Dell's revenue is growing faster than Applied Materials', but Applied keeps the margins
Dell posted $47.0 billion in quarterly revenue, up 58%. Applied Materials made $9.12 billion, up 25%, at a far higher margin. A Motley Fool chart piece compares the two.
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Dell is growing faster than Applied Materials, and it's about five times bigger by revenue. Applied makes far more on each dollar it sells. A Motley Fool chart comparison published on Nov. 9 lines up eight quarters of sales for both companies, and Dell's line is much steeper.
One correction first. The editor's brief mentioned a "Materials deal", but the Fool piece isn't about a deal. It's a revenue comparison. The only Applied transaction in the news is its planned increase in a stake in Besi, which I cover below.
The numbers side by side
| Latest reported quarter | Applied Materials | Dell Technologies |
|---|---|---|
| Revenue | $9.12 billion (quarter ended July 26) | $47.0 billion (quarter ended July 31) |
| Growth year over year | 25% | 58% |
| Gross margin | 50.3% (GAAP) | 20.9% (per the Fool) |
Applied's figures come from its third-quarter release: record revenue of $9.12 billion, up 25 percent, with a GAAP gross margin of 50.3 percent. Dell's come from its second-quarter release: record revenue of $47.0 billion, up 58% year over year. The 20.9% Dell margin is the Fool's number; I didn't find it in the Dell release text I read.
Where the Fool's framing slips
The article's headline and summary say Applied has "stabilized near $7 billion" in quarterly sales. Its own table says otherwise. It shows Applied at $7.9 billion and then $9.1 billion in the last two quarters.
Applied's filings agree with the table. Revenue was $7.01 billion in the quarter ended January, then a record $7.91 billion in April, then $9.12 billion in July. The CEO called the last one "the highest sequential revenue growth in the company's history." So "stable" describes last year, not now. I'd read the Fool piece as a Dell-versus-Applied growth comparison and ignore the stable label.
What's driving Dell
Dell's jump is mostly AI servers. Per the company, it booked a record $60.9 billion in AI server orders, recognized $16.4 billion in AI server revenue and ended the quarter with a $95 billion backlog. CNBC reported that Dell now expects $74 billion in AI-optimized server sales for the fiscal year, up 200%. The full-year revenue outlook rose by $25 billion to $192 billion.
Two caveats apply. A backlog isn't revenue yet: MLQ noted that Dell didn't disclose a schedule for recognizing it. And operating cash flow fell 13% to $2.225 billion in the same quarter. Dell is growing fast, but the cash isn't keeping pace.
What's driving Applied
Applied sells the tools that make the chips, so it gets paid before the servers ship. Its CFO said it expects continued strong revenue growth in the second half of the calendar year, particularly in DRAM, leading-edge foundry-logic and advanced packaging. The next test is close. Yahoo Finance flagged a Nov. 12 earnings report, with fiscal fourth-quarter revenue guided to between $9.75 billion and $10.75 billion.
The Besi stake: who pays, who gains
This is the one Applied deal on the table. On Oct. 26, Applied said it's raising its investment in BE Semiconductor Industries to approximately 20 percent of Besi's outstanding shares. Applied pays, through an accelerated share purchase. The release I read doesn't give a price, so I can't say what it costs.
Besi gains a bigger shareholder. Investing.com reported its shares jumped more than 8% on the news, and that Applied's stake was about 9% before. Applied gets closer access to hybrid bonding, a packaging technique used in AI chips. The deal isn't done: delivery of the shares depends on the U.S. antitrust waiting period under the HSR Act. Applied also doesn't intend to go beyond about 20 percent or seek a Besi board seat.
The stakes for investors
If you only care about speed, Dell wins this comparison. If you care about what the company keeps, Applied's roughly 50% gross margin against Dell's roughly 21% is the bigger story. I think that margin gap is the more useful number, since Dell has to buy much of what it assembles.
Honestly, I'd wait for Applied's Nov. 12 report before reading too much into either line. Applied needs to land inside its guided range to show the July jump wasn't a one-off. Dell, as far as I can tell, has to turn that backlog into shipments. A Motley Fool column carried by the Globe and Mail worked out that hitting $74 billion means roughly $21 billion of AI server revenue a quarter in the second half. That's a big step up from $16.4 billion.
This isn't investment advice, and the Fool's author discloses he holds both stocks. The chart piece uses data as of Nov. 2, so it won't reflect Applied's results later this week.
