Dell Technologies has revised its annual revenue and profit projections upwards, spurred by a surge in demand for its artificial intelligence (AI)-focused servers equipped with Nvidia chips. This development led to a 3% increase in Dell’s shares during after-hours trading. Notably, Dell’s Infrastructure Solutions Group (ISG), which includes Nvidia-powered servers, recorded a 38% growth in revenue, reaching $11.65bn in the second quarter. These servers are designed to handle the substantial computational needs of AI applications, such as training large language models, which are critical in current AI advancements.
“In Q2 our combined ISG and CSG revenue was $24.1 billion, up 12% year over year, positioning us well for the second half of the year and beyond,” said Dell’s chief financial officer, Yvonne McGill. “Our momentum in ISG is a significant tailwind, with record ISG revenue of $11.6 billion, up 38% year over year.”
Strong results for Dell
Dell reported a net income of $841m for the second quarter of fiscal year 2025 (Q2 FY25), an 85% increase year-on-year. Dell now expects its annual revenue to be between $95.5bn and $98.5bn, an increase from the previous forecast of $93.5bn to $97.5bn.
Dell’s ISG division reported revenues of $11.6bn in Q2 FY25, up 38% year over year (YoY). The firm’s servers and networking revenue, meanwhile, reached $7.7bn, a surge of 80% compared to the corresponding quarter of the prior fiscal year. The demand for Dell’s AI-optimised servers in particular increased by about 23% on a sequential basis, totalling $3.2bn in the second quarter. The backlog for these servers remains at $3.8bn, highlighting strong ongoing demand.
Dell’s results weren’t all good news. Its Client Solutions Group (CSG) reported revenues of $12.4bn in Q2 FY25, a decrease of 4% year-on-year. The company’s commercial client revenue remained flat at $10.6bn, while consumer revenue was down 22% at $1.9bn. Storage revenue, too, experienced a decline to $4bn, or 5% annually, while Dell’s PC business also lost market share to its competitors.
Remedies to declining revenue in key sectors
Despite its decline in PC sales, Dell said it expects a significant refresh cycle for AI-enabled PCs next year, following Microsoft’s decision to end support for Windows 10. The firm also reported a $328m charge for workforce reductions during the second quarter. Earlier this month, the company was planning to implement a substantial workforce reduction as it shifts its focus towards AI products and services. Although the exact number of job cuts was not officially disclosed, reports suggested the move could impact thousands of employees, with around 12,500 roles at risk.
In a separate development, Dell is revisiting the potential sale of its cybersecurity subsidiary, SecureWorks, after previous unsuccessful attempts to find a buyer, reported Reuters. Citing sources familiar with the matter, the news agency wrote that the company has engaged investment bankers from Morgan Stanley and Piper Sandler to explore acquisition interest from potential buyers, including private equity firms.
SecureWorks, valued at approximately $800m, is not guaranteed to be sold, and Dell may opt to retain ownership. Dell currently owns 79.2% of SecureWorks by holding all of the company’s class B shares and controls 97.4% of its voting stock through dual-class shares. This move follows a similar attempt in 2019 when Dell sought to offload SecureWorks as part of a strategy to reduce its debt load.
Reported by Refna Tharayil
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