Sign in

Dell Technologies Inc. (DELL) Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY25 revenue was $24.37B (+10% Y/Y) with GAAP EPS $1.58 and non-GAAP EPS $2.15; EPS beat but revenue missed consensus (LSEG: $24.67B rev, $2.06 EPS). AI-led ISG strength offset softer CSG; gross margin rate declined Y/Y on AI mix but non-GAAP operating margin improved sequentially to 9.0% .
  • ISG delivered $11.37B revenue (+34% Y/Y); servers/networking +58% Y/Y to $7.36B; ISG operating income rose to $1.51B and margin to 13.3% (+230 bps Q/Q) on better server gross margins and lower OpEx .
  • AI momentum: $3.6B AI server orders in Q3, $2.9B shipped, $4.5B AI server backlog; 5-quarter AI pipeline grew >50% Q/Q; over 2,000 enterprise AI customers since launch .
  • Q4 FY25 guide trimmed vs Street: revenue $24–$25B (vs LSEG $25.57B) and non-GAAP EPS $2.50±$0.10 (vs $2.65), citing delayed PC refresh and shift to Blackwell AI platforms; FY25 non-GAAP EPS midpoint $7.81; full-year revenue midpoint reduced to ~$96.1B from $97.0B in Q2 .

What Went Well and What Went Wrong

  • What Went Well

    • ISG outperformance: revenue +34% Y/Y to $11.37B; servers/networking +58% to $7.36B; ISG OI $1.51B with margin 13.3% and sequential improvement of 230 bps on better server margins and lower OpEx .
    • AI traction and pipeline: record AI server orders ($3.6B), $2.9B shipped, backlog $4.5B; pipeline grew >50% Q/Q; “AI is a robust opportunity…with no signs of slowing down” – Jeff Clarke .
    • Operating leverage and cash: non-GAAP operating income up 12% Y/Y to $2.20B; CFO highlighted “EPS growth that outpaced revenue” and $1.6B CFFO in Q3 .

  • What Went Wrong

    • Revenue miss vs consensus and guide trim: Q3 revenue below LSEG consensus ($24.37B vs $24.67B) and Q4 guide below Street ($24–$25B vs $25.57B), with adjusted EPS guide $2.50 vs $2.65 .
    • Gross margin pressure: GAAP gross margin % down 140 bps Y/Y to 21.8% (AI mix, competitive CSG pricing), though up vs Q2 on a non-GAAP basis .
    • CSG softness: CSG revenue -1% Y/Y to $12.13B; Consumer -18% Y/Y to $1.99B; CSG OI margin 5.7% (down 180 bps Y/Y) amid a more competitive environment and delayed enterprise PC refresh to CY25 .

Financial Results

MetricQ3 FY24Q2 FY25Q3 FY25Consensus (Q3 FY25)
Revenue ($B)$22.25 $25.03 $24.37 $24.67
GAAP Diluted EPS ($)$1.36 $1.17 $1.58 N/A
Non-GAAP Diluted EPS ($)$1.88 $1.89 $2.15 $2.06
GAAP Gross Margin %23.1% 21.2% 21.8% N/A
Non-GAAP Gross Margin %23.7% 21.8% 22.3% N/A
GAAP Operating Income ($B)$1.49 $1.34 $1.67 N/A
Non-GAAP Operating Income ($B)$1.96 $2.03 $2.20 N/A
GAAP Operating Margin %6.7% 5.4% 6.8% N/A
Cash from Operations ($B)$2.15 $1.34 $1.55 N/A
Adjusted Free Cash Flow ($B)$0.86 $1.28 $0.72 N/A
  • Results vs consensus: Revenue missed by ~$0.30B and non-GAAP EPS beat by $0.09; Q4 revenue/EPS guidance below LSEG expectations. Bold takeaway: revenue miss, EPS beat; guidance reset is the stock driver .

Segment breakdown

SegmentQ3 FY24Q2 FY25Q3 FY25
ISG Revenue ($B)$8.50 $11.65 $11.37
• Servers & Networking ($B)$4.66 $7.67 $7.36
• Storage ($B)$3.84 $3.97 $4.00
ISG Operating Income ($B)$1.07 $1.28 $1.51
ISG OI Margin %12.6% 11.0% 13.3%
CSG Revenue ($B)$12.28 $12.41 $12.13
• Commercial ($B)$9.84 $10.56 $10.14
• Consumer ($B)$2.44 $1.86 $1.99
CSG Operating Income ($B)$0.93 $0.77 $0.69
CSG OI Margin %7.5% 6.2% 5.7%

Key KPIs

KPIQ1 FY25Q2 FY25Q3 FY25
AI Server Orders Demand ($B)$2.6 $3.2 $3.6
AI Server Shipments ($B)$1.7 $3.1 $2.9
AI Server Backlog ($B)$3.8 $3.8 $4.5
5-Quarter AI PipelineMultiple of backlog Several multiples of backlog >50% Q/Q growth
Enterprise AI CustomersExpanding Increasing each quarter >2,000 since launch
Cash Conversion Cycle (days)-47 -43 -38
Inventory ($B)—$5.95 $6.70

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($B)Q4 FY25N/A$24–$25 New/Below Street
Non-GAAP EPS ($)Q4 FY25N/A$2.50 ± $0.10 New/Below Street
ISG Revenue Growth (Y/Y)Q4 FY25N/AMid-20s % New
CSG Revenue Growth (Y/Y)Q4 FY25N/ALow single digits New
OpEx (Y/Y)Q4 FY25N/ADecline mid-single digits New
Operating Income RateQ4 FY25N/AUp sequentially New
Diluted Shares (M)Q4 FY25N/A715–719 New
FY25 Revenue ($B)Full Year$95.5–$98.5 (midpoint $97.0) Midpoint ~$96.1 (implied) Lowered
FY25 Non-GAAP EPS ($)Full Year$7.80 ± $0.25 $7.81 midpoint Maintained
DividendOngoingAnnual $1.78 (raised in Feb) $0.445/quarter declared Dec 3 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
AI/Technology InitiativesAI server shipments accelerating; backlog $3.8B; pipeline multiple of backlog; Dell AI Factory launch Orders $3.6B; shipments $2.9B; backlog $4.5B; pipeline +50% Q/Q; first to ship GB200 design; enterprise customers >2,000 Stronger, broadening to rack-scale (cooling, power, networking)
PC Refresh/Windows 10Stabilizing commercial demand; optimism on refresh; Windows 10 EOL as catalyst Refresh pushed to CY25; Q4 guide reflects delay; consumer remains challenged Delay near-term; still a 2025 tailwind
Supply Chain / TariffsMonitoring component inflation; DRAM/SSD inflation expected in H2 FY25 Global, resilient supply chain; prepared to navigate tariffs; Blackwell transition affects shipment timing Manageable; mix/availability drive cadence
Storage TrajectoryStorage margins to improve H2; Dell IP focus (PowerMax/Store/Scale) Storage +4% Y/Y; double-digit demand in PowerStore/PowerFlex; strongest quarter seasonally ahead Improving mix, profitability
AI Profitability/MarginsAI margin rate dilutive but dollar accretive; improving with services/networking attach ISG margin up to 13.3%; continuing improvement expected; expanding services/L11-L12 Improving with higher-value attach
Customer Mix (AI)Weighted to Tier-2 CSPs; enterprise growing share Enterprise portion of pipeline growing faster; federal strong; sovereign not yet sizable Diversifying toward enterprise

Management Commentary

  • “AI is a robust opportunity for us with no signs of slowing down…record AI server orders demand of $3.6B in Q3 and a pipeline that grew more than 50%” – Jeff Clarke, COO .
  • “Gross margin was $5.4B or 22.3% of revenue…down 140 bps due to an increase in our AI-optimized server mix and a more competitive pricing environment, specifically in CSG.” – CFO Yvonne McGill .
  • “This business will not be linear, especially as customers navigate an underlying silicon roadmap that is changing.” – Jeff Clarke on Blackwell transition .
  • “We expect Q4 revenues to be between $24B and $25B…non-GAAP EPS $2.50 ± $0.10…operating income rate up sequentially.” – CFO guidance .

Q&A Highlights

  • ISG margin sustainability: ISG OI margin up 230 bps Q/Q to 13.3% on better server gross margins and lower OpEx; management expects continued improvement in Q4 .
  • Guidance reduction drivers: Slower PC refresh pushing into CY25 and shift of AI demand to Blackwell affecting near-term shipments drove the guide down vs prior thinking .
  • AI shipments cadence: Q4 AI server shipments guided “slightly down” Q/Q given Blackwell ramp/availability; pipeline up >50% with growing enterprise mix .
  • Storage outlook: Midrange (PowerStore/PowerFlex) demand double-digit; Q4 seasonally strongest; mix shifting to Dell IP supports margins .
  • Tariffs/manufacturing: Dell cites resilient global supply chain and experience navigating geopolitical/tariff changes; not overreacting .

Estimates Context

  • Q3 FY25 actuals vs LSEG consensus: Revenue $24.37B vs $24.67B (miss), non-GAAP EPS $2.15 vs $2.06 (beat). Q4 guide midpoint rev $24.5B vs $25.57B (below), EPS $2.50 vs $2.65 (below) .
  • S&P Global (Capital IQ) consensus could not be retrieved due to API rate limits; where estimates are cited, LSEG figures are used instead .

Key Takeaways for Investors

  • AI remains the core growth engine: Orders, backlog, and pipeline all expanded; enterprise adoption is accelerating, and Dell is extending into higher-value rack-scale integration (networking, cooling, power), supporting margin improvement .
  • Near-term revenue headwinds from PC timing and Blackwell transition: Expect quarterly lumpiness; focus on ISG margin trajectory and services/networking/storage attach to AI deals to gauge sustainable profitability .
  • ISG margin inflection is real: 13.3% in Q3 with management guiding further improvement; monitor whether this level holds as Blackwell ramps and mix evolves .
  • CSG stability with 2025 catalyst: Windows 10 EOL and AI PC features underpin a 2025 refresh; current consumer weakness and enterprise delays likely apportion into CY25 .
  • Storage mix improving: Growth in Dell IP (PowerStore/PowerFlex/PowerScale) and seasonal Q4 strength should aid margins; watch for AI storage attach and SuperPOD-linked wins .
  • Guidance reset lowers bar: Full-year revenue midpoint trimmed; Q4 guide below Street sets a more achievable near-term hurdle—stock reaction likely keyed to AI shipment cadence and ISG margin carry-through .
  • Capital returns continue: $0.445 quarterly dividend declared; buybacks ongoing (3.7M shares in Q3) while maintaining core leverage at ~1.4x .

Best AI for Equity Research

Performance on expert-authored financial analysis tasks

Fintool-v490%
Claude Sonnet 4.555.3%
o348.3%
GPT 546.9%
Grok 440.3%
Qwen 3 Max32.7%