Dell Technologies (DELL Quick QuoteDELL - Free Report) reported second-quarter fiscal 2021 non-GAAP earnings of $2.24 per share that beat the Zacks Consensus Estimate by 9.3% and increased 17% year over year.

Revenues, on a non-GAAP basis, increased 15% year over year to $26.13 billion and beat the consensus mark by 3%.

Product revenues increased 16% year over year to $19.39 billion. Services revenues increased 12% year over year to $6.73 billion.

Quarter in Detail

Infrastructure Solutions Group (“ISG”) revenues were up 3% year over year to $8.43 billion.

This year-over-year growth was due to 6% growth in servers and networking revenues that totaled $4.46 billion. Storage revenues slid 1% year over year to $3.97 billion.

Dell Technologies Inc. Price, Consensus and EPS Surprise

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In the reported quarter Dell Launched the APEX portfolio of services. The company introduced Dell EMC VxRail hyperconverged infrastructure or HCI systems with enhanced software and performance, based on recently launched Dell EMC PowerEdge servers.

Dell also started shipping six of its latest-generation Dell EMC PowerEdge servers, including the ruggedized systems built for challenging environments at the edge.

Client Solutions Group (“CSG”) revenues were $14.26 billion, up 27% year over year. Commercial revenues soared 32% year over year to $10.6billion. Consumer revenues were up 17% to $3.7 billion.

In consumer business, Dell witnessed strong growth from Latitude and Precision systems. This Zacks Rank #3 (Hold) company introduced the new Dell UltraSharp Webcam, an external 4K webcam ideal for a superb video conferencing experience. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Dell launched the high-performance Alienware X-Series – a new mobile gaming family with its thinnest available 15” and 17” gaming laptops – featuring exclusive Cryo-Tech innovations in the reported quarter.

Markedly, Dell was ranked third by both Gartner and IDC among all PC vendors, trailing Lenovo (LNVGY Quick QuoteLNVGY - Free Report) and HP (HPQ Quick QuoteHPQ - Free Report) in their latest second-quarter report.

VMware revenues were $3.15 billion in the reported quarter, up 8% year over year, driven by portfolio strength.

Operating Details

Non-GAAP gross profit increased 9% year over year to $8.34 billion. Gross margin contracted 100 basis points (bps) year over year to 32%.

Adjusted EBITDA increased 7% year over year to $3.33 billion. Adjusted EBITDA margin contracted 100 bps year over year to 13%.

Non-GAAP operating income was $2.81 billion, up 7% from the year-ago quarter. Operating margin was unchanged year over year to 11%.

ISG operating income was unchanged year over year at $970 million. However, CSG operating income jumped 39% year over year to $995 million.

VMware’s operating income decreased 5% year over year to $849 million.

Balance Sheet and Cash Flow

As of Jul 30, 2021, Dell had $11.72 billion in cash and cash equivalents.

Debt was $43.59 billion as of Jul 30, 2021. The company paid down $5.5 billion of debt year to date, including the final $1 billion of margin loan.

Core leverage ratio, as of second quarter, is approximately 2.2 times as Dell continues to make progress toward its long-term target of 1.5 times.

Cash flow from operations was $1.73 billion in the reported quarter.

Guidance

Dell expects third-quarter revenues to increase in the mid-to-high teens range on a year-over-year basis and experience above-normal sequential growth. The company expects strong CSG results, with revenues up in high-single-digit, sequentially. ISG revenues are expected to grow low-single-digit, sequentially.