Dell (DELL, Financial) is trading flat after its Q1 results. The company reported its first EPS miss in 12 quarters, though revenue rose 5.1% year-over-year to $23.38 billion, slightly exceeding expectations. Despite the EPS miss, Dell provided significant EPS and revenue upside for Q2. However, it only reaffirmed its full-year revenue guidance at $101-105 billion, which was disappointing given the Q2 outlook.
- Infrastructure Solutions Group (ISG): Revenue increased 12% year-over-year to $10.32 billion with a 9.7% operating margin, up from 8.0% last year. Server and networking revenue reached a record $6.32 billion, driven by strong demand for AI-optimized servers. Dell booked $12.1 billion in orders in Q1, surpassing all FY25 shipments, and shipped $1.8 billion of AI servers, leaving a $14.4 billion backlog.
- AI Momentum: Dell anticipates continued strong AI demand but expects variability in timing and technology choices. Traditional server revenue grew double digits, though demand moderated compared to Q4. Storage revenue increased 6% year-over-year to $4.0 billion.
- Client Solutions Group (CSG): Segment revenue rose 5% year-over-year to $12.51 billion with a 5.2% operating margin, down from 6.5% last year. Commercial revenue increased 9% to $11.05 billion, while consumer revenue fell 19% to $1.46 billion. Demand in the consumer segment remains soft, affecting profitability.
- Q2 Guidance: Dell expects to ship around $7 billion of AI servers in ISG, fulfilling large deals. It anticipates sub-seasonal performance in traditional server and storage due to customer IT spend evaluations amid a dynamic macro environment. In CSG, the ongoing PC refresh cycle should enhance profitability sequentially.
- Full-Year Outlook: Dell reaffirms its revenue guidance, optimistic about its portfolio and execution capabilities. It expects ISG to grow high-teens, driven by over $15 billion in AI server shipments and growth in traditional server and storage. CSG is expected to grow low- to mid-single digits.
Overall, Dell's Q1 was mixed. The positive Q2 guidance indicates strong potential from large deals, but the Q1 EPS miss and cautious language during the call were concerns. Particularly, demand for traditional servers softened, and North America, a high-margin region, showed weakness. The decision to reaffirm full-year revenue guidance despite a strong Q2 outlook was underwhelming, reflecting mixed signals in the Q1 report.
