戴尔的强劲表现得益于利润率扩张和定价能力；假设持续高增长，按PEG估值具有吸引力，尽管存在技术阻力。

Just EPS came in at $74. That is well ahead of estimates for $4.92. Revenue was 46.97 billion, topping expectations of 44.92 billion. AI optimized server revenue that came in ahead of expectations at 16.4 billion, up 27% year-over-year, even against what was a very tough comp after last year's blowout growth.

And then Dell is raising its fullear AI server revenue target yet again now to $74 billion up from 60 billion. The strength also showed up across the broader infrastructure business with ISG revenue that is the division of Dell that sells enterprise hardware coming in ahead of estimates while gross and operating margins were both well above expectations.

revenue that is the division of Dell that sells enterprise hardware coming in ahead of estimates while gross and operating margins were both well above expectations. And then looking ahead, Dell is delivering a sizable both beat and raise for the full year backed by a strong Q3 forecast. Del now sees 192 billion in revenue up from 167 billion previously and 2550 an adjusted EPS versus the street at just shy of $19. The conference call kicking off in about 25 minutes from now. We'll bring you headlines as we get them and for now shares up uh close to 6% Mike. for now shares up uh close to 6% Mike.

The uh Dell Beats are just remarkable. They just keep honestly crushing. Uh, and it's that that data center portion of their business that's doing so well, which is actually surprisingly low margin. I think somewhere around five to six% margin but the top line just does so freaking well. So uh they see yeah revenue just exp uh explosive and increase in guide their AI optimized servers guidance for the fiscal year expected to be 74 billion they saw about $60 billion and so keep in mind if you're bringing down you know 4% uh even though that margin sucks it's still 4 billion more dollars you know uh well I mean on a 100 so on on 74 it'd be less but uh 7 Yeah, 74 time 4%. That's still $3 billion, right? So, some of the enthusiasm on Dell.

It looks like right now the answer to that is Dell. Uh so look at some of the I mean we'll look go look at their sheets in just a moment but you're this really actually brings you back. I mean the stock was down 7% today. So, you're literally just barely recovering what happened the last couple days. Also, kind of wild.

I know we've got Dell earnings, we've got

Let's go look at Dell Investor relations quarterly results. So, we'll pop open Dell. We'll get to go into here. So, this is going to be the Q2. We only have a press release right now. The earnings call is going to be going on soon.

we take a quick look at Dell, which did pull that up, just never actually ended up getting to doing it. Okay. So, Dell Dell Dell Dell. Don't know where I put it. We will find it. I got it. All right. So, this is their earnings report and then they've probably got I think they have their earnings call running as well right now.

Let me see if I can get a live transcript of it. Sometimes I can. Dell earnings call. I'll pull this and then uh let's look at Dell 9126 earnings report.

Dell Technologies announced uh the results. Del Dell. Let's drop that here. Dell. Okay, we've got COO spotty CPU shortages and shortages with disc drives. expecting 75% of all data center demand to be AI by 2030.

second half to be even stronger than first half. The bubble ain't over. First full year operating expense rate outlook of 8% of revenue. 8% of revenue expense rate lowest in 42-year history.

Large enterprise customers continue to refresh their PC install base. Majority of install base still on 14th generation or older servers. significant durable refresh opportunity ahead. Uh big refresh opportunity for older 14 and older generation servers

demand broadening across NeoCloud sovereigns enterprise sovereign customers are modernizing their data centers.

AI optimized servers ISG. So this is the infrastructure solutions group. AI optimized servers literally grew by double. That's an incredible rate.

in fairness, the growth rate has kind of collapsed because they were coming off such a low level. 164 3 months ending July, ending May. Wait a sec. That didn't grow that much. That's actually very interesting. So that's a double year-over-year. But from the last quarter, last Q it was 161 32. So sequential growth was actually slow divided by 16132 only 1.67% Q uh sequential. That's interesting. It's actually somewhat surprising.

Traditional servers 92%. Traditional servers grew more. Storage 26%. Storage grew 8%. So storage and traditional grew faster this quarter. So, this works out to operating income of $4.78 billion. Pretty good. 4.7 from here. So, that brings us to a margin of 15%. Wow, the margins actually really improved. Look at that. Was 8% operating income. operating income has has doubled. Margin really popped. So, they're really starting on such a slow margin or low margin that they're able to grow above that. So, that's margins.

I wonder if that's what they're saying in their earnings call, too. Can I get Dell? I don't think their earnings call is going to be out yet. I can't. Come on. No, I can. Nah, just not gonna happen right now. That's fine. We'll wait for it.

But Dell greater use of our storage products and AI applications. Okay, that's fine. I mean, it's obvious the margins are going up here. Gross margin grew 80%. This is growing pricing power right here. Their total revenue grew 58%. Their margins grew by this. So, their cost of services has actually come down, which is fantastic. and the cost of their products is grow growing slower than their revenue increase you know so that's PP and then you know this gross margin growth that's pe R&D all of these like the operating expenses only growing at 21% that's great we're actually seeing way more margins and see a massive portion of net income uh is is I mean net income is exploding from this 4133 divided by 4697 still bringing about 8.8% to the bottom.

Let me see what their forecast margins are because that's really really good. So, we're gonna go with Dell. Oh, here we go. Here's some uh more insight on what's going on with Dell.

Dell guidance. Let's see. revenue guidance also plus two AR revenue surges boosted fiscal year outlook fiscal year adjusted EPS whoa that's big fiscal year adjusted EPS was projected at that's about 50 cents so 1769 plus 25 1790 uh actual forecast now is 2550. That's a forecast beat of 255 divided by 179. 42% beat uh of forecast EPS. That's substantial.

So I don't think markets were looking at that all and that's probably why it's adjusting like this. Very good.

So they're really actually they're getting so much pricing power on this low margin product that they're just able to crank it and enterprise AI is where it's at. IMO this is very impressive. I mean this is this is the Apple move as well as well except Apple has margin.

So, it's the earnings boost that made them really pop here. It wasn't so much that, you know, the AI server growth grew a lot because it really didn't sequentially. It was the margin boost because you're going from a company that historically has had much lower margins.

Yeah. Yeah. I mean, you can see the net income up there, but historic net income. Okay. So, if I go back two or three years, right? Historic net income at this company has been uh negative.5 2020, 2.3 2021, 4.7 2022, 4.7 Sorry, 4.2 2 2023 4.7 2024 4.8 2025 5.7 2026 Okay, ready for this? This is where it actually gets fun. 2027. So Jan 27 estimate 7.1 Jan 2027 esting to go up to about 8% possibly even 8.2 Jan 2031 estimate. So you have a little bit of that forecast for net income. Uh this is actually going to be yeah that's net income margin.

And if we look at the growth rates 20.63 1744 plus 22.77 + 4.42 equals 6526 divided 4 equals 16.31% growth rate. If I do a four, call it 65 price divided by 1910 because next year they're projecting 25. Well, that's more than these estimates are based on anyway. Uh, so the growth rates are honestly low by probably 40%. Maybe not that high or well just I mean that's what this forecast was off. What was this forecast off? This forecast Oh, where did I write it? This forecast was here. So this is the margins 42% on forecast, right?

So, if that's low, if average 4-year growth rate is 24% too low, then oh, sorry, 42% too low. Then growth might actually be uh take 24.34 time 1.42 would be about 35% average. Now I could take Oh, hold on. Growth rate of 16.1%. Whoops. That's the growth rate. That's uh projected earnings. Uh if the four-year growth rate is 42% too low, then growth rate might actually be 16.32 times 1.42 23% 23 times still low margin, you know, 1.4 maybe call it uh times uh 23 * 1.4 times 1910. Yeah, I mean that justifies $615 stock at 1.4 as a peg if you want to go that high. If you stay lower, you stay closer to 1.2, that would be 1.2 * 23 * 19.1 equals still 527. So, it shows how the forecasts were just too low for what this company's pulling off,

let me see if there are any other new notes on it. Nope. Uh fiscal year forecast earnings were 42% too low compared to uh Dell updated forecast. Let's update that in.

let me keep looking just to finish my thoughts here on the Dell info because it's pretty impressive. Do they have a note about their customers? IT environments have shifted from cost center to value drivers. that fuel growth and competitive advantage which is going to give them pricing power of course that's creating an opportunity for our portfolio clear in our AI business 60.9 billion in orders broader revenue traditional servers are up storage is up second quarter delivered record revenue 47 billion raising our outlook AI optimized servers blah blah blah blah blah.

How's the balance sheet looking at Dell? Just to see their current liabilities, I've got about 70 in bills. 70 bill in bills. Long-term debts 26 14 no 27 30 billion long-term about a 100red billion in debt a lot of short honestly they need to step up the cash game they need to sell this crap short-term financing receivables 13 plus 22 plus 23 + 11.5 and 69 yeah that roughly pays their bills uh cash and receivables roughly pay bills still a little tight.

And if I look at the cash flow, I mean here, free cash flow still coming in with free cash flow. Cash flow from operations 2.2 billion. Capex 1.2. Still got a billion bucks of free cash flow. Yeah, low low low margin winner here.

So, Dell up about 6% in afters. I would say there's a chance some of the weight down on it could honestly be yields and some of the pain on um the Iran news.

let's try to cover all of this quickly and efficiently. So let's do Dell first just because we have the numbers here. Oh, we should summarize the fiscal year B on what was that again? It was it was the EPS the adjusted EPS forecast was insane. But it really then you know with that guidance or that forecast we did sort of prices in all of the excitement. Uh, and then how much they see for the fiscal year for AI optimized servers is up about 23%. Q3 revenue guide also $7 billion higher than expected, which is great. So you got 23 and 49 divided by 41.9. Yeah, 16 and 23. Okay. All right. Pretty good. Cool.

Dell just smashed earnings, suggesting the AI overbuild is nowhere close to finishing, which has been consistent with the thesis given that we really believe that the money coming from SpaceX and other companies is going to keep going into this vortex, whether it's the anthropic IPO or money raising, debt financing, whatever, it's all just going to kind of keep cycling into these AI hardware companies. Dell is the recipient of some of that sucking. They suck money out of the financial system to invest in capital expenditures. Dell picks some of that up.

The hardware 2.0 cycle which has been struggling with a lack of liquidity and fear over JPA and well Kevin Worsh and rates that sucking is sending money to the hardware place and eventually should drive a hardware 2.0 rally. Although we're delayed a little bit because again those the you know rate concerns and worsh.

So what did we just get out of Dell and what's so interesting about it? Dell just reported uh revenues uh that beat expectations across the board. We got Q3 revenue guide up 16.9%. Which is really good. The AI optimized server forecast uh came in 23% higher than expected at 74 billion versus 60. And this was really the showstopper.

Their fiscal year earnings per share forecast came in 42% higher than expected, which is insane. Instead of $17.9 per share uh on uh 17.8 17.9 in that rough midpoint range for adjusted EPS next year or for the uh yeah, for the fiscal year uh ending January 2027. Their fiscal year is a little funky. uh instead of 17.8 to 17.9, they're expecting to have adjusted EPS of $25.50. 2550. Come on, man. This is a massive beat of 42% on their forecast bottom line.

Now, that is adjusted EPS, so there could be some funky math going on there. So, what I wanted to do was go deep in uh dig deep into their margins because I've always thought of Dell as a relatively low margin infrastructure play.

And uh uh for example, one of the things that I did is I typed in Dell into the search function right here. And then I could see some of the Dell commentary coming straight out of the earnings call without having to actually listen to the earnings call. But talking about margins, so I've always thought of Dell as a historically low margin business and since 2020, they really have been. Go back to 2020, you see, they lost money. Uh, okay fine. It was COVID. 2021 2.3% margins. 2022 23 24 25 basically between 4.2 to 4.8% margins. Low.

But look at the expectations of what's happening to their margins. 2026 5.7 2027 7.1 terminating at about 8.2 in 2031 based on current analyst expectations. this jump between 25 and 26 uh and then this jump up to January of 2027. All these dates, by the way, end in January, which is again their sort of weird fiscal calendar, but whatever.

5.7 from 4.8 represents an 18.9% 18.8% growth. And if I go 17.1 divided by 5.7, that represents a 24 12% growth rate. So these net income margins are popping off and that's one of the reasons there's so much enthusiasm on the earnings report coming from Dell because we're finding that a relatively low margin provider is actually contributing uh substantial bottomline boosts uh for Dell.

So, if I jump on over to their infrastructure group, which is where you're going to see the artificial intelligence servers, you'll find here that AI optimized servers saw a doubling from last year.

Now, interestingly, that growth was only 1.67% from the last quarter. See, I pulled up their last earnings report, and AI optimized servers ending May 1st sat at 16.1 billion. And in this quarter, they sat at 16.4 billion. So, you're kind of starting to run into some of those large number concerns, but the EPS growth is what's making people really excited about the stock.

I personally flag this as a little bit of a red flag. And I want to be clear, I do not have an exposure long or short to Dell. Just sharing, you know, my sort of reaction to this. uh I did see that in this quarter traditional servers and storage grew more at 122% and 26% whereas in the last quarter they were growing at 92% and 8%. So both of those segments actually grew nicely leading to an 89% increase in that infrastructure group revenue.

Uh last quarter higher growth rate because of that growth uh you know that like 700% growth rate in AI optimized servers. So a little bit of a slowdown quarter to quarter uh here in AI optimized servers who are running into the law of large numbers.

But what's fascinating isn't the law of num large numbers problem. What's fascinating is their pricing power. Their uh percentage of operating income as a percentage of net income. So after costs is now 15% for the infrastructure solutions group. It used to be 8.8%. So they'd go sell a server to somebody and they'd bring bring 8.8% to operating income. Now they're bringing nearly twice that to operating income. Okay, I might be generous with twice. They are bringing 70% more. That's really good.

So that margin pop is fascinating. People love that. that margin pop could be justifying this boost we're seeing in Dell's uh forecast for adjusted EPS. But I didn't just want to look at the infrastructure solutions group. So I wanted to see if their pricing power is growing elsewhere. If I look at their margin growth on products, the answer is yes. We are generating more revenues than our products are costing us. That's an increase in pricing power.

Plus, when we compare total revenue growing at 58% or even just products growing at 72%. And then we look at gross margin growth of 80%. We can see that 80% their gross margin is greater than what their revenue growth is, which means they're taking more pricing.

You could also look at it in the inverse by looking at their costs which are growing slower than their actual uh revenues are growing. Uh which is great. both both products services were actually negative over here. They spent less money on services. So you've got this expanding gross margin. Those are all signs of pricing power.

Is it possible this is all a temporary bubble? Of course. Of course. Like you know, like I said, I think we got one more good euphoric rally and then I think Anthropic ruins everyone's day. Not right when they IPO, but when they report their first and second and third quarter earnings as they're public and people start going, "Ah, really? That's not that good." You know, the more that starts happening, that's when, you know, some of the spending slows down a little bit and the hardware hype kind of dies. I still think there's a hype cycle between now and them.

But Dell is actually really unique because Dell doesn't actually sell to the hyperscalers. Dell focuses their sales on the sovereigns, the Neoclouds, uh, and then also uh, the the enterprise businesses.

And because like the money we're spending on hardware is generating money. And that's literally what Dell said at their top line. If you look at Dell's top line, they say, and it's totally true, it environments have shifted from cost centers to value drivers that fuel growth and competitive advantages, and customers are investing accordingly, creating opportunities across the Dell portfolio.

Yeah. Yeah. I totally totally agree. Now, let's think about what that means for Dell. What that means is across the board, you have customers going to Dell saying, "Hey, we don't really care what it costs." I mean, there's obviously some limit, but enterprise businesses, that's a little redundant, businesses are going to Adele and they're saying, "We want AI servers in our business. Help us set them up. We don't want to go buy the graphics card ourselves. We don't want to hire the engineers to build the software to run it. you give us the software, you give us the hardware, plug it in, and tell me I have an AI data server. Dell will do that for you. And that's what's kind of cool.

Now, the CEO says they have spotty CPU shortages uh and shortages with disk drives as well. They expect that 75% of all data center demand will be artificial intelligence by 2030. I don't actually see that as an issue mostly because I think we're just kind of transitioning away from a normal server to a server that can basically do AI and nonAI tasks. It's just sort of like the next generation server, right?

Uh they say here the second half they think will be even stronger than the first half. I think that's a little bit of explaining for that slowdown in the quarter overquarter growth rate. I think that quarter overquarter growth rate like not year-over-year but comparing to last quarter was a little weird. like really only grew to what 1%. Okay, whatever. Uh that like really one of the few red flags I found.

Uh big refresh opportunity they say for older 14th generation servers and before that. Uh and then uh you know the fiscal year forecast for earnings were 42% too low. And that actually helps us look at evaluation. And this is the hardest thing about fundamental analysis is you kind of have to compare your expectations for growth to what analysts are projecting. And analysts can be wrong to the upside, they could be wrong to the downside. This is obviously the problem with that.

So if we look at where this company sits right now based on analyst expectations, it's sitting at a growth rate of about 16.3 with a price to earnings ratio of about uh let's see if we take 1910 for the end of the year. Now revised numbers that puts us at about uh 24 times. So right now we're trading for somewhere around divided by 16.3 actually trading for only about 1.4. 49 on a PEG ratio. That's after these last earning sets uh come in. So this number really drove some meaningful change to that that Dell bottom line.

Uh so I'm going to modify this uh in terms of the EPS that's currently projected. We've got 19 or I'm just going to write this down. We've got 19 10 uh and then the growth rate analysts expect 16%. But remember, if the forecast is that we're actually going to be about 42% higher on earnings, then we might actually be growing closer to 23%.

If we adjust that in, the peg for this company all of a sudden looks a lot more inexpensive and it looks like the company has more potential upside. Because if I now come in here and say, "All right, we're going to say growth is 23%. We're going to give it a 1.4 peg at uh the EPS for the for January. We could potentially get to a price target range between 527 to 615."

Now, there's something really important about that. That target range assumes that we could keep beating estimates that all estimates between now and 2030 should get jacked up by about 42%. That might be too aggressive.

Unfortunately, if you discount away that 42%. The stock shouldn't really go anywhere, right? You kind of suggest with these latest earnings, it's actually earnings were really good. they're making a whole lot more money, but now the stock has already priced that in.

The last time we looked at Dell, we're like, ah, they're a little pricey. You know, the markets are expecting bigger growth and we got that. So, last time we're like, man, you know, these earnings, these estimates, they're they're really low. All of a sudden, we get these crazy earnings. It's like stock blows up, you know, 6% or whatever. Blows people's expectations out of the water. That's great. Stocks up now 7%. You're sitting at about 455.

If we look at this on a technical basis, we could see we're pretty dang close to the top over here. Uh let's go down. We'll take the 2025 uh in this case, we'll take the 2025 bottom and we'll just do a quick technical look at it. If I take 514 and 6473 here. Okay, lock that into place. Look at where we're sitting. We're literally jumping off of that 417 line that we've consistently been rubber banding around. So, a durable place to bounce on. More preferable to buy it around these levels.

It's possible because the market is a little tenuous between now and Fed day. maybe you'll be able to get a discount for this again. But the flip side is you really have to expect those big growth rates to justify the forward valuation on this. So maybe you do maybe you think enterprise AI is going to last a whole lot longer, boom, a whole lot more than the hyperscaler uh AI demand. I don't disagree with that argument. Uh I think there's a risk that if hyperscaler demand goes away, all socks kind of fall in the hardware space, but enterprise might be a whole lot more durable. Uh, so I like the enterprise spending,

but I will make a note here that a five, what do we say? Five, this is on the low end for margins. 1.2 peg versus 1.4 peg puts us out 527 to 615. 517 to 615 uh terminal price target uh requires uh about 23% average EPS growth. That might be frothy.

Uh enterprise might rush to AI the next few years but will terminal growth rates hold up right uh rates hold up because if the terminal growth rate for this ends up at 10%. You know then then we get to really pricey again at these lower 8% margins.

So bottom line, growth really beat expectations here. Yes, some nervousness in markets now, but the spend is still going on like crazy. That's good for now and uh honestly good