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Dell shows AI is already generating an impact

Vendor’s Q2 numbers show demand for AI servers, and executives talk up the future benefits on the PC front

Dell has been banging the artificial intelligence (AI) drum with its channel partners over the past few months, and its second quarter numbers have given executives a further opportunity to talk up the prospects of the technology.

Where the impact of AI can already be seen is on the server front, but it is also expected to have a positive impact on PCs next year as more features are incorporated into those devices.

Jeff Clarke, vice-chairman and COO at Dell Technologies, said that AI was already having an impact on the firm’s numbers: “Demand for our proprietary software-defined storage solution has now grown eight consecutive quarters. Our client solutions group business was up 8% sequentially with strong attach rates. And AI is already showing it’s a long-term tailwind, with continued growth across our portfolio.”

In a call with analysts to discuss the Q2 numbers in more detail, he revealed that the vendor had seen a surge in demand for AI servers.

“AI is expanding the TAM for total technology spending and is projected to grow at a 19% CAGR for the next couple of years to approximately $90bn, including hardware and services. In Q2 alone, we saw unprecedented strength from our PowerEdge XE9680. It’s the fastest ramping new solution in Dell history,” he said.

He added that there were opportunities for AI to make an impact in the cloud, PCs and in datacentres as it helped drive a new series of workloads and incremental capability.

“We think it’s one-size-does-not-fit-all – there’s a whole slew of our AI solutions, again, from the PC to workstations to what happens in the datacentre,” he said.

In terms of the results, the tone struck by Clarke when talking to analysts was a positive one, despite a 13% year-on-year (YoY) drop in revenues.

“While revenue was down YoY, a better demand environment and strong execution enabled extraordinary Q2 results. Revenue was $22.9bn, with operating income of $2bn,” he said.

“We are encouraged with some of the signs we are seeing in the macro environment as we move into the second half. We saw better underlying demand in the US market and EMEA was better than anticipated. We also saw demand growth in government and SME and our transactional demand improved through the quarter.”

Clarke also added his voice to the growing number who are looking for an improvement in PC sales in 2024 after what has been a tough year so far.

“We think about next year and, as we end this year with a new version of Windows with CoPilot, all of us building AI-enabled PCs, we think AI at the edge on the PC is great. I’d call it the killer app, and it is going to drive a productivity increase,” he told analysts.

“Any time we’ve seen new applications that drive productivity at the edge on the PC, we’ve seen the market rebound. If you’re going to ask your PC to do more, it generally means it needs a bigger CPU, a little more memory, a little bit more storage, a better display, et cetera, which is another proxy for driving ASPs,” he added.

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