Dell Technologies (NYSE:DELL) CFO David Kennedy told investors at Citi’s TMT conference that the company sees continued demand for AI infrastructure, traditional servers and storage, supported by expanding customer pipelines and supply-access discussions extending multiple years.
Kennedy said Dell booked $6.1 billion of AI server GPU orders in its fiscal second quarter, matching the amount booked across the prior three quarters. Over the last 12 months, the company booked $13.2 billion in such orders, he said. Pipeline activity is multiples of backlog, according to Kennedy, with demand spanning neocloud providers, sovereign customers and enterprises. Enterprise demand is growing fastest by rate, while neocloud customers continue to represent larger dollar volumes.
Demand Broadens Beyond AI GPUs
Storage is also becoming an increasingly important part of the company’s growth outlook. Kennedy cited 26% storage growth in the second quarter and said Dell has guided for double-digit storage growth for the full year. He said the company expects to add $2.5 billion in storage revenue during the year and described the coming quarter as potentially a record storage quarter for Dell.
“The more and more you see these inferencing workloads and enterprises adopting these use cases, I think we feel it’s pretty durable and robust,” Kennedy said of the storage opportunity.
Kennedy said Dell’s own storage intellectual-property portfolio is contributing to higher average selling prices and margins. He highlighted PowerStore, which recorded its 10th consecutive quarter of double-digit growth, as well as PowerScale and ObjectScale products, which have posted multiple consecutive quarters of growth. Project Lightning, meanwhile, remains a small and nonmaterial part of current financial results, though it is being tested by some of Dell’s largest customers, he said.
Supply Constraints Expected to Tighten
Dell continues to face demand that exceeds supply for both AI and traditional servers, Kennedy said. He described the company’s second-half outlook as “realistic,” citing improved visibility into components, customer requirements and data-center readiness.
Looking into next year, however, Kennedy said Dell expects the supply-demand imbalance to worsen rather than improve. DRAM and NAND are the largest constrained components, he said, while CPUs, opticals, transceivers, T-glass and other components used in AI systems are also constrained to varying degrees.
The supply environment is prompting customers to discuss infrastructure requirements two, three and four years ahead, according to Kennedy. Dell is offering supply-access commitments to customers that choose to partner with the company, though he emphasized that guaranteed supply does not mean guaranteed pricing.
“That is what the market is looking for, it is that supply access,” Kennedy said.
Margins Supported by Scale and Storage Mix
Kennedy said Dell’s Infrastructure Solutions Group achieved a 15% margin rate despite the growth of lower-margin AI servers. He attributed the result primarily to operating scale and growth in Dell’s storage portfolio.
The company has guided to operating expenses equal to 8% of revenue, which Kennedy said is its most efficient level in Dell’s 42-year history. He said that ratio stood at 20% six years ago. Dell expects approximately 4.5 points of operating-expense scale in the current year, and Kennedy characterized operating leverage as a meaningful potential contributor to earnings per share.
For AI compute, Kennedy said Dell expects profitability to remain in the mid-single-digit range. He said the business is competitive, but Dell seeks to differentiate itself through its ability to procure, assemble, install and deploy complex systems. The company refers to this advantage as “Time to Token,” with Kennedy saying Dell can be four to six weeks faster on average in deploying multibillion-dollar installations.
“Complexity is our friend,” Kennedy said, noting that Dell works across the infrastructure portfolio and has a deep relationship with NVIDIA, which represents the majority of Dell’s AI-related business today.
Enterprise Adoption Still Early, Kennedy Says
Dell has more than 6,500 enterprise AI customers, up more than 60% over the past six months, Kennedy said. Still, he estimated that only 10% to 15% of enterprises have made meaningful AI-agentic modernization efforts, with many others either at the proof-of-concept stage or not yet underway.
He said enterprises must often standardize workflows, automate processes and improve data quality before they can fully use AI. Kennedy pointed to Dell’s own multiyear modernization effort, which included simplifying processes and addressing disparate data systems.
On deployment models, Kennedy cited an Amazon comment that 85% of data remains on-premises. He said lower-cost AI tokens may be generated closer to data, while businesses may also retain proprietary information in their own environments. At the same time, some workloads will require public-cloud computing resources, creating a hybrid infrastructure model.
Kennedy also said Dell expects commercial PC demand to remain pressured in the near term, particularly on the consumer side. However, he pointed to more than 400 million PCs that are over four years old and said older devices may lack the battery life and computing power needed for AI workloads. Dell’s primary focus will be higher-average-selling-price commercial systems, he said.
On capital allocation, Kennedy said Dell intends to maintain a prudent approach to customer financing and does not plan to use its balance sheet for long-term neocloud financing. He also cited the company’s share repurchase authorization, which increased from $1.6 billion to $3.9 billion over 90 days, as evidence of its intention to return cash to shareholders.
About Dell Technologies (NYSE:DELL)
Dell Technologies Inc is a global technology company that develops, sells and supports information technology hardware, software and services. Its portfolio includes personal computers, workstations, monitors, displays, peripherals and related accessories marketed primarily under the Dell brand.
The company also provides enterprise infrastructure solutions, including servers, storage systems, networking equipment, data protection, cybersecurity and cloud-related technologies. Dell Technologies supports organizations with consulting, deployment, managed and support services designed to help them operate data centers, hybrid cloud environments and modern workplace technology.
Michael Dell founded the company in 1984 and serves as its chairman and chief executive officer.
