Dell Technologies Announces Q2 FY2024 Results

Dell Technologies has announced Q2 FY2024 results and, depending on how you view the numbers, they’re either good or bad. Year-on-year revenue has declined again, while sequentially (compared to Q1) revenue is up. Is this a blip, or was Q1 so bad that Q2 couldn’t be worse?

Background

Dell Technologies reported revenue for Q2 FY2024 of $22.9 billion, down 13% year-on-year but up 10% compared to the previous quarter. ISG Servers & Networking was down 17.9%, Storage down 3.2%, CSG Commercial down 13.1% and CSG Consumer down 28.7% on a year-on-year basis. Sequentially, the data looks better with growth figures of 11.4% (Servers), 11.5% (Storage), 7% (CSG Commercial) and 12.6% (CSG Consumer). Overall, Q2 FY2024 represents the fourth quarter of year-on-year declining revenues (see Figure 1).

Green Shoots

One swallow doesn’t make a summer, as the saying goes. Similarly, one quarter of growth doesn’t represent a return to business as usual. Instead, we will need to wait and see how the remaining financial year pans out before making any assumptions.

Project Helix

In May 2023, Dell announced Project Helix, a partnership with NVIDIA, to ship Dell servers with NVIDIA GPUs. The company also announced the PowerEdge XE9680, a rack-mounted server capable of configuration with up to eight NVIDIA H100 or A100 GPUs. Dell is clearly hoping that the AI gold rush will result in customers buying more of this type of server for the revenue it generates.

Figure 2 – Revenue by Quarter by BU (stacked)

The greatest challenge to success with this strategy is the availability of NVIDIA GPUs and the supply chain to deliver them into Dell servers. Reports claim lead times of six months or more, although NVIDIA also claims it has plenty of supply, with any issues related to pre-determined allocations to existing customers.

From a storage perspective, Dell is positioning PowerScale (Isilon) and ECS as the solutions for integration within Project Helix. This choice might not be the most optimal, with fierce competition from Pure Storage, NetApp and VAST Data. Even if Dell has a strong offering with the XE9680, customers may prefer an integrated package with better storage capabilities. We need to wait and see.

The Architect’s View®

We might be seeing green shoots of recovery from Dell Technologies, but then again, it’s too early to tell. Dell, like many infrastructure vendors, will be hoping the AI boom adds to the bottom line. Currently, we’re in “wait and see” mode, but we still feel that Dell needs more than an AI boost to bring the company back to long-term growth.

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