Talking Earningspalooza Salesforce, HPE, MongoDB, HP, Pure Storage, Broadcom, Cisco, Dell Technologies

By Patrick Moorhead - June 6, 2023

On this episode of The Six Five Webcast, hosts Patrick Moorhead and Daniel Newman discuss the tech news stories that made headlines this week. The handpicked topics for this week are:

    1. Salesforce Q1 Earnings
    2. HPE Q2 Earnings
    3. MongoDB Q1 Earnings
    4. HP Q2 Earnings
    5. Pure Storage Q1 Earnings
    6. Broadcom Q2 Earnings
    7. Cisco Q3 Earnings
    8. Dell Technologies Q1 Earnings

For a deeper dive into each topic, please click on the links above. Be sure to subscribe to The Six Five Webcast so you never miss an episode.

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Disclaimer: The Six Five Webcast is for information and entertainment purposes only. Over the course of this webcast, we may talk about companies that are publicly traded and we may even reference that fact and their equity share price, but please do not take anything that we say as a recommendation about what you should do with your investment dollars. We are not investment advisors and we ask that you do not treat us as such.


Pat Moorhead: Hi, this is Pat Moorhead, and we are back for an incredible episode 170 of the Six Five Podcast. Dan, it’s hard to believe, 170. And I think there might even have been a few more, but this is super exciting. Good to see you, buddy.

Daniel Newman: It’s 170 of our weekly pod. That doesn’t count for the thousands of our on the roads, in the booth, Six Five Summit. By the way, do we have a Six Five Summit coming up or something? I heard a rumor that we have a Six Five Summit.

Pat Moorhead: I heard something like that and I’m hearing that there’s a going to be 60 speakers from 40 companies, 20-25 CEOs. I can’t even keep track. But no, we’re really happy. The support has been incredible. We really appreciate our sponsors. We really appreciate all of our viewers. And we’re going to be rocking. Literally June 6th next Monday, we’re going to be rocking it. We’re lighting this candle. Three days of action across all the way from chips to SaaS, and everything in between. And here’s the great part. It’s free, ad free, I think, if you’ve got the right connections to YouTube. But just sign up, check it out. Anyway, super excited today. Dan, what is today? It’s earnings palooza. Forget the Six Five, we’re going to be doing the eight three or the eight four. All right?

Daniel Newman: Well, we’re not going to do that. We never do shorter. But I think we do have a stop in 53 minutes. So with eight topics, 53 minutes, that gives us about six actual minutes per topic. But I’ve never seen us do anything faster. For whatever reason, I don’t know if it’s part of being an analyst, and I’m doing it right now, the need to drone on to hear ourselves talk when we could just keep things progressing, I’m just filling the space, buddy. Filling the space.

Pat Moorhead: I know. Let’s dive in. Let’s dive in. We’re talking Salesforce, HPE, MongoDB, HP Inc, Pure Storage, Broadcom, Cisco, Dell Technologies, earnings, one fell swoop. We are going to start with Salesforce’s Q1 earnings. Dan, what is going on at the force?

Daniel Newman: Hey, do you mind if I do a quick disclaimer just before I start talking about the stock? This show is for information entertainment purposes only, while anything I would say or Patrick says cannot be looked at as investment advice. Please just enjoy the content, enjoy our perspectives and know that we’re right, but don’t invest based on anything we say. Okay, there we go.

So look, I guess there’s the question of did they beat or did they not beat? I think on the lowered guidance, it was a good quarter for Salesforce, but of course the market was pouting a little bit because it was the slowest growth that the company had I think on record, I think is the actual data point here. But let’s look at what we’re up against. We’re up against tons of companies laying off lots of people and despite the stronger than expected job market that we’ve heard about, those aren’t information jobs. Those aren’t the kinds of jobs that people are using Salesforce. Those are a different set and archetype. So lots of companies, the big tech companies, all these laps means less seats for SaaS. So Salesforce is working against that sort of macroeconomic headwind to grow the business, and yet they still grew the business 11%. They also froze prices, paying attention to customer sentiment. And overall the company is still on a good track.

But let’s be really clear what this quarter was about. This quarter was about Marc Benioff getting on the record and coming out and telling a story about AI. That’s what this quarter was all about. He came out and he talked about we have Salesforce GPT, you have Tableau GPT, you have Slack GPT. This wave going forward is going to be it’s time for Salesforce to get on the record to contest that it’s not just Google and Microsoft, that they have a real play to be made and that this GPT generative AI capability is going to be meaningful for the business long term.

Because really right now with these kind of macro headwinds, with slowdowns, with prices being frozen, with the overall market, this is the time for the company to sort of reboot. It’s made some important cost cuts, it was able to deliver on its earnings. But what it does need to do now is it needs to drive growth and it needs to convince the market that it’s got the answers for all this AI technology. Pat, look, I think we have to consider how businesses are going to run. Salesforce is the most pervasive CRM platform on the planet. In terms of the broader Slack integration, I’ve been saying for a long time, there’s some room to grow. They’ve not done a good enough job of making Slack the front end business digital headquarters that has been promised. I think that’s a big opportunity for low-code no-code, for optimization in workflow, for better business decision making and data visibility. And I think of course Tableau can help that.

But the GPT thing, the fact that we’re going to move from complex, multi-screen querying, lots of custom design to being able to ping a prompt to be able to get data out of the system is what Marc Benioff was indicating in his post earnings call, the earnings call. And that was what I got most excited about. So my take is it’s the AI story now. This has been the quarter of AI. The growth has slowed, they need to turn that back up. But AI is going to be the accelerator for this. So not too much on the numbers Pat because it was kind of business as usual, but the slower growth concerned people, but AI was the story.

Pat Moorhead: Yeah, good breakdown. People kind of forget they beat on the top and they beat on the bottom, right? Very good profitability, which I think is a good testament to some of the transformation that Benioff is putting in place. And by the way, cleaning house of many of its senior executives, or maybe the other way to look at it is they just didn’t want to hang out and be part of this transition. There is definitely a sediment, and Dan, I brought this up years ago, we kind of got used to 20% growth in and out every quarter. We’re down to single digit, maybe 10% right now. And investors are wondering if it’s a growth play. You dip below that 20% day in, day out and that’s the issue. Now they had 10% growth. I think it’s too early though to call whether it is just the economy or being self-inflicted. Some of the biggest areas of decline, I mean Q1 of ’23 Slack, this platform and other, 58% growth. It was 12% growth this quarter. A year ago in the Americas, 21% growth. In this quarter, 10%. Those are absolutely dramatic slowdowns.

One of the things that I appreciated you adding is if you look, who’s being laid off now, do you know who they are? They’re marketing people and salespeople. Now I know that the days of Salesforce being a CRM company, even though it’s their ticker, they’ve grown a lot outside of that, right? With MuleSoft, with Tableau and Slack and others, but some of their core users basically got laid off. Now, I don’t know if those were decision makers or not, but the consumption and the sales have essentially been cut in half. Then if I look at the comparison in growth like I showed out, I think it’s pretty staggering. I think what the street wants to see is they want to see numbers based on the AI talk. I am very impressed with what Salesforce has rolled out throughout. I mean adding GPT to basically everything, everything’s not GA yet, but some of it is, and these are exactly the type of applications that you expect generative AI to add enterprise value.

So I’m optimistic about how they’re doing and I look forward to learning more about how their customers are using these AI integrations. And by the way, are they making more money? Are they taking market share? It’s one thing, and we’ve got a couple stories here of companies who talked AI and their stocks just were flat, right? Because they couldn’t show growth, EPS, prices, things like that.

Daniel Newman: So, Pat, and I know we got to keep moving, but the demarcation between winners and losers on AI have been the companies that have been able to discern the value of the content versus just needing to add AI as a, “Hey, this is something we’re going to put in our current product for the same price.” So anyways, that’s what I’m not sure about is, does Salesforce charge more? Does it actually yield more revenue or is this kind of table stakes?

Pat Moorhead: Yeah, or to protect share, protecting share doesn’t get anybody excited in the street. So yeah, more research to go. Let’s bounce to HPE. And I can recall my own number on this one. HPE beat on EPS by a pretty good margin, 6%. They missed on revenue, which is primarily that compute line there. Stock took a little bit of a tumble but is slowly moving back. So I want to put a focus on two things. First of all, intelligent edge, 50% year-on-year growth, 56% in constant currency. That is insane. I don’t think I’ve seen a big breakout from HPE that big ever. And by the way, that’s before the integration of the 5G and the security acquisitions that they made for the edge. Absolutely stunning. I was also impressed, record gross margin percent, they raised full year EPS guide. It’s too bad that the street kind of yawned at that. Bookings, right? Hey, how durable is this? 1.5X the normal rate.

And you remember right when they were having a hard time getting supply, that was 2X the normal rate of bookings were. HPE GreenLake hit a big milestone, $10 billion, and for this quarter, $1 billion of ARR. Little focus on HPC and AI, although it wasn’t 56%, that group went up 22%. And in the call, Antonio called out that the AI portion of that grew even further. And I am really, really excited about what HPE Discover brings at the table. HPE has some real high performance computing gems with Cray, the way that they do interconnects, the way that they do cooling. And then when you layer on top of that GreenLake, I’m excited about what’s coming up to show.

Daniel Newman: Yeah, pat, I think you hit it on the head. There’s some lumpy business with things like server that tends to cause some gyrations in the overall performance of the company. I think the ARR growth in the mid double digits continues to be the strength of the company. Its pivot to GreenLake continues to be sort of its core messaging. Can you put everybody on as a service platform on-prem to kind of take advantage of this opportunity of hybrid cloud? I thought it was interesting when we talked about the company Slingshot Fabric. It’s got a story around AI for data fabric that I don’t think a lot of people are talking about. And I think they’ve made a number of acquisitions in data, data management, storage related and AI ops over the last few years. And I think there’s going to be a chance for HPE to get that story in market and more appreciated, because I think things like that tend to get lost inside of the broader HPE portfolio.

The HPC business showed a lot of strength and resilience and I think in our conversation, you and I had the chance to talk to CEO Antonio Neri about the overall state of the business and you felt a lot of optimism on his end. It was a pretty well managed quarter. They managed the margins pretty well. I think it’s another company who are really helping to explain to the market the value of AI in terms of accelerating its growth. And that’s what I think where everyone’s at right now, is it’s kind of this winding and bend in the road is there’s the people that are continuing on a path knowing that AI has to be baked into a product, but there’s not really a clear, “How does this help us make more money?” And then there’s the companies that are really clearly discerning, “This is how AI is going to help the business make more money.” And people are getting really excited about that.

But the diversification of the business is looking pretty good. It seemed like they maintained share in most of the areas where they were focused. But they’re a story of subscription. They’re a story of consumption. That’s been the pivot. It’s four years now into the pivot. The era of rising above a billion and people want to see that number keep growing. Is it being fully appreciated and valued? I still don’t think so. But I do think that as the crawl in the portfolio and that area continues to grow, the company is continuing to win customers and that will eventually enable the value of the business to shine. So I’ll pause there and we’ll keep going.

Pat Moorhead: Yeah, let’s dive into MongoDB. They absolutely crushed it. What’s going on in Mongo?

Daniel Newman: MonsterDB, I mean MongoDB. Monster quarter. Look, I like that the company had a huge number, a huge growth in its big customer base. It saw revenues grow almost 30%. Another company that’s been able to tell an AI story. The operating database that enables you to build apps and take advantage of all this app data. So the kind of Uber experiences cannot be built without MongoDB. The company’s still generating losses in terms of on an earnings basis, but they’re growing faster than people are expecting. They’re narrowing losses substantially on a year-over-year basis. Like I said, they’re adding customers at a really good clip. And Pat, I think they’re cementing themselves in the role that they have to play. Look, a developer data platform is going to be critical. They basically are able to come out and say, “Look, the AI breakthroughs are basically where software development is going to now start to shine.”

So embedding AI deeply in the applications, the capabilities of AI are going to require a platform like what MongoDB offers for people to actually build a applications that we’re going to use where we’re going to be able to utilize and take advantage. So you know, also saw, Pat, some fairly strong growth in cloud. The Atlas business, which is the cloud business, is now 40% up year-on-year, 65% of revenue. So it’s creating a pretty strong overall part of the revenue base which people want to see, right? Moving to the modern ARR, which is what everyone’s focused on. And Pat, listen, 43,100 customers now paying MongoDB. So these are good numbers. You saw the good growth, narrowing losses, a strong AI story. They’re in the middle of the right opportunity at the right time, and I think the street’s rewarding them. But this is just continued good behavior. This isn’t some breakthrough. This is between you and me, what I expected.

Pat Moorhead: Yeah, this is a great example of a company that puts together an offering, database offering, that is operational in nature. It’s what you would put some of your most important applications behind and then scaling it across to the multi-cloud. And obviously they’ve got a big presence inside of AWS. And all the times we use throwaway lines like, “Data is the new oil, and companies being able to mine and leverage.” I mean, companies like MongoDB are right at the center. I need to do a little bit more research to understand their play in AI, but it’s very straightforward to me. You can’t have AI without data. And different levels of AI have different sizes and levels of big data. But literally whenever you have AI, whether it’s ML, DL, generative AI or analytics based AI, you have to have a solid data platform. And that’s exactly where Mongo sits is having a very strong developer data platform that is really going out to developers to go out there, create, transform, disrupt industries out there. And Mongo’s got a lot of customers. 40,000 customers across a hundred different countries. And the platform’s been downloaded 365 million times. So just incredible amount of scale. All right, let’s pop into HP Inc.

Hey, we’re doing pretty well on time, Dan.

Daniel Newman: Oh, well you know what, Pat, this is actually a real pressure cooker for you and I to see if we can do this. When we’ve done our 12 fives or whatever we did the doubles, it took us like three hours.

Pat Moorhead: So company missed on top line, beat on EPS. A couple of things really stood out for me though. First of all, beating on profit at a time that demand is plummeting is really hard exercise. And I give credit to Enrique and company, which by the way, I appreciated talking to him on earnings day to kind of break this down a little bit. So operational excellence, this is hard to do when demand is plummeting to beat on profits.

So other things that I gleaned from the report in the call, sell out outperformed sell in. And what does that say is that they have good demand. And in the end, what is it about the PC and the printer market that is, at the end of the day, if end user demand has plummeted and, listen, it’s nowhere near where it was a year ago because we’re back to work, we’re spending money on different things. I’m not going to use that word because I don’t want to be monitor here, but yeah, a good demand. For the first time in a long time, the company also talked about gaining share, right? Gain share year on year, quarter on quarter. And not just low end consumer stuff, but they’re saying that over the past year they’ve gained 2.5 points of commercial market share.

The biggest question that came up, and it was funny, I felt pretty good about myself, but the question I had asked Enrique was the first question he got on the call and that was about, “Hey, why do you feel so good? Why do you have confidence in the second half of ’23?” It’s very basic, right? Channel reductions are to the point where you just don’t have a lot of channel, slightly elevated, but they’re burning it off and second half in the PC market since the dawn of time has always been bigger in the second half than the first half. So I don’t feel like Antonio is necessarily saying that he was going to beat these expectations, even though he did raise a guidance or there was something phenomenal in the market. I think he was saying, “Yeah, second half is going to look better than the first half.” In the second half you have back to school, you have holiday around the globe, and typically the second half is always 60 to 70% of the entire year.

Daniel Newman: So yeah, just didn’t know. I was waiting for you to breathe out, so I knew that was all me. All right, so listen, the overall state of the PC will continue to be a huge weight on HPA and they have diversified the business more, especially with some of the hybrid work, the poly acquisition. And I do think there is a fairly significant on device AI wave that will create another buying cycle for PCs. But I do think we’re still probably a few quarters out. That killer app is not as well understood yet as for instance, ChatGPT, and we just don’t know exactly what that on device thing will be. But we all seem to have a sense that that’s going to happen. I think it’s about managing business. One of the more encouraging things was seeing inventory levels come back under control, which gave an indication that we’re going to start to see a possibility for a bottoming and a growth.

And of course those are things that the market tends to have to look at is a lot of this has been kind of spreadsheet driven, Pat. It’s been the math of, “Where does things sit in the spreadsheet? Are they burning through inventory?” We’ve seen last few quarters when we’ve talked about Qualcomm, it’s been, “Oh, the inventory burn off didn’t happen as much as they thought. Another quarter here, we’re going to wait one more quarter to see if it happened.” They also guided up a little bit. So they actually had a slightly more encouraging guide, which again means are we kind of at a bit of a turning point? Again, I don’t think we’re out of any weeds yet. There’s still so many macro factors that we aren’t weighing in. But I do think that that’s encouraging because again, you can always run your business better. And so it seems that they’re continuing to improve how they run their business. They had a lot of early on issues with supply chain, but seemingly have gotten that under control as supply chains have eased and hopefully longer term that means good things for the company. So that’s probably about it for me. Again, kind of biz as usual, given the macro circumstances, Pat.

Pat Moorhead: Good stuff, man. Hey, let’s jump into something very different from PCs and printers and workforce stuff. And that is Pure Storage. I mean Pure Storage nailed it. Their stock was up just gigantic. It was up, I don’t know, 15, 20%. And this is one-

Daniel Newman: Bigly, was it up bigly, Pat?

Pat Moorhead: It was. And I got to tell you, I just love what this team is doing at Pure because they focused on software and they focused on the experience. And in many cases in their architecture they came up with bladed architecture that allows you to kind of slot in what’s good and what’s not. Are you giving me the sign?

Daniel Newman: Well, no, I was going to kick this one off, but you can do it.

Pat Moorhead: Oh my gosh.

Daniel Newman: It’s all good. It’s all good. Look, I’ll jump in and we’ll kick it back to you. But we’re just off on the math, it’s an eight five.

Pat Moorhead: Sorry about that.

Daniel Newman: But the bottom line, Pat, is you hit it on the head, shared my sentiment. Look, revenue actually slowed. But again, against the guide, the company did extremely well. Huge beat on the bottom line expectation, solidly hit the revenue target, Pat. But 30%, almost 30% growth on ARR. Their net promoter score, which is something they’ve focused on for a long time, is their customers love working with Pure Storage, 81.4. It’s like distantly farther.

Pat Moorhead: Like iPhone or something.

Daniel Newman: They are a customer obsessed culture and that’s really yielding them a lot of value. And Pat, every quarter they continue to knock off pieces of the Fortune 500. So over the last, they went from 49% two quarters of ago to 54% last quarter to 58%. So over the next five or six quarters, this company could very realistically have 70, 75% of the Fortune 500 using Pure Storage. So that’s been a big talking point for them. They’re doing it right. They’re making the move to the cloud, they’re playing in the multi-cloud era with what they’re doing with containers and Portworx.

But this is a company, like I said, that’s really just been hyper focused on happy customers. And in the world that we’re in, you cannot understate the value of being customer obsessed. So as I watched their earnings, I listened through, you and I regularly talked to Charlie Giancarlo, their CEO, this company is just doing it right quarter on quarter on quarter. And this was another really, really great result for the company. Like I said, despite slowing revenue, they’re outperforming expectations and keeping their customers happy in the process. So strong numbers, strong results. And Pat, as all this AI stuff kicks off, by the way, they had that kind of story, storage is going to also be a beneficiary, especially any storage and technology that can make that data more accessible for inference.

Pat Moorhead: Yeah, everybody likes to talk about, “It’s the CPU and the GPU game.” Which it is, it’s big. But when you look at you can’t do any of that without storage and some incredible networking, as we talked about with Marvell and we’re going to talk about with Broadcom coming up. So 29% growth in subscription ARR, record subscriptions with Evergreen and One. Flashblade//E, which by the way, Charlie talked a lot on the call about literally the hard drive is dead. Now I’ve heard that the hard drive was dead for 20 years and it keeps kicking out with some of their new technologies. But with the type of algorithms they’ve put in to make SLC last longer, this is as good a shot as possible. Now Charlie talked a lot on the call about AI, but the reason the stock flew was not because he talked about AI, but it’s because he knocked the ball off the covers.

But I knew very early on with a large social media company, essentially anything that you had to do fast, that was high performance computing, they leaned on with them. Who was the early storage partner with NVIDIA on DGX? Oh, it was Pure. Right on the call, Charlie said they support more than 10 autonomous vehicle development companies doing machine learning. Okay, they did come out and cite Meta, okay? Meta and their AI research super cluster that I wrote about on Forbes where they’re connecting 160,000 GPU. So good to see them driving across there.

The irony here is they’re hitting low cost with E and they’re hitting highest performance with their highest performance products. And that’s hard to do, man. So if anything, drive scale. Company did not disappoint on its crawl charts. I love its crawl charts. Customers up to 11,500 and they showed four years of crawl. They showed three years of crawl and RPOs, which of course is up and to the right. And of course subscription ARR up and to the right, and they showed three years of that. So a company that is not afraid to share details, it’s good to see. Dan, let’s move on. Sorry for hijacking that one. Let’s move on to Broadcom. You can hijack this one if you’d like.

Daniel Newman: No, no, I was just actually sharing your tweet because it was so good. Just so much data goodness in it. And I’m like, “This is good.” Finger point down. And now I’ll get all the credit with the retweets.

Pat Moorhead: Exactly. There we go. So Broadcom, what you come to expect from Broadcom, beat, beat, raise. The beat was small. The raise was a 5% raise. I mean that is just absolutely bonkers in this environment. That 8% revenue growth overall was driven by next generation from hyperscalers. What could this be? Well, what’s incredible about this, Daniel, is that most people in the hyperscaler market are down. We saw Intel, we saw AMD from a processor standpoint. So what could this mean? How about AI networking? So overall semis were up 9%, which is incredible. Software is up 3%, which is really in line with those single digit gross that the company wants to bring out.

But here was the thing, I mean you have to talk about AI now on your call. And net-net what they said is, “Hey, in 2022, 10% of our revenue was related to AI.” And they said that by 2024, 25% will be related to AI. I think the market got a little confused or Broadcom wasn’t clear enough on whether that was incremental business. So it kind of just yawned it off. Not yawned off, actually the company’s up 3% today. It was weird. Up four, down, going into pre it was negative, in negative territory. But it looks like people have figured this out. So VMware still expecting a close to fiscal, right? Closed already in Australia, Brazil, Canada, South Africa, Taiwan, and foreign control clearance in all jurisdictions. This baby is going through, VMware is going through.

Daniel Newman: That’s all I wanted to really talk about. I mean you and I, in case anybody missed it, we were in San Jose last week, Santa Clara. We had a chance to sit down with Hock Tan. And you know what, I’ll just leave it to your imagination that there’ll be a conversation next week where you’ll get the skinny and you’ll get the updates on what’s going on there. But Pat, it’s kind of like that rap song, All I Do is Win. That seems to be kind of his MO. I’m not even saying this cynically. Look, you can argue with his methods, you can argue with the way they buy things and how they then manage customers. We can talk and we can have that debate. But talk about well run.

So when you look at earnings, you talk about well run. Well run means you have a good pulse on the business, you manage to the street, you continuously beat, you raise, you return value to shareholder. And that is what he does every single quarter. But Pat, what a moment. I mean look, there’s going to be some types of concessions. I can’t say exactly what they are. The way Broadcom software and hardware maybe split or they’re going to run as two different businesses or division. Something’s going to happen. I don’t know exactly what it’ll look like, but what I can tell you is this is, you just said it probably the best and most eloquent way possible.

Pat Moorhead: Aw, bestie.

Daniel Newman: The deal’s going through. It’s going through. Write your complaints, tweet about it. And here’s the thing, Pat, I’m going to make a prediction that some people probably won’t agree with. The business will grow faster now. The business VMware will grow substantially faster and return more value to shareholders than it’s been able to return running the way it’s been running over the last several years. That will not take very long. He will go in, he will figure out how to optimize it. And I think the market will be surprised that just like CA has been a very, very strong run business and generated a lot more value than it was independently, we’re going to see the same from VMware.

Pat Moorhead: Good stuff. Dan. Let’s dive into Cisco now. They announced a couple of weeks back. And I’m glad that they’re part of Earnings Palooza.

Daniel Newman: Yeah buddy, listen, I had to go back and review. There’s been so many earnings since their earnings. But look, the company, it delivered record revenue. It delivered on the high end of earnings, actually above, at $1 a share. They generated tons of cashflow this quarter. They were up 43% at 5.2 billion and returned almost $3 billion to shareholders. So another very well run company. Pat, what I’ve been watching for with Cisco is, look, this is one of those companies that’s on that sort of tipping point between old big iron high value capital expense and getting to more recurring revenue. You and I have had sit downs. We’ve talked to Chuck Robbins, we’ve had talks with their CFO, Scott Herren. And as we’ve gone through these conversations, what we’ve found is that this is a company that’s really aggressively trying to pivot perception. It used to be about selling switches and maintenance contracts. That was the business. Now it’s more software, it’s more recurring revenue, it’s observability, it’s collaboration, it’s security.

So it’s in a lot of businesses and of course it’s in networking. And networking right now is going to be red-hot. And you’re seeing all the impetus on ethernet networking for AI. And Cisco should have a story to tell here. They’ve partnered closely with a number of the semiconductor companies we’ve talked about and obviously they’re building more and more high capacity switching and networking capabilities to handle the traffic of the future. What do they always call internet of the future? That was the Cisco thing.

Pat Moorhead: That is actually a breakout in their P&L, internet for the future. No joke.

Daniel Newman: And it’s up 5%. But where did their growth come from, Pat? Well their growth this quarter came from secure agile networks, 30%. Big, big growth in that category. But the other thing that I’ve been tracking close and I think you have too, has been software growth, subscription growth. 18% software growth, 17% software subscription growth, 11% subscription revenue growth. And their RPO was up too, not bigly but their RPO was up in the quarter. We’re seeing revenue growth globally across the world. So they saw growth in all their major markets this quarter on a quarter over quarter and a year-over-year basis. And I guess the one area that’s been just hard to figure out is how they’re going to manage through the collaboration consolidation. With remote work, they’ve got WebEx. That business, Pat, shrunk 13%. That was probably the one slightly black mark given the fact that we’re going back to this hybrid work.

But they’ve got the hardware, they’ve got the software, they’ve got the platform, they just haven’t been able to seemingly capitalize on it as much as in other areas, Pat. But overall, I’m focused on the subscription revenue and I’m focused on the recurring revenue for this business. They seem to be able to make those pivots. The only other thing I’d say, Pat, is the order book was down. I think it was down about 20%, a little over 20%. And that’s another area that of course people are going to be watching as the RPO was up but the order book was down, does that mean that we have slower quarters ahead, Pat? And I think the guide was pretty conservative but they did raise it.

So despite the order book being down, I think the company still feels it’s got strong RPO enough backlog and enough success in the areas that it’s competing to win long term. So that’s my quick take on Cisco. I had to take a little jog because it was like, what, two weeks ago now, down memory. But it’s good that I’m young and the brain still triggers on a Friday morning.

Pat Moorhead: That’s right. You’re not stuck like me with the crystallized knowledge.

Daniel Newman: Cobwebs.

Pat Moorhead: Yeah, something like that. So no listen, I mean beat, beat, raise, right? And the company is being rewarded in the stock market. And one thing I really love that Chuck does is he has a very strategic point of view. How does he start it off? I mean third paragraph on the call, he goes through long-term growth. And I freaking love that. Because in the end, it is about long-term growth. And if you’re focused on that as a company, you may sometimes get into hot water with investors who are more short-term focused, but your customers love you for it. And Chuck talked about, again, the continuing drumbeat of subscriptions and recurring revenue. 32 billion in RPOs. And RPOs are shorthand for services and anything as a service that you sell.

Also talked about security as an opportunity. And Dan, you and I have talked many times that the security market has really shifted from a best of breed at all costs to simplifying it. And not that those best of breed offerings aren’t best in breed. But if you’re an enterprise and you’re stitching together 10 of these so-called best in breed pieces, what you find is your two or three revs behind and you were no more secure and the chore of stitching it all together can sometimes make you insecure. Cisco Security Cloud is interesting. I call it fabrics, they call it a cloud. Essentially looking at the hybrid multicloud and whether it’s at AWS, on-prem with Cisco having a common fabric for security and networking, I just freaking love.

And then finally, generative AI and the cloud. We talked about chip providers like Marvell and Broadcom taking advantage and having to move the data, moving it between clusters, moving it between racks, moving it between data centers. Everything goes through that Cisco switch at the end of the day. So more data going in. Companies are going to have to up their capabilities. And I think Cisco wins. I’m looking for to a drill-down at Cisco Live. I’m going to be there Monday, Tuesday and Wednesday. Looking forward to it.

Daniel Newman: Yeah, you’ll have to tell me how that is. Sad to say, but I’ll be up at Google’s Executive Forum and I’ll be actually recording. There’s a little magic in the Six Five, Pat, but we are down to the wire. How many did you record this week? I think it was like 20. I recorded like 20 this week.

Pat Moorhead: I lost count. Everything I put on my calendars in yellow. So I just need to hit the yellow boxes. Let’s not forget we were in Raleigh on Tuesday after the weekend, but pretty much it’s 12, 14 hour days supporting the Six Five Summit. But I got to tell you, it’s worth it. Bringing content to our fan base out there really, really excites me.

So hey, let’s dive into this last one, Dell Technologies. And that, I think, is moi. So I think the Investor Business Daily headline says it all, “Dell Technologies crushes the first quarter earnings and sales targets.” Which I think was great. Didn’t necessarily get a lot of credit out there for that though, which is fine, but kind of sucks if you’re Dell. They beat big on EPS and they beat slightly on revenue. And who wouldn’t have expected revenue declines in PCs and data center services and storage? I mean pretty much everybody’s down. Even Pure was down, who they’re never down. But that’s just the way it goes. We saw compute light at HPE and it’s light here at Dell. The only company who crushed it there was Lenovo who just continues to take share and, unlike HPE and Dell, participate in the hyperscale market.

I thought the recurring revenue from a size standpoint, $5.6 billion, and think of recurring revenue as services plus as a service, so APEX plus managed services plus break/fix, I thought was a really good look for them. And Dell is a cash generation machine. Very well run company 1.8 billion in cash, which I just think is exceptional. Final comment that I’m going to make is I really do appreciate their slides that they bring in, that they really answer a lot of those deep questions that everybody wants to know. If ISG is down, well how are they doing in market share and server, right? Well they showed 10 years of server market share out there, nine points of share gain over the past 10 years. Number one in external storage with share greater than two, three, and four combined. Sometimes it’s like, “Oh my gosh, Dell, why didn’t you knock it out of the park on storage revenue growth?” Well they’re in everything. They’re price band one into Isilon that attaches itself to an IBM Z, right? And everything in between. It’s just a huge business.

So as we saw, law of large numbers, hard to get meaningful growth percentage wise when you’ve got such a big business. And then on the PC front, okay PCs are down, but hey, guess what? Most profitable segment, commercial PCs. They showed over 10 years of market share gains in commercial PCs. 10 points of share gain over the past 10 years. So kudos to Dell. Just an extremely well managed business. The precision is pretty awesome.

Daniel Newman: Yeah, I think you hit it on the head, Pat. And when I sat down with the executive team yesterday and we did the run through, basically my takeaway was exactly what I would’ve expected from Dell. Operationally really well run. The slowing of the PC market inevitably is going to impact the company’s top line, but they beat revenue expectations. They well outperformed, almost double I think, about 50% above what was expected on an earnings basis. So they run the company really well. They’re very humble. They don’t overstate themselves. I thought they did announce at Dell Tech World a lot of innovation that I think the market can be encouraged about. The APEX portfolio is starting to come to life. And this is something that you and I both said for some time is it’s light. It was light.

So what they’ve been able to announce in over the last weeks, adding compute, adding AI with Project Helix, Fort Zero on security, some of the Native Edge capabilities that were announced, they did add a really nice set of portfolio that’s going to start to provide more opportunity to grow that. I mean look, this is a company that has billions of dollars of recurring revenue, but it’s treated like a commodity company. I think there’s like a negative 20 billion valuation on VMware. I mean the company did 102 billion in revenue last year and got a $37 billion value. Just work with me there. And not only does it do that, but it makes money, it returns to shareholders. It is the ultimate value play.

Now the question is, again, with things like AI, can they convince the market that they’re a picks and shovels company that’s going to be critical to the global deployment. And the big thing they’re going to have to prove is that it’s not about the hyperscalers only. Because right now the perception is AI is all about the hyperscaler. So the question is, do you think in regulated industries that AI data centers are going to get built out? Do you think that edge underneath the telco clouds are going to have AI data centers? Do you think there’s going to be options for smaller companies to build out technology around AI? That’s just a for instance, because I think the market’s kind of looking at as it’s a bit of a zero-sum game and it’s not. So I think that’s a big option. Of course, they’ve made the right partnerships. They’ve announced their partnership with NVIDIA, they’ve got access to all the different silicon, and then of course they have a massive PC portfolio that will benefit from the next wave of PC purchasing.

So Pat, as I said, and you said pretty well, the company’s done a good job of presenting its positioning, it’s number one share in so many different categories. They’re starting to really show that they have a bigger, broader serviceable market. They showed at one of their slides, Pat, that their TAM is almost doubling because of their service software portfolio. So it went from about a three-quarter of a trillion dollar TAM in their traditional hardware market to now with all the services they have almost a $1.6 trillion market to go after. And so they’re well positioned, they’re well run, they’re well led. There’s a lot to like here. It’s not always the most exciting. But you know what, Pat, there’s something about stability, well run companies that put off cash that have great customer bases and global presence, and that’s really what Dell is.

Pat Moorhead: Good analysis there, Dan. And I think we did it. I’m just completely amazed. Somehow, we cranked out eight topics in 49 minutes, which might be an all-time record for us. I mean we covered Salesforce, HPE, MongoDB, HP, Pure, Broadcom, Cisco, and Dell. And I think the content was good. So it is definitely fun to be able to crank this stuff out like we do. And I think the ultimate measurement is whether audience likes this and found it valuable. I hope you did. Give us comments on these segments. And finally, sign up for the Six Five Summit 2023. It’s free thought leadership, strategic commentary from really technology industry luminaries. They’re at the highest levels of the company, chief executive officers, presidents, BU leaders. Really kind of an end to end. We hope you sign in.

Daniel Newman: We sure do. So Pat, should we call it a wrap here? Hit that subscribe button. Join us. Good stuff, buddy.

Pat Moorhead: Yeah, thank you. Wherever you’re watching on the planet, good morning, good afternoon, goodnight. And thanks again.

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Patrick founded the firm based on his real-world world technology experiences with the understanding of what he wasn’t getting from analysts and consultants. Ten years later, Patrick is ranked #1 among technology industry analysts in terms of “power” (ARInsights)  in “press citations” (Apollo Research). Moorhead is a contributor at Forbes and frequently appears on CNBC. He is a broad-based analyst covering a wide variety of topics including the cloud, enterprise SaaS, collaboration, client computing, and semiconductors. He has 30 years of experience including 15 years of executive experience at high tech companies (NCR, AT&T, Compaq, now HP, and AMD) leading strategy, product management, product marketing, and corporate marketing, including three industry board appointments.