Dell Technologies Infrastructure Sales Hit Record, AI Server Revenue Surges 80 Percent

‘We are offering customers choice, flexibility and control of how and where they build, train and run artificial intelligence,’ Dell Vice Chairman and COO Jeff Clarke said on the company’s second fiscal quarter earnings call.

Dell Technologies revenue surged to $25 billion in its second fiscal quarter, coming in 9 percent higher than the same quarter last year as the company’s lineup of infrastructure products reached record sales and demand for its AI servers continued to rise.

“Our industry has always been competitive. I do not expect that to change,” Dell Technologies Vice Chairman and COO Jeff Clarke told investors on the Round Rock, Texas-based company’s earnings call Thursday. “I go back to what makes Dell special, why we win, and I think continue to win. We have the broadest coverage model in the industry, a combination of direct sellers and our partner programs. We’re going to invest in coverage. We’re going to continue to broaden in channel programs to cover customers who want to continue to buy Dell gear and those who don’t yet know they want to buy Dell gear.”

Dell shipped $3.1 billion of AI-optimized servers in the last quarter alone, which accounts for about half of the $6 billion in AI servers it has sold in the past four quarters. Sales of its AI-optimized servers were up 80 percent quarter to quarter. The current AI server backlog is $3.8 billion, Clarke said.

“We are offering customers choice, flexibility and control of how and where they build, train and run artificial intelligence,” he said on the earnings call.

But there was softness inside the earnings as well, with PC revenue down 4 percent across commercial and consumer segments.

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Dell’s Infrastructure Solutions Group (ISG), which makes servers in addition to storage and networking offerings, saw revenue of $11.6 billion, up 38 percent year over year, led by servers.

“Server demand continues to outpace shipments with strong growth across traditional and AI servers,” Dell Technologies CFO Yvonne McGill said on the earnings call.

Those server numbers came with better financial discipline as well. The ISG operating income rate increased by 3 percent, bringing it to 11 percent of revenue.

“We improved the margins in each of our PowerMax, PowerStore, PowerScale and PowerProtect data protection [offerings] quarter over quarter though price discipline,” Clarke said. “We improved margins of our AI portfolio. And we did that with the same price discipline, but more importantly the engineering value-add and technical value-add that we’re bringing to our customers and the expansion beyond the specific node to the rack-level deployment.”

Storage revenue was $4 billion, down 5 percent, across the core storage portfolio, including PowerMax, PowerScale, PowerStore and PowerProtect. However, Dell’s organic portfolio of storage saw growth in that same time frame, Clarke said.

“If you look at our Dell IP [storage] portfolio and the success we had in Q2, it was good to see,” Clarke said. “We had double-digit growth on a demand basis across the high-end products, the midrange products, and the unstructured products and the data protection products. Those products from a margin point of view are significantly greater than the partner IP products.”