Earnings Take the Talk of the Pod Intel, Kyndryl, Commvault – Infrastructure Matters Episode 50

Well, good morning guys. It is Infrastructure Matters number 50. And I'm not talking age, I'm talking about number of episodes.

There you go. Episode 50. Wow, that has gone quick.

So, uh, I can't imagine being your friend for this long. It's really alright, guys, Taking the medication. You'll be fine.

Welcome to Krista Case, Macomb, or is the Macomb case, I dunno which one's. Anyway, case is a lot easier to say than McCumber. It's, and I've got, of course, Steven Dickens here who's joining us.

We're talking a bit about earnings, but more, you know, if you wanna talk about financial kind of stuff, go listen to Patrick and Daniel. We're gonna more talk about kind of where this stuff is going and what it means to the infrastructure guys and everything else, um, because we have some significant things going on. Um, and then there are some announcements that we will touch base on.

So, to kick things off, I'm gonna turn it over to Mr. Steve to talk a little bit about AWS Yeah, so a w I'm digging in and writing my research now. This literally happened last night after markets close.

I think, you know, stock is up 30, 21% year to date, according to CNBC. 56. So we've just gotta be, you know, really sort of, I mean, yes, these estimates are good.

56, you gotta put it in context, that's not very far away. 3 billion versus 26 billion. I mean, let's just put that for in context before we sort of dig in here.

Quarterly revenue, 26 billion for a cloud business that 18 years ago was selling books. I mean, that is frankly astonishing growth over that 18, 19 year period for me. You know, this is tracking now at over a hundred billion from a cloud business, which is a business unit annually within the wide ramers Amazon group.

8 versus 13. You know, obviously we're, there's, there's two sides to this business in what we cover in this podcast. We are interested in where AWS is going.

There's obviously the ads business, the retail business, there's devices, there's a whole bunch of other things within the Amazon sort of organization, but becoming the law of big numbers for that organization, you know, so, And, and one comment I'll make about the number, we still have more than probably 60, 70% of the enterprise is still on premise. Yeah. And in some sectors it's even more than that.

Right. And it's, and it's significant. I mean, it's, you know, it is kind of like, it's mind boggling about where we are in terms of, well, it's not mind boggling because we had CrowdStrike that shut down us as we, we all went on vacation or whatever, CrowdStrike kind of thing.

But, um, you know, how dependent in, um, our world is on the technology and whether it's off-Prem or on-Prem. Um, so cool. Well, I mean, I think as, as we track AWS and I track those guys pretty closely, I'm sort of gonna be digging in obviously, where they are from an a AI perspective.

I wrote about, um, alphabet's earnings, and particularly what Google Cloud was doing that, you know, as I dig in and go through those numbers to write my research note today, I'll be looking for CapEx investments. You know, there's a huge build out phase within the hyperscalers. That's what I'll be looking at.

Um, you know, AWS has got work to do, is it in third place from its AI perspective, uh, proposition, you know, there's, there's, I've heard that narrative. I think they're plowing a different route, a different furrow than kind of Google and Microsoft respectively less about having their own large language models and more about being a home to host your large language model. Maybe that strategy's gonna work out as large language models become more commoditized and things like Lama and, you know, other open source models, you know, being a home for a home for open source models may turn out to have been the more strategic play when we look back five years from now.

So, I mean, that's the whole sort of broader narrative around AWS things I'm gonna be looking for when I dig into the earnings transcript, AI driven CapEx spend and what they're starting to see with revenue come through for things like q and some of their other services. So those are, those are gonna be the things I'm looking for. But I think the miss on top line revenue against Consensus estimates, it's a tiny miss in comparison now.

Yes, they wanna be beat raised, but I, I, you got, I I I'd never understand how the markets react a day after anyway, so, you know, you can, so, So let's, so let's go to a positive one, which is also very, very much so, um, benefited from the, the cloud and the hybrid cloud strategy. And that is Convault, which is like they took it and hit it out of the park. Geez, That they did.

They absolutely did. Um, so for Commvault, I have the numbers up here. Um, so total revenue is up 13% year to year to just under $225 million.

Um, but in particular, there are subscription revenue up 28% year to year to 124 million. Um, right. So that's kind of representing more than half, um, of Commvault's revenues these days.

And their a RR for that subscription business up 27% year to year to 636 million. Um, so certainly Commvault was a very early mover, um, in terms of embracing that, you know, kind of cloud delivery model. Um, they launched their metallic, um, division back in late 2019, um, if my memory is serving me correctly, um, at their, um, at their annual trade show that October.

And so that really kind of gave that fuel for Commvault to really kind of put their stake in the ground. Um, and what they've been doing over, I would say, really the last, um, you know, year to 18 months has been, um, folding that cloud division in. Um, and really kind Of, is that what's working here, Krista?

Is it is. I mean, when I was on some of the early calls, the three of us were on with Commvault, it was kind of, we've got metallic, we've got the traditional business Mm-Hmm. We're kind of pulling those together.

Mm-Hmm. I know you've been tracking and working with them a lot more closely since those initial calls I was on. Is that what's starting to come home to roost, hear the metallic folding, the kind of doubling down that Anna and the, the sort of marketing team have been doing on that message?

Is that what started to translate, do you think? It is Steven. So, um, again, they were really able to put their stake in the ground, um, from a cloud perspective, but it was a little bit of a double-edged sword.

So the feedback that we got from customers was, there was a little bit of confusion, you know, is metallic this completely separate, um, you know, entity from Commvault? Um, if I am looking to use Commvault to protect on-premises and cloud, when should I use, um, complete, which is their flagship platform that protects on-prem? When should I use metallic?

So what, um, Commvault has been doing is really trying to bring those businesses together to be able to tell that more fluid sort of hybrid and multi-cloud story, um, from a protection standpoint and also kind of that story around the flexibility of delivery. Um, so absolutely, I would say that's, that's what's working. I mean, it's Interesting for me, you know, new CMO comes in, you know, really gets the messaging tight, really doubles down on that clarity.

I think it gets lost the CMO role sometimes in what that can translate to on the stock price, you know? Mm-Hmm. The technology's probably got better, but has the messaging outpaced the quality of the product delivery?

Mm-Hmm. And has is, you know, that's what I'm always looking at, the sort of clarity of message, clarity of sort of narrative put into the market. The product can be great and that's gotta keep moving as well.

But, but it really makes a difference, I think. Absolutely. And I would say the other area to that point, Steven, that they're really, you know, hitting the mark in terms of messaging is around resiliency.

Mm-Hmm. Um, and actually the CO, you know, sand Mei, he actually touched on this, um, which is what I'm gonna be watching for the second half of this year following the CrowdStrike outage, is, um, just how much that message of resiliency resonates not only for resiliency against cyber attacks, but also resiliency against all these other disasters that we still have to, um, you know, be able to recover from. So I'm definitely expecting a resurgence in interest, um, in data protection.

You know, they kind of referenced some of their offerings, you know, for, for example, um, for data air gapping to be able to have those copies that are available for recovery. Um, so again, from a resiliency standpoint, they've certainly been making strides around security. Um, so, um, the CEO Sanjay Murani, he said they've had their most conversations with, um, CISOs, and I believe he said both CISOs and CIOs actually, um, over the past quarter.

Right? So that kind of shows the traction that they've been making from more of the kind of cybersecurity perspective, but I'm also anticipating it's going to benefit them, um, following the CrowdStrike outage as companies are really looking at, um, you know, again, their resiliency and ability to be able to recover from, you know, an outage like this. What I find is significant about their numbers is not only this, you know, because they've benefited from what the work that they've done on the hybrid piece of it.

But as we've talked about, data protection is one of the, is the stickiest of all technologies it to, to move on. It is. And, and yes, we've had a resurgence of data protection with, with cybersecurity and re reevaluating what's going on, but this big of a jump means they are either winning, they're winning new business.

I mean, it's not like you're, this is most people, everybody's got data protection out there. So what's happening is they're winning new business somewhere along the lines. Are they winning share or are they getting, they've gotta be winning share, right?

And, and there's also expansion going on in terms of the amount of data that's out there. And you're, you're doing more in the cloud, you're, you know, protecting more in the cloud that before wasn't protected, as we all know, you are responsible for your reliancy and your protection up there. Mm-Hmm.

All in all, it's a, it's a, you know, outstanding and, and kudos to the team over there that have, have produced this. So lemme skip over the next one, and it's kind of related to this. Um, the first piece of it is the, is what happened with Intel and there was a lot of noise in market, you know, on the, in our market about what announced.

And, um, and I won't go through all the numbers because I think there's enough out there, you can grab it, but the big, big piece of it was the profitability was significant. And the other thing that they announced is that they're going to be doing a layoff, um, of fairly about 15% of their people over the next, um, probably 24, a little bit over 24 months. They said they were targeting a head count reduction, uh, 15% by the end of 2025, but the majority of that is gonna be this year.

And most of that, when we looked, I read through the yearning transcript, you know, most of the focus was on profitability because they hit their top line, but the profitability was significantly hit. And some of that was significantly hit because of some of the movements they've been making in their foundry and also accelerating technology into the market. So one of the things they did, did is they accelerated their A IPC, um, technology, bringing it into the market, um, because they see this thing as significant and big.

So what he said is that they expect it to grow, um, from less than 10% of the market to over 50% of the market in 2026. And, and they really want, they're gonna go out there and grab this market. They've already got the companies that they work with.

I mean, I don't track the client business, but I do now because the IPC is a little bit more than, you know, just a PC or something that's sitting on your desk. It's something that's gonna be running co-pilot. Maybe we need to get Olivier on a show and talk about what's going on in that side at some point.

The, and I think that would be a great idea. Um, yeah. And what they're talking about is this next generation is, you know, is qual, you know, Microsoft has qualified it, um, with the co-pilot PCs, and, um, and then there's another 20 OEMs that have got it.

So we're gonna start shipping on the data center piece. What they saw, and what we are seeing is that the traditional server business has been depressed. Um, and, and they're hit getting double hit because they've got some significant competition and pricing competition that's going on.

But so much of the money is going into the AI side of the house. Your traditional server market has not been doing the uptick. They haven't been getting the numbers, we haven't been doing the upgrades.

So the question is, is when is this going to recover either for on-prem or in the cloud? And now what Gelsinger basically said is that we're gonna see the cloud happen first because the value proposition of granite, which will be coming out here, is significant in terms of consolidation and delivery of it. And that kind of gets it into another kind of con, you know, commentary is that our friends over at Marvell announced some CXL technology, um, called stratera.

And what was really cool about it is one of the offerings, and I know I've been focusing way too much on this piece of it, is a way to recycle memory. So what they're doing, saying what, and it's pitching to the hyperscalers and they're testing it out. I can take the memory out of the older servers, I can put it into the CXL as a shared memory device and put it in with the newer servers and recycle it, and the performance of what you need is there.

So we're gonna see them doing that. And that, you know, as we go into this next generation, uh, of, you know, kind of environments, the hyperscalers are probably gonna latch onto this. Um, we won't see the enterprise doing it, um, because they don't crack open boxes.

But you, you know, the hyperscalers build their own stuff. So, um, it's kind of an interesting kind of thing of saying what we're gonna see in this next 2025 in terms of what's gonna happen in the server business. So stay tuned to the enterprise and whether or not folks start to change things out this next year.

Mm-Hmm. So That's my commentary on Intel a little bit less than Dr. Daniel Said.

I, I, I think, I think my piece just to Pat Gelsinger is the only person who can turn that company around in my mind. So easy to turn job, this is kind of Lou Garner broke 1995 kind of existential threat moment for the intel is too big to fail for what the US from a geopolitical perspective and in impact I trust. So, you know, the, I think there's some tough quarters ahead, but I think if you look over the five year time horizon, this company's gonna be, it's too instrumental to the US on lots strategic levels, You know, and one of the things he said during the q and a, um, which I thought was very, very telling, it's like I say this rebuilding that we're underway is the most significant rebuilding of intel since the transition from memory to microprocessors four decades ago.

And, you know, that's where they're at. It's big. It's very big.

So it's a once in a generation re it's not, you know, trim and nudge. It is a fundamental, this will set them up for the next 20 years that what, what Pat is doing right Now. And, and the other reason what you said, you have trust in Pat.

I do too. You know, in my interaction, I think It is transparency. Kimberly, for me it's the, it's the guy's a deeply religious, sort of genuinely good human.

And I think, and I mean, yes, you've gotta be a smart business person. Yes, you've gotta do all those things. But I think genuinely caring about Intel and what it's trying to do and, and feeling that in his very fiber and knowing where he is at and knowing what he's gotta do, that's, that's a huge part of it, I think.

Super grounded. Super grounded. Okay, so talking about the enterprise, let's flip over to one more.

We are an earning stages, these guys, uh, ndl. Yeah. So I mean, ndl, it, it's a tough one.

You know, revenues down, you know that there's some challenges here. This was a business that when it exited, IBM, what was it just over two years ago, was a $19 billion business. They're now a $15 billion business.

The market doesn't like that story, but what you've gotta think about is what was that business? GTSs was within IBM was a boat anchor. They the wrong mix of contracts.

Those were not profitable contracts. Martin Schroeder, ex CFO of IBM has done a fantastic job of writing this ship, helping the team clean out some of those low value, low margin in some cases, loss making contracts, pivot to growth, strong numbers from the consult business, um, double digit revenue growth. That's a new part to their business.

You know, when they were part of I-B-M-I-B-M consulting would've taken that business. So to grow that business, double digits, you know, lots of focus on losses, pre-tax adjusted income, you know, ebitda, all that sort of financial speak. But I think that really sort of crucial piece for me is companies talking about growth coming back in the fourth quarter.

You know, they've moved their reporting period, so this was Q1, they shifted it by a quarter, um, to clean some of this stuff up. So I mean, I think the strategy that they're on focusing on, uh, NDL Bridge from an innovation point of view, focusing on their accounts, focusing on, there's a three a strategy that they've got, they're making really strong progress. I think, you know, I look periodically at the stock, it's tanked since they went, uh, split, split out under the ticker kd, what you can see now, I think it's reached the bottom and we're starting to see that come up.

This isn't stock advice. This company hits its Q4 growth objectives and starts becoming a growth story. It's not gonna be much growth, it's gonna be low single digits if they get there.

But I think if they can get there and the work that, uh, Martin and the team will have done over the last sort of two, two and a half years at that point, it'll be a fantastic turnaround of a company that was in not a great place when it spun out from IBM solid brand solid execution. You know, the mainframe business that I work with closely under Petra and her team, you know, they're the biggest in this space. There's some really strong fundamentals, as I say, consult, bridge and mainframe.

I think they're in really good shape on those three vectors. Yeah. And you know, one of the things they probably were a little bit behind on is all the AI stuff.

You know, especially a lot of that went over to I that's IBM you know, tend to have more of that. So getting back to what we were seeing in terms of the churn of what was going on in the enterprise or not doing the, what they were doing this last year and spending their money on was cybersecurity ai. Mm-Hmm.

Not in those places. The, the extra money or the, you know, they're re diverting some number numbers or kind of trying to make things last a bit longer so they can afford the other pieces that they're putting the money into. So, Well, you, I mean, you look at where they were when they were part of IBM, it was to prop up IBM cloud and it was to sort of work with the, the IBM solutions.

They've come out hard, you know, they've done a really good job of recruiting a strong ecosystem and have massively invested in their Azure AWS and Google Cloud businesses. And that's what's driving that consultant number. So really strong, uh, turnaround story.

Tough from a financial analyst point of view. 'cause nobody wants to hear about revenue going down and you know, Martin's trying to find some sort of silver linings in the, in that, but I think the longer term, if they can get to growth, long term positive. Yeah.

Yeah. So we had a few announcements. There was one fun one that was Veeam and Splunk.

And, um, so talk about, you know, that's kind of a, you, you may not think that those two go together, but they do. It's, it's not, maybe it's peanut butter and marshmallow sandwich. Peanut butter and jelly, I dunno.

Right. Peanut butter or marshmallow Peanut butter. Peanut butter and matters peanut butter marshmallow.

I always Get that. I can Get behind peanut butter. Marshmallow Peanut butter and bacon on toast.

On toast. Yep. Anything Bacon is a good idea.

I'm right. Sorry, it's Christopher, get us Back on top. Okay.

Peanut butter marshmallow, Veeam and Splunk. Yes. Yep.

And I would say, I mean, these things have to go together these days. Um, so specifically what the announcement was, um, is that Veeam has announced an extension for Splunk, um, that allows Splunk users to be able to monitor, um, the Veeam backup infrastructure. Um, and this is so important.

And in fact, what we are looking at here, when we look at the ability for data protection solutions to integrate with, you know, your SIM tools, um, and any other tools that your, um, security operations center might be using to, you know, kind of monitor, um, and threat hunt, um, that data protection infrastructure needs to be integrated as a component of that visibility. Um, we've known for quite some time now that the attackers have been targeting backup infrastructure. Um, and naturally that's because it is the backups that, you know, the organization is going to use to recover from attacks.

Um, so this was again, um, just kind of a good announcement and I would say something that we're really looking at as an important table stakes, you know, kind of criteria for data protection solutions today. Wow, that's a really cool, and I mean mm-Hmm. Well, as we're saying this, I mean we, we talked about, you know, Commvault and, and they had done, um, they purchased the threat wise kind of guy.

So that was a bringing this and, you know, 10 years ago this never would've worked because there wasn't that connectivity between the CISO and the CIO. But now there's, this is definitely working in the market, so, yeah. All right.

So we have one other to touch on unless you, well, Krista, did you have any say anything else on that? No, I mean that's sort of, you know, my high level and like you say, you know, just kind of that integration between IT ops and security teams today. Um, you know, sort of, it does, it reflects that trend and it really just reflects, um, a common theme I was hearing at RSA, which is really just the need to have that visibility and the ability to monitor, um, across the entire, you know, IT ecosystem, um, not just your production system.

So, um, you know, the more that the data protection infrastructure is folded into that visibility is going to be very crucial. Right. All right, last take it out is we had a couple Google announcements that you wanted to touch up.

Yeah. So just sheer keeping up this week, you've got earnings announcements and then, you know, everybody's dropping ai, so I've got some work to do to dig into these, but, and classic Google, they just drop everything. You've gotta sort of pick through this.

So there's a couple of articles that I'm speaking to the press about this, but, you know, stuff around big query stuff around Looker, um, bringing graph capabilities to spanner, you know, a whole raft. I think lots of technical detail that I need to go through. I think what I would say is that I'm expecting to see more and more of this, we've seen this with Oracle with 23 ai.

As we start to get away from all of the sort of jazz and handwaving being at the top of the stack around generative AI models, I I'm, I'm expecting the trend here to be get, let's get the data right, let's get the curation right, let's get the data stack right. Let's go down and make sure these, all of these tools are starting to integrate into things like BigQuery and down into Databricks and down into, um, snowflake and down into Oracle databases and Teradata and cloud, you know, that whole sort of data stack, if you will. I see these updates as part of that.

So I've got a, I've got a whole probably two or three hours of reading to do at some point over the weekend. 'cause you just get these announcements and you're like, okay, I've gotta work out how this fits with this bit and how it, but I mean, directionally this is the type of work that we're gonna see as we start to move towards enterprise deployments of ai. Where's the data coming from?

What's the quality of the data? How clean is the data? What's the security of the data?

Where's, what's that data pipeline it moving through? Where's it coming from? Just that whole piece is gonna need a lot more work.

We've got the top line, we've got the, the sort of generative, uh, models piece that has captured all the noise. So I think lots of good stuff for me to dig through from Google, but, you know, literally two or three big announcements down in their data stack. I've gotta sort of do some reading, but directionally looks really positive for me from what a sort of a quick read.

Yeah. So we're gonna see that addressing that data stack, data pipeline, data platform, whatever you wanna call that thing, because it is, you know, there's a long, long road on that in order to get it from where you're using your data. And we're seeing everything from your Snowflake, Databricks, those kind of guys come out with things.

You've got of course AWS um, Oracle, Google. You have your traditional data, data storage people building those capabilities within there. We have data management kind of software, um, that is coming out, et cetera.

So there's so much going on. Um, it's gonna be interesting because it, it, there is a little bit of a, I'm wouldn't say it's a gold rush as much, but it's a, a need, a real painful need as, and that's a, that's a barrier to entry that we're seeing in terms of being able to deploy and, and bring out the AI systems. So there's gonna be quite a bit of decisions.

There's gonna be some stumbles, um, and successes, you know, once, Once, you know, this is all the work we saw got built out in 99, 2000 for the internet. This is what we saw with the mobile ecosystem in 2007, 2008. What we've seen with cloud, you know, that you sort of say the high level thing and then you've gotta get, get open stack, you've gotta get Kubernetes, you've gotta get cloud backups.

You, it just ripples down the stack. And we're at the same with, with, um, with ai. We're starting to see that ripple down the stack piece come through, Right.

So guys, we've been here, uh, it's been about 30 minutes, so thank you very much for joining us. And uh, we covered a lot of ground here. Um, we've got this next week we've got Krista at Black Hat.

Uh, Steve is at Share. I am at FMS, which is now called the Future of Memory and Storage. Um, so I mean, we're, what the heck is this?

We're in August. We're supposed to be on vacation and we've got three big shows going on, right. I'm doing planning for what looks like September and October, which means I might see my wife for like five minutes on a Sunday afternoon.

It's crazy. I've just gotta, I've got a plan. I've gotta sit down next week.

Here's my violin for you. Oh, I know. Yeah.

I wasn't looking for sympathy. I've got a, I've got literally a block on my calendar to book flights and hotels and it's probably gonna take me two hours. It's be, There We go.

Once September comes around, it's gonna be crazy. Our our listeners are just crying for you. I know.

They're just crying. There You go. Vegas sounds fun, but it's not fun people, It's like, how many times do we get to go there every year?

Okay guys, thank you very much for joining in and, uh, don't forget to like, share, tell people all about us, um, because we have too much fun doing this every week. Um, certainly do take care.