After Dell Technologies (DELL) reported fiscal first-quarter revenue and earnings that beat analysts’ estimates, executives joined the company’s earnings call to discuss Dell’s guidance, margins, artificial intelligence (AI) server backlog, and AI opportunities.
Full-Year Outlook Raised, Q2 Guidance Tops Analysts’ Estimates
On the call, Dell provided guidance for the second quarter, the full 2025 fiscal year, and the infrastructure solution group (ISG) segment.
CFO Yvonne McGill said Dell expects second-quarter revenue to be between $23.5 billion and $24.5 billion, slightly above analysts’ estimates compiled by Visible Alpha.
McGill also told investors that Dell raised its full-year outlook to between $93.5 billion and $97.5 billion, up from the range of $91 billion to $95 billion provided the quarter prior. Consensus estimates put full-year revenue expectations at $94.07 billion.
The CFO said Dell expects its ISG business to grow “in excess of 20% fueled by AI,” consistent with analysts’ projections.
AI Server Backlog Is ‘Nvidia-Based’
When asked about Dell’s AI server backlog, Dell COO Jeff Clarke said “[looking] at the composition of our backlog, it’s primarily Nvidia-based.”
He said that while H100 availability is better, H200 supply is expected to improve in the second half of the year while B200, Nvidia’s Blackwell server, is now in production.
Nvidia’s supply has been unable to keep up with surging demand amid the AI era, and analysts have indicated the already high demand for the chipmaker’s new products likely means Blackwell is sold out into 2025 as Hopper supply improves.
Clarke said Dell’s AI server backlog includes enterprise customers as well as some large cloud service providers.
Dell ‘Can Do Better’ in Margins
Clarke told investors “We can do better in both our traditional servers and our storage products in terms of margins.”
Dell reported that its gross margin declined 4% from the year-ago period, with McGill citing “a more competitive pricing environment and a higher AI optimized server mix.” The CFO said that the decrease in gross margins drove a decline in operating income, which fell 14%.
She also noted that the first quarter is typically the weakest in terms of profitability for the ISG segment, and suggested the company expects to see operating margins expand in its ISG business as the year progresses, driven by enterprise customer spending rebound and scaling opportunities.
AI Opportunities and Partnerships
Dell executives reassured investors that the company could be well-positioned to gain as enterprise customers integrate AI, with Clarke saying Dell is “uniquely positioned to help customers with artificial intelligence,” and noting that “strong AI momentum continues.”
Dell’s AI-optimized server orders increased to $2.6 billion in the quarter, compared to $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 called out Dell during the chipmaker’s earnings call last week as an important partner.
Dell shares were down 18.2% at $139 in extended trading Thursday following the company’s earnings call.
