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Dell (NR/BBB/BBB) Q1 Results; Cash Flow Weaker, Leverage Steady

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  • Equity moves driven by extremely high expectations; don’t see this as a big credit mover given healthy underlying fundamentals.
  • Q1 revenue close to 3% ahead of consensus at +6.6% YoY driven by a 22% increase in Infrastructure Solutions and flat Client Solutions revenue with AI server sales doubling QoQ. Q1 op income was -14% YoY on flat Infrastructure Solutions and an 18% drop in Client Solutions.
  • CFO of USD 1bn was -41% YoY but still gives a LTM figure of USD 7.9bn. adj-FCF of USD 0.6bn was -9% YoY to give a LTM figure of USD 5.5bn. Capital returns of USD 1.1bn in line with USD 1.1bn in Q423 and USD 1bn in Q323. Chosen LT core leverage metric flat to FY23 at 1.5x.
  • Q2 revenue seen +5% YoY at the midpoint vs. FY25 guidance of +8% at the midpoint (FY25 BBG consensus of +7.9%). FY25 gross margin to decline by 150bps on cost inflation and higher spending on AI-optimised servers.
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  • Equity moves driven by extremely high expectations; don’t see this as a big credit mover given healthy underlying fundamentals.
  • Q1 revenue close to 3% ahead of consensus at +6.6% YoY driven by a 22% increase in Infrastructure Solutions and flat Client Solutions revenue with AI server sales doubling QoQ. Q1 op income was -14% YoY on flat Infrastructure Solutions and an 18% drop in Client Solutions.
  • CFO of USD 1bn was -41% YoY but still gives a LTM figure of USD 7.9bn. adj-FCF of USD 0.6bn was -9% YoY to give a LTM figure of USD 5.5bn. Capital returns of USD 1.1bn in line with USD 1.1bn in Q423 and USD 1bn in Q323. Chosen LT core leverage metric flat to FY23 at 1.5x.
  • Q2 revenue seen +5% YoY at the midpoint vs. FY25 guidance of +8% at the midpoint (FY25 BBG consensus of +7.9%). FY25 gross margin to decline by 150bps on cost inflation and higher spending on AI-optimised servers.