Dell Technologies (DELL - Free Report) reported second-quarter fiscal 2020 non-GAAP earnings of $1.92 per share that beat the Zacks Consensus Estimate by 30.6%. The figure decreased 11% year over year.
Revenues on a non-GAAP basis fell 3% year over year to $23.45 billion. However, the figure beat the consensus mark by 1%.
Product revenues declined 7% year over year to $16.74 billion. However, services revenues increased 10% year over year to $6 billion.
Orders from the government and education end-markets increased 16% and 24% respectively in the quarter. Dell’s top line benefited from strong demand for online learning and work-from-home.
Recurring revenues, which includes deferred revenue amortization, utility, and as-a-Service delivered as part of Dell on Demand service, were roughly $6 billion, up 15% year over year.
Quarter in Detail
Infrastructure Solutions Group (“ISG”) revenues were down 5% year over year to $8.21 billion.
This year-over-year drop was due to 5% fall in servers and networking revenues that totaled $4.2 billion. High-value servers built for AI and machine-learning workloads saw mid-single-digit orders growth.
Moreover, storage revenues slid 4% year over year to $4.01 billion.
Client Solutions Group (“CSG”) revenues were $11.20 billion, down 5% year over year.
Commercial revenues declined 11% year over year to $8.04 billion. However, consumer revenues were up 18% to $3.16 billion.
In consumer business, Dell witnessed strong double-digit growth across all consumer notebooks and gaming systems, driven by its premium XPS and Alienware brands, with orders up 25%. Notebook orders grew 8% for this Zacks Rank #3 (Hold) company. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Markedly, Dell was ranked third by both Gartner and IDC among all PC vendors, trailing Lenovo (LNVGY - Free Report) and HP (HPQ - Free Report) in their latest second-quarter report. (Read more: PC Sales Soar in Q2 on Increased Demand, Improved Supply Chain)
VMware revenues were $2.91 billion in the reported quarter, up 10% year over year, driven by portfolio strength. Notably, Dell has a majority stake in VMware.
Operating Details
Non-GAAP gross profit decreased 5% year over year to $7.63 billion. Gross margin contracted 100 basis points (bps) year over year to 33%.
Adjusted EBITDA fell 2% year over year to $3.10 billion. Adjusted EBITDA margin expanded 100 bps year over year to 14%.
Non-GAAP operating income was $2.62 billion, down 5% from the year-ago quarter. Operating margin contracted 100 bps year over year to 11%.
ISG operating income fell 7% year over year to $973 million. CSG operating income decreased 27% year over year to $715 million.
VMware’s operating income increased 19% year over year to $894 million.
Balance Sheet and Cash Flow
As of Jul 31, 2020, Dell had $11.22 billion in cash and cash equivalents. The company had undrawn revolver capacity of $5.9 billion.
Debt was $54.5 billion as of Jul 31, 2020. The company paid approximately $3.5 billion of total debt during the second quarter, including $2.2 billion of core debt and $1.25 billion of VMware debt.
Cash flow from operations was $3.33 billion in the reported quarter up 1.6% year over year.
Outlook
Dell expects third-quarter revenues to be seasonally lower, which has typically been flat to down 2% sequentially in previous years.
Dell plans to reduce core debt by approximately $5.5 billion in fiscal 2021.
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Dell Technologies (DELL - Free Report) reported second-quarter fiscal 2020 non-GAAP earnings of $1.92 per share that beat the Zacks Consensus Estimate by 30.6%. The figure decreased 11% year over year.
Revenues on a non-GAAP basis fell 3% year over year to $23.45 billion. However, the figure beat the consensus mark by 1%.
Product revenues declined 7% year over year to $16.74 billion. However, services revenues increased 10% year over year to $6 billion.
Orders from the government and education end-markets increased 16% and 24% respectively in the quarter. Dell’s top line benefited from strong demand for online learning and work-from-home.
Recurring revenues, which includes deferred revenue amortization, utility, and as-a-Service delivered as part of Dell on Demand service, were roughly $6 billion, up 15% year over year.
Quarter in Detail
Infrastructure Solutions Group (“ISG”) revenues were down 5% year over year to $8.21 billion.
This year-over-year drop was due to 5% fall in servers and networking revenues that totaled $4.2 billion. High-value servers built for AI and machine-learning workloads saw mid-single-digit orders growth.
Moreover, storage revenues slid 4% year over year to $4.01 billion.
Client Solutions Group (“CSG”) revenues were $11.20 billion, down 5% year over year.
Commercial revenues declined 11% year over year to $8.04 billion. However, consumer revenues were up 18% to $3.16 billion.
In consumer business, Dell witnessed strong double-digit growth across all consumer notebooks and gaming systems, driven by its premium XPS and Alienware brands, with orders up 25%. Notebook orders grew 8% for this Zacks Rank #3 (Hold) company. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Markedly, Dell was ranked third by both Gartner and IDC among all PC vendors, trailing Lenovo (LNVGY - Free Report) and HP (HPQ - Free Report) in their latest second-quarter report. (Read more: PC Sales Soar in Q2 on Increased Demand, Improved Supply Chain)
VMware revenues were $2.91 billion in the reported quarter, up 10% year over year, driven by portfolio strength. Notably, Dell has a majority stake in VMware.
Operating Details
Non-GAAP gross profit decreased 5% year over year to $7.63 billion. Gross margin contracted 100 basis points (bps) year over year to 33%.
Adjusted EBITDA fell 2% year over year to $3.10 billion. Adjusted EBITDA margin expanded 100 bps year over year to 14%.
Non-GAAP operating income was $2.62 billion, down 5% from the year-ago quarter. Operating margin contracted 100 bps year over year to 11%.
ISG operating income fell 7% year over year to $973 million. CSG operating income decreased 27% year over year to $715 million.
VMware’s operating income increased 19% year over year to $894 million.
Balance Sheet and Cash Flow
As of Jul 31, 2020, Dell had $11.22 billion in cash and cash equivalents. The company had undrawn revolver capacity of $5.9 billion.
Debt was $54.5 billion as of Jul 31, 2020. The company paid approximately $3.5 billion of total debt during the second quarter, including $2.2 billion of core debt and $1.25 billion of VMware debt.
Cash flow from operations was $3.33 billion in the reported quarter up 1.6% year over year.
Outlook
Dell expects third-quarter revenues to be seasonally lower, which has typically been flat to down 2% sequentially in previous years.
Dell plans to reduce core debt by approximately $5.5 billion in fiscal 2021.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through Q2 2020, while the S&P 500 gained an impressive +44.0%, five of our strategies returned +50.9%, +93.8%, +122.2%, +153.0%, and even +156.8%.
This outperformance has not just been a recent phenomenon. From 2000 – Q2 2020, while the S&P averaged +5.5% per year, our top strategies averaged up to +51.7% per year.
See their latest picks free >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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