Dell’s Profits Top Estimates on Strong Sales of Enterprise PCs

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Demand for desktop PCs has increased as some offices reopen and companies find a need to replace equipment that was idle during the pandemic.

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NOTE: EMBARGOED FOR 4:30 p.m. Eastern

Dell Technologies posted better-than-expected results, driven by a strong performance in its commercial personal-computer business. That is a switch from recent quarters, when the PC business was largely driven by high demand among consumers.

For its fiscal second quarter, ended July 31, Dell (ticker: DELL) reported revenue of $26.1 billion, up 15% from a year earlier, and ahead of the Street consensus forecast of $25.5 billion. The results mark an acceleration from 12% growth in the April quarter.

Non-GAAP profits were $2.24 a share, ahead of the Street’s call for $2.03. Non-GAAP net income was $1.9 billion, up 18% from a year ago, while adjusted earnings before interest, taxes, depreciation and amortization, or Ebitda, came in at $3.3 billion, up 7%. Operating income was $1.4 billion, up 21%.

Under generally accepted accounting principles, the company earned $880 million, or $1.05 a share.

Product revenues were $19.4 billion, up 16%, while revenue from services was $6.7 billion, up 12%. Gross margin was flat versus a year ago at 31% despite continuing constraints on the supply of components. While prices for many parts have increased, Dell has been passing along the extra costs by charging more, a key factor in its ability to increase profits faster than revenue.

Dell said revenue from its client-solutions group, which mainly sells PCs, was $14.3 billion, up 27% from a year ago. That is well ahead of the Street consensus for $13.5 billion, and up from 20% growth in the April quarter.

The figures include 32% growth from commercial customers and 17% from consumers, a reversal of the pattern in recent quarters. In the April quarter, for instance, Dell posted 42% growth in consumer PC revenue and 14% growth in commercial PCs.

While Dell is seeing strong growth from notebooks as more companies prepare staff for a hybrid work environment, there is also increased demand for desktop PCs, as some offices reopen and find a need to refresh PCs that have been sitting idle for more than 18 months. The overall shift in preference for notebooks tends to help PC makers like Dell, since they generally have shorter lifespans and higher selling prices than desktop models.

The company said its infrastructure services group had revenue of $8.4 billion, up 3%, just a touch below Street estimates. That includes 6% growth in servers to $4.5 billion, moderating from 9% growth in the April quarter, and a 1% drop in storage systems sales to $4 billion. Storage was flat in the April quarter.

The company said VMware (VMW) had revenue in the quarter of $3.1 billion, up 8% from a year earlier, and in line with Street forecasts. Dell owns a controlling stake in VMware, but previously announced plans to spin off the stake to holders. The company now expects to complete the transaction in early November.

Dell has paid down $5.5 billion in debt for the year to date, and expects to boost the total to more than $16 billion for the full fiscal year, using its portion of a special dividend VMware will pay to its holders just ahead of the spinoff. Dell expects debt-rating companies to increase its credit rating to investment-grade levels when that process is completed.

In Thursday’s regular session, Dell was up a fraction at $102.20, just a couple of dollars below the stock’s all-time high. The stock is up nearly 40% for the year to date.

Write to Eric J. Savitz at

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