Sign in

Dell Technologies Inc. (DELL) Q4 2025 Earnings Summary

Executive Summary

  • Q4 FY2025 revenue was $23.93B, up 7% YoY, with record GAAP diluted EPS of $2.15 (up 30% YoY) and non-GAAP diluted EPS of $2.68 (up 18% YoY), driven by 22% ISG growth and strong storage profitability; gross margin was 23.7% amid a more competitive CSG environment and higher AI server mix .
  • Management initiated FY26 guidance: revenue $101–$105B (midpoint +8% YoY), GAAP EPS $7.85 (+23% YoY), non-GAAP EPS $9.30 (+14% YoY); Q1 FY26 revenue $22.5–$23.5B and non-GAAP EPS $1.65 (+25% YoY), with FY26 gross margin rate expected to decline ~100 bps on AI mix and continued CSG competition .
  • Capital return was stepped up: annual dividend raised 18% to $2.10 per share (first payment $0.525 on May 2, 2025) and share repurchase authorization increased by $10B, signaling confidence in FY26 growth and sustained cash generation .
  • AI momentum remains a primary stock narrative: Q4 AI server orders were $1.7B, shipments $2.1B, backlog $4.1B; new deals (including xAI) in February lifted AI server backlog to roughly $9B, bolstering visibility into FY26’s at least $15B AI server shipment target .
  • A disclosed material weakness in internal controls related to supplier credits (impacting CSG) prompted prior-period revisions; management has begun remediation—an overhang to watch but with limited prior-period P&L materiality per SEC SAB 108 treatment .

What Went Well and What Went Wrong

What Went Well

  • ISG execution and profitability: ISG revenue up 22% YoY to $11.35B, with servers and networking up 37% to $6.63B and a record ISG operating income of $2.05B (18.1% margin), aided by a pivot to higher-margin Dell IP storage and improved product profitability .
  • AI pipeline/backlog expansion: “The deals we’ve booked with xAI and others puts our AI server backlog at roughly $9 billion as of today,” reinforcing multi-quarter demand and shipment visibility .
  • Operating leverage and cost efficiency: Non-GAAP operating income grew 22% to $2.67B, with OpEx down 6% to $3.14B; management highlighted modernization efforts that reduced OpEx while investing in innovation and differentiation .

What Went Wrong

  • Margin rate pressure: Gross margin rate declined versus prior year driven by competitive pricing in CSG and a higher AI-optimized server mix; management expects FY26 gross margin rate to decline ~100 bps on mix—an investor watch item .
  • CSG softness: CSG operating income fell 19% YoY to $0.63B with commercial up 5% but consumer down 12%; profitability in commercial was weaker than expected as demand shifted into FY26 .
  • Cash flow compression: Q4 cash from operations was $0.59B (down 62% YoY) with adjusted free cash flow down 53% YoY; inventory invested to support AI and CSG underperformance weighed on CCC in FY25 .

Financial Results

MetricQ4 FY2024Q2 FY2025Q3 FY2025Q4 FY2025
Revenue ($USD Billions)$22.32 $25.03 $24.37 $23.93
GAAP Diluted EPS ($USD)$1.66 $1.17 $1.58 $2.15
Non-GAAP Diluted EPS ($USD)$2.27 $1.89 $2.15 $2.68
Gross Margin (%)24.1% 21.2% 21.8% 23.7%
Operating Income ($USD Billions)$1.55 $1.34 $1.67 $2.16
Net Income ($USD Billions)$1.21 $0.84 $1.13 $1.53
Cash from Operations ($USD Billions)$1.53 $1.34 $1.55 $0.59
Segment Detail ($USD Billions)Q4 FY2024Q2 FY2025Q3 FY2025Q4 FY2025
ISG Servers & Networking$4.86 $7.67 $7.36 $6.63
ISG Storage$4.48 $3.97 $4.00 $4.72
ISG Total$9.33 $11.65 $11.37 $11.35
CSG Commercial$9.56 $10.56 $10.14 $10.00
CSG Consumer$2.15 $1.86 $1.99 $1.89
CSG Total$11.72 $12.41 $12.13 $11.88
Segment ProfitabilityQ4 FY2024Q2 FY2025Q3 FY2025Q4 FY2025
ISG Operating Income ($USD Billions)$1.43 $1.28 $1.51 $2.05
ISG Operating Income Rate (%)15.3% 11.0% 13.3% 18.1%
CSG Operating Income ($USD Billions)$0.78 $0.77 $0.69 $0.63
CSG Operating Income Rate (%)6.7% 6.2% 5.7% 5.3%
AI KPIsQ2 FY2025Q3 FY2025Q4 FY2025
AI-Optimized Server Orders Demand ($USD Billions)$3.2 $3.6 $1.7
AI-Optimized Server Shipments ($USD Billions)——$2.1
AI Server Backlog ($USD Billions, quarter-end)$3.8 —$4.1
AI Server Backlog ($USD Billions, post-quarter update)——~$9.0

Note: “—” indicates not disclosed.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($B)FY26N/A$101–$105 (midpoint $103, +8% YoY) Initiated
GAAP Diluted EPS ($)FY26N/A$7.85 (+23% YoY) Initiated
Non-GAAP Diluted EPS ($)FY26N/A$9.30 (+14% YoY) Initiated
Revenue ($B)Q1 FY26N/A$22.5–$23.5 (midpoint +3% YoY) Initiated
GAAP Diluted EPS ($)Q1 FY26N/A$1.29 (−6% YoY) Initiated
Non-GAAP Diluted EPS ($)Q1 FY26N/A$1.65 (+25% YoY) Initiated
Gross Margin RateFY26N/A~100 bps decline expected Lowered
OpExFY26N/ADown low single digits YoY Lowered
ISG Operating Income RateFY26N/ARoughly flat YoY Maintained
CSG Operating Income RateFY26N/ADown slightly YoY Lowered
Interest & Other (I&O)FY26N/A$1.4–$1.5B Initiated
Non-GAAP Tax RateFY26N/A18% Maintained
Diluted Share Count (mm)Q1 FY26N/A706–710 Initiated
AI Server Shipments ($B)FY26N/AAt least $15 Initiated
DividendAnnual$1.78Increased to $2.10; next $0.525 on May 2, 2025 Raised
Share Repurchase AuthorizationOngoingN/A+$10B increase Increased

Earnings Call Themes & Trends

TopicQ2 FY25 (Prior-2)Q3 FY25 (Prior-1)Q4 FY25 (Current)Trend
AI demand/backlogAI orders $3.2B; backlog $3.8B; pipeline several multiples of backlog Record AI orders $3.6B; pipeline grew >50% QoQ AI orders $1.7B; shipments $2.1B; backlog $4.1B; post-quarter backlog ~$9B incl. xAI Strengthening visibility
Storage mix to Dell IPStorage −5% YoY; focus on Dell IP Storage +4% YoY; improving profitability Storage +5% YoY; record profitability on higher Dell IP mix; PowerStore/PowerScale demand Mix improving, margins up
CSG environment/PC refreshCommercial flat; consumer −22%; competitive pricing Commercial +3%; consumer −18% Commercial +5%; consumer −12%; refresh visibility (Win10 EOL, AI PCs); Jan slowdown Recovery building H2 FY26
Supply chain/tariffsNot highlightedNot highlightedResilient, globally diverse supply chain; dynamic tariff landscape; pricing to reflect input costs Managed but fluid
ODM/AI server competitionNot highlightedNot highlightedDell emphasizes custom engineering, services, financing; first to GB200 rack; margin dollars accretive Differentiation sustained
Cash flow/CCCCFO: cash ops $1.3B; adj FCF down on working capital Cash ops $1.6B; strong cash performance Q4 cash ops $0.59B; FY25 CCC impacted by AI inventory; outlook for >1x cash conversion Rebound expected in FY26

Management Commentary

  • “FY25 was a transformative year – we hit $95.6 billion in revenue, grew our core business double digits, unlocked efficiencies, and drove record EPS… We’re raising our annual dividend by 18%…confidence in our opportunity to grow in FY26.” — Yvonne McGill, CFO .
  • “In Q4 we grew our Infrastructure Solutions Group revenue by 22%…The deals we’ve booked with xAI and others puts our AI server backlog at roughly $9 billion as of today.” — Jeff Clarke, COO .
  • On ISG drivers: “Record ISG operating income of $2.1B…rate up again sequentially to a record 18.1%…result of improved gross margins, especially in storage, and reduced operating expense.” — Yvonne McGill .
  • On AI margin dynamics: “AI servers are margin rate‑dilutive…margin dollar‑accretive…operating margin‑positive…and better margins in enterprise use cases.” — Jeff Clarke .
  • On PC refresh: “We’re 9 months away from Windows 10 end of life…over 500M PCs running Windows 10 that can’t run Windows 11…customers are waiting to buy AI PCs that future‑proof their purchases.” — Jeff Clarke .

Q&A Highlights

  • FY26 margin mix and EPS bridge: ISG high‑teens growth anchored by at least $15B AI server shipments, OpEx down low single digits, ISG OI rate roughly flat; CSG margin down slightly; gross margin rate −~100 bps on AI mix .
  • AI competitive landscape: Dell’s custom engineering, integration, services, financing and time‑to‑market advantages defend against ODM encroachment in large AI deployments (e.g., first to market GB200 rack) .
  • Tariffs and supply chain: Dynamic environment; diversified, agile supply chain and pricing actions to mitigate impacts; new measures announced that morning not reflected in guidance .
  • Cash flow drivers: FY25 FCF down due to CSG softness and AI inventory build; FY26 outlook benefits from CCC improvement, CSG recovery, and P&L growth (expect >1x cash conversion) .
  • Server consolidation and storage attach: Ongoing traditional server consolidation (higher TRUs) with targeted storage attach for AI workloads (PowerScale, parallel file system “Project Lightning,” data lake house) .

Estimates Context

  • Wall Street consensus (S&P Global Capital IQ) for Q4 FY2025 revenue and EPS was unavailable at time of analysis due to SPGI daily request limits; therefore, no estimate comparison is provided here. Values retrieved from S&P Global would be used when available.

Key Takeaways for Investors

  • ISG is the core earnings engine entering FY26: storage mix shift to Dell IP and scaling servers support record margins; expect ISG OI rate ~flat despite AI mix headwind .
  • AI narrative remains a multi‑quarter catalyst: backlog stepped up to roughly $9B post‑quarter; management targets at least $15B AI server shipments in FY26, with enterprise AI margins better than CSP mega‑deals .
  • Watch CSG trajectory and PC refresh timing: commercial strength emerging, but pricing remains competitive; refresh visibility (Win10 EOL, AI PCs) points to stronger H2 FY26 mix .
  • Expect near‑term margin rate pressure: gross margin rate guidance implies ~100 bps decline in FY26; monitor mix, pricing discipline, and storage margin offsets .
  • Cash conversion should improve as AI inventory turns and CSG recovers; management signals >1x cash conversion in FY26, supporting stepped‑up capital return .
  • Internal control remediation is a governance watch item: supplier credits issue resulted in immaterial prior‑period revisions but constitutes a material weakness; track remediation milestones .
  • Trading set‑up: positive catalysts include AI backlog updates, storage margin momentum, dividend/buyback support; risks include CSG competition, margin mix headwinds, and tariff volatility .

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%