Dell has divulged to stakeholders that its AI server offerings, specifically the PowerEdge XE9680, are in high demand, which has led to an unprecedented backlog. The wait time for these AI servers has prolonged to a staggering 39 weeks. During Dell's third-quarter fiscal 2024 earnings call, Vice Chair and COO Jeff Clarke highlighted that the company has recorded $500 million in AI server shipments within the quarter, a substantial growth on a sequential basis.
PowerEdge XE9680 has emerged as one of Dell's most rapidly growing solutions, a testament to the burgeoning AI market. Despite the notable market interest and a pipeline tripling for AI servers in this quarter, supply restrictions have severely hampered Dell's ability to promptly fulfill orders.
Market and Financial Highlights
In the broader server market, Dell's Q3 revenue reported a downturn, reaching $22.3 billion — a 10 percent decline year-over-year. However, it's not all grim news for the tech giant; net income saw a leap to $1.04 billion, marking a 317 percent increase, amidst an operating income drop of 16 percent to $1.49 billion.
The Infrastructure Solutions Group, covering servers, storage, and networking, contributed $8.5 billion to the revenue pool, indicating a year-over-year fall of 12 percent but maintaining a flat performance sequentially. Dell's Client Solutions Group, their PC division, meanwhile, secured $12.3 billion, with commercial customers accounting for $9.8 billion. An anticipated surge in PC demand did not materialize, attributed to corporate clients' spending hesitation.
Clarke anticipates growth returning in fiscal year 2025, with a more detailed forecast deferred to the report of fourth-quarter results. The company is prepping to engage with more computing alternatives to Nvidia's GPUs in the coming year. Although the software implications of such transitions remain an area of focus, Clarke remained positive about diversifying the AI server offerings.
Moreover, the PC market is poised for potential growth, driven by technological upgrades and an aging installed base. Dell is preparing for a refresh cycle as a substantial number of PCs will reach the four-year threshold commonly recognized as signaling time for an upgrade. Notably, the reference to Windows on ARM by Clarke hints at a possible move towards ARM-powered PCs, signifying a shift in the industry dynamics.
Dell's report also underscores persistent GPU availability concerns as one of the significant bottlenecks, an issue relayed by Nutanix CEO and president Rajiv Ramaswami as well. Nutanix, on a related note, has reported a favorable Q1 '24 performance with an 18 percent year-over-year revenue increase.