For Dell Technologies, AI is paying off as booming server sales

and quickly expanding networking have eased the company through a difficult time.

The future is bright for Dell Technologies despite a difficult time given the growing demand from businesses for AI solutions.

Despite a difficult beginning in the battle for generative AI, Dell Technologies’ recent earnings call demonstrates that its investment on AI is starting to pay off. The tech giant reported record growth for its server and networking products.
The corporation said that revenue increased by 9% to $25 billion in the most recent quarter. The hardware manufacturer made significant employment layoffs prior to the strong quarterly performance.

Job layoffs at Cisco, Intuit, and Dropbox have been driven by a similar AI-centered objective. Dell lost 10% of its workforce at the beginning of last month, citing the reorganization as intended to focus the company on AI.
Income increased along with revenue, rising 3% to $2 billion in operating income and 7% to $1.37 billion in net income.

Given the increase in its outcomes that is centered on AI, this restructure makes sense. Dell’s Infrastructure Solutions Group (ISG) reported a 38% increase in revenue for the second quarter. Sales of networking and servers reached a record $7.7 billion, up 80%.
Dell Technologies Chief Financial Officer Yvonne McGill stated, “Our momentum in ISG is a significant tailwind, with record ISG revenue of $11.6 billion, up 38% year over year.”

In the meantime, the PC-related Client Solutions Group at Dell decreased 4% annually to $12.4 billion. The company projected that the adoption of AI technologies and the approaching Windows 10 end-of-life deadline in 2019 would drive growth for commercial PCs in the second half of the year.

During a conference call, McGill stated, “The PC market will experience tailwinds due to the upcoming PC refresh cycle and the longer-term impact of AI.”

Dell Technologies appears to be doing well based on server sales.
According to Dell’s results announcement, both traditional and AI technologies were witnessing increases in server demand, along with higher profit margins.
According to Jeff Clarke, vice chairman and chief operating officer, “AI momentum” accelerated dramatically throughout Q2, and the business saw a notable increase in the number of enterprise clients purchasing AI products.

Demand for AI-optimized servers was $3.2 billion, up 23% from the previous quarter and $5.8 billion year to date, according to Clarke. “Our pipeline has grown to several multiples of our backlog, which was $3.8 billion.”
Clarke stated on a conference call that tier-2 cloud service providers were primarily responsible for the rise in server orders. Additionally contributing to the company’s success was the demand for Dell’s AI servers with liquid and air cooling.
At Dell Technologies World 2024, Dell made a big deal out of the Dell PowerEdge XE9680L, a new rack server that uses direct liquid cooling (DLC). The rack was introduced as a pillar of support for Dell’s “AI Factory” service and holds 72 of Nvidia’s Blackwell CPUs.

Similar to this, Dell also observed a growth in the number of businesses acquiring AI solutions, along with a sharp spike in demand for specialized sovereign AI services.
“Enterprise remains a significant opportunity for us as many are still in the early stages of AI adoption,” he said. “We are also excited about the emerging sovereign AI opportunity, which plays to our strengths given our position with governments around the world.”
According to McGill, Dell is starting to find advantages from implementing AI throughout its entire company, not just in the hardware division.

“We’re using it to improve customer and team member experiences in sales, software development, services, content management and our supply chain,” she said in the conference call. “And in turn, we’re using our experiences to help our customers realize the benefits of AI for themselves.”

The results and argument in favor of the benefits of AI for enterprises come amid concerns about the rising costs of AI for the industry. Beyond the aforementioned job cuts, Microsoft warned that its heavy spending on investment on AI may mean a return on investment takes as long as 15 years.
More broadly, Gartner said data center spending is expected to increase 24% and software spend up 12.6% as companies shell out to jump on the AI bandwagon.