BONUS: Dell CFO David Kennedy Talks Earnings & Upbeat Outlook Fueled by AI

0:00Ed Ludlow:Indiana University strengthens tomorrow's workforce with practical, real-world experience. IU grads make a difference in your community, serving as teachers, nurses, and engineers who rise to tomorrow's challenges and meet them. Learn more at iu.edu slash impact. Bloomberg Audio Studios. Podcasts. Radio. News. Dell, a lot of stories within this one. David, you'll tell me it's a strong quarter. I think the market right now is staring at the outlook for the fiscal year ending January 27, the$167 billion of sales,$60 billion of that being AI servers. Something in there is new. In fact, $27 billion of something in there is new in the outlook.

0:48Ed Ludlow:What is it? Yeah, afternoon, Ed. Look, it's a tremendous start to the quarter, obviously, in the year ahead. 88 % revenue growth, 214 % EPS growth and record cash flows. You're built on real, durable and accelerating globally the amount of infrastructure that's needed out there. If you look at this, you know, really production at scale, all of those things have given us confidence, as you say, to add to that full year guide, adding$27 billion to the revenue,$167 billion now, almost 50 % increase year on year. EPS of$17.90, really strong and, you know, really looking forward to the year ahead. David, is this coming from sort of one single hyperscaler customer?

1:36Ed Ludlow:Is it the NeoClouds? Or is there more sort of granularity you can give me about what is actually happening in the world? Completely acknowledge that the CPU server is back, right? That's clear in the quarter gone. But there must be something more happening under the surface here. Yes, this is more broad-based and more prevalent across the ecosystem and our solution. So, CSG growth, 17 % growth in Q1. We're guiding almost similar in Q2. You mentioned the traditional server networking business grew 92 % in Q1. We're expecting a strong guide to go to the year. Obviously, we've taken up our AI storage guide, our server guide to$60 billion, and storage will grow every single quarter to go to the year.

2:19So it's more prevalent across our products, across our verticals, across our customer base. So really more broad base. And AI demand, if you like, beyond the GPU in terms of the opportunities ahead.

2:31Ed Ludlow:Can you quantify that, the AI demand beyond the GPU? Yeah, if you look at our guide, it's up$27 billion. We've taken our AI guide up$10 billion from$50 billion to$60 billion. So obviously the rest is in our core business and it's more prevalent across CSG, traditional server and the storage market. So strong across the board. Been under the working assumption for quite a while now that the US government's your biggest customer. I think the world was a little bit surprised yesterday. I was a little bit surprised about the$10 billion defense deal, basically$2 billion per year for five years. What is that?

3:10Ed Ludlow:I'm trying to understand. Is Dell in the software game here in that deal? Or what does it represent to you, David? No, look, we're historically selling software over many years. We obviously support all the federal agencies in the US, but it's also more prevalent across the globe and all the government agencies. So this is just another mark, if you like, in terms of the broad solutions when any customer, whether it be federal or whether it be enterprise-based, is looking for us to help them in their technology needs and the solutions. We're there to help them. We have those longstanding relationships.

3:46And this is just another example of that.

3:49Ed Ludlow:And can I just double-check something mechanically speaking? The$9.7 billion deal, is that reflected in the updated outlook you gave? like it was something that was baked in? Well, again, if you think of the guide, we're up$27 billion for the year. That contract is$9 billion over five years. At most, it's less than a billion dollars for this year. So again, a very small part of what is a broad-based discussion around broad technology opportunities, solutions that our customers are looking for, and making sure we can fulfill as many customer needs as we can in this environment. Some people might say in this environment, what's a billion dollars here or there in every given quarter or balance of financial year?

4:31Ed Ludlow:I think the sense the analysts are trying to get from the call is the staying power of this demand, how sustainable it is. But I think another way of looking at it, David, is have you set yourself a new baseline going forward of what the world is like for particularly the AI server business? Yeah, I think it goes beyond the AI server business. I think it's AI demand and total across the solution and infrastructure stack that's there. If you look at the broad-based opportunities that are appearing, I think as we move from training models into inferencing, those inferencing workloads are creating a net new environment, a net new TAM, if you like, that's there to go attack and go balance from a customer perspective.

5:14We're seeing that, and those education elements are coming in as part of the opportunity that's in front of us. We're excited by that. And I think that makes it a more broad based, durable growth over the long term for us as we see that.

5:27Ed Ludlow:I appreciate that you've outlined twice that it's broad based. Was there one big customer or even sector in the quarter gone or one big customer or sector for the outlook in the year that has changed the trajectory for you? No, it's again more broad based. If you look at our segments, Neoclouds, Sovereign, those enterprise customers, you'll have heard and spoke with Michael last week in relation to our 5 ,000 customers and the enterprise side in relation to AI. As we broad based out those AI factories, you know, there's growing. If you look at our five quarter pipeline, all individual verticals are growing in their own right.

6:07And it shows, again, that the scale and the opportunity that's both geo and vertical based.

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