IT demand "currently healthy" after record quarter: Dell

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IT demand "currently healthy" after record quarter: Dell

Dell Technologies’ first fiscal quarter 2023 financial report shattered the company’s sales records across the board as one of the tech giant’s top executives said “IT demand is currently health” even as economic and supply chain challenges are slowly appearing.

The IT giant reported record revenue, with strong growth across its Infrastructure Solutions Group and Client Solutions Group.

Consumer PC sales showed the weakest growth at only 3 per cent, Dell said in its financials.

Jeff Clarke, Dell’s vice chairman and co-COO, told financial analysts the company continues to execute in a complex macroenvironment characterised by supply chain issues and shifting customer requirements.

“We are focused on our long-term strategy while continuing to innovate, enhancing existing solutions and creating new ones for our customers. ... We are grateful to succeed alongside our customers,” Clarke said.

Clarke said the company used its recent Dell Technologies World conference to unveil technologies aimed at a multi-cloud future.

These included the unveiling of Project Alpine to bring enterprise-class data services to public clouds, over 500 software enhancements to its storage portfolio, a partnership with Snowflake to provide direct access to Dell object storage on-premises, enhanced cybersecurity, and enhancements to its PowerMax, PowerStore and PowerFlex lines.

“To date, the transition toward multi-cloud and a highly distributed architecture is playing out much like we thought,” he said.

“It’s clear our strategy is resonating across our customers and partner ecosystem,” Clarke added.

Customer spending from consumer technologies and PCs to data centre infrastructure drives the shift, Clarke said.

Clarke said he previously expected that Dell would see the growth rate in the Client Solutions Group temper.

He said this is primarily from the impact on sales of lower-end PCs, especially on the Chrome side, and on consumer PCs in general, compared with growth in commercial or enterprise computers.

Dell also saw its sixth consecutive quarter of server growth and the fourth consecutive quarter of orders growth for storage, he said.

“Continued digital transformation, the fact that in this data economy and data world, you need more compute assets and storage assets to be able to accelerate that digital transformation," Clarke said.

"We continue to see that certainly the demand environment today indicates that continues,” he added.

In total Dell’s Client Solutions Group side delivered record revenue, including record PC sales as the company grew unit share in 33 of the last 30 quarters, Whitten said.

However, while Dell’s commercial Client Solutions Group business sales grew 22 per cent over last year, sales from its consumer side grew only 3 percent.

Looking ahead, Dell is seeing a rotation in IT spending from the Client Solutions Group to the Infrastructure Solutions Group. 

There are some storm clouds on the horizon for Dell however.

Dell experienced a wide range of semiconductor shortages that impacted both its Infrastructure Solutions Group and Client Solutions Group, Clarke said.

Furthermore, he said that COVID-related lockdowns in China caused temporary supply chain interruptions in the quarter, pushing up backlog levels in both business groups.

“We expect backlog to remain elevated through at least Q2 due to current demand and industrywide supply chain challenges,” he said.

Component costs in the first quarter were deflationary across key commodities but logistics spending remained high. In the second quarter, however, Dell expects component costs to turn inflationary and logistics costs to remain at elevated levels, Clarke said.

“That all said, Dell Technologies is well positioned to navigate these supply chain challenges just as we have over the past three-plus years,” he said.

“There is a shortage of parts for servers, and we’ve been able to work our way through that and be able to deliver for our customers,” he said.

“Ultimately, that’s the name of the game. And I think our supply chain continues to distinguish itself at being able to fulfill and meet the commitments we give to our customers.”

The IT industry as a whole still suffers from semiconductor storages across a wide range of components, and even the component manufacturers are suffering from delays in procuring the equipment they need to manufacture their components, Clarke said.

Financials breakdown

For its first fiscal quarter 2023, which ended April 29, Dell reported total revenue of US$26.1 billion, up 16 percent over the US$22.6 billion the company reported for its first fiscal quarter 2022.

That included product revenue of US$20.5 billion, up 17 per cent, and services revenue of US$5.7 billion, up 11 per cent.

When broken down by industry segment, Dell reported Infrastructure Solutions Group revenue of US$9.3 billion, up 16 per cent over last year.

That included servers and networking revenue of US$4.0 billion, up 22 per cent, and storage revenue of US$4.2 billion, up 9 per cent.

On the Client Solutions Group side, Dell reported total revenue of US$15.6 billion, up 17 per cent.

This includes commercial revenue of US$12.0 billion, up 22 per cent, and consumer revenue of US$3.6 billion, up 3 per cent.

For the quarter, Dell reported GAAP net income of US$1.1 billion or US$1.37 per share, up from last year’s US$660 million, or 84 cents per share.

On a non-GAAP basis, Dell reported net income of US$1.4 billion, or US$1.84 per share, up from last year’s US$1.1 billion or US$1.35 per share.

 

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