Dell is expected to report strong earnings due to its large server backlog; success depends on executing shipments without eroding margins.

All right, let's go deep on Dell and tomorrow's earnings report. So, we think about Dell. Let's hear what your thoughts are when it comes to Dell for the earnings. Yeah. So, we have a great story for infrastructure providers like Dell, right? Great backlog coming into the quarter.

and so it's Dell's job to execute on that, get the best margins that they can, and then continue to expand their footprint in the enterprises. So, we're we're looking forward to I think a strong announcement tomorrow.

Well, what is it about Dell specifically? and what is it about Dell, which really had a turnaround? You know, you had the Silver Lake move in there and it was listed, it wasn't listed, then it was back.

We talked about PC demand. Tell me a little bit about Dell in particular, what Dell's doing right. Well, you and I can remember back when they were just a PC company, right? Obviously, they've really expanded their enterprise footprint and now Dell has the ability to put together storage, networking, data protection, you know, resiliency, and the whole package, power and cooling into rack rack systems that are very easy for enterprises to implement and hyper scalers and neo clouds as well.

So, they have become really an integrator. They'll take the the platform that Nvidia provides and then put that in rack scale so that customers can easily deploy them in their data centers.

And you talk a lot about the backlog and why that's so important for the company. I mean, as they try to take the AI demand and the delivery, how do you think that's going?

Well, so Dell doesn't have to establish the demand. We know that from Nvidia. Now, Dell came in last quarter with a 51.3 billion dollar server backlog.

Their job is to service that as quickly as possible, ship while maintaining their margins. And so that's what we're going to be looking for tomorrow is how quickly they're able to serve that backlog while it grows and also be able to maintain their margins.

Where does Vera Rubin fit into this Dell story? And Dell actually implemented one of the first racks at CoreWeave. I remember Michael Dell posting about it and the pride that the company has in being able to take that chip and put it into a complete rack system and have it be on the customer floor within, you know, weeks of the announcement is huge.

That That's that That shows their ability to execute.

Uh so, we're finding that um companies like like Dell, like HPE, uh Supermicro, um Lenovo are all doing a great job of starting to convert their portfolio to AI systems. The challenge for them again is being able to maintain the margins as they do that.

And And we did see the margins slip a little bit in the last quarter, right? As you noted that, tell me a little bit about that. Well, the balance is between the traditional products and the AI products.

The AI products have tremendously expensive components in them. The memory, the GPU, the flash storage, all of those pieces take away from the profitability of the units. And so, what Dell has to do is they have to balance that with the other parts of the portfolio that I talked about, traditional servers and storage.

The data estate is massive, so every time companies are are are are committing AI executions, they're building the data. There's more data, and that has to go somewhere, that has to be stored somewhere for context and for persistence.

And so, the storage alone the attached to these AI systems is tremendous. And they get a lot of margin out of that as well.

Yeah, I was looking at a Bank of America note all about Dell and how the expectations were very high. And you know, just also they even expect them to raise guidance, right? And they talked about the backlog and the magnitude of the AI server demand versus supply.

But you talked about some of the other elements like storage and other things in the stack. Do you expect to hear a growth in any one of those in particular when we try to get visibility into the many quarters ahead?

Well, Dell is not just serving serving up the the GPUs in an AI server. They're really wrapping that with other products and services. And so, they're delivering a complete enterprise solution.

And that's they want to grab market share in all of those areas. They want the compute market share, they want storage market share, and they're moving up the stack by providing agentic AI capabilities and data management.

So, they're really looking at the full the full AI estate for their customers, not just a single AI server.

I mean, the stock's at 466, and I saw Loop Capital put a $600 target buy rating. Bank of America, which I referenced earlier, has a 505 rating.

Well, if we if we look at Dell alone, I mean, they're not competing against their own guidance now. They're competing against expectations that have moved well above where they set it.

And so that's the challenge, right? The bar keeps going up every single quarter. So a company may raise, they may beat, and that still may disappoint investors cuz they're looking for again better margins and they're looking to server orders to be able to deliver those shipments and be profitable at the same time.

So Dell and other companies are talking about the difficulty in this market and I think it's just, you know, maintaining the volume, managing the backlog without diminishing quality growth at the same time.

Um when you think about the competitive landscape and for the different elements and products that they provide, what are your thoughts there?

Well, one of the things we didn't talk about was the commercial PC side of the house as well. So that's actually 1/3 of their revenue today, right? So Dell 1/3 is the commercial PCs and then the other third is the ISG or the enterprise business.

And so those continue to be important to Dell. It's a a mainstay business for them and it also allows them to keep a commercial footprint with their customers.

Yeah, well, look, I mean, I'm watching Dell right now and we're looking at some of the estimates. So the estimate is 45.34 billion. Um look, it's more than last quarter and it's well above last year of the 29.78 billion.

So, we are expecting some great moves and it's not that far off its high. I mean, for 1 year the stock's up 250% almost. So, it's been a nice run.