Financial Data and Key Metrics Changes - Revenue for Q3 was $24.4 billion, up 10% year-over-year, driven by strong ISG revenue growth [8][18] - Diluted EPS increased by 14% to $2.15, with cash flow from operations at $1.6 billion [8][20] - Gross margin was $5.4 billion, or 22.3% of revenue, down 140 basis points due to an increase in AI optimized server mix and competitive pricing [18][19] - Operating income rose by 12% to $2.2 billion, representing 9% of revenue [19][20] - Net income increased by 11% to $1.5 billion [20] Business Line Data and Key Metrics Changes - ISG revenue was $11.4 billion, up 34%, with servers and networking revenue up 58% [20] - Storage revenue increased by 4% to $4 billion, with strong demand in PowerStore and PowerFlex [20][21] - CSG revenue decreased by 1% to $12.1 billion, with commercial revenue up 3% and consumer revenue down 18% [22] - CSG operating income was $694 million, or 5.7% of revenue, reflecting a competitive pricing environment [22] Market Data and Key Metrics Changes - Orders demand reached a record $3.6 billion, up 11% sequentially, primarily from Tier 2 cloud service providers [9] - AI server shipments totaled $2.9 billion in Q3, with an AI server backlog of $4.5 billion [9][20] - The 5-quarter pipeline grew more than 50% sequentially, indicating strong demand across all customer types [9][20] Company Strategy and Development Direction - The company is focused on AI and traditional servers, with expectations for continued strength in the server business [27][29] - There is an emphasis on modernization and consolidation in data centers to support AI infrastructure [13][122] - The company aims to balance growth and profitability while managing pricing within a competitive landscape [30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the upcoming PC refresh cycle and the potential for AI demand to drive growth [15][29] - The IT spending environment is dynamic, with certain areas experiencing faster growth than others [26] - Management anticipates that the enterprise refresh cycle will contribute to growth in both ISG and CSG [29][30] Other Important Information - Cash flow from operations was $1.6 billion, with a cash conversion cycle of negative 38 days [24] - The company ended the quarter with $6.6 billion in cash and investments, up $600 million sequentially [25] - The company has returned $9.8 billion to shareholders through stock repurchases and dividends since the start of FY 2023 [25] Q&A Session Summary Question: ISG margins performance - Management noted that ISG revenue grew 34% year-over-year, with operating income up 41%, driven by higher revenue and lower operating expenses [36][39] Question: Changes in annual guidance - Management explained that the PC refresh cycle is moving out, impacting guidance, along with unpredictability in AI shipments [42][45] Question: AI server dynamics and backlog - Management confirmed that the AI pipeline grew significantly, with a shift towards Blackwell design impacting Q4 shipments [48][52] Question: Federal spending impact - Management indicated strong demand in the federal vertical, with opportunities for growth in traditional servers and storage [55][58] Question: Untapped storage and services opportunity - Management highlighted the potential for expanding storage and services beyond individual AI nodes into full rack scale integration [62][63] Question: AI revenue expectations for Q4 - Management expects AI revenues to be somewhat down sequentially in Q4 due to the mix of products and component availability [69][73] Question: Customer concentration in AI backlog - Management reported that over 2,000 enterprise customers have been engaged, with a growing portion of the pipeline coming from enterprise customers [90][92] Question: Storage growth expectations for FY 2026 - Management anticipates growth in the storage marketplace, driven by new solutions and capabilities [84][85]

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