Top 4 Takeaways from Dell Technologies’ Earnings Call

After Dell Technologies (DELL) reported fiscal first-quarter revenue and earnings that topped analyst estimates, executives joined the company’s earnings call to discuss Dell’s guidance, margins, AI server backlog (AI) and opportunities related to artificial intelligence.

Full-year outlook raised, second-quarter guidance beats analyst estimates

During the call, Dell presented guidance for the second quarter, full fiscal year 2025 and the Infrastructure Solutions Group (ISG) segment.

Chief Financial Officer Yvonne McGill said Dell expects second-quarter revenue to be between $23.5 billion and $24.5 billion, slightly above analyst estimates by Visible Alpha.

McGill also told investors that Dell raised its full-year outlook to $93.5 billion to $97.5 billion, up from the $91 billion to $95 billion range given in the prior quarter. Consensus estimates for full-year revenue will be $94.07 billion.

The CFO said Dell expects its ISG business to grow “more than 20% thanks to AI,” which is in line with analyst forecasts.

AI server backlog is ‘Nvidia powered’

When asked about Dell’s AI server backlog, Dell COO Jeff Clarke said, “(looking at) the makeup of our backlog, it’s primarily based on Nvidia processors.”

He said that while H100 availability is better, H200 supply is expected to improve in the second half of the year while the B200, Nvidia’s Blackwell server, is already in production.

Nvidia’s supply hasn’t been able to keep up with growing demand in the artificial intelligence era, and analysts have pointed to already high demand for the chipmaker’s new products likely meaning Blackwell will be sold out by 2025 as Hopper’s supply increases.

Clarke said Dell’s AI server backlog includes enterprise customers as well as some large cloud service providers.

Dell “can do better” in terms of margins

Clarke told investors: “We can outperform both our traditional servers and storage products on margins.”

Dell said its gross margin fell 4% from the year-ago period, and McGill cited “a more competitive pricing environment and a higher range of AI-optimized servers.” The CFO said the decline in gross margin resulted in a decline in operating revenues, which fell 14%.

She also noted that the first quarter is typically the weakest for profitability in the ISG segment and suggested that the company expects operating margins in its ISG business to expand as the year progresses, driven by a rebound in enterprise customer spending and scale opportunities.

AI opportunities and partnerships

Dell executives assured investors that the company could be well-positioned to profit as enterprise customers integrate AI, with Clarke saying Dell is “uniquely positioned to help customers with AI” and noting that “a strong the development of artificial intelligence continues.”

Dell’s orders for AI-optimized servers increased to $2.6 billion this quarter, up from $800 million in the final quarter of fiscal 2024.

Clarke also highlighted Dell’s “open ecosystem of partners,” including Nvidia, Meta Platforms (META), Microsoft (MSFT) and Hugging Face. Nvidia CEO Jensen Huang last week named Dell as an important partner during the chipmaker’s earnings call.

Dell shares fell 18.2% to $139 in extended trading Thursday after the company’s earnings call.