Record server sales and growing VMware revenue continued to be a boon to Dell Technologies’ bottom line in the third quarter of fiscal 2018. The company reported $19.6 billion in revenue, a 21 percent increase compared to last year.
Also this quarter, Dell Technologies reported an operating loss of $533 million, largely due to the debt incurred from the Dell EMC merger. The merger, which closed in September 2016, made Dell Technologies the world’s largest privately-controlled technology company. Its brands include Dell, Dell EMC, Pivotal, RSA, SecureWorks, Virtustream, and VMware. The private company chooses to report its earnings.
Dell Technologies paid down $1.7 billion in debt during the third quarter. Since the close of the EMC transaction, it has paid down $9.7 billion of gross debt.
The company generated cash flow from operations of $1.6 billion.
Dell Technologies saw record revenue and double-digit growth for servers for the second consecutive quarter. Dell EMC — the infrastructure segment of Dell Technologies’ that sells these servers — grew 2 percent, quarter-over-quarter, with third quarter revenue of $7.5 billion and operating income of $678 million. Server and networking revenue was $3.9 billion, an increase of 32 percent year over year and 3 percent quarter over quarter.
Despite flat storage revenue of $3.7 billion quarter over quarter, the company reported triple-digit growth in hyperconverged infrastructure (HCI), and double-digit demand growth for its newer storage technologies including all-flash arrays.
“We are working to improve our storage business velocity,” said CTO Tom Sweet. “While we have begun to see some progress, we believe this will be a gradual recovery over the coming quarters.”
Jeff Clarke, vice chairman of products and operations at Dell Technologies, said hiring more sales specialists, growing demand for HCI and all flash, and recent product updates to the company’s storage portfolio will boost this recovery. “The external storage market grew last quarter — it is a $24 billion market. It’s a big opportunity. We have a big, big opportunity with our 30 percent share to grow in this market, and that’s all we need to do. Clearly the competition is NetApp and Pure [Storage] most notably.”
VMware segment revenue for the third quarter was $2.0 billion, with operating income of $639 million, or 32.7 percent of Dell Technologies’ revenue. VMware reported its third-quarter earnings last week.