Dell Posts Record Q2 Revenue on AI-Optimized Server Demand
Dell's server sales surged in the second fiscal quarter of 2025, pushing its revenue up 9 percent year-over-year to $25 billion, with a profit of $841 million—significantly surpassing Nutanix's total quarterly revenue of $524.6 million. However, there was a noted slowdown in hyperconverged infrastructure (HCI) sales.
The company attributed its strong performance to "exceptional demand for AI-optimized servers" alongside growth in traditional server demand during the quarter, which ended on August 2, 2024.
Jeff Clarke, Dell's Vice Chairman and COO, praised the company's efforts, stating, "We executed exceptionally well in Q2, and I’m incredibly proud of our team’s performance." He also highlighted the revenue milestone as "another record for our servers and networking business."
Dell’s second fiscal quarter of 2025
- Gross Margin: 21.2%, down from 23.5% last year
- Operating Cash Flow: $1.3 billion
- Free Cash Flow: $1.28 billion, compared to $3.1 billion in the previous year
- Cash, Cash Equivalents, and Restricted Cash: $6.0 billion, down from $7.9 billion last year
- Diluted Earnings per Share: $1.17, reflecting an 86% year-over-year increase
- The $1.7 billion reduction in cash and investments was driven by:
- $1 billion in capital returns
- Repurchase of 5.5 million shares at an average of $130.03 per share
- Dividend payment of $0.45 per share
- $1 billion in net debt repayment during the quarter
ISG Soars 38% as CSG Revenue Declines in Q2
Dell's two primary business units, the Infrastructure Solutions Group (ISG) and Client Solutions Group (CSG), saw contrasting performances. ISG, which includes servers, storage, and networking, posted a 38% year-over-year revenue increase to a record $11.6 billion.
In contrast, CSG, focused on PCs and related products, experienced a 4% decline in revenue, dropping to $12.4 billion. Within CSG, commercial client revenue remained stable at $10.6 billion, while consumer revenue fell by 22% to $1.9 billion. ISG is now closing in on CSG, potentially surpassing it in revenue after years of CSG maintaining a lead.
ISG's revenue growth was primarily fueled by soaring server sales, with server and networking revenue surging by 80% to reach a record $7.7 billion. However, storage revenue declined by 5%, totaling $4.0 billion.
Dell's AI-driven momentum surged in Q2, with AI-optimized server demand reaching $3.2 billion, up 23% sequentially, and $5.8 billion year-to-date. The AI server pipeline grew substantially, with high expectations for future revenue.
Dell's core storage products like PowerMax, PowerScale, and PowerStore saw double-digit growth, though hyperconverged infrastructure (HCI) struggled due to partner IP declines, offsetting gains elsewhere. CFO Yvonne McGill noted a 6% sequential revenue growth in storage and improved profitability, while demand grew in North America.
Dell is positioning itself to capitalize on enterprise AI adoption and sovereign AI opportunities, backed by a $174 billion AI hardware and services TAM.
The company is also leveraging AI internally to boost productivity, including workforce reductions and automating business processes. Clarke emphasized the growing role of AI agents in transforming industries and enhancing individual productivity.
