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G500 76 Dell Technologies

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Founded by Michael Dell in his dorm room at the University of Texas at Austin in 1984, the pioneering personal computer company made its mark by selling affordable PCs directly to consumers. The company’s offerings grew to include televisions and cameras, and by the early 2000s it came to dominate the consumer electronics market. Dell Computer went private in 2013, when Michael Dell and the private equity firm Silver Lake Partners purchased it for $25 billion; the company returned to public markets in 2018 as Dell Technologies. In 2016 the company and an investment firm acquired data storage provider EMC for $67 billion—at the time the biggest tech deal in history. In May 2025, amid growing demand for artificial intelligence systems, Dell unveiled new AI servers powered by Nvidia chips.

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Dell Technologies (DELL): Company Profile, Stock Price, News, Rankings

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Dell Technologies

dell technologies

Good afternoon, and welcome to the Fiscal Year twenty twenty five Fourth Quarter Financial Results Conference Call for Dell Technologies Inc.

I'd like to inform all participants that this call is being recorded at the request of Dell Technologies. This broadcast is a copyrighted property of Dell Technologies Inc. Any rebroadcast of this information in whole or part without the prior written permission of Dell Technologies is prohibited. Following prepared remarks, we will conduct a question and answer session. I'd like to turn the call over to Paul Franz, Head of Investor Relations.

Thanks everyone for joining us. With me today are Jeff Clark, Yvonne DeGill and Tyler Johnson. Our earnings materials are available on our IR website and I encourage you to review those materials. Also, please take some time to review the presentation, which includes additional content to complement our discussion this afternoon. Guidance will be covered on today's call.

During this call, unless otherwise indicated, all references to financial metrics refer to non GAAP financial measures, including non GAAP gross margin, operating expenses, operating income, net income, diluted earnings per share, free cash flow and adjusted free cash flow. A reconciliation of these measures to the most directly comparable GAAP measures can be found in our WebEx and our press release. Growth percentages refer to year over year change unless otherwise specified. Statements made during this call that relate to future results and events are forward looking statements based on current expectations. Actual results and events could differ materially from those projected due to a number of risks and uncertainties, which are discussed in our Red Deck and SEC filings.

We assume no obligation to update our forward looking statements. Now, I'll turn it over to Jeff.

Thanks, Paul, and thanks, everyone, for joining us. I am proud of the team's execution this year. We navigated an incredibly dynamic AI environment and accelerating server consolidation, a significant pivot to Dell IP storage and a lagging PC refresh and delivered results above our long term value creation framework. We grew our company, while reducing our operating expenditures over the course of the year. Our modernization efforts have made us more efficient and provided us the ability to invest in more innovation and in areas of strategic differentiation.

Our FY twenty twenty five revenue was $95,600,000,000 up 8% with operating income of $8,500,000,000 OpEx was reduced by 4% over the course of the year. This resulted in record EPS of $8.14 up 10% and cash flow of 4,500,000,000 We continue to differentiate ourselves with consistent performance from numerous economic cycles, differing technology buying and adoption cycles in our rapidly innovating technology ecosystems. Some examples of the innovation from this past year. We added five platforms to our AI optimized portfolio, including support of Blackwell architectures. The highlight being the PowerEdge XE9712 supporting NVIDIA's NVL72GB200, which we were the first to ship in the world.

We launched the Dell Infrastructure Rack Scalable System, our IR7000 and 5,000 in both 21 inches and 19 inches versions, providing up to 96 GPUs in a rack and seven eighty six GPUs in a scalable unit. We have made significant advancements of CDUs, cold plates, manifolds and power distribution with our IR7000 supporting up to four eighty kilowatts per rack. We introduced our direct to chip liquid cooling version of the 9,680 providing 33% density improvement and 2.5 times improvement in energy efficiency. We've made significant advances to PowerStore with PowerStore Prime, our mid range storage solution addressing the fastest growing portion of the market. And we introduced the PowerScale F910 and F710 in our unstructured portfolio that is primed to support unstructured and AI workloads.

We introduced the most Copilot Plus PCs powered by ARM based Qualcomm Snapdragon processors and also launched the broadest portfolio of Intel Lunar Light commercial PCs, furthering our number one leadership position in commercial AI PCs worldwide. We continued our number one leadership in PC monitors with the world's first four ks monitors to achieve five star EyeComfort Certification. We focused on expanding our peripherals portfolio selling everything around the PC, docking stations, cameras, mice, keyboards and headsets, including the first and only holistic solution to manage your fleet of PCs and peripherals remotely, creating the best possible customer experience. And finally, we simplified our branding, redesigned our PC portfolio and broaden our silicon options across Intel, AMD and Qualcomm setting us up well for the PC refresh. We are extremely well positioned to capture growth across every segment of our business and extend AI from the largest at scale CSPs into enterprise workloads and out to the edge with the PC.

These tailwinds and our unique operating model that leverages our leading product positions, our go to market engine, services and supply chain underpin our confidence that our opportunity continues to grow as we look ahead to FY 2026. Moving to Q4, revenue was $23,900,000,000 up 7% driven by robust ISG growth. We executed particularly strong and substantial operating margin improvement in ISG driven by our Dell IP storage portfolio. This resulted in EPS of $2.68 up 18% growing faster than revenue. Turning to BU results, let's start with ISG.

The prospects for AI are strong and we are very well positioned. In Q4, AI orders demand was $1,700,000,000 with $2,100,000,000 in shipments, ending the quarter with $4,100,000,000 in backlog as customers work through technology changes. And in February, our partnership with XAI and other customers continued. We booked deals putting our AI backlog at roughly $9,000,000,000 as of today. Our pipeline expanded sequentially and has grown every quarter since the introduction of the 09/1980.

We are seeing continued progress in AI from enterprise customers, albeit still earlier in their journey with sequential growth in both orders and customers. And our engineering, services, financing and ability to optimize density and performance per watt are important differentiators for the largest at scale CSPs and provide very efficient enterprise solutions. In traditional servers, the growth trajectory continues, up double digits in Q4. We have now seen five quarters of year over year demand. Our mix of 16 gs servers continues to increase as customers remain focused on consolidation to improve power efficiency and increase floor space.

The server consolidation in the data center is expanding server TRUs driven by servers with more CPU cores, storage and memory. In storage, we saw P and L growth for the second consecutive quarter with very strong profitability driven by our Dell IP storage portfolio. PowerStore, our flagship mid range product, has had strong demand growth for four consecutive quarters, the most recent three at double digit demand growth. As I mentioned, the software and hardware updates we made with PowerStar Prime resonate with customers and partners. We have industry leading five to one data reduction, delivered 30% improvement in IOPS, native, MetroSync and QLC availability.

We also saw double digit demand growth in PowerScale, our leading unstructured storage platform and continued growth in our buyer base with PowerFlex. We are well positioned with some of the fastest growing categories within storage as customers shift towards disaggregated architectures. In CSG, we are seeing the recovery coming with strength in SMB, which historically is a leading indicator. We also saw large opportunities within the quarter, which were very competitive. Commercial was up 5%, marking the second consecutive quarter of year over year growth and the fourth consecutive quarter of demand growth.

Consistent with what we saw coming out of Q3, customers are waiting to refresh to buy AI PCs that future proof their purchases going forward. Consumer continues to be challenged with softer demand and elevating levels of discounting. We expect a broader PC refresh this year as the installed base continues to age, we get closer to the Windows 10 end of life and AI PCs are more broadly available. To close, I am proud of our FY twenty twenty five results and our ability to execute our strategy, leveraging our strengths to extend our leadership positions and capture new growth. The AI hardware and services TAM has nearly doubled over the course of the year to $295,000,000,000 in 2027, growing at a 33% CAGR.

We are well positioned in AI, traditional servers, storage with our focus on Dell IP and PCs, including everything around the device. We continue to drive a disproportionate level of AI growth by demonstrating the value we provide to our customers, and I'm excited for the tailwinds surrounding our business as we enter FY '20 '20 '6. Now over to Yvonne for more details about Q4.

Thanks, Jeff. Let me begin with an overview of our Q4 performance, then I'll move to ISGCSG cash and guidance. In the fourth quarter, we delivered strong profitability specifically in ISG. Our total revenue was up 7% to $23,900,000,000 This was driven by continued strength in servers. Our combined ISG and CSG business grew 10%.

Gross margin was $5,800,000,000 or 24.3% of revenue. This is down 50 basis points due to a more competitive pricing environment, predominantly in CSG and an increase in our AI optimized server mix. Within gross margin, we discovered previously unrecognized accumulated credits from suppliers. You'll find revised financial results within our Q4 press release that reflect higher gross margin and increased earnings per share for the relevant periods. Operating expense was down 6% to $3,100,000,000 or 13.1% of revenue.

FY 2025 was a transformative year as we reevaluated, reimagined and modernized how we operate. This enabled us to unlock efficiencies and increase productivity, all while growing our core business double digits. Now, let's look at operating income. We delivered a 22% increase to $2,700,000,000 or 11.2% of revenue. This was driven by higher revenue and lower operating expenses, partially offset by a decline in our gross margin rate.

Q4 net income was up 15% to $1,900,000,000 primarily driven by stronger operating income and our diluted EPS was up 18% to $2.68 Now let's move to ISG, where we delivered another quarter of strong performance. ISG revenue was $11,400,000,000 up 22%. Servers and networking revenue was a Q4 record at $6,600,000,000 up 37%. We continue to see strong demand across both AI and traditional servers. Storage revenue was up 5% to $4,700,000,000 our second consecutive quarter of growth.

We executed very well in storage. We had a record demand quarter for PowerStore. PowerScale grew double digits and our PowerFlex buyer base grew. While the overall demand environment is lagging that of traditional servers, we see some promising trends. We had record ISG operating income of $2,100,000,000 up 44%.

This was driven primarily by higher revenue. Our ISG operating income rate was up again sequentially to a record 18.1% of revenue. The rate improvement of four eighty basis points was the result of improved gross margins, especially in storage and reduced operating expense. Within storage, we saw record profitability driven by a higher mix of Dell IP versus partner IP, improved product profitability and revenue scaling in what is seasonally our strongest quarter. Now let's turn to CSG.

CSG revenue was up 1% to $11,900,000,000 Commercial revenue was up 5% to $10,000,000,000 while consumer revenue was down 12% to $1,900,000,000 CSG operating income was $600,000,000 or 5.3% of revenue. This is down 90 basis points sequentially due to a more competitive pricing environment. We saw some promising signs as we went through November and December with pockets of strength in large deals, but overall saw a slowdown in January. As Jeff mentioned, we saw strength in small and medium business, which is historically a leading indicator. Profitability in commercial was weaker than expected as demand continued to push into the next fiscal year.

In consumer, the demand environment remains soft and profitability remains challenged. We are ready and well positioned for a PC refresh with our simplified rebrand, leading go to market engine and focus on commercial PCs, the most profitable segment of the market. Shifting gears, Dell Financial Services continues to drive differentiated payment solutions for our customers. We exited the year with a record $15,000,000,000 in assets under management, up 5%. And when you normalize for the exit of our VMware resale business and the discontinuation of our commercial revolving product, DSS originations were up 7% in Q4 with a strong attach rate across the business.

Now let's move to cash flow and balance sheet. Q4 cash flow from operations was $600,000,000 This was primarily driven by profitability, partially offset by working capital. Our cash conversion cycle was negative thirty one days with $6,700,000,000 in inventory. We ended the quarter with $5,200,000,000 in cash and investments, down $1,400,000,000 sequentially. Our core leverage ratio was down sequentially to 1.2x.

We returned $1,100,000,000 of capital to shareholders with 6,400,000.0 shares of stock repurchased at an average price of $117.51 and paid a dividend of $0.45 per share. Since our capital return program began at the beginning of FY 2023, we returned $10,800,000,000 to shareholders through stock repurchases and dividends. We announced an 18% increase in our annual dividend to $2.1 per share, well above our long term value creation framework. Additionally, the Board of Directors has approved a $10,000,000,000 increase in our share repurchase authorization. This is a testament to our confidence in the business and our ability to generate strong cash flow.

Turning to FY 2026 guidance. IT spending is expected to grow with three underlying trends that we see. First, businesses are leveraging AI to enable competitive advantages and we are seeing that in our opportunity pipeline that continues to expand. Second, data center modernization is well underway with a focus on consolidation and power efficiency. Third, customers are planning to refresh their PC installed base with AI enabled devices.

As these trends materialize, we will leverage our operating model that has driven value creation over the last forty years. Against that backdrop, we expect revenue and EPS growth in FY twenty twenty six above our long term value creation framework. We expect FY twenty twenty six revenue to be between $101,000,000,000 and $105,000,000,000 with a midpoint of $103,000,000,000 up 8%. We expect ISG to grow high teens driven by 15,000,000,000 of AI server shipments and continued growth in traditional server and storage. And we expect CSG to grow low to mid single digits more weighted towards the second half of the year.

We expect the combination of ISG and CSG to grow 10% at the midpoint. Given the higher mix of our AI optimized servers and the current competitive environment, we expect our gross margin rate to decline roughly 100 basis points. As our modernization efforts continue, we expect OpEx to be down low single digits year over year. We expect ISG operating income rate to be roughly flat year over year with CSG down slightly. We expect I and O to be between $1,400,000,000 and $1,500,000,000 Diluted non GAAP EPS is expected to be $9.3 plus or minus $0.25 up 14% at the midpoint, assuming an annual non GAAP tax rate of 18%.

For Q1, we expect revenue to be between $22,500,000,000 and $23,500,000,000 up 3% at the midpoint of $23,000,000,000 ISG and CSG combined are expected to grow 6% at the midpoint with ISG growing low teens and CSG flat year over year. Gross margin rate will be lower sequentially given seasonally lower storage mix and a higher AI optimized server mix. OpEx will be down low single digits year over year. We expect operating income rate to be down sequentially given typical seasonality in ISG with lower storage mix. We expect our diluted share count to be between $7.00 6,000,000 and $710,000,000 shares and our diluted non GAAP EPS is expected to be 1.65 plus or minus $0.1 up 25% at the midpoint.

In closing, we delivered solid FY 2025 results well above our long term value creation framework. We generated $95,600,000,000 in revenue, record EPS of 8.14 and returned $3,900,000,000 of capital to our shareholders. We executed our strategy and expanded our lead in AI, while positioning our core business for the opportunity ahead. Internally, we began a transformation to future proof the company, focusing on simplifying, automating and modernizing how we work. And as we look forward, I'm excited about the sustainable growth we see and the value we will continue to deliver to our customers and our shareholders.

Now, I'll turn it back to Paul to begin Q and A.

Thanks, Yvonne. Let's take the Q and A. In order to ensure we get to as many of as possible, please ask one concise question. Let's go to the first question. Operator?

Thank you. And the first question comes from Wamsi Mohan with Bank of America.

Yes. Thank you so much. Ewan, could you talk through the fiscal twenty twenty six guide and what sort of maybe some of the assumptions that are incorporated beyond what you stated? Your revenues are going to be up roughly in total about 7.7%, EPS up about 14%, but your comments on ISG and CSG margins are flat to down and you noted a fairly competitive environment. So can you just bridge those sort of comments to your EPS growth?

How much is coming potentially from buybacks? And have you made any tariff related assumptions in these margin guides? Thank you so much.

Thanks, Swansy. So yes, in the guide for the year, we guided to the excuse me, the $103,000,000,000 of midpoint up 8% with everything growing, right, ISG and CSG expected to be up combined about 10%. If I look at ISG, which I think some of your questions coming from, we expect that to be in the high teens fueled by that $15,000,000,000 of AI server shipments that we referred to, as well as continued growth in both traditional server and storage. And I'd say with storage in the low single digits. CSG, we do expect to grow in the mid single digits coming up for the year that's just begun with that refresh cycle that we're expecting to be more weighted towards the second half of the year.

OpEx is another area we guided to it being down low single digits year over year. That's just a continuation of all of the efficiencies that we're driving across the entire company. And then the op increase improving year over year to the 9.1%, up from 8.9%, so an improvement there. When I think of what to expect from an ISG standpoint from an op income level, we're saying roughly flat year over year. And we expect there to be continued competition, I guess is the right way to put it in CSG.

But again, we've guided and embedded that in there. And I go back to ISG real quick and say, hey, we are going to be growing the AI business while continuing to drive profitability there. So we'll continue to balance as we have been doing our growth and profitability and we're going to manage pricing, we're going to manage the competitive environment and we're going to continue to drive value for our shareholders.

And the next question comes from Eric Woodring with Morgan Stanley.

Great guys. Thanks so much for taking my question. Jeff, a question I often get from investors is kind of about the risk of ODM encroachment in the AI server market. As customers get more sophisticated over time, competition intensifies, potentially margins face downward pressure.

Effectively, the concern is AI servers become somewhat of a cloud two point zero type of disintermediation. Clearly your AI server backlog helps to refute this concern, but I would love if you could just maybe how would you respond to those concerns if you got that question? Thanks so much.

Sure. Thanks, Eric. I mean, do we see the ODMs in these large opportunities? Of course, we do. These are multibillion dollar opportunities.

Everybody tends to show up and wants an opportunity to win the business. When I step back and reflect why Dell and why we continue to be optimistic here is, this is custom work. It takes significant engineering capability. It takes significant architecture capability to win. And in many cases, we're building a unique and differentiated solution for each and every customer.

And our customers have learned to value what we've been able to bring to them across their deployments, Whether that is the service side when we extend beyond an L10 server out of the factory with L11 and L12 and full integration of Iraq. The network expertise we bring to do the install and deployment of very complex our service, the ability that we have a global service footprint, professional servers can show up anywhere to solve any related problem or hands on in these very large deployments with full time teams, literally there 20 fourseven trying to get them up and running. I think about the financing capabilities that we have in our company and the ability to help these CSPs, these fast growing companies grow at the rates they want with our financing capabilities. I think about our go to market coverage and I think about the expertise we have in the top 30 or so CSPs, digital natives, our ability to scale this to enterprise. Eric, every time I look at this question and I don't really focus on OEMs or for that matter other OEMs, I look at the differentiated value we are bringing to the marketplace with the Dell company, bringing end to end solutions and right now it's valued.

And right now we continue to differentiate. Right now we help these large scale clusters get deployed faster than anybody else. I'll remind you, I probably did last time as well. We were the first to bring to market a GB200 rack. That's not by luck.

It's by a lot of hard work, detailed engineering, collaborating in this case with NVIDIA and our customer to be able to take out every ounce of time and run at the speed of light, so to speak. So we're going to continue to invest in that differentiation. We're going to continue to make us stand out to be different. Our customers really value the full range of our capabilities. They like the notion of a one place to go.

I'm not sure others bring that. I know we do and I know we're extracting value from the marketplace for that with our customers on our deployments.

Awesome. Thank you, Jeff. I appreciate it. Good luck guys.

And the next question will come from Simon Leopold with Raymond James.

Thank you very much for taking the question. I was wondering if you could give us your thoughts on your exposure to the U. S. Federal Government. Basically, how big is it typically as a percent of your revenue?

And how are you thinking about the trends given all of the noise we hear out of Washington around budget cuts and spending cuts? Thank you.

So Simon, I'll take a pass at that. We do business in 170 plus countries around the world. Obviously, our largest country is The United States and we do business with the federal government, but I can't really parse out exactly what you're asking for. We're certainly going to lean into all opportunities that are ahead of us and continue to be successful in that space. I don't know.

No, I would add to what Yvonne said. We've had numerous times in our history where a country or a particular segment demand was suppressed for various reasons. We've been able to navigate those cycles, I think pretty successfully. Our underlying belief is United States government will need technology. AI plays a pretty significant role in our nation and I think the demand will materialize, we'll get through whatever is happening today.

And we have a broad business to be able to do that, whether it's PC, servers, storage, AI solutions, our services, making it up in other parts of the world, other parts of The United States, we've again proven we've done that consistently and we'll do so here.

We can help drive efficiencies in every environment. So excited about the opportunity, Ed.

And our next question will come from Aaron Rakers with Wells Fargo.

Yes. Thanks for taking the question. Just building on Eric's prior question, I'm curious, Jeff, as we really start to see the materialization of the Blackwell product cycle through your AI backlog. I'm curious when you're engaged in like rack scale configurations, how would you compare the margin profile of those relative to the AI business on let's say the hopper product cycle? And can you talk a little bit about the levers that you see to improve that margin as we move through 2025?

Sure, Aaron. I think I mentioned in the last call that the Blackwell margins were lower than the hopper margins and remain so today. We're still early. The deals are very large upfront. There's more competitors, so it's a more competitive landscape.

And I'll probably sound a little redundant with the last answer with Eric. Look, this is custom design and architecture work. There's an ability to really distinguish your engineering and value add in that step, which is an opportunity for us to extract value and opportunity for us to reduce costs. These aren't reference designs or as we would affectionately call in the engineering community, they're not cookie cutter designs. We're designing a unique rack, a unique power distribution unit, our cooling, our manifold, the cold plate, the ability to engineer that and to drive that through the scale of our supply chain are opportunities for us, helping our customers attach with our networking and with our storage opportunities.

And while still small, it remains an opportunity because every large cluster and for that matter, every AI workload requires data to fulfill its need. Services, installation, deployment, those are value add opportunities for us that we continue to build on. And then obviously the ability to be a time to market advantage. Those are areas that we continue to focus on. They drive differentiation.

I think Ivan and I have been consistent for the better part of a year that AI servers are margin rate dilutive. They are margin dollar accretive. They are operating margin positive. They are profitable for us. And what's really interesting for us if we take the work that we're doing in these large clusters, it really scales nicely to the enterprise.

It allows us to really take the efficiencies and learnings from what we're doing with the largest clusters in the world and build optimized solutions for very specific domain specific AI use cases. And our experience to date is the AI margins in enterprise are better. And I think they'll continue to be and that's what we're focusing on.

And our next question will come from Michael Ng with Goldman Sachs.

Hi, good afternoon. Thank you for the question. I just have one on the ISG margin outlook of flat year over year for the upcoming year. It's a great outlook, particularly considering AI server revenues growing 50%. So can you talk a little bit about the expectations for margins for some of the components, traditional servers, storage, AI servers?

I'm just trying to understand the ability to keep ISG margins flat despite presumably the dilutive effect from the AI server margins? Thank you.

I think, Mike, maybe the way to look at this is the first and foremost, as we think about holding ISG margins flat, I love the way that you asked the question. We're going to do that by growing at least $15,000,000,000 in AI servers. I know your question is how we're going to do that, but for us that's a very important mark that we're going to be able to meet that operating range that we've committed in our long term framework. And we're going to grow at a minimum of $15,000,000,000 in AI servers. And we're going to do that by what we've done in traditional servers and what we've done in storage.

Dell Technologies (DELL) Q4 2025 Earnings Call Transcript

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