DELL Earnings Justifying Stock Rally? AI Growth & Backlog Delivery Critiacal

**SPEAKER_1** (0:02)
Looking at some of the infrastructure names this morning, as Alex pointed out, it's a down day for a lot of the AI trade, Dell included. Obviously, that's going to be reporting later. HP is down two, Corwee is down 3.4, Supermicro is down over 2% as well. But we do have Dell reporting later today. So let's go inside out and preview that report. Joining us now to do that is Ryan Shrout, who is Futurum's president of Signal65. Ryan, nice to see you again.
All right, what are we expecting from Dell tonight? I mean, what have they got to say? Are we going to keep seeing AI demand offsetting the memory pressures?

**Ryan Shrout** (0:38)
Yeah, it does feel like that's going to be the case. I think memory pricing and pressure has really been the bare case for a lot of this from the infrastructure names for a long time. But I think if you really look at the demand curve that we continue to see increasing, the Nvidia earnings gave everybody a very good preview of what we could expect there.
I do think Dell is in a very good position to figure out a way to offset that. They're the largest of those OEM system integrators in this space and they have a lot more pricing power than some of the smaller options.

**SPEAKER_1** (1:12)
Okay.
Is it a bit of a similar story to what we heard with Lenovo? Is it the fact that some of these companies, they have the AI server business that's different to an HPQ, which suffered last week on higher memory input costs, that's kind of saving the day here? And how long do you think that can last?

**Ryan Shrout** (1:31)
I do think them owning the server business outright is a big advantage. I think as more of these non-hyperscaler companies begin to integrate a lot of this technology, whether buying this infrastructure or leasing this infrastructure very directly, it gives an advantage to somebody like Dell, right? There's big improvements that we're seeing, even in the testing we're doing with our Pinnacle benchmark about how much benefit you can get, performance and real action per dollar you spend when doing on-prem versus the Cloud hyperscalers. I think Dell is going to be able to lean into that much more heavily in the next quarter.

**SPEAKER_1** (2:09)
What about the backlog? How much of that would you like to see that is actually translating into sales at this point?

**Ryan Shrout** (2:18)
Well, obviously, as much as we can, I think that's all limited by what the supply constraints are. Memory is still the biggest one. I talked to a lot of customers and a lot of people in the industry that talk about they have CPUs, they have GPUs, and memory is that constraint. And even listening to some of the language that Jeff Clark has used from Dell, he's talking about demand is accelerating meaningfully and outpacing supply. So I still continue to believe that that backlog will probably grow over the next quarter when they talk to us tonight.

**SPEAKER_1** (2:51)
What metric are you looking out for the most?

**Ryan Shrout** (2:55)
I want to see, so I would say the $60 billion forecast that they have for their data center revenue seems low. And I think you're already seeing some of the analysts in the market kind of creep that up a little bit. I think we've seen $65 billion as kind of one of the consensus numbers.
I think based on what we've seen out of NVIDIA just from last week, that that number should go up pretty significantly.

**SPEAKER_1** (3:21)
Gross margins, I mean, what would you like to see on that?

**Ryan Shrout** (3:27)
Any improvement over what they had last quarter would be good. I know they've been compressed a little bit. I think they're in the 17 percent range, which again, as a system builder in OEM, that is pressured by memory costs, that's pretty tough to do.
But I think Dell has the advantage of selling a lot of attach to these server infrastructure deployments, a lot of networking, a lot of storage, a lot of services that can help improve those margins quite a bit. So at least a few points I think would be on the table.

**SPEAKER_1** (3:56)
I mean, this is up 250 percent year to date. I mean, how much of this has been priced in? The good news, because obviously we've set a pretty high bar this time around.

**Ryan Shrout** (4:06)
You look at a lot of these infrastructure names, even the NVIDIAs of the world variety, and you start to wonder what has been priced in and what hasn't. I think it's all about, we expect a beat and a raise. It's the dramatic nature of whatever the raise happens to be. I still think there's room for this to increase, just like I think we saw a really good day for NVIDIA after its earnings announcements. Today is a little bit of an exception, obviously, everything kind of in the red, but I would expect Dell to still have quite a bit of room to grow.