Thirty-nine weeks: That's how long you'll be waiting for an AI server from Dell

Revenue and net income down, server market flickers, PCs fail to ignite

Dell has told investors that demand for AI servers has surged, but buyers will be forced to wait 39 weeks to get their hands on the hardware due to supply chain constraints.

Speaking on the computing giant's Q3 2024 earnings call, vice chair and COO Jeff Clarke said Dell shipped half a billion dollars worth of AI servers in the quarter, and saw demand nearly double sequentially. The PowerEdge XE9680 – a server sporting a fourth-gen Intel Xeon processor and capable of hosting eight Nvidia GPUs, has become "the fastest ramping solution in Dell history," Clarke boasted.

"Our AI-optimized server backlog nearly doubled versus the end of Q2 with a multibillion-dollar sales pipeline, including increasing interest, across all regions," he added.

Dell managed to triple its pipeline for AI servers in the quarter. But even that effort left the hardware titan with a lead time of 39 weeks.

"We're working now to convert that pipeline into real sales into orders, so we can continue to ship and benefit from this exciting time," Clarke enthused.

Wells Fargo analyst Aaron Rakers pressed Clarke on the 39-week delay, which the Dell exec pinned firmly and solely on Nvidia, before welcoming the advent of more competitors.

"As we look forward into calendar year '24, there's clearly alternatives coming," Clarke conceded. "There's work to be done in those alternatives – software stacks have to be taken care of, resolve the opportunities around them. But there's more options coming.

"Their adoption rate, we'll see. But right now, that multi-billion-dollar pipeline that I referenced, the backlog that we've talked about is Nvidia-based 39-week lead time. We're working our behinds off every day to get more supply."

He later said Dell is "hand-in-mouth for parts." We think he meant "hand-to-mouth" but you get the idea: even mighty Dell, the planet's biggest enterprise hardware player, is struggling to get Nvidia GPUs.

Dell's Q3 revenue landed at $22.3 billion – down ten percent year-over-year. Net income of $1.04 billion was up 317 percent. Operating income of $1.49 billion was down 16 percent.

Accountants do like to look at a business from multiple angles. Dell's view of its numbers was that macro-economic conditions caused its dip.

The Infrastructure Solutions Group – which does servers, storage, and networking kit – accounted for $8.5 billion of revenue, which was flat sequentially and down 12 percent year-over-year. The Group produced $1.1 billion in operating income. Clarke saw "green shoots" in conventional servers, with two quarters of sequential growth and buyers finally looking to add capacity after their spending surge in the early months of the COVID-19 pandemic,

The Client Solutions Group, Dell's PC limb, won revenue of $12.3 billion – $9.8 billion of it from commercial customers.

An expected jump in PC demand during Q3 didn't happen. Clarke explained that it has "pushed out" because big corporate buyers were "cautious with their spending."

"The PC install base continues to age, and there are exciting changes coming to the PC next year, including advances in AI-enabled architectures from Intel, AMD and Windows on Arm, which will help drive a PC refresh cycle," Clarke predicted, describing the market as "ripe for a refresh."

"There'll be 300 million PCs turning four years old next year. That's typically a tipping point for upgrading in commercial. And most of those are notebooks. As everybody was working remote, the notebook mix went up … they're aging in time to refresh."

Two things to note there:

Clarke predicted a return to growth in FY 2025, but put off more detailed guidance for next year until the business reports its Q4 results. ®

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