Dell Technologies COO Clarke: ‘The Opportunity In AI Is Enormous’

‘Increasingly, enterprises see the disruptive nature and the innovation opportunities with GenAI, resulting in growing GenAI experimentation and proof of concepts. Underpinning our success is broad enterprise coverage, professional services, engineering leadership, and large-scale system design, all done with incredible speed and time to market. These highly specialized workloads and deployments require high value engineering and a solutions mindset, where custom designs and fast deployments are the norm,’ says Jeff Clarke, Dell’s vice chairman and chief operating officer.

While Dell Technologies continues to see growth from its commercial PC, traditional server and storage businesses, the company said its focus on the infrastructure on which AI is built is set to supercharge its growth going forward.

Jeff Clarke, Dell’s vice chairman and chief operating officer, Tuesday told investors at his company’s third fiscal quarter 2025 quarterly financial conference call that Dell delivered a combined 10 percent revenue growth in both its Infrastructure Solutions Group (ISG) and Client Solutions Group (CSG).

That growth is being led by AI-related technology, Clarke said.

“We have seen sequential orders demand growth every quarter since the launch of the XE9680 [AI-focused rack server],” he said. “We shipped $2.9 billion of AI servers in Q3, resulting in AI server backlog of $4.5 billion. Our five-quarter pipeline grew more than 50 percent sequentially, with growth across all customer types. We continue to gain traction with enterprise customers large and small, with over 2,000 unique enterprise customers since launch.”

GenAI is proving to be a big future business driver, Clarke said.

“Increasingly, enterprises see the disruptive nature and the innovation opportunities with GenAI, resulting in growing GenAI experimentation and proof of concepts,” he said. “Underpinning our success is broad enterprise coverage, professional services, engineering leadership, and large-scale system design, all done with incredible speed and time to market. These highly specialized workloads and deployments require high value engineering and a solutions mindset, where custom designs and fast deployments are the norm.”

In response, Dell has accelerated the speed of innovation, Clarke said. The past two months have seen the launch of Dell’s 21-inch ORv3 (Open Rack version 3) Integrated Rack 7000 in both a 44 OU (OpenRack unit) and 50 OU rack design with integrated cooling power and networking that is multi-generational and future-proof up to 480 kilowatts per rack, he said. It is aimed at meeting the demands of foundational training at the data center scale.

Dell is also shipping what Clarke called the industry's first enterprise-ready Nvidia GB200 NVL72 server racks with its new XC9712 with direct liquid cooling and up to 72 GPUs per rack, and just unveiled a new NVL4 AI server with liquid cooling that supports up to 144 GPUs per rack. The company also offers the M7725, a dense compute design which supports up to 27,000 CPU cores per rack for high performance computing, he said.

On the storage side, Dell has increased the density and performance of its PowerScale scale-out NAS storage systems. The new PowerScale F710 offers 61 terabytes of QLC SSDs and capacity density of 614 terabytes per rack unit with a new software release that works with 200-gigabit Ethernet support to increase streaming write performance by 163 percent and more than double streaming read performance, compared to the previous generation.

“The opportunity in AI is enormous, and we are pushing the boundaries with our engineering and all of this innovation making its way into the enterprise,” he said.

Dell’s traditional server demand improved double digits in the third fiscal quarter, the fourth consecutive quarter of year-over-year growth, driven by growing units and average selling prices thanks to improvements in core counts, memory, and storage per server, Clarke said.

“Customers are focusing on consolidation and power efficiency by modernizing their data centers with more efficient and denser 16G servers, freeing up valuable floor space and power that will support their AI infrastructure,” he said.

Storage demand, however, continues to trail that of traditional servers, with PowerStore and PowerFlex demand growing double digits in the quarter, he said.

Dell’s Client Solutions Group saw continued stability with demand growth in commercial PCs for the third quarter in a row, Clarke said.

“More enterprise customers are beginning to refresh, albeit modest and in a more price-competitive environment,” he said. “We are seeing an indication that customers are lining up their upgrade cycles with new AI PCs in the first half of next year, a clear signal that enterprises are balancing their need to refresh and their desire to future-proof their purchases.”

Consumer demand and profitability continue to be challenged, Clarke said.

“We are optimistic about the coming PC refresh cycle as the install base continues to age and with Windows 10 reaching end of life in 46 weeks,” he said. “The significant advancements in AI-enabled architectures and application development are welcome tailwinds.”

All in all, AI has become a robust opportunity for Dell’s ISG and CSG businesses, Clarke said.

“Interest in our portfolio as an all-time high with no signs of slowing down,” he said. “That said, this business will not be linear, especially as customers navigate an underlying silicon road map that is changing. Regardless, we are winning deals at a price premium to our competition, delivering value across a much broader AI ecosystem. We have the balance sheet to grow the business and the credibility to deliver on our commitments to our customers. When you pair this with a recovering traditional server market and pending PC refresh and our updated storage portfolio, we are extremely well positioned.”

Dell By The Numbers

For its third fiscal quarter 2025, which ended November 1, Dell reported revenue of $24.37 billion, up about 10 percent over the $22.25 billion the company reported for its third fiscal quarter 2024.

That included record third fiscal quarter 2025 ISG revenue of 11.4 billion, up 34 percent over last year. Servers and networking revenue was $7.4 billion, up 58 percent, thanks to demand growth across AI and traditional servers. Storage revenue was $4.0 billion, up 4 percent.

Dell’s total revenue for the quarter missed analyst expectations by $350 million, according to Seeking Alpha.

Dell reported CSG revenue of $12.1 billion, down 1 percent over last year. Commercial client revenue was up 3 percent at $10.1 billion, while consumer revenue fell 18 percent to $2.0 billion.

Dell also reported GAAP net income of $1.13 billion or $1.58 per share, up from last year’s $1.00 billion or $1.36 per share. On a non-GAAP basis, Dell reported net income of $1.54 billion or $2.15 per share, up from last year’s $1.39 billion or $1.88 per share.

Non-GAAP earnings beat analyst expectations by 9 cents per share, according to Seeking Alpha.

Looking ahead, Dell expects fourth fiscal quarter 2025 revenue of $24.0 billion to $25 billion, up 10 percent over last year at the midpoint, with ISG and CSG combined growing 13 percent at the midpoint. ISG growth is expected to be up in the mid-20-percent range driven by AI and traditional server growth. CSG growth is expected to be in the low single digits. Fourth quarter non-GAAP earnings per share is slated to grow by 14 percent over last year.