Dell Technologies is acknowledging that infrastructure and storage supply still can’t keep up with agentic AI’s insatiable appetite for resources.
The company this week reported a “record” AI backlog, with $95 billion in orders waiting to be filled. This dovetails with quarterly earnings reflecting a more than 50% year-over-year increase in AI demand.
On an earnings call, Dell COO Jeff Clarke acknowledged that supply constraints start with servers and storage, and span the stack to “just about every product going through a leading node.”
“We are doing everything we can to get more supply,” he said. “In today’s environment, that’s a very difficult task.”
A glimpse of infrastructure demands ahead
Dell reported that, in its financial quarter ending July 31, its revenue was $47 billion, reflecting 58% year-over-year growth. Moreover, revenue in its Dell Infrastructure Solutions Group (ISG) increased 89% to a record $31.8 billion.
Much of this growth is in servers, notably traditional central processing unit (CPU)-based servers that are increasingly supporting agentic AI workloads. Demand is “exceptionally strong” in this area, with earnings up 122% year-over-year.
Perhaps most tellingly when it comes to the ongoing demand, the company booked nearly $61 billion in AI server orders in the three months ending July 31; all told, over the last 12 months, it has inked more than $130 billion in AI server orders.
Clarke reported that Dell converted $131.7 billion of demand into orders over the last year, and that demand is broadening across enterprise customers, neoclouds, and sovereign cloud providers. To illustrate his point, he noted that the number of customers using Dell AI Factory, the company’s platform built to support AI workflows, has surpassed 6,500, and of those, 3,300 signed on in the last three quarters. Clarke pointed out that, by contrast, it took the company two years to sign on the first 3,200 after debuting Dell AI Factory in May 2024.
“Agentic demand is reshaping the data center,” Clarke said. Inference is “pure demand in our industry.” In fact, Dell anticipates that 3,600 quadrillion tokens will be in use by 2030, representing an 87x increase from today. Further, over that same period, training demand is predicted to grow to 850 zettaflops, a 5x jump.
“Enterprise agentic AI is expected to be the single largest workload by 2028,” Clarke said, and by 2030 will account for 75% of all data center demand.
Enterprises clamor for traditional servers
Dell is seeing a growing trend of customers requiring “meaningful CPU compute capacity” to support AI and agentic workflows. As evidence of this demand, in just its last two financial quarters, it has generated nearly as much revenue from traditional servers and networking as it has in any prior full year in company history.
Most of this growth comes from existing customers accelerating their investments in traditional IT environments to refresh, modernize, and bolster performance, efficiency, and resiliency. Dell anticipates “significant and durable” refreshes ahead, and heightened security and resiliency requirements are also increasing demand.
“AI requires modern, disaggregated architectures that keep data accessible and in motion across compute, storage, and networking,” Clarke noted. It is much more than assembling and delivering components; AI deployments require significant engineering, design, and deployment expertise. Some customer engagements, in fact, require upwards of 50 unique designs as enterprises optimize for workload performance, power, cooling and the data center environment, he claimed.
Enterprises want new servers with more cores, more dynamic random-access memory (DRAM), and more storage. However, the constraints remain the same: “DRAM, DRAM, DRAM, followed by NAND, NAND, NAND [flash memory],” Clarke said. There are “spotty” CPU and disk drive shortages, and constraints all the way down the supply chain, from microcontrollers to drives to transistors.
Large enterprises and multinational corporations across the globe “would prefer to have products now if we had the supply,” he said. “We are supply constrained in the sense of what we can build in any given quarter.”
This has led Dell to plan accordingly and optimize configurations with what “bits and bytes” they do have coming in to maximize outputs, with a focus on “getting it out the door,” Clarke said. There are associated lead times that the company is working through, but they’ve been able to “realize greater shipments.”
“We’ll continue to focus on trying to get more supply, and take the supply we have and optimize the output,” he said.
Reflecting increased need for storage as enterprises prep, manage, and protect huge volumes of data, Dell has also seen strong growth across its PowerFlex, PowerStore, PowerProtect, and PowerVault products.
“Demand remains broad based; enterprises continue to modernize their storage environments as data growth increases the importance of keeping data available and secure,” Clarke said.
How customers respond to shortages
Clarke acknowledged that modernization is driving higher core counts, more DRAM, and more storage. Those configurations “cost more than they did last quarter, and the quarter before, and the quarter before.”
Customers are adjusting to these price increases, he noted, deferring purchases because they are unable to sufficiently flex existing budget dollars. In other cases, enterprises are placing orders further in advance to ensure they have access to constrained supplies. “Large, sophisticated customers are acting, first and foremost,” Clarke said. Some are collaboratively planning with Dell to gain a view of their needs further into the future.
“That is a new phenomenon,” he said. “We are working through this demand environment that’s well ahead of supply, helping customers manage.”
This article originally appeared on Network World.
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