The News: Dell Technologies’ (NYSE: DELL) recent first quarter fiscal 2023 results were highlighted by a 16 percent jump in net revenue to $26.1 billion, a new company Q1 record, including healthy revenue growth in its Infrastructure Solutions Group and its Client Solutions Group. Bolstering the figures even more, Dell’s Q1 2023 revenue beat analyst estimates of $25 billion in revenue for the quarter. Read the full earnings report from Dell.
Dell Q1 2023 Revenue Up 16%, Topping Analyst Estimates
Analyst Take: For Dell this was a significant and successful quarter, amidst a market of continuing turmoil across the tech sector. There was good news here for the company, which is continuing to show financial progress over the last several quarters.
Here are the Dell Q1 2023 earnings by the numbers:
- Q1 2023 net revenue of $26.1 billion, up 16 percent from $22.6 billion for the same quarter one year ago. The Q1 revenue handily beat analyst consensus estimates of $25 billion, according to Yahoo Finance.
- Q1 2023 non-GAAP net income of $1.4 billion, up 36 percent from $1.05 billion one year ago.
- Q1 2023 non-GAAP diluted earnings per share of $1.84, which is up 36 percent from the $1.35 diluted earnings per share price one year ago.
Marking these strong results is growth across the board for Dell in its most important market segments, which is notable due to the ongoing tough market conditions being faced in the tech sector by many companies.
Dell’s Infrastructure Solutions Group (ISG) posted Q1 2023 net revenue of $9.3 billion, up 16 percent from $8 billion one year ago. That includes the servers and networking division, which saw net revenue of $5.05 billion, up 22 percent from $4.1 billion one year ago; and the storage division, which reported Q1 net revenue of $4.2 billion, up from $3.9 billion one year ago.
Dell’s Client Solutions Group (CSG) posted Q1 2023 net revenue of $15.6 billion, up 17 percent from $13.3 billion a year ago. That includes net revenue of $11.9 billion from its commercial PC division, up 22 percent from $9.8 billion one year ago; and Q1 2023 net revenue of $3.6 billion from its consumer PC division, up three percent from $3.5 billion one year ago.
This is strong growth for the quarter and continues the boosts in sales seen by many PC and laptop makers due to the Covid-19 pandemic and computer growth spurred by corporate work-from-home strategies across the board. While the Covid-19 related purchasing is slowing, the strength in the client business for Dell is a sign for cautious optimism as many had forecasted a slowdown in PC growth. Strong operational and sales execution are the likely contributors to the outsized results.
We are impressed by Dell’s Q1 2023 numbers, which show again strength during tumultuous times. The company’s robust sales and its smart leadership team are testaments to its success in these tumultuous times—something Dell has proven to be well suited to manage. Its path to $100 billion in revenue has been paved with bold yet wise inorganic growth and disciplined operational management.
Dell Technologies has a considerable historical footprint in the IT sector and spans everything from consumer gaming-focused PCs to Enterprise Class storage and everything in between. We believe we will see Dell continuing to extend comfortably into these areas in the foreseeable future, given how well the company is positioned with its core offerings. We also continue to see Dell making significant investments to bolster its hybrid cloud, 5G, and consumption services as the company improves its stickiness and further expands its revenue within its customer base.
While the market is waiting to see its consumption services business gain material size, it is easy to see the direction that the company is taking. A move that will be both critical and challenging as hypersclale cloud providers and competitive OEMs like Lenovo, HPE, and Cisco all lean into subscription based offerings as well. Having said that, we still see this as a smart strategy for Dell as it must show an ability to compete in these key areas.
Other Notable Numbers in Dell’s Q1 2023 Results
Dell Technologies also reported that it ended Q1 with remaining performance obligations of $42 billion, up 14 percent from one year ago, as well as deferred revenue of $27.4 billion, and cash and investments of $8.5 billion. Recurring revenue for the first quarter was approximately $5.3 billion, up 15 percent. The strength in its backlog despite the strong beat is noteworthy as many companies built up large performance obligations during the pandemic. Seeing these number remain high despite a strong result is a positive sign for sustained growth in future quarters.
These positive Q1 2023 figures for the company are notable because they are the second quarter in a row to no longer include financial results from its former VMware division, which was spun-off in 2021. Dell’s previous third-quarter 2022 results were the last to include VMware results, marking the end of that chapter of its business lines.
Making this even more interesting lately is Broadcom’s recent announcement is that it is acquiring VMware for $61 billion in cash and stock, marking yet another new chapter in VMware’s history. VMware, which offers cloud computing and virtualization technologies and services, has experienced stock declines since spinning out from Dell Technologies in 2021.
Intriguingly, VMware’s largest shareholder is still Michael Dell at approximately 40 percent, making his influence certain, even without owning VMware lock, stock, and barrel.
2023 to See Expansion of Dell’s APEX Flex on Demand Subscription Offering
Driving Dell’s continuing success in fiscal 2023 will be a continuing expansion of Dell’s APEX Flex on Demand subscription offering, which was launched in FY2022. Dell says the service is resonating with customers and that adoption of the APEX Cloud Services portfolio is proceeding well. Among the services are APEX Multi-cloud Data Services, which delivers storage and data protection as-a-service with simultaneous access to all major public clouds through a single console; and Dell APEX Backup Services, which give customers scalable data protection with centralized monitoring and management for SaaS applications, endpoints and hybrid workloads, as well as backup, disaster recovery, and long-term data retention. The current offerings reflect only a fraction of what we expect Dell to offer in its Apex portfolio in the coming periods. During Dell Tech World, the company showed its ambition with Project Alpine and an ambitious partnership with Snowflake to create more continuity between data that exists on-prem and in the cloud.
We continue to believe that APEX is a critical business focal point for Dell, particularly as hyperscale cloud providers continue to look for growth on-premises where there is growing competition in this space. HPE, Lenovo, and Cisco are all large-scale IT infrastructure providers developing hybrid cloud services. Between public cloud providers and industry competition, Dell will have its work cut out for it. However, with its massive client base and reputation, we expect Apex to catch on in the coming year.
We think this is a forward-looking and smart initiative that will help Dell Technologies meet its existing and new customers with the products and services they continue to need to run and transform their own growing operations.
Dell’s Q1 2023 earnings report again shows that the company is one of the premier technology players in the world and that it does so by meeting customer needs and expectations wherever they are. We continue to be bullish about Dell, its direction, and its strategy in making its way through any storm and finding ways to deliver customer and investor value.
Disclosure: Futurum Research is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of Futurum Research as a whole.