WEBVTT - Dell CFO David Kennedy Talks Earnings Call

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Dell a lot of stories within this one, David, you'll

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<v Speaker 2>tell me it's a strong quarter. I think the market

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<v Speaker 2>right now is staring at the outlook for the fiscal

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<v Speaker 2>year ending January twenty seven, the one hundred and sixty

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<v Speaker 2>seven billion dollars of sales, sixty billion of that being

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<v Speaker 2>AI servers. Something in there is new, In fact, twenty

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<v Speaker 2>seven billion dollars of something in there is new in

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<v Speaker 2>the outlook. What is it?

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<v Speaker 1>Yeah, afternoon, Ed, look at a tremendous start to the quarter.

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<v Speaker 1>Obviously in the year ahead, eighty eight percent revenue growth,

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<v Speaker 1>your two hundred and fourteen percent EPs growth, and record

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<v Speaker 1>cash flows. You're built on real, durable and accelerating globally.

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<v Speaker 1>The amount of infrastructure that's needed out there. If you

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<v Speaker 1>look at this, you know, really production at scale. All

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<v Speaker 1>of those things have given us confidence, as you say,

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<v Speaker 1>to add to that full year guide, adding twenty seven

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<v Speaker 1>billion dollars to the revenue one hundred and sixty sixty

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<v Speaker 1>seven billion dollars now almost fifty percent increase year on year.

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<v Speaker 1>EPs is seventeen dollars and ninety cents. Really strong, and

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<v Speaker 1>you know, really looking forward to the year ahead.

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<v Speaker 2>David, is this coming from sort of one single hyperscala customer.

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<v Speaker 2>Is it the neo clouds or is there more sort

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<v Speaker 2>of granularity you can give me about what is actually happening.

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<v Speaker 1>In the world.

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<v Speaker 2>Completely acknowledge that the CPU server is back, right, that's

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<v Speaker 2>clear in the quarter gone, But there must be something

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<v Speaker 2>more happening under the surface here.

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<v Speaker 1>Yes, this is more broad based and more prevalent across

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<v Speaker 1>the ecosystem and our solutions. So CSG growth seventeen percent

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<v Speaker 1>growth in Q one, we're guiding almost similar in Q

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<v Speaker 1>two you mentioned the traditional server networking business s grow

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<v Speaker 1>ninety two percent, and Q one we're expecting a strong

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<v Speaker 1>guide to go to the year. Obviously, we've taken up

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<v Speaker 1>our AI storage guide, our server guide sixty billion dollars

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<v Speaker 1>and storage will grow every single quarter to go to

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<v Speaker 1>the year. So it's more prevalent across our products, across

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<v Speaker 1>our verticals, across our customer base. It's really more broad based.

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<v Speaker 1>And you know AI demand if you like, beyond the

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<v Speaker 1>GPU in terms of the opportunities ahead.

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<v Speaker 2>Can you quantify that the AI demand but beyond the GPU.

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<v Speaker 1>Yeah, if you look at our guide it's up twenty

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<v Speaker 1>seven billion dollars. We've taken our AI guide up ten

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<v Speaker 1>billion dollars from fifty billion to sixty billion. So obviously

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<v Speaker 1>the rest is in our core business, and it's more

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<v Speaker 1>prevalent across c ISG, traditional server and the storage market.

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<v Speaker 1>So you know, strong across the board.

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<v Speaker 2>Been under the working assumption for quite a while. Now

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<v Speaker 2>that the US government's your biggest customer, I think the

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<v Speaker 2>world was a little bit surprised yesterday. I was a

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<v Speaker 2>little bit surprised about the ten billion dollar defense deal

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<v Speaker 2>basically two billion dollars per year for five years. What

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<v Speaker 2>is that I'm trying to understand. Is Dell in the

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<v Speaker 2>software game here in that deal or what does it

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<v Speaker 2>represent to you?

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<v Speaker 1>David? Now, look, we're historically selling software over many years.

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<v Speaker 1>We obviously support all the federal agencies in the US,

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<v Speaker 1>but it's also more prevalent across the globe and all

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<v Speaker 1>the government agencies. So this is just another mark, if

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<v Speaker 1>you like, in terms of the broad solutions. When any customer,

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<v Speaker 1>whether it be federal or whether it be enterprise based,

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<v Speaker 1>is looking for us to help them in their technology

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<v Speaker 1>needs and the solutions, we're there to help them we

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<v Speaker 1>have those long standing relationships and this isn't just another

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<v Speaker 1>example of that.

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<v Speaker 2>And can I just double check something mechanically speaking? The

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<v Speaker 2>nine point seven billion dollar deal is that reflected in

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<v Speaker 2>the updated outlook you gave like it was something that

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<v Speaker 2>was baked in.

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<v Speaker 1>Well, again, if you think of that the guide, we're

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<v Speaker 1>up twenty seven billion dollars for the year. That contract

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<v Speaker 1>is nine billion over five years, you know, and most

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<v Speaker 1>it's a billion less than a billion dollars for this year.

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<v Speaker 1>So again a very small part of what's a broad

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<v Speaker 1>based discussion around broad technology opportunities, solutions that our customers

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<v Speaker 1>are looking for and making sure we can fulfill as

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<v Speaker 1>many customer needs as we can in this environment.

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<v Speaker 2>Some people might say, in this environment, what's a billion

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<v Speaker 2>dollars here? Are there in any given cords or balance

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<v Speaker 2>of financial year. I think the sense the analysts are

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<v Speaker 2>trying to get from the call is the staying power

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<v Speaker 2>of this demand, how sustainable it is. But I think

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<v Speaker 2>another way of looking at it, David, is have you

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<v Speaker 2>set yourself a new baseline going forward of what the

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<v Speaker 2>world is like for particularly the AI server business.

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<v Speaker 1>Yeah, I think it goes beyond the AI server business.

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<v Speaker 1>I think it's AI demand and total across the solution

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<v Speaker 1>and infrastructure stack that's there. If you look at the

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<v Speaker 1>broad based opportunities that are appearing, I think as we

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<v Speaker 1>move from training models into inferencing, those inferencing workloads are

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<v Speaker 1>creating a net new environment, a net new tim if

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<v Speaker 1>you like, that's there to go attack and go balance.

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<v Speaker 1>From a customer perspective, we're seeing that and those education

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<v Speaker 1>elements are coming in as part of the opportunity that's

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<v Speaker 1>in front of us. We're excited by that, and I

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<v Speaker 1>think that makes it a more broad based, durable growth

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<v Speaker 1>over the long term for us as we see that.

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<v Speaker 2>I appreciate the You've outlined twice that it's broad based.

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<v Speaker 2>Was there one big customer or even sector in the

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<v Speaker 2>court of gone or one big customer sector for the

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<v Speaker 2>outlook in the year that has changed the trajectory for you.

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<v Speaker 1>No, it's again more broad based. If you look at

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<v Speaker 1>our segments neoclouds, Sovereign, those enterprise customers you'll have meant

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<v Speaker 1>heard and spoke with Michael last week in relation to

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<v Speaker 1>our five thousand customers in the enterprise side in relation

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<v Speaker 1>to AI. As we broad based out those AI factories,

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<v Speaker 1>you know there's growing. If you look at our five

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<v Speaker 1>quarter pipeline, all individual verticals are growing in their own

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<v Speaker 1>right and it shows again that the scale and the

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<v Speaker 1>opportunity that's both geo and virtual based