DELL Beats Q2 Earnings Estimates: Will Higher FY25 View Lift Shares?

Core Insights - Dell Technologies reported non-GAAP earnings of $1.89 per share for Q2 fiscal 2025, exceeding the Zacks Consensus Estimate by 8.62% and showing a 9% year-over-year increase [1] - Non-GAAP revenues rose 9% year-over-year to $25 billion, surpassing the consensus mark by 3.03%, driven by strong performance in AI servers and a recovery in the commercial PC sector [1][2] Financial Performance - Product revenues increased 12% year-over-year to $18.9 billion, beating the Zacks Consensus Estimate by 6.41% [3] - Services revenues grew 1% year-over-year to $6.07 billion, falling short of the Zacks Consensus Estimate by 2.97% [3] - Infrastructure Solutions Group (ISG) revenues surged 38% year-over-year to $11.6 billion [3] Segment Analysis - Servers and networking revenues reached $7.6 billion, an 80% year-over-year growth, driven by demand in AI and traditional servers [4] - Storage revenues declined 5% year-over-year to $3.9 billion [4] - AI server orders increased by $3.2 billion, with $3.1 billion worth of AI servers shipped in Q2 [5] Operating Metrics - Non-GAAP gross profit decreased 1% year-over-year to $5.46 billion, with a gross margin contraction of 230 basis points to 21.8% [6] - SG&A expenses fell 6.3% year-over-year to $2.74 billion, while R&D expenses rose 9.1% to $682 million [6] - Non-GAAP operating income was $2.03 billion, up 3% year-over-year, with an operating margin contraction of 50 basis points to 8.1% [7] Balance Sheet and Cash Flow - As of August 2, 2024, Dell had $4.55 billion in cash and cash equivalents, down from $5.83 billion on May 3, 2024 [8] - Total debt decreased to $24.5 billion from $25 billion during the same period [8] - The company generated $1.3 billion in cash flow from operations and $1.28 billion in adjusted free cash flow for Q2 [8] Shareholder Returns - Dell returned $712 million to shareholders through share repurchases and paid $316 million in dividends, totaling $1 billion in capital returns [9] Fiscal 2025 Guidance - For Q3 fiscal 2025, revenues are projected between $24 billion and $25 billion, reflecting a 10% growth [10] - For the full fiscal 2025, revenues are expected between $95.5 billion and $98.5 billion, with a midpoint of $97 billion, also indicating a 10% growth [11] - Earnings are anticipated to be $7.80 per share, up 9% at the midpoint [11]