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    Dell Technologies Inc (DELL)

    Business Description

    Dell Technologies is a global technology company that provides a broad and innovative solutions portfolio aimed at helping customers modernize their IT infrastructure and address workforce transformation . The company is organized into two main business units: the Infrastructure Solutions Group (ISG) and the Client Solutions Group (CSG) . Dell sells a range of products, including storage solutions, servers, networking solutions, branded PCs, peripherals, and third-party software .

    1. Client Solutions Group (CSG) - Provides branded PCs, including notebooks, desktops, and workstations, along with branded peripherals and third-party software. Offers services such as configuration, support, and extended warranties .
    2. Infrastructure Solutions Group (ISG) - Enables digital transformations with solutions that address AI, machine learning, data analytics, and multicloud environments. Offers a comprehensive storage portfolio, including all-flash arrays and hyper-converged infrastructure, as well as a server portfolio with high-performance and AI-optimized servers. Includes networking solutions .
    3. Other Businesses - Engages in the resale of VMware products and services, integrating VMware products with its offerings, reflecting these results within ISG or CSG depending on the nature of the offering .

    Q3 2025 Summary

    Initial Price$112.93August 1, 2024
    Final Price$130.87November 1, 2024
    Price Change$17.94
    % Change+15.89%

    What went well

    • Strong Growth in AI Servers and Pipeline Expansion: Dell's AI server momentum continued with orders demand reaching a record $3.6 billion, up 11% sequentially, primarily driven by Tier 2 cloud service providers and enterprise customers . The company shipped $2.9 billion of AI servers in Q3, resulting in an AI server backlog of $4.5 billion . Their 5-quarter pipeline grew more than 50% sequentially, demonstrating strong future demand .
    • Improved ISG Operating Income and Margins: Infrastructure Solutions Group (ISG) revenue grew 34%, with server and networking revenue up 58% . Operating income for ISG increased by 230 basis points quarter-over-quarter and is up 530 basis points since Q1, driven by improving gross margins, especially in servers, and reduced operating expenses percentage . Dell expects ISG operating income rates to continue to improve in Q4 .
    • Storage Growth and Market Share Gains Expected: Dell expects the storage marketplace to grow next year and aims to take share with their Dell IP storage portfolio, having invested in new solutions and capabilities . The company is focusing on high-margin, differentiated products like PowerStore, PowerFlex, and PowerScale to drive future growth and profitability .

    What went wrong

    • Dilutive Gross Margins in AI Servers: Despite the high average selling prices (ASPs) of AI-optimized servers, Dell acknowledges that the gross margin rate is dilutive, which could impact overall profitability. The company is working to improve rates through services and other offerings, but the competitive landscape remains challenging.
    • Lag in Storage and Services Demand from AI Servers: Dell expected that AI server sales would drive growth in storage and services demand. However, there is indication that this opportunity hasn't materialized yet, which may limit the company's ability to capitalize fully on the AI market.
    • Supply Constraints Affecting AI Server Shipments: Due to component availability and shifts towards new products like Blackwell, Dell anticipates that AI server shipments will be down slightly quarter-over-quarter in Q4, despite a growing backlog. Supply constraints could hinder near-term revenue growth in the AI segment.

    Q&A Summary

    1. AI Server Shipments Outlook
      Q: Will AI server revenue decline in Q4?
      A: Yes, AI server shipments are expected to be slightly down sequentially in Q4 due to the shift in orders towards Blackwell products, which are now ramping up in production. The backlog reflects when we will receive components and can ship them. Despite this, our 5-quarter AI pipeline grew over 50% quarter-over-quarter, and we continue to work on converting this pipeline into shipments.

    2. Guidance Revision Reasons
      Q: Why did full-year guidance decrease?
      A: The midpoint of our full-year revenue guidance decreased from $97 billion to $96.1 billion due to two main factors: the delay in the PC refresh cycle, pushing demand into calendar 2025, and the shift in AI demand towards Blackwell, affecting shipment timing. These factors impact our fiscal year and Q4 outlook.

    3. AI Pipeline Growth and Composition
      Q: How is the AI pipeline growth and customer mix?
      A: Our 5-quarter AI pipeline expanded over 50% quarter-over-quarter, with the enterprise customer portion growing even faster. We have now sold AI solutions to over 2,000 enterprise customers, and as enterprises increasingly adopt AI, we see significant growth opportunities ahead.

    4. AI Server Margins
      Q: How are AI server margins trending?
      A: While AI servers have lower gross margin rates, they are margin dollar accretive. We've seen rate improvements fueled by services, installation, financing solutions, and opportunities in networking and storage. We are focused on continuing to improve margins across the portfolio.

    5. Storage Business Outlook
      Q: What's the outlook for storage growth?
      A: We expect storage to grow next year, driven by investments in new solutions like our Dell IP storage portfolio. AI is creating new demands in storage architecture, and our offerings—such as PowerStore, PowerScale, and PowerFlex—are well-positioned to meet high-performance AI workloads.

    6. Enterprise Server Growth Sustainability
      Q: Is enterprise server growth sustainable?
      A: Yes, we believe the growth is sustainable as we're in the early stages of a modernization cycle. Customers are consolidating servers to free up resources for AI, with our 16G servers offering significant consolidation benefits. We've seen six consecutive quarters of growth, indicating a strong recovery in the server market.

    7. Tariffs and Supply Chain Resilience
      Q: Any impact from tariffs on operations?
      A: We have a resilient global supply chain and extensive experience navigating geopolitical and macroeconomic challenges, including tariffs. We're well-equipped to respond to any changes in the best interests of our customers and shareholders.

    8. Customer Concentration in AI Backlog
      Q: What's the customer mix in the AI backlog?
      A: Our AI backlog includes both large enterprises and Tier 2 cloud service providers. The enterprise portion is growing faster, and we're only in the early stages of enterprise AI adoption. Our scale and go-to-market footprint position us well to capitalize on this expanding market.

    9. Federal Spending Impact
      Q: How is federal spending affecting business?
      A: We had a strong federal government business in Q3, with robust demand across all product types. Our AI pipeline currently has minimal sovereign demand, presenting additional future opportunities as we engage globally.

    10. Advantage of Full Stack Solutions
      Q: How does offering full stack benefit attach rates?
      A: Offering a full stack of servers and storage is a significant advantage, especially in AI. GPUs require substantial data storage, and our portfolio meets the high-performance needs of modern AI workloads, driving higher attach rates for storage and services.

    11. Shift to Blackwell Architecture
      Q: How does migration to Blackwell affect product mix?
      A: We have demand for both Hopper and Blackwell architectures, with orders shifting notably toward Blackwell. Our open-based architecture allows us to quickly adapt to new designs and meet customer needs at scale and speed, leveraging platforms like our new IR 7000 rack.

    12. Outlook for Fiscal 2026
      Q: What's the early view on fiscal 2026?
      A: While it's early, we're optimistic about fiscal 2026, expecting multiple tailwinds such as robust AI demand, an aging installed base of PCs and servers, and an upcoming enterprise refresh cycle. We anticipate growth across ISG, including AI servers, traditional servers, and storage, and expect CSG revenues to be up.

    Key Metrics

    View all financials →
    Revenue by Segment - in Millions of USDQ1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024Q4 2024FY 2024Q1 2025Q2 2025Q3 2025
    Infrastructure Solutions Group (ISG)7,5938,4618,4999,33233,8859,22711,64611,368
    - Servers and Networking-4,2744,656-17,6245,4667,6727,364
    - Storage-4,1873,843-16,2613,7613,9744,004
    Client Solutions Group (CSG)11,73612,94212,27611,96248,91611,96712,41412,131
    - Commercial-10,5549,835-39,81410,15410,55610,138
    - Consumer-2,3882,441-9,1021,8131,8581,993
    VMware--------
    Other Businesses-1,5281,474-5,6141,049966867
    Unallocated Transactions-3------
    Impact of Purchase Accounting--------
    Products-16,93516,233-64,35316,12718,95418,290
    Services-5,9996,018-24,0726,1176,0726,076
    Total Revenue20,92222,93422,25122,31888,42522,24425,02624,366
    Revenue by Geography - in Millions of USDQ1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024Q4 2024FY 2024Q1 2025Q2 2025Q3 2025
    United States----43,986---
    Foreign countries----44,439---
    Americas-----IncreaseIncreaseIncrease
    EMEA-----DecreaseDecreaseIncrease
    APJ-----DecreaseIncreaseIncrease
    Total Revenue20,92222,93422,25122,31888,42522,24425,02624,366

    Executive Team

    NamePositionStart DateShort Bio
    Michael S. DellChairman and Chief Executive Officer1984Michael S. Dell is the Chairman of the Board and Chief Executive Officer of Dell Technologies. He founded Dell Inc. and served as its CEO from 1984 until July 2004 and resumed the role in January 2007 .
    Jeffrey W. ClarkeVice Chairman and Chief Operating Officer1987Jeffrey W. Clarke is responsible for running Dell's day-to-day business operations and shaping the strategic agenda. He has been with Dell since 1987, starting as a quality engineer .
    Yvonne McGillChief Financial OfficerAugust 5, 2023Yvonne McGill is responsible for all aspects of Dell's finance function. She has held the role of CFO since August 5, 2023 and joined Dell in 1997 .
    Richard J. RothbergGeneral CounselNovember 2013Richard J. Rothberg oversees the global legal department and manages government affairs, compliance, and ethics. He has served as General Counsel since November 2013 and joined Dell in 1999 .
    Jennifer D. SaavedraChief Human Resources Officer2005Jennifer D. Saavedra leads Dell's Global Human Resources and Facilities function. She has been with Dell since 2005 and has held various key leadership roles within the Human Resources organization .
    William F. ScannellPresident, Global Sales and Customer OperationsFebruary 2020William F. Scannell is responsible for the global go-to-market strategy and driving global growth. He has been in this role since February 2020 and previously held leadership roles at EMC .
    Geraldine TunnellChief Marketing OfficerMarch 30, 2024Geraldine Tunnell was appointed as Chief Marketing Officer effective March 30, 2024, succeeding Allison Dew. She previously served as Senior Vice President of Global Field & Partner Marketing .

    Questions to Ask Management

    1. Despite a growing AI server backlog of $4.5 billion, AI server revenue is expected to be slightly down quarter-over-quarter; can you clarify if this is due to the shift towards Blackwell, component availability, or other factors, and how you plan to address these issues?
    2. With the move to NBL systems featuring up to 72 GPUs per server, and given the higher GPU content that's harder to mark up, how should we think about the evolution of gross profit dollars and margins in your AI server business?
    3. As enterprise and large customers become more cautious with PC and storage spending, particularly in your highest margin storage products, can you provide clarity on your expectations for storage growth next year?
    4. You previously expected AI server sales to drive storage and services demand, but this hasn't materialized as anticipated; can you explain why storage demand hasn't matched AI server growth and what steps you're taking to capitalize on this opportunity?
    5. With your key customers migrating AI platforms from Hopper to Blackwell and potential shifts from HGX to DGX and MGX platforms, what are your underlying assumptions for the platform mix, and how might this impact your AI server business strategy?

    Share Repurchase Program

    Program DetailsProgram 1Program 2
    Approval DateSeptember 23, 2021 October 5, 2023
    End Date/DurationNo fixed expiration date No fixed expiration date
    Total Additional Amount$5 billion $5 billion
    Remaining Authorization$5.7 billion $2.6 billion
    DetailsRepurchase of Class C Common Stock Repurchase of Class C Common Stock

    Past Guidance

    Q3 2025 Earnings Call

    • Issued Period: Q3 2025
    • Guided Period: Q4 2025 and FY 2026
    • Guidance:
      1. Q4 Revenue: $24 billion to $25 billion, midpoint $24.5 billion, 10% increase at midpoint.
      2. IHG Revenue Growth Rate: Up mid-20s year-over-year.
      3. CSG Revenue Growth Rate: Up low single digits year-over-year.
      4. Operating Expenses (OpEx): Decline mid-single digits year-over-year.
      5. Operating Income Rate: Up sequentially with ISG improvement.
      6. Q4 Diluted Share Count: 715 million to 719 million shares.
      7. Q4 Diluted Non-GAAP EPS: $2.50, plus or minus $0.10, up 14% at midpoint.
      8. Full Year Revenue Growth: 9% at midpoint.
      9. Full Year Diluted Non-GAAP EPS: $7.81, up 10% year-over-year.
      10. Fiscal Year 2026 Outlook: Growth driven by AI demand and refresh of PCs and servers .

    Q2 2025 Earnings Call

    • Issued Period: Q2 2025
    • Guided Period: Q3 2025 and FY 2025
    • Guidance:
      1. Fiscal Year 2025 Revenue: $95.5 billion to $98.5 billion, midpoint $97 billion, 10% growth.
      2. ISG Revenue: Grow roughly 30%.
      3. CSG Revenue: Flat to low single digits.
      4. Combined ISG and CSG Business Growth: 13% at midpoint.
      5. Gross Margin Rate: Decline roughly 180 basis points.
      6. Operating Expenses: Down low single digits.
      7. ISG and CSG Operating Margin Rates: 11% to 14% and 5% to 7%, respectively.
      8. Interest and Other Expenses: Roughly $1.4 billion.
      9. Annual Non-GAAP Tax Rate: 18%.
      10. Diluted Non-GAAP EPS: $7.80 plus or minus $0.25, up 9% at midpoint.
      11. Q3 Fiscal Year 2025 Revenue: $24 billion to $25 billion, midpoint $24.5 billion, up 10%.
      12. Combined ISG and CSG Business Growth for Q3: 14% at midpoint.
      13. Q3 Operating Expenses: Down low single digits sequentially.
      14. Q3 Operating Income Rate: Improvement expected.
      15. Q3 Diluted Share Count: 714 million to 718 million shares.
      16. Q3 Diluted Non-GAAP EPS: $2 plus or minus $0.10 .

    Q1 2025 Earnings Call

    • Issued Period: Q1 2025
    • Guided Period: FY 2025 and Q2 2025
    • Guidance:
      1. Fiscal Year 2025 Revenue: $93.5 billion to $97.5 billion, midpoint $95.5 billion, 8% growth.
      2. ISG Growth: In excess of 20%.
      3. CSG Growth: Low single digits.
      4. Combined ISG and CSG Business Growth: 11% at midpoint.
      5. Gross Margin Rate: Decline roughly 150 basis points.
      6. Operating Expenses (OpEx): Down low single digits.
      7. Diluted Non-GAAP EPS: $7.65 plus or minus $0.25, up 7% at midpoint.
      8. Q2 Fiscal Year 2025 Revenue: $23.5 billion to $24.5 billion, midpoint $24 billion, up 5%.
      9. Combined ISG and CSG Growth for Q2: 8% at midpoint.
      10. Q2 Operating Expenses: Down roughly 3% year-over-year.
      11. Q2 Diluted Share Count: 723 million to 727 million shares.
      12. Q2 Diluted Non-GAAP EPS: $1.65 plus or minus $0.10 .

    Q4 2024 Earnings Call

    • Issued Period: Q4 2024
    • Guided Period: FY 2025 and Q1 2025
    • Guidance:
      1. FY '25 Revenue: $91 billion to $95 billion, midpoint $93 billion, 5% growth.
      2. ISG Growth: Mid-teens.
      3. CSG Growth: Low single digits.
      4. Gross Margin Rate: Decline by roughly 100 basis points.
      5. Operating Expenses (OpEx): Roughly flat.
      6. Interest and Other (I&O): Roughly $1.4 billion.
      7. Diluted Non-GAAP EPS: $7.50 plus or minus $0.25, up 5% at midpoint.
      8. Non-GAAP Tax Rate: 18%.
      9. Long-term Financial Framework: Revenue growth of 3% to 4%, EPS growth of at least 8%.
      10. Capital Returns: 80% or more of adjusted free cash flow to shareholders.
      11. Q1 FY '25 Revenue: $21 billion to $22 billion, midpoint $21.5 billion, up 3%.
      12. ISG and CSG Growth for Q1: 5% at midpoint.
      13. Gross Margin Rate for Q1: Lower sequentially.
      14. Operating Expenses (OpEx) for Q1: Up slightly.
      15. Q1 Diluted Share Count: 723 million to 727 million shares.
      16. Q1 Diluted Non-GAAP EPS: $1.15 plus or minus $0.10 .