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<ul> 
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GPTW Texas Large 2022-Dell Technologies

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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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Q3 2025

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 2026 Third Quarter Financial Results Conference Call for Dell Technologies. I'd like to inform all participants this call is being recorded at the request of Dell Technologies. This broadcast is a copyrighted property of Dell Technologies. 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 then one on your telephone keypad at any time during the presentation. I'd now 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 Clarke, David Kennedy, and Howard 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 it over to Jeff.

Thanks, Paul, and thanks, everyone, for joining us. Before we get started, I'd like to congratulate David on his appointment to CFO. We've worked together closely for the past couple of decades, and I look forward to what's ahead. Now, moving to our results. We delivered a strong 3rd quarter with a record for both revenue and earnings per share and an all-time high in AI server orders. Total revenue reached $27 billion, up 11%. CSG and ISG combined were up 13%. Year-to-date, total revenue was up 12%, with ISG revenue up 28%. EPS was up 17% to $2.59, driven by improved profitability in AI and storage and continued operational scaling. Our strong performance and operational discipline led to continued robust Cash Flow and significant capital returns for shareholders.

Now, let's move to AI, where momentum has accelerated meaningfully in the 2nd half of the year, building on an already strong 1st half. AI server demand remained exceptionally strong. We booked $12.3 billion in orders in the quarter, bringing year-to-date orders to $30 billion, both record figures. The large-scale customer base continues to broaden, with expansion across Neoclouds, or tier two CSPs, and Sovereigns. Our strong orders and customer base expansion clearly shows customers value our unique ability to design, deploy, and maintain large at-scale AI factories, especially our engineering and rapid deployment capabilities. We have AI racks operational within 24-36 hours of delivery, with uptime exceeding 99%. We shipped $5.6 billion in AI servers during the quarter for a total of $15.6 billion year-to-date. We ended the quarter with a record backlog of $18.4 billion.

Our five-quarter pipeline continued to grow sequentially across Neoclouds, Sovereigns, and enterprises, and remains multiples of our backlog, even when accounting for the robust demand we've seen. As expected, AI server profitability improved sequentially. Moving to Traditional Servers, overall demand grew double digits, with growth accelerating sequentially in both EMEA and North America. We saw growth across units, TRUs, our buyer base, and the mix of the 16th and 17th generation platforms, reflecting customers' preference for dense, high-performing compute configurations. Traditional x86 compute demand continues to benefit from workload expansion and AI driving broader IT modernization and consolidation. Moving to storage, while revenue declined 1% year-over-year, demand for our Dell IP portfolio remained strong. For two consecutive quarters, our all-flash array portfolio has delivered double-digit demand growth, supported by strong double-digit growth from PowerStore, PowerMax, ObjectScale, and PowerFlex.

PowerStore demand has now grown for seven consecutive quarters, with six quarters of double-digit growth. Profitability improved as we increased both the mix and margin of Dell IP offerings, underscoring the differentiated value of our platforms. In CSG, we saw momentum continue. CSG revenue increased 3%, with commercial up 5%. International growth accelerated sequentially, up double digits year-over-year. North America also showed improvement. Demand for small and medium business remained strong, and we now have five consecutive quarters of P&L growth and seven consecutive quarters of commercial demand growth. Consumer revenue declined 7%, although the demand environment turned to growth as we refocused on expanding what we play in the market. Commercial profitability was stable, while consumer and education were competitive. The PC refresh cycle remains durable, supported by an aging installed base and a significant portion of systems not yet upgraded to Windows 11.

Before I wrap up, I'd like to briefly touch on the commodity supply environment. We are well-positioned across our commodity basket. Q3 was deflationary, and our outlook for Q4 is largely unchanged from last quarter. Looking ahead to next year, there will be dynamics that we will have to navigate, but we are confident in our ability to secure supply and adjust pricing as needed. As always, we'll leverage our World-class supply chain to deliver the best outcomes for our customers and shareholders. In closing, we delivered a record 3rd quarter with strong performance across all segments and continued operational discipline. Revenue and EPS reached Q3 highs, supported by growth in ISG, CSG, and improved profitability in AI and in storage. AI momentum remains exceptional, with record orders, backlog, and a growing diverse customer base.

Our competitive edge in AI is our ability to engineer bespoke, high-performance solutions, deploy large-scale clusters rapidly, and support them globally, all backed by an unmatched ecosystem and flexible financing offerings. This end-to-end capability is why Dell continues to win in AI. We are well-positioned to capitalize on AI infrastructure buildouts, expanding traditional infrastructure demand, and the ongoing PC refresh cycle. Now, let me turn it over to David to talk more about Q3 in detail.

Thanks, Jeff. I'm pleased with the team's strong execution this quarter, delivering Q3 records for both revenue and EPS, along with strong cash generation and above-trend capital return. Total revenue was up 11% to $27 billion. ISG and CSG combined grew 13%. Gross margin was up 4% to $5.7 billion, or 21.1% of revenue. Gross Margin Rate was driven primarily by a mix shift to AI servers, with shipments doubling year-over-year, partially offset by improved profitability in storage. Operating Expense was down 2% to $3.2 billion, or 11.8% of revenue, as we continue to drive scale within the P&L. Operating Income grew 11% to $2.5 billion, or 9.3% of revenue. The increase in Operating Income was driven by higher revenue and lower Operating Expenses, partially offset by a decline in our Gross Margin Rate. Q3 net income was up 11% to $1.8 billion, primarily driven by stronger Operating Income.

Our diluted EPS increased 17% to $2.59, a Q3 record. Moving to ISG. ISG revenue was a Q3 record $14.1 billion, up 24%, marking seven consecutive quarters of double-digit revenue growth. Servers and networking revenue reached a Q3 record $10.1 billion, up 37%, and is up 43% year-to-date. AI server demand accelerated, with a record $12.3 billion in orders, $5.6 billion in AI server shipments, and a record-ending backlog of $18.4 billion. In Traditional Servers, we saw demand improve throughout the quarter and stability within the P&L. Storage revenue was $4 billion, down 1%, with strong demand across parts of our Dell IP portfolio. PowerStore continued its double-digit growth trajectory, with seven consecutive quarters of growth. ISG Operating Income was a Q3 record $1.7 billion, up 16%, marking six consecutive quarters of double-digit growth. This was driven primarily by higher revenue.

Our ISG Operating Income rate was up 360 basis points sequentially to 12.4% of revenue. This improvement was driven by a mix of AI servers, sequential improvement in AI server margins, and stronger profitability from storage. Turning to CSG, CSG revenue was up 3% to $12.5 billion. Commercial revenue grew for the fifth consecutive quarter, up 5% to $10.6 billion, while consumer revenue declined 7% to $1.9 billion. CSG Operating Income was $0.7 billion, or 6% of revenue. Commercial profitability was stable, driven by steady pricing sequentially as customers prioritized rich configured AI-ready devices. In consumer, profitability improved year-over-year, and demand returned to growth. Moving to cash and the balance sheet, we delivered another strong cash quarter, with Cash Flow from operations of $1.2 billion. This was primarily driven by profitability and working capital improvements. We ended the quarter with $11.3 billion in cash and investments, up $1.6 billion sequentially.

Our core leverage ratio is 1.6x. We returned $1.6 billion of capital to shareholders, including 8.9 million shares of stock we purchased at an average price of $140 per share and paid a dividend of approximately $0.53 per share. Through three quarters, we have returned $5.3 billion and repurchased over 39 million shares. With record Q3 results in hand, I now walk you through our outlook for Q4. In ISG, we expect to ship roughly $9.4 billion of AI servers in Q4, a record, bringing full-year shipments to roughly $25 billion, or over 150% year-over-year. Our Q4 outlook for traditional server and storage remains unchanged from last quarter, supported by continued data center modernization and consolidation and above-market growth in Dell IP storage. In CSG, with the ongoing PC refresh cycle, we are improving our execution to drive revenue growth and gain market share.

Given that backdrop, we expect Q4 revenue between $31 billion and $32 billion, up 32% at the midpoint of $31.5 billion. ISG and CSG combined are expected to grow 34% at the midpoint, with ISG growing mid-60s and CSG up low to mid-single digits. Operating Expenses will be flat sequentially. We expect Operating Income to be up roughly 21%, with continued sequential improvement in ISG Operating Income Rate. We anticipate a diluted share count of roughly 672 million shares and an 18% non-GAAP tax rate. Our diluted non-GAAP EPS is expected to be $3.50, ±$0.10, up 31% at the midpoint. Our Q4 guidance implies a strong FY 2026, with revenue of $111.7 billion, up 17%, and non-GAAP EPS of $9.92, up 22% at the midpoint, both well above our long-term framework. Briefly on FY2027, it is still very early in our planning process.

We wanted to give you some context on how we are thinking about next year. We have strong conviction in our AI business, supportive of what we see in our backlog, the pipeline, and ongoing customer discussions. We've proven we can execute and deliver for our customers in this space. For the rest of the business, the long-term framework we outlined at our securities analyst meeting remains a solid starting point as you think about next year. We are highly confident in our ability to drive EPS growth, supported by multiple levers, including leveraging our go-to-market engine, improving gross profit, scaling Operating Expenses, and ongoing share repurchases. In closing, we delivered a record Q3 with revenue of $27 billion and EPS of $2.59, both quarterly highs, driven by strong execution across ISG, CSG, and disciplined cost management.

ISG continues to see sustained double-digit growth and accelerating AI demand, evidenced by $30 billion in AI server orders over the past three quarters. We are focused on capitalizing on the ongoing PC refresh and expect continued growth from CSG. We remain focused on driving shareholder value through strong cash generation and capital returns. Thank you all for your time. Now, I'll turn it back to Paul to begin our Q&A.

Thanks, David. Let's get to Q&A. In order to ensure we get to as many of you as possible, please ask one concise question. Operator, let's go to the first question.

Thank you. We'll take our first question from Samik Chatterjee with J.P. Morgan.

Hi. Thanks for taking my question. Jeff and David, I mean, maybe since this is sort of the topic of investor conversation mostly at this point, if you can flesh out your thoughts on the kind of reaction you expect from customers in relation to the pricing discussions by sort of the product categories, where do you think it's more sort of easier to take some of those pricing actions versus not relative to your overall portfolio? David, if I heard you correct, you're saying to sort of use your investor targets for about mid-teens EPS growth as still a starting point for next year, despite those sort of dynamic sort of headwinds on the memory side. Can I just clarify that as well? Thank you.

Sure, Tom. Let me wade my way through that. I suspect it will be the first question this afternoon, or the only question I should say. Look, we're in a very unique time. It's unprecedented. We have not seen costs move at the rate that we've seen. By the way, it's not unique to DRAM. It's NAND. It is hard drives, leading-edge nodes across the Semiconductor network. There is a, if you will, I'd categorize it as demand is way ahead of supply. As we wade our way through that, we're going to lean on the things that we've always done. We have a lot of experience at this. This isn't our 1st DRAM cycle. There have been seven, I think, in the last 40 years. Michael and I have been here navigating the organization in various ways through that time.

Our senior leadership team and our supply chain has been through everyone this decade. 1st rule of our supply chain is to get the parts. Supply matters. Mix matters. As we get the supply and mix, our job is to minimize the impact of that to our customers. Clearly, we're in a situation that is not typical. We've learned a great deal since COVID, since the previous cycle of this last super cycle of this magnitude was 2016 through 2017. We're going to do everything we can to minimize the impact. The fact is the cost basis is going up across all products. No one more unique than others. Everything uses a CPU, has DRAM, has storage in it. With that said, we're going to do things we've always done. We're going to work on configurations. We're going to work on availability, adjust mix.

Our direct model allows us to move demand where supply is. Our direct model allows us to act to the market signals it gives us quicker than anybody else, allows us to price accordingly, reprice when needed. We will make our way through that across Consumer PCs, Commercial PCs, into Server Storage, and through our AI servers. No product category is not going to be impacted in terms of the aggregate cost basis moving. Again, our number one rule is get parts. Secure supply. Secure the mix we need to meet the customer demand. The world needs more computational intensity, needs more compute. If you're in the world of AI, token growth is going. We see a consolidation in servers. Consolidation in servers is driving denser servers with more DRAM, more storage. We are in the middle of a PC refresh that's not complete.

I don't see how we will not—what's the best way to describe it? I don't see how this will certainly not make its way into the customer base. We'll do everything we can to mitigate that. As we mentioned earlier, our cost outlook for Q4 is largely unchanged. David just gave you what our guidance is that we believe that you'll see sequential profitability improvement in our company across the broad portfolio while managing an increase in our cost basis. That's what we're going to do. That's what we know how to do. We have all of the tools in our company to be able to do that effectively and fast.

Yeah. Hey, Samik. Yeah. Like we said, it's very, very early in our planning process, obviously. The framework from our Security Analyst meeting is a good reference point to start with. I think EPS included in that is the zip code we'll be in. We'll be looking out to leverage our go-to-market engine, which is differentiated. All the things Jeff has just outlined there in relation to our supply chain, we'll continue to drive significant scale in our OpEx. Obviously, we stay committed to our Capital Return KPIs, right, whether it's share repurchase or stay committed to our dividends. Look, we feel we have many tools in that toolbox that allow us to stay agile and deliver our EPS numbers. Like I said, it's still very, very early in the planning process here.

We will take our next question from Mark Newman with Bernstein.

Hi. Thanks for taking my question. Congrats on a great quarter, particularly impressive on the AI server orders. I wondered on AI servers if you could talk about some of the recent comments that have been coming from NVIDIA around the potential vertical integration that they're doing, getting a little bit more involved in the supply chain and how that may impact on how Dell is navigating around that. Also on AI servers, any color on the mix of AI servers, any change on the mix, for example, enterprise as a portion of AI server orders would be useful. Thanks very much.

For Mark, let me make my way through that. I mean, first of all, as we look forward to the new technologies that are in front of us, we remain excited. We think there's ample opportunity for us to continue to differentiate. These large-scale deployments are very complex. Our value add is at the rack level, is at the solution level, L11 and beyond. That differentiation, we believe, remains for the next several cycles easily. In fact, our ability to engage with customers early, which we can on the next-generation technology, to work through their needs to bring these very complex offers to the marketplace fast and at scale with a significantly better uptime and outcome, we believe is a differentiation. We focus on optimizing performance per watt, performance per dollar at the Data Center level.

We focus on our services, our value add and deployment, our financing side, the ecosystem that we bring to our customer base. None of that changes in the next generation of technology. To be honest, I think the opportunity for us gets greater in the future as we head towards 500 kW of rack of power density moving to a MW and beyond. The engineering skill required to do that at rack scale is significant. We have invested in that ahead of the curve, and we believe that gives us the opportunity to differentiate, remain the leader in time to market, drive broad installation and deployment capabilities ahead of our competition at a higher level, uptime of 99% or better. That is why we win. I do not see that changing.

When I look at the mix, two forms of the mix that I'll address is we saw a change in the quarter towards GB300. In our backlog of $18.4 billion, there's been a significant shift towards GB300 as expected. Lastly, we continue to see great build on our five-quarter pipeline around sovereigns and around enterprise and remain very encouraged about the opportunities in both.

The next question will come from Ben Reitzes with Melius Research.

Hey, great. Good execution with the commodity environment, guys. I'll try to be concise for Paul. The question is around your AI server margins. You mentioned it was up sequentially. I was wondering if you guys can talk about order of magnitude there. Is that going to continue into the 4Q? Are you starting to see more product attached, more high margin attached to that end? Thanks.

I'll take a run at it, Ben, and then David can certainly add to this. Clearly, we made reference in Q2 that we had some one-time cost elements that hit us. If you recall, we talked about expedites and supply chain reconfiguration. Those went away in Q3 as expected. We also talked about shipping a lot of the early aggressive GB200 deals in the quarter. Those went through the system. We continue to now see the ability to add differentiation, as I just mentioned in the previous question, that we see in the GB200 and 300 designs. Our margins moved to stay right in that range that we've talked about, mid-single digits. We see that continuing. This part of our long-term value creation framework that we laid out eight weeks ago is what we'll continue to talk about here.

We believe that we can operate going forward in that range. In fact, we're very confident of that. We also had a mix change, or if you will, a change in customer mix to the good. When you look at the broad portfolio and diverse customer set that we have within the AI portfolio, shipping to a broader set of customers across a greater range of solutions helps margin. I hope that answered your question about AI margins.

Our next question will come from Erik Woodring with Morgan Stanley.

Hey, guys. Thank you for touching my question tonight. I wanted to touch on PCs. Jeff, you sound very bullish on the PC opportunity into next year. Some of the channel partners earlier in earnings were talking about maybe the 7th inning of a PC refresh. I'd love to just get your comments because you sound more bullish. Where do you think we are on the PC refresh? Is that still Windows End-of-Life upgrades that still need to get done, or are there new factors that you think could elongate the PC cycle well into 2026? Thank you.

Sure, Erik. Maybe a couple of things. One, we have not completed the Windows 11 transition. In fact, if you were to look at it relative to the previous OS in the service, we are 10-12 points behind at that point with Windows 11 than we were the previous generation. We still have ample opportunity to convert. If memory serves me right, the installed base is roughly $1.5 billion or 1.5 billion units. We have about 500 million of them capable of running Windows 11 that have not been upgraded. We have another 500 million that are four years old that cannot run Windows 11. Those are all rich opportunities to upgrade towards Windows 11 and modern technology.

Equally important, AI PCs, small language models, more capable applications, improvements in operating systems and their capabilities, and the embedded AI there, the use of an NPU, the capability of an NPU in future PCs gives me the view that the PC market will continue to flourish going forward. Now, let's define flourish. We have the PC market in our outlook roughly flat year-over-year. That's after a year that we grew mid to high single digits. I think it's flat as we look into next year's planning horizon, and we're building plans accordingly that would take share against that outlook.

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

Yes. Thank you so much. I was wondering if you could just maybe give some color around this AI business. You noted very strong conviction going into fiscal 2027. Obviously, you just raised your guide here from $20 billion-$25 billion. Can you just put that in context of some of the financing issues at Neoclouds? How much of sort of your conviction and growth is predicated on some of these Neoclouds being able to procure financing versus maybe other customers that you might have visibility into? Jeff, if you could just clarify, you mentioned the cost base moving up across the product portfolio, and I was wondering if you could maybe just share at the highest level, how much of that conceptually could you recover from pricing versus how much of OpEx reductions are possible to offset some of these pressures? Thank you so much.

Maybe I'll start, Wamsi, and Jeff can add some color. Look, I think if you start answer first, you look at our Q4 guidance, $9.4 billion. That represents $25 billion, obviously, for a full FY 2025. You look at that appetite for AI demand, and it's across the Neoclouds, sovereign opportunities, and obviously within the enterprise, shipments of $5.6 billion in Q3, orders of $12.3 billion. That's year to date at $30 billion. Backlog at $80.4 billion. As Jeff referenced in his opening remarks, the next five-quarter pipeline is multiples of that. Every conversation we're in, which has also been very aware of all the opportunities that are out there, is about demand. It's about opportunity and eagerness to work and see the opportunities in front of us. We actually see huge scale to come.

Every opportunity reality is we're not going to win them all, but we love our momentum that's there, and we think we're well positioned to meet the expected needs of the customer base.

Yeah. I would add to that maybe some color. $25 billion this year, 150% increase over last year. On the guidance that David called out, we will ship nearly as much in Q4 as we did all of last year. I think that gives a reflection on the need for compute, the need for what we see as token generation increasing at an incredible rate and the corresponding compute that has to be behind that to generate those tokens. It is reflected in that five-quarter pipeline that David said that is up across all three customer types, Neoclouds, sovereigns, as well as enterprises. We are seeing progress in all three. I think that is very important for us to make sure that we communicate that the momentum as we head into Q4 continues. You saw that in the orders in Q3, the backlog building, and significant shipments in Q4.

If I flip to the other question about the cost basis and our ability to recover, that's an interesting question. We've said over the years, in normal times, when our input costs go up, we can recover roughly 2/3 of that cost in a 90-day period. I would tell you this is not normal times. This is extraordinary times, and we've put extraordinary actions in place weeks ago as we saw this to be able to mitigate the impact upon our company, our customers, and our shareholders. It goes back to our Business Model, Direct Signals. We understand the demand, our long-term partnerships and agreements with our partners that make DRAM and make NAND, the agreements we have in place around capacity. Those relationships are meaningful and impactful as we navigate these types of situations that, again, are unprecedented.

Our model gives us tremendous flexibility, whether that is to reprice, how we set out quotes, whether that's to reconfigure, redirect to different products, the ability to determine how long price will be in effect, the ability to understand where we're going to drive demand to and change our demand generation vehicles to drive that. It's important that our engine and the way we run, I think, is very different than others in our ability to respond. Those of you that took note saw that in COVID in a very similar situation. The experience that we had there where there were material shortages and increased costs, our ability to navigate that, I think, was unmatched in the marketplace. Our supply chain is very good at this, and we're going to lean on them.

Those lessons learned from the COVID time and most recently what happened with tariffs, I think, show that we can operate with the right sense of urgency. We are managing this real-time, actively managing it. I was on three pricing calls today alone, and we are driving to get a better outcome. Our belief is we will do better than our normal 2/3 in a 90-day period, given the actions that we have put in place and our understanding of demand and our understanding of supply.

Our next question will come from Amit Daryanani with Evercore.

Yep. Thanks, Wamsi. My question. I guess maybe you could just spend a little bit of time on ISG margins improved rather well by about 350 basis points sequentially. Can you just touch on what drove the trends in ISG margins in Q3 versus Q2? Your guide, I think, reflects the largest AI server revenue number you guys are going to put up in Q4 at $9.4 billion+. How should we think about that impacting your P&L? Do you think gross margins should remain in the Q2 levels, or is there kind of further movement from there as you think about the P&L impact from the AI numbers in Q4? Thank you.

Yeah. Thanks, Amit. Yeah. Look, really pleased with the team's execution in Q3 around ISG, up ink at 12.4%, like you said, up 350 basis points quarter-on-quarter. A lot to like here. I guess a couple of things to call out. First, on the storage side, Q3 was no different than what we've seen year to date, where we've seen demand growth at a premium to market for our Dell IP storage portfolio. Probably a strong call out there will be PowerStore also, six consecutive quarters with double-digit growth. Obviously, that Dell IP portfolio gives us better operating margins as you'd expect. There's a natural mix effect that creates a tailwind there. Secondly, in storage, our pricing discipline was something I was very pleased with also.

Thirdly, look, the focus of the teams looking to find improvements at a by-product level within the portfolio also. Like I said, a lot to like on the storage side. Also within that, on the AI margins, like Jeff said earlier, Q3 on track to what we've consistently committed to, mid-single-digit UpInk here in relation to that. We obviously didn't have those Q2 one-timers that were there, and we'll keep that consistency as we go into Q4. Your reference, I think your question was Q3 into Q4, then from a guidance perspective, look, we expect to continue to make progress. Our Q4 profit guidance is anchored again through the storage P&L. With the Dell IP storage growth, we expect to make it four for four in terms of quality growth in that portfolio.

That should allow us to grow at our likely slightly ahead of normal sequentials, which will allow us to see an uptick in our up ink rate sequentially also into Q4.

Yeah. Amit, I just, again, to emphasize that AI shipments $5.6 billion-$9.4 billion quarter-over-quarter, our strategy of focusing on Dell IP storage, the mix is up, the rate is up, and increased velocity of our traditional server business is the recipe for the performance that we expect to have in Q4 while increasing AI shipments significantly, as we mentioned.

The next question will come from Aaron Rakers with Wells Fargo.

Yeah. Thanks for taking the question. I want to shift gears a little bit away from the AI to the more traditional server business. Jeff, I think in your prepared comments, you've mentioned double-digit demand growth. I think if my math's correct, I don't think revenue grew necessarily at that cliff. I'm curious if you could talk a little bit about what you're seeing as far as the aged install base, where we're at in the upgrade cycle for Traditional Servers. Do you think double-digit growth is a good baseline that we could think about going into fiscal 2027 as that demand follows through to revenue? Thank you.

Sure. A couple of comments, yes. The double-digit was demand. The P&L certainly did not track that, but we obviously would have built backlog as a result. We talked about North America recovered or improved quarter-over-quarter and that the international market demands were double digits. That is two in a row now off last quarter's double-digit performance. We continue to see modernization in the data center, consolidation in the data center, which is reflected in the fact that our TRUs continue to go up, our content continues to go up, the number of cores, how much DRAM, how much NAND per server is corresponding with that. We still see a pretty significant opportunity with roughly 70% of our install base still the older generation servers that we shipped many years ago.

The ability to continue to upgrade them, modernize them is the opportunity that we have in front of us. We see that cycle continuing into next year. This has been a longer consumption cycle. We're encouraged by what we see. That's reflected in the Q4 guidance that we just talked about. That momentum, as we update you on 2027, will give you the best look we have. Right now, that momentum of consolidating, modernizing, refreshing old servers to new ones continues. We're working on making sure our pipeline grows and we can convert it into orders as quickly as we can.

We'll take our next question from Michael Eng with Goldman Sachs.

Hey, good afternoon. Thank you for the question. I just wanted to follow up on the Commodity Cost Recovery Point, which was encouraging to hear. When you talk about the actions that you've taken to help mitigate the impacts, I guess, do you expect to see a benefit from below market costs, strategically purchased commodities? If so, how long can that be a benefit for? I think you may have alluded to opportunities to maybe reprice longer-term commercial contracts in response to rising commodity costs. Just wanted to see if that was the case, or are there any kind of longer-term contracts that might inhibit your ability to price at all? Thank you very much.

I mean, maybe working backwards towards the 1st parts of your questions. I think clearly we have to do what's right by customers. Where we have contracts, we have contracts, and we will honor those contracts and work through the situation. I think what maybe I didn't convey correctly or to the right balance that's needed is we tend to talk about the commodity cost here. There's a commodity scarcity too. In other words, there's not going to be enough parts. There's a combination of the demand that's in the marketplace, one's ability to procure the part, which is why job one of our supply chain is to get the material, never run out of parts, and then price it to the commensurate value with having that material. That's what we're going to work our way through. We're, I think, very skilled at this.

The last two cycles have certainly honed our skills. We will use all of the tools available from configurations. It is not uncommon in the PC industry to see configurations come down. That has happened before, likely to happen again. That tends to happen in the lower price bands. You tend to see mixed where what comes out of the factory is not necessarily what was forecasted. We think we have a unique ability to adjust our demand faster than anybody. We think the ability to navigate how you price with a very large transactional business, selling to small and medium businesses, selling to the day-to-day needs of many corporations, we can adjust that to what is available. Those are all skills and techniques that, being a direct manufacturer and a direct seller, we believe gives us an advantage and will help our partners and customers through that as well.

All of these tools that I've mentioned in one of the previous answers are in effect now. Our special pricers know the cost for all of next year, our best guess for next year, what's available. Our sales force, our product business leaders all know, and we're working as one team to collectively work this real-time, as I mentioned before, to get the best outcome for the company, our shareholders, and customers. That's what we'll work through. Our ability to recover, I think, is better than normal times. I think that's probably amplified or improved by the fact that there'll be a scarcity of parts.

Our next question will come from Asiya Merchant with Citigroup.

Great. Thank you for taking my question. Just looking ahead into storage, it seems like that business is doing perhaps a little bit better than what was previously expected. As you look into the server demand that is driving up the revenues for the core server, and as you look into next year, just given all the, obviously, the backdrop of Commodity Headwinds here, how are you thinking about storage from here on? If we can get that inflection towards more Dell IP storage, which is obviously positive for your margins, quicker relative to some of the unwinding of the HCI storage, if that can happen faster than what was previously communicated at the Analyst Day? Thank you.

Yeah. I think, again, just to clarify, I guess, in Q4, what we're looking at in terms of guidance, continuing to show that Dell IP storage growth and seeing that sequentially, hopefully, above or expected to be above normal sequentials, that allows, along with the pricing discipline, to keep that margin improvement coming along for the P&L. On the server comment, again, strong demand in Q3, particularly in month three. To Jeff's point earlier, building a bit of that backlog. I think you can expect high single-digit growth in that business for Q4, which would end us on a high point as we exit the quarter. That said, look, as we head into FY 2027, still very early. Obviously, it's a lot happening in the market and changing. I would still reference you back to the long-term framework that we've got. I think it's a good reference starting point.

We'll work from there. Obviously, be agile as we assess and see how it evolves. For now, I think it's still a little early for FY 2027. Strategy-wise, we made the pivot to Dell IP, not looking back. It is serving us well. The mix continues to increase across our Storage Revenue Dollars. The margins within the portfolio continue to improve. We talked in our comments about the all-flash portion of the portfolio growing double digits for the second quarter. Think PowerMax, PowerScale, PowerStore, ObjectScale, and PowerFlex, all growing. We've talked about PowerStore and seven quarters of growth, six of those double digits. The buyer base is growing. The net new customers buying Dell storage with PowerStore is up.

The strategy that we've flipped to, which really drives this notion of three core areas where the Dell Private Cloud, which is really open, disaggregated, and automated storage, it's our three-tier storage with our Dell Automation Platform. Our AI and unstructured storage assets, so think of those as the construct of the AI data platform, and then cyber resilience, which is really Data Domain and PowerProtect. Those are all Dell IP assets. That's what we're driving. That's what the sales force is incented to do. We're seeing nice results from it.

Our next question will come from Simon Leopold with Raymond James.

Thanks for taking the question. I want to see if you could maybe unpack the elements that contribute to the roughly $5 billion of incremental AI revenue for the full year. I guess what I'm trying to get at is how much is this about your ability to get key components, new orders, or existing orders occurring earlier? Just help us unpack what factors led to the raised forecast for AI. Thank you.

Dell Technologies (DELL) Q3 2026 Earnings Call Transcript

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