lift its storage business to gains in the fourth quarter, which will help margin.

During the second quarter ended Aug.1, Dell’s Client Solutions Group, which includes its PC business, grew 1 percent year over year to $12.5 billion. On the commercial side, sales were up 2 percent to $10.8 billion, but consumer sales dipped 7 percent year over year to $1.7 billion.

Inside industry tracker IDC’s most recent report on PC shipments among the top five PC makers globally, Dell, at No. 3, is the only company that lost share amid a refresh of devices this year that has lifted Lenovo and HP Inc.

There are less than 50 days until Windows 10 loses support from Microsoft and goes “end of life.” When that happens, hundreds of millions of PCs will lose product support for their operating system, and about half of those devices have not been refreshed, Clarke said.

“We have every intention to grow. We have every intention to outperform the marketplace and take share,” he said of PCs. “That’s our goal. We have not done that consistently enough. That’s problematic. We are focused on doing so. I’m not happy with the share performance. We’re going to turn that around, and we’ve reflected that in our guide, where we believe our business will grow mid-single digits and will improve our operating margins.”

Dell has recently reorganized its PC business, placing Clarke at the helm, which Dell Titanium partner Bob Venero told CRN is a signal the company plans to get aggressive about winning back the market. Venero is founder and CEO of Fort Lauderdale, Fla.-based Future Tech Enterprise.

While Dell trails Lenovo and HP in overall global PC market share, the company still holds No. 1 positions inside the PC category, ranking first in North America desktops and North America for commercial PCs, PC workstations and PC monitors.

The company also leads in x86 servers, mainstream servers and several storage categories.

Clarke said there is a massive refresh opportunity in the traditional server market with 70 percent of Dell’s installed base running a 14th generation server. Dell’s newest 17th generation server is able to consolidate those devices at a 7-to-1 ratio. Clarke also said that while demand for traditional servers has picked up globally, in North America—its most profitable region—it has slumped amid a slowdown in large accounts and in federal spending.

“We had demand growth in all other regions, but North America, our most profitable region, was challenged from a demand perspective,” Clarke said. “We saw that again continue from what we encountered in April—federal spending continues to be down. That had an impact on our overall demand for the quarter. … In storage, it was what I tried to describe earlier as large accounts, particularly in North America, particularly in months two and three, was slower than expected.”