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What's in Store for Dell Technologies' (DELL) Q2 Earnings?

·3 min read
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  • DELL

Dell Technologies DELL is set to release second-quarter fiscal 2021 results on Aug 27.

For the quarter, the company expects top-line growth to be lower than the normal 6-8% sequential growth experienced in the previous years.

The Zacks Consensus Estimate for revenues is pegged at $22.46 billion, suggesting a 3.9% decline from the year-ago reported number.

Further, the consensus mark for quarterly earnings has been steady over the past 30 days at $1.44 per share, suggesting a decline of 33% from the year-ago period’s reported figure.

Dell’s earnings beat the Zacks Consensus Estimate in three of the past four quarters and reported in line in one, with the average earnings surprise being 23.2%.

Dell Technologies Inc. Price and EPS Surprise

Dell Technologies Inc. Price and EPS Surprise
Dell Technologies Inc. Price and EPS Surprise

Dell Technologies Inc. price-eps-surprise | Dell Technologies Inc. Quote


Let’s see how things shaped up prior to this announcement.


Factors to Watch

Dell is expected to have benefited from its dominant position in the enterprise IT-solutions market. Strong spending by customers on data centers as well as the communications-infrastructure solutions amid the coronavirus outbreak might have been an upside as well. A surge in remote working and network traffic are key catalysts driving this strategic spending.

The work-and-learn-from-home necessity has stoked demand for cloud services. Furthermore, the coronavirus-led lockdown has increased the usage of online and e-commerce services globally. Therefore, data-center operators are enhancing their capacities to accommodate the demand spike for cloud services. This is expected to have benefited Dell in the to-be-reported quarter.

Ongoing momentum at VMware VMW is also likely to have aided Dell, which has an 81% stake in the former. VMware’s expanding product portfolio is likely to have driven its top line in second-quarter fiscal 2021. Solid adoption of cloud, NSX, vSAN, EUC and security solutions is expected to have driven top-line growth.

Additionally, the second-quarter top line is expected to reflect Dell’s steady share gain in the PC market due to solid demand for commercial PCs driven by coronavirus-led remote working and online-learning wave. Dell was ranked third by both Gartner and IDC among all PC vendors in their latest second-quarter report. (Read More: PC Sales Soar in Q2 on Increased Demand, Improved Supply Chain)

However, despite data-center strength, the overall server-market weakness is expected to have hurt Dell’s top line in the to-be-reported quarter. Moreover, this Zacks Rank #3 (Hold) company’s top-line growth is expected to have suffered from sluggish on-premise hardware spending as both enterprises and small-medium businesses’ customers delayed or scrapped projects. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Moreover, Dell faces stiff competition in the server market from Hewlett Packard Enterprises HPE and International Business Machines IBM, which might have a bearing on the impending quarterly results.

Key Q2 Developments

Markedly, on Jul 15, Dell announced that it is planning to spin off its 81% equity ownership interest at VMware. The deal is expected to not materialize before September 2021.

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VMware, Inc. (VMW) : Free Stock Analysis Report
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