Dell Technologies (DELL - Free Report) reported second-quarter fiscal 2020 net income of $1.75 billion that surged 39.1% year over year. Non-GAAP earnings were $2.15 per share.
Revenues increased 1.4% year over year to $23.45 billion, driven by double-digit growth in commercial and VMware revenues.
The Zacks Consensus Estimate for earnings and revenues were pegged at $1.20 and $23.11 billion.
Quarter Details
Product revenues (77.2% of revenues) were flat year over year at $18.11 billion. Services revenues (22.4% of revenues) increased 9.7% year over year to $5.26 billion.
Infrastructure Solutions Group (ISG) revenues were down 6.6% year over year to $8.62 billion. The segment accounted for 36.8% of revenues.
The year-over-year decline was due to a 12.3% fall in servers and networking revenues. Storage revenues were flat at $4.18 billion.
During the quarter, the company launched “Dell Technologies Cloud.” Moreover, “VMware Cloud on Dell EMC,” the industry’s first fully managed, on-premises Data Center-as-a-Service, was made available. Further, the company’s “Unity XT” storage solution witnessed strong traction.
Client Solutions Group (CSG) revenues were $11.75 billion, up 5.6% year over year. The segment accounted for 50.1% of revenues.
While Commercial revenues grew almost 12%, Consumer revenues were down 11.5%.
Growth at Commercial revenues was driven by double-digit growth in commercial notebooks, desktops and workstations.
Dell launched new “OptiPlex 7070 Ultra” and “Unified Workspace” in the reported quarter.
VMware revenues were $2.47 billion in the reported quarter, up 12.4% year over year, driven by portfolio strength. Notably, Dell has a majority stake in VMware as well as owns stakes in Pivotal Software and SecureWorks.
Operating Details
Non-GAAP gross profit increased 13% year over year to $7.99 billion. Gross margin expanded 350 basis points (bps) from the year-ago quarter to 34% due to a decline in component costs.
Adjusted EBITDA increased 28.3% year over year to $3.16 billion. Adjusted EBITDA margin expanded 280 bps year over year to 13.5%.
Non-GAAP operating expenses grew 5.7% year over year to $5.24 billion due to continued investment in sales capacity. Moreover, operating expenses, as a percentage of revenues, increased 90 bps year over year to 22.4%.
ISG operating income climbed 3.8% year over year to $1.05 billion. CSG operating income jumped 131.1% year over year to $982 million. VMware operating income increased 3.5% year over year to $762 million.
Non-GAAP operating income was $2.74 billion, up 30.1% from the year-ago quarter. Operating margin expanded 260 bps year over year to 11.7%.
Balance Sheet and Cash Flow
As of Aug 2, 2019, Dell had $9.19 billion in cash and cash equivalents. Long-term debt was $45.97 billion.
The company repaid roughly $2 billion of gross debt in the quarter. Notably, Dell has repaid approximately $17 billion of gross debt over the three years following the EMC transaction's completion. The company is on track to repay approximately $5 billion of gross debt in fiscal 2020.
Cash flow from operations was $3.28 billion in the reported quarter compared with $2.63 billion in the year-ago quarter.
Zacks Rank & A Key Pick
Dell currently carries a Zacks Rank #3 (Hold).
Computer Task Group , with a Zacks Rank #1 (Strong Buy), is a stock worth considering in the same industry. You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Computer Task Group is pegged at 15%.
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Dell Technologies (DELL - Free Report) reported second-quarter fiscal 2020 net income of $1.75 billion that surged 39.1% year over year. Non-GAAP earnings were $2.15 per share.
Revenues increased 1.4% year over year to $23.45 billion, driven by double-digit growth in commercial and VMware revenues.
The Zacks Consensus Estimate for earnings and revenues were pegged at $1.20 and $23.11 billion.
Quarter Details
Product revenues (77.2% of revenues) were flat year over year at $18.11 billion. Services revenues (22.4% of revenues) increased 9.7% year over year to $5.26 billion.
Infrastructure Solutions Group (ISG) revenues were down 6.6% year over year to $8.62 billion. The segment accounted for 36.8% of revenues.
The year-over-year decline was due to a 12.3% fall in servers and networking revenues. Storage revenues were flat at $4.18 billion.
During the quarter, the company launched “Dell Technologies Cloud.” Moreover, “VMware Cloud on Dell EMC,” the industry’s first fully managed, on-premises Data Center-as-a-Service, was made available. Further, the company’s “Unity XT” storage solution witnessed strong traction.
Client Solutions Group (CSG) revenues were $11.75 billion, up 5.6% year over year. The segment accounted for 50.1% of revenues.
While Commercial revenues grew almost 12%, Consumer revenues were down 11.5%.
Growth at Commercial revenues was driven by double-digit growth in commercial notebooks, desktops and workstations.
Dell launched new “OptiPlex 7070 Ultra” and “Unified Workspace” in the reported quarter.
VMware revenues were $2.47 billion in the reported quarter, up 12.4% year over year, driven by portfolio strength. Notably, Dell has a majority stake in VMware as well as owns stakes in Pivotal Software and SecureWorks.
Operating Details
Non-GAAP gross profit increased 13% year over year to $7.99 billion. Gross margin expanded 350 basis points (bps) from the year-ago quarter to 34% due to a decline in component costs.
Adjusted EBITDA increased 28.3% year over year to $3.16 billion. Adjusted EBITDA margin expanded 280 bps year over year to 13.5%.
Non-GAAP operating expenses grew 5.7% year over year to $5.24 billion due to continued investment in sales capacity. Moreover, operating expenses, as a percentage of revenues, increased 90 bps year over year to 22.4%.
ISG operating income climbed 3.8% year over year to $1.05 billion. CSG operating income jumped 131.1% year over year to $982 million. VMware operating income increased 3.5% year over year to $762 million.
Non-GAAP operating income was $2.74 billion, up 30.1% from the year-ago quarter. Operating margin expanded 260 bps year over year to 11.7%.
Balance Sheet and Cash Flow
As of Aug 2, 2019, Dell had $9.19 billion in cash and cash equivalents. Long-term debt was $45.97 billion.
The company repaid roughly $2 billion of gross debt in the quarter. Notably, Dell has repaid approximately $17 billion of gross debt over the three years following the EMC transaction's completion. The company is on track to repay approximately $5 billion of gross debt in fiscal 2020.
Cash flow from operations was $3.28 billion in the reported quarter compared with $2.63 billion in the year-ago quarter.
Zacks Rank & A Key Pick
Dell currently carries a Zacks Rank #3 (Hold).
Computer Task Group , with a Zacks Rank #1 (Strong Buy), is a stock worth considering in the same industry. You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Computer Task Group is pegged at 15%.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.
This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% 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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