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Dell Technologies (DELL) Q2 Earnings & Revenues Increase Y/Y

Zacks Equity Research

Dell Technologies DELL reported second-quarter fiscal 2020 net income of $1.75 billion that surged 39.1% year over year. Non-GAAP earnings were $2.15 per share.

Revenues increased 1.4% year over year to $23.45 billion, driven by double-digit growth in commercial and VMware revenues.

The Zacks Consensus Estimate for earnings and revenues were pegged at $1.20 and $23.11 billion.

Quarter Details

Product revenues (77.2% of revenues) were flat year over year at $18.11 billion. Services revenues (22.4% of revenues) increased 9.7% year over year to $5.26 billion.

Infrastructure Solutions Group (ISG) revenues were down 6.6% year over year to $8.62 billion. The segment accounted for 36.8% of revenues.

Dell Technologies Inc. Price, Consensus and EPS Surprise

Dell Technologies Inc. Price, Consensus and EPS Surprise
Dell Technologies Inc. Price, Consensus and EPS Surprise

Dell Technologies Inc. price-consensus-eps-surprise-chart | Dell Technologies Inc. Quote

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The year-over-year decline was due to a 12.3% fall in servers and networking revenues. Storage revenues were flat at $4.18 billion.

During the quarter, the company launched “Dell Technologies Cloud.” Moreover, “VMware Cloud on Dell EMC,” the industry’s first fully managed, on-premises Data Center-as-a-Service, was made available. Further, the company’s “Unity XT” storage solution witnessed strong traction.

Client Solutions Group (CSG) revenues were $11.75 billion, up 5.6% year over year. The segment accounted for 50.1% of revenues.

While Commercial revenues grew almost 12%, Consumer revenues were down 11.5%.

Growth at Commercial revenues was driven by double-digit growth in commercial notebooks, desktops and workstations.

Dell launched new “OptiPlex 7070 Ultra” and “Unified Workspace” in the reported quarter.

VMware VMW revenues were $2.47 billion in the reported quarter, up 12.4% year over year, driven by portfolio strength. Notably, Dell has a majority stake in VMware as well as owns stakes in Pivotal Software PVTL and SecureWorks.

Operating Details

Non-GAAP gross profit increased 13% year over year to $7.99 billion. Gross margin expanded 350 basis points (bps) from the year-ago quarter to 34% due to a decline in component costs.

Adjusted EBITDA increased 28.3% year over year to $3.16 billion. Adjusted EBITDA margin expanded 280 bps year over year to 13.5%.

Non-GAAP operating expenses grew 5.7% year over year to $5.24 billion due to continued investment in sales capacity. Moreover, operating expenses, as a percentage of revenues, increased 90 bps year over year to 22.4%.

ISG operating income climbed 3.8% year over year to $1.05 billion. CSG operating income jumped 131.1% year over year to $982 million. VMware operating income increased 3.5% year over year to $762 million.

Non-GAAP operating income was $2.74 billion, up 30.1% from the year-ago quarter. Operating margin expanded 260 bps year over year to 11.7%.

Balance Sheet and Cash Flow

As of Aug 2, 2019, Dell had $9.19 billion in cash and cash equivalents. Long-term debt was $45.97 billion.

The company repaid roughly $2 billion of gross debt in the quarter. Notably, Dell has repaid approximately $17 billion of gross debt over the three years following the EMC transaction's completion. The company is on track to repay approximately $5 billion of gross debt in fiscal 2020.

Cash flow from operations was $3.28 billion in the reported quarter compared with $2.63 billion in the year-ago quarter.

Zacks Rank & A Key Pick
 
Dell currently carries a Zacks Rank #3 (Hold).

Computer Task Group CTG, with a Zacks Rank #1 (Strong Buy), is a stock worth considering in the same industry. You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Computer Task Group is pegged at 15%.

 

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Computer Task Group, Incorporated (CTG) : Free Stock Analysis Report
 
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VMware, Inc. (VMW) : Free Stock Analysis Report
 
Pivotal Software, Inc. (PVTL) : Free Stock Analysis Report
 
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