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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

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Good afternoon, and welcome to the Fiscal Year twenty twenty six First Quarter Financial Results Conference Call for Dell Technologies Inc. I'd like to inform all participants this call is being recorded at the request of Dell Technologies. This broadcast is the 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.

If you have a question, simply press star, I'd like to turn the call over to Paul Frantz, Head of Investor Relations. Mr. Frantz, you may begin.

Thanks everyone for joining us. With me today are Jeff Clark, Yvonne McGill and Tyler Johnson. Our earnings materials are available on our IR website and I encourage you to review these 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 measures 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 their most directly comparable GAAP measures can be found in our web deck 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 web deck and our SEC filings.

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

Thanks, Paul, and thanks everyone for joining us. This quarter, we executed very well, achieving growth across our core markets and experiencing unprecedented demand for our AI optimized servers. Our revenue reached $23,400,000,000 up 5%, driven by growth across all of our core markets. ISG and CSG were up 8%. Earnings per share increased by 17% to $1.55 growing three times faster than revenue.

This resulted in a record cash generation for the first quarter and shareholder returns exceeding $2,000,000,000 Turning to AI. We experienced exceptionally strong demand for AI optimized servers, building on the momentum discussed in February and further demonstrating that our differentiation is winning in the marketplace. We booked $12,100,000,000 in orders in the first quarter, surpassing the entirety of shipments in all of FY 2025. We shipped $1,800,000,000 leaving us with a backlog of $14,400,000,000 Our May pipeline continued to grow sequentially across both Tier two CSPs and private and public enterprise customers and remains multiples of our backlog. Enterprise AI customers grew again sequentially with good representation across key industry verticals including WebTech, financial services industry, manufacturing, media and entertainment and education.

AI momentum continues to remain strong. That said, given the scale of these opportunities, variability and timing and choices around technology, the inherent nonlinear nature of demand and associated shipments is likely to persist. This quarter is a clear indicator the Dell offering resonates with customers. We are innovating at breakneck speed, designing bespoke custom solutions for customers while being agile to respond quickly to evolving next generation architectures. Our ecosystem in this space is unmatched with key partners such as NVIDIA, AMD, Hugging Face, Cohere, Meta, Mistral, and Google, and so many others.

Our execution continues to be a key differentiator. We've built a strong reputation for deploying large scale clusters quickly and reliably, significantly reducing the time to first token and accelerating time to value for our customers. Beyond deployment, we provide ongoing comprehensive support, including managed services that ensure systems reliability and performance in customer data centers. And finally, our ability to offer flexible financing solutions enables customers to scale their AI infrastructure with confidence and efficiency. Looking ahead, we remain focused on expanding our leadership in this space by continuing to invest in innovation, deepening customer partnerships and delivering the infrastructure and software solutions within our AI factories that will power the next wave of AI transformation.

In traditional servers, revenue increased double digits and we now have six consecutive quarters of year over year demand growth. TRU's increased alongside the mix of our sixteenth generation servers as customers prioritize consolidation and modernization of their data centers. A significant portion of the installed base remains on fourteenth generation servers or older, presenting a substantial refresh opportunity with our 16 gs and 17 gs servers. In storage, revenue increased 6%, making it the third consecutive quarter of P and L growth along with margin improvement year over year. We continue to execute in our areas of focus, Dell IP in the midrange, software defined, unstructured and data protection as more and more customers move to disaggregated architectures.

PowerStore demand rose double digits growing for five consecutive quarters. Customers value our five to one data reduction guarantee, and we are integrating more security in the PowerStore using advanced AI analytics. We're gaining traction in data production with demand up double digits in both our next generation target appliance as well as our software. Our mix of Dell IP storage continues to grow, and we are capturing more value from our platforms, expanding the margin rates within our products. In CSG, momentum increased in commercial PCs where demand strengthened.

Overall, CSG revenue rose by 5%, driven by strong commercial revenue growth of 9%. We now have three consecutive quarters of P and L growth and five consecutive quarters of demand growth in commercial. We saw double digit demand growth across small business, medium business and large enterprise. Commercial demand was strongest in North America with EMEA and APJ up double digits. While the PC refresh remains behind prior cycles, we are seeing indicators that the installed base is upgrading to new Windows 11 PCs, many of them AIPCs.

The consumer market remains challenged, consumer revenue declined 19%, and the industry pricing remained competitive. Over the past three months, we've made significant advancements to the Dell AI factory. From industry first AIPCs to the edge and data center enhancements, we are pushing the boundaries with highly dense, powerful, energy efficient AI infrastructure, leading the industry in pace of innovation. Some examples of our recent end to end AI announcement. We lead the industry with the broadest portfolio of CoPilot plus capable AIPCs shipping since March.

Strategically timed with the Windows 11 refresh, this allows our customers to move to the latest technology and future proof on device AI workloads. We announced new Dell Pro Max notebooks and desktops equipped with the NVIDIA RTX Pro Blackwell GPUs, Intel Core Ultra processors, and AMD Rising and Threadripper processors. At GTC, we announced the future of desk side AI development with the Dell Pro Max with the GB10 and GB300, with the latter touting seven eighty four gigabytes of unified system memory in the power to run a trillion parameter model. At DTW, we announced the Dell Pro Max notebook with the industry's first enterprise grade discrete MPU capable of running a 109,000,000,000 parameter model setting a new bar for edge inference in a mobile form factor. On the server side, VXE ninety seven eighty and ninety seven eighty l are air cooled and liquid cooled platforms supporting up to 256 NVIDIA HGX b 300 GPUs per rack.

The XE9712 supporting NVIDIA GB300 NVL72, which we had the world's first led at GTC in March. The XE7745 supporting the NVIDIA RTX Pro 6,000 Blackwell GPUs will support for up to eight GPUs and a 4U chassis. The launch of our power cool platform starting with our rear door heat exchanger that captures, cools, and recirculates 100% of the rack heat, reducing the cooling energy costs by up to 60%. We introduced the Dell AI data platform, which showcases fast, powerful, scalable storage with significant software and hardware enhancements to power scale and object scale. It also features cutting edge technologies like Project Lightning, a large scale caching solution co engineered with Nvidia, and end to end data management with the Dell Data Lakehouse.

We expanded our ecosystems partners and announced our collaboration with Google to bring Gemini on prem exclusively for Dell customers and industry first. And additionally, we announced our partnership with the innovative Cohere to simplify the deployment of agentic technology on prem. We also announced the Dell Private Cloud and the Dell Automation Platform designed to make deploying, managing, and scaling private cloud environment simple. We are not only innovating today, we are defining the future architecture of the intelligence enterprise. In closing, I'm confident in our position and ability to execute.

We are leading in AI and pushing the boundaries of innovation. We had over $12,000,000,000 in AI orders this quarter alone, which will drive significant revenue growth and EPS. We are enabling data center modernization and consolidation with our sixteenth and seventeenth generation servers, enabling lower TCO while reducing physical footprint. Our Dell IP storage portfolio targets faster growing higher margin segments of the market. Our commercial PC portfolio is ideally suited for enterprises with a wider range of offerings and AI capable devices.

Our industry leading supply chain is a unique advantage in the dynamic environment we are operating in today. We are leveraging the agility and resilience we have built over the past four decades, enabling us to navigate numerous challenges over the years and allows us to minimize the impact on our customers and shareholders. We are using GenAI internally to increase the competitiveness and capability of the company. For example, our digital service assistant has increased our diagnostic and resolution ability while increasing customer satisfaction. We are well positioned today as AI accelerates and becomes more pervasive in all of our lives.

There is so much more to come and we will be leaving. Now over to you Yvonne for more details on Q1.

Thanks, Jeff. Let me begin with an overview of our Q1 performance, then I'll move to ISG, CSG, cash and guidance. In the first quarter, we saw continued P and L growth across all of our core markets and record Q1 cash flow from operations. Our total revenue was up 5% to $23,400,000,000 Our combined ISG and CSG business grew 8%. Gross margin was $5,100,000,000 or 21.6 percent of revenue.

This was down 80 basis points due to a more competitive pricing environment, predominantly in CSG and geographical mix within traditional servers. Operating expense was down 2% to $3,400,000,000 or 14.5% of revenue as we continue to unlock efficiencies and modernize our processes. Now let's look at operating income. We delivered a 10% increase to $1,700,000,000 or 7.1% of revenue. This was driven by higher revenue and lower operating expenses.

Q1 net income was up 13% to 1,100,000,000 primarily driven by stronger operating income. And our diluted EPS is up 17% to $1.55 growing three times faster than revenue. Now let's move to ISG, where we delivered another quarter of strong performance. ISG revenue was $10,300,000,000 up 12%. Servers and networking revenue was a Q1 record of $6,300,000,000 up 16%.

We saw very robust demand in AI servers with $12,100,000,000 of orders in the first quarter, and we shipped $1,800,000,000 of AI servers. In traditional servers, we saw continued P and L growth, but the demand environment moderated compared to the last quarter. Additionally, we saw a lower mix of North America in traditional server, which is a higher margin geography. Storage revenue was up 6% to $4,000,000,000 our third consecutive quarter of growth. We saw strong demand in our Dell IP portfolio, specifically with PowerStore and data protection.

We had ISG operating income of $1,000,000,000 up 36%. This was driven primarily by higher revenue. Our ISG operating income rate was up year over year to 9.7% of revenue. The rate improvement of approximately 170 basis points was driven by revenue scaling and slightly lower operating expense and higher mix of Dell IP storage. As Jeff mentioned, we are focused on further increasing our mix of Dell IP versus partner IP storage and are also driving continued product profitability improvement within our storage business.

Now let's turn to CSG. CSG revenue was up 5% to $12,500,000,000 Commercial revenue was up 9% to $11,000,000,000 while consumer revenue was down 19% to 1,500,000,000 CSG operating income was $700,000,000 or 5.2% of revenue. TRUs remained stable sequentially, and we continue to see customers prioritize richly configured AI ready devices. As Jeff mentioned, we saw strong performance across small and medium business and large enterprise. In consumer, the demand environment remains soft and profitability remains challenged.

We are focused on executing within CSG, leveraging our leading go to market engine and broader portfolio of offerings to capture the PC refresh. Now let's move to cash flow and the balance sheet. We had a strong cash quarter with record Q1 cash flow from operations of $2,800,000,000 This was primarily driven by profitability and working capital improvement. We ended the quarter with $9,300,000,000 in cash and investments, up $4,200,000,000 sequentially. Our core leverage ratio was up sequentially to 1.6x given our recent debt issuance.

We returned $2,400,000,000 of capital to shareholders with 22,100,000.0 shares of stock repurchased at an average price of $90 per share and paid a dividend of roughly $0.53 per share. Our significant share repurchases this quarter reflect our continued confidence in the business, our ability to act opportunistically during periods of price dislocation, and commitment to disciplined capital allocation. Since our capital return program began at the beginning of FY 'twenty three, we've returned $13,200,000,000 to shareholders through stock repurchases and dividends. Turning to Q2 guidance. In CFG, we expect the PC refresh cycle to continue as the installed base upgrades to new devices, resulting in improved profitability sequentially.

In ISG, we expect to ship roughly $7,000,000,000 of AI servers as we fulfill some of our large deals. We are expecting sub seasonal performance in traditional server and storage, our larger profit pools that provide scale as customers evaluate their IT spend for the year given the dynamic macro environment. Given that backdrop, we expect Q2 revenue to be between 28,500,000,000 and $29,500,000,000 up 16% at the midpoint of $29,000,000,000 ISG and CSG combined are expected to grow 19% at the midpoint, with ISG growing significantly and CSG up low to mid single digits. OpEx will be down low single digits year over year. We expect operating income to be up roughly 8%.

We expect our diluted share count to be roughly $685,000,000 shares. And our diluted non GAAP EPS is expected to be $2.25 plus or minus zero one zero dollars up 15% at the midpoint. Moving to the full year. It is early in what has been a very dynamic year. We're optimistic on our portfolio and our ability to execute.

However, we want to be thoughtful on how customers think through their IT spend relative to the macro environment. Against that backdrop, we are reiterating our full year revenue guidance and expect FY 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 over $15,000,000,000 in AI server shipments and continued growth in traditional server and storage. And we expect CSG to grow low to mid single digits. We expect the combined ISG and CSG to grow 10% at the midpoint.

Given what we expect for the first half, the full year guide reflects slightly lower profitability expectations within CSG, traditional server and storage. As our modernization efforts continue, we expect operating expense to be down low single digits year over year. We expect operating income to be up roughly nine percent. We expect I and O to be between $1,400,000,000 and $1,500,000,000 We are increasing our diluted non GAAP earnings per share guidance to $9.4 plus or minus $0.25 up 15% at the midpoint, assuming an annual non GAAP tax rate of 18%. In closing, we had another strong quarter with EPS growth significantly outpacing revenue and record Q1 cash generation.

We are focused on executing our strategy, expanding our lead in AI and modernizing our business, all driving increased EPS growth. This will be an exciting year, and I look forward to the growth we see above our long term framework 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. In order to ensure we get as many of you as possible, please ask one concise question. Let's go to the first question.

We'll take our first question from Amit Daryanani with Evercore ISI.

Thanks for taking my question. I guess my question was just on the AI server revenues. You folks had some really impressive performance in Q1. I think the backlog at $12,100,000,000 was up over $3,000,000,000 from ninety days ago. Can you just touch on kind of what are you seeing and how should we think about the fiscal twenty twenty six AI server revenue target, which I think was $15,000,000,000 before, especially as you've seen a bigger uptick in engagement from the sovereign side and also some of the neo clouds that are raising the CapEx?

Just any framework on how to think about the AI server market as we go forward would be really helpful.

Sure. Amit, thanks for the question. First of all, we're ninety one days into the year. We've got two seventy three more to go. But I like to start.

Dollars 4,100,000,000.0 of orders in Q1, more than all of last year. We're off to a good start, but we have much in front of us. The customer deployments that we have in front of us are large, they're complex, they have very detailed scheduled deliveries. There's lots of dependencies on this. We've talked about this business being lumpy and nonlinear.

The dependencies in this business are waiting for data centers to be built, power to be provided, direct liquid cooling infrastructure put in place. We're orchestrating a highly complex supply chain. You've probably seen reference that a GB200 NVL 72 rack has 1,200,000 parts in it. Coordinating and orchestrating that across our value add, whether that be CDUs, cold plates, the racks themselves, power shelves, what have you. That's what we're working through.

It's driven the backlog. We love where the backlog is. It's healthy. It's reflected, I believe, backlog is $14,400,000,000 on top of that $12,100,000,000 of orders. And probably the interesting thing, what I think is the most interesting thing is that we converted our five quarter pipeline, obviously, to generate the $12,100,000,000 in the growing backlog and the five quarter pipeline grew.

It grew sequentially. It's up significantly year over year. It's filled through lots of multiple types of technology versions of Blackwell and it now contains Sovereign. You may have seen an announcement earlier today from the Department of Energy around the Nurse ten and our design win there. An example of Sovereign AI.

We're very excited about that. Also, got lots to go. Three quarters in front of us. I can really tell you we're on the plus side of $15,000,000,000 and feel pretty good about it. But we'll update you now before year goes in another quarter.

And our next question will come from Ben Reitze with Melius Research.

Make this concise from Paul there, so I'll do my best, Jeff. I wanted to talk about second half guidance. Amit went there a little bit. But if you do the $15,000,000,000 plus, let's call it, and including $8,000,000,000 in the first half for AI servers, that implies, I don't know, 3,500,000,000.0 each quarter in the back half. And I think Amit was getting at this that is that indicative of demand?

And Yvonne and Jeff, do you mind just talking about is that the kind of lumpiness we're really getting, seven going to 3.5? Or are you just being conservative? And just sorry for the multi part, but Yvon, do you mind just saying again what you're looking for in ISG? What level of moderation for the second half of demand in both ISG and CSG? Is it really significant in order to kind of keep your guidance?

We actually have to slow down AI servers, but I'm not so sure street numbers for the other two segments go down very much. Thanks. In the back half, I mean. Thanks.

Let's see if we can parse our way through that. So I believe, first of all, I've made reference that we expect to ship $7,000,000,000 of AI servers on top of the $1,800,000,000 that I referenced. So we're closer to 9,000,000,000 in the first half. I made reference that the May pipeline continues to grow and grow significantly. It remains multiples of our backlog.

The enterprise component of that continues to grow. In fact, it's growing at a faster rate than the CSP part of that pipeline. And we're optimistic. It's early in the year. We're ninety one days in.

We have a couple of technology shifts in front of us. We're very excited about that. We continue to win and differentiate ourselves with our engineering and innovation, our ability to deliver and deploy, deliver and deploy and turning on our racks in twenty four hours when they're operating and in business for our customers. We continue to focus on what differentiates us. I like our prospects of converting more pipeline in the second half.

But at this point, we're on the 15 plus side. Our annual guidance that we just delivered suggests that's exactly where we are and let Yvonne work our way through the ISG question again.

Yes. So from an ISG perspective, as I think through the full year guide, we are early on, right? And so we have been thinking that as we are, I'd say, historically a bit conservative in how we look at the year, we have really held holistically on the year right now given what we're seeing in the dynamic environment. I am really excited about the AI opportunity. Obviously, we have a significant backlog already and that will continue to expand.

But at this juncture, we think we should remain on what we have put out for the guide and not do any dynamic increases there.

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

Hey, guys. Thank you so much for taking my question. Jeff, obviously, Ben and Amit have touched on it, really strong commentary on AI servers. I would love to just get a little bit more color from you on the potential for the storage and services attach opportunity alongside AI servers. Obviously, there was commentary more than a year ago about a pretty big opportunity there.

And I'm just wondering as you've kind of seen this market evolve with CSP customers, enterprises, sovereigns, When can we think about that attach opportunity really starting to materialize? Any way to size how to think about the attach? Anything that you could help us understand for margin impact there? Just some more context would be helpful there. Thanks so much.

Sure. Think part of it is part of the answer lies in what we announced at Dell Technology World, which is an expansion of our storage portfolio, the storage capability, our data management platform, the Dell automation platform. Those things are all important as we're building out the portfolio pluses around the specific AI server node and the rack. We made reference to project lightning last week, continue to be excited about the opportunities there. We've made, I would probably cast it as modest improvement in our storage and networking attach.

We've made significant improvement in our deployment and installation services attach. It is what's actually differentiating us in the marketplace. Our ability to do the L11, L12, get it deployed, installed, and ultimately operational in a short period of time. That continues to differentiate. It's being valued by our customers.

And if I extrapolate that to what can be done in enterprise, it's the same sort of opportunity. In fact, we think the opportunity to attach storage, particularly as the data structure moves to more object storage And our assets in the unstructured space, we have a differentiated advantage. We're going to continue to invest in that portfolio. The opportunity in networking is there. And obviously, the services that I just mentioned are equally important in enterprises, they are in the largest clusters in the world.

So we remain optimistic. We have work to do. I'd be not be truthful if I said we were satisfied. We are not satisfied with the attach today. I think that is all upside and opportunity.

Our sales team is focused on that. And we continue to find opportunities to differentiate our portfolio, look at some of the subsystems and our performance and the attributes that it brings to what's being done in these modern workloads. And we're very optimistic about that. I think I've made reference in the past as these modern workloads evolve. It's clear that the disaggregated storage architecture is the path of the future and I think we have the best portfolio in that and we'll continue to focus on that with our customers.

And the next question will come from Wamsi Mohan with Bank of America.

Yes, thank you so much. Maybe a quick clarification. Are you assuming any impact from tariffs in your numbers at all? And for my question, given the significant ramp of AI servers, and sort of what you're guiding incrementally for next quarter, I'm calculating a low single digit operating margin on the AI servers. Would you agree with that?

And how should we think about the progression of gross margin? Thank you.

Well, maybe a couple of sound bites and then Ivan can add to this. Our guidance for the year and for Q2 includes everything that we know about tariffs as of today. We were able to navigate that I believe successfully. I think we view the input cost to our business as deflationary in Q2. That's inclusive of tariffs.

And we're very confident that what we conveyed in the form of our outlook is very inclusive of our cost associated with tariffs. We did not make any price moves in the quarter. We were steady. We have been through this before. And I think we weathered the storm quite well and ultimately took care of our customers and served them quite well.

When I think about AI in the numbers that we gave, the $7,000,000,000 of incremental revenue, when you look at it I believe it's roughly $4,000,000,000 on a year over year basis. It's roughly $5,000,000,000 on a quarter over quarter basis. And it drives significant gross margin dollar growth on both a year over year and quarter over quarter basis. And it drives significant operating income dollar growth on a quarter over quarter and year over year basis. Hand that over to Yvonne and she can add more color.

Yes. I'd say embedded within the guide is a 10% quarter over quarter increase in gross margin dollars. As Jeff mentioned, we're seeing what we're seeing in IFC quarter over quarter is about $5,300,000,000 more revenue with roughly $500,000,000 more in operating income, which is being driven by AI server profitability and to a lesser extent improvement in the profitability within our storage portfolio.

Dell Technologies (DELL) Q1 2026 Earnings Call Transcript

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