Dell Technologies (DELL) Q2 2026 Earnings Call August 28, 2025 04:30 PM ET Company ParticipantsPaul Frantz - VP - IRJeff Clarke - Vice Chairman and Chief Operating OfficerYvonne McGill - CFOErik Woodring - MD - Equity ResearchBen Reitzes - MD & Head - Technology ResearchVijay Rakesh - Managing DirectorDavid Vogt - Managing DirectorAmit Daryanani - Senior MD - Equity ResearchMichael Ng - MD - Global Investment ResearchSimon Leopold - Managing DirectorAsiya Merchant - Technology Equity ResearchKrish Sankar - ...

Financial Data and Key Metrics Changes - The company reported record revenue of $29.8 billion, up 19% year-over-year [6][17] - Earnings per share (EPS) increased by 19% to $2.32, marking a Q2 record [6][19] - Operating expenses decreased by 4% to $3.3 billion, representing 11% of revenue [18] - Net income rose by 13% to $1.6 billion, driven by stronger operating income [19] Business Line Data and Key Metrics Changes - Infrastructure Solutions Group (ISG) revenue reached a record $16.8 billion, up 44%, with servers and networking revenue up 69% [19][20] - Client Solutions Group (CSG) revenue increased by 1% to $12.5 billion, with commercial revenue up 2% and consumer revenue down 7% [22] - PowerStore saw double-digit growth for six consecutive quarters, with 46% of buyers being new customers [12][20] Market Data and Key Metrics Changes - Strong demand for AI servers continued, with $5.6 billion in orders booked and $8.2 billion shipped in Q2 [7][20] - International markets showed growth, while North America experienced weakness [11][19] - The company noted a significant opportunity as over 70% of the installed base is running on older server generations [11] Company Strategy and Development Direction - The company is focused on driving revenue growth and share gains while maintaining profitability [29] - Continued investment in AI solutions is a key differentiator, with expectations for AI hardware and services market to double by 2028 [16] - The company aims to improve execution in the PC market, particularly with the upcoming Windows 10 end of life [14][116] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth and value creation opportunities ahead, particularly in AI and enterprise sectors [30][98] - The company expects profitability to improve in the second half of the year across ISG and CSG, especially within AI servers [25][28] - Management acknowledged challenges in the storage market but remains confident in outperforming the market with their Dell IP portfolio [50][72] Other Important Information - The company returned $1.3 billion to shareholders through stock repurchases and dividends [24] - Full-year revenue guidance was raised to between $105 billion and $109 billion, with a midpoint of $107 billion, reflecting a 12% increase [27][28] Q&A Session Summary Question: AI server guidance and capacity - Management raised AI server shipment guidance to $20 billion, indicating strong demand and capacity to meet it [33][37] Question: Profitability improvements in the second half - Management expects improved profitability driven by seasonal acceleration in storage and better execution in CSG [40][42] Question: Storage market performance - Management noted slower demand in large accounts, particularly in North America, impacting storage revenue [47][50] Question: AI server margins - Management indicated that margins for AI servers are expected to improve due to a better business mix and reduced one-time costs [54][66] Question: Pipeline and sovereign orders - The pipeline for AI servers includes a mix of sovereign and enterprise orders, with strong growth in both segments [64][66] Question: Supply chain dynamics - Management discussed deflationary pressures in input costs and the expectation of stable supply chain conditions moving forward [130][132]

Summary of Dell Technologies (DELL) 2025 Conference Call Company Overview - **Company**: Dell Technologies (DELL) - **Event**: Bank of America's Global Tech Conference - **Date**: June 03, 2025 Key Points Financial Performance - **Revenue**: $10.3 billion in the Infrastructure Solutions Group (ISG), representing a 12% year-over-year growth, marking the fifth consecutive quarter of double-digit revenue growth [6] - **Operating Margins**: Approximately $1 billion, growing 36%, which is three times faster than revenue growth [6] - **Record Orders**: Bookings reached $12.1 billion, exceeding total shipments from the previous fiscal year in just the first quarter [7] - **Backlog**: A record backlog of $14.4 billion, indicating strong future demand [8] AI and Technology Trends - **AI Demand**: The company experienced a "blockbuster AI quarter," with significant growth in AI-related orders and a robust pipeline for the next five quarters [7][8] - **Server Business Growth**: The overall server networking business grew by 16%, with six consecutive quarters of demand growth [9] - **PowerStore Performance**: PowerStore saw its highest growth rate in 12 quarters, with 15% of new buyers being new to Dell [10] Market Dynamics - **Product Transition**: The company is adept at managing complex product transitions, having successfully deployed new technologies like Hopper and NVL 72 ahead of competitors [27][28] - **Supply Chain Management**: Dell has effectively navigated geopolitical issues and tariffs, maintaining price stability and agility in operations [34] Strategic Focus Areas - **Disaggregated Infrastructure**: There is a significant trend towards disaggregated infrastructure, driven by the need for flexibility and efficiency in cloud operations [38][41] - **Customer Segmentation**: The company identifies three main customer segments: tier two cloud service providers (CSPs), sovereign entities, and enterprises, with varying levels of maturity in AI adoption [44][50] Future Outlook - **Revenue Guidance**: The company anticipates revenue growth of over $15 billion for the year, with a focus on AI and related technologies [15][73] - **Materiality of AI Business**: The AI segment is still nascent, but expected to ramp up quickly, with significant future contributions to revenue [75] Innovation and Product Development - **Product Announcements**: Dell has made 40 major product announcements, showcasing its commitment to innovation in AI and infrastructure [56] - **Integration of Systems**: Dell positions itself as a unique integrator of compute, network, and storage solutions, enhancing performance for AI applications [65][66] Customer Engagement - **Strategic Partnerships**: The company is actively engaging with customers to define their future data strategies and optimize their AI deployments [51][55] - **Use Cases for AI**: Examples of AI applications include content generation, coding assistance, and customer service enhancements, demonstrating clear ROI for enterprises [59][62] Additional Insights - **Market Conditions**: A slight slowdown in demand was noted around April 2, attributed to macroeconomic uncertainties, but the overall market remains growing [78] - **Installed Base**: 75% of Dell's installed base is on servers 14 generations or older, indicating a significant opportunity for upgrades [79] This summary encapsulates the key insights and data points from the Dell Technologies conference call, highlighting the company's strong performance, strategic focus on AI, and innovative capabilities in the tech industry.

Financial Data and Key Metrics Changes - Revenue reached $23.4 billion, up 5%, driven by growth across all core markets [8][22] - Earnings per share increased by 17% to $1.55, growing three times faster than revenue [8][22] - Net income rose by 13% to $1.1 billion, primarily driven by stronger operating income [24][22] - Gross margin was $5.1 billion or 21.6% of revenue, down 80 basis points due to a competitive pricing environment [22][23] Business Line Data and Key Metrics Changes - ISG revenue was $10.3 billion, up 12%, with servers and networking revenue at a record $6.3 billion, up 16% [24][25] - CSG revenue rose by 5% to $12.5 billion, with commercial revenue up 9% to $11 billion, while consumer revenue declined 19% to $1.5 billion [27][22] - PowerStore demand rose double digits, growing for five consecutive quarters [13] Market Data and Key Metrics Changes - Strong demand for AI optimized servers, with $12.1 billion in orders booked in Q1, surpassing all shipments in FY 2025 [9][24] - Enterprise AI customers grew sequentially across key industry verticals including WebTech, financial services, manufacturing, media, and education [9][10] - Commercial demand was strongest in North America, with EMEA and APJ regions also showing double-digit growth [14] Company Strategy and Development Direction - The company is focused on expanding its leadership in AI, investing in innovation, and deepening customer partnerships [11][18] - The strategy includes modernizing the business and driving increased EPS growth through AI and infrastructure solutions [34][19] - The company aims to capture a substantial refresh opportunity with its sixteenth and seventeenth generation servers [12][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong demand for AI servers and the ability to execute on large, complex customer deployments [39][40] - The company anticipates a continued PC refresh cycle and expects Q2 revenue to be between $28.5 billion and $29.5 billion, up 16% at the midpoint [30][32] - Management remains cautious about traditional server and storage performance due to the dynamic macro environment [32][34] Other Important Information - The company generated record cash flow from operations of $2.8 billion in Q1 [28] - A total of $2.4 billion was returned to shareholders through stock repurchases and dividends [29] - The company expects full-year revenue to be between $101 billion and $105 billion, with ISG expected to grow in the high teens [32][33] Q&A Session Summary Question: AI server revenues and fiscal 2026 targets - Management noted that the backlog for AI servers is healthy, with expectations to exceed $15 billion in revenue for fiscal 2026 [37][43] Question: Second half guidance and demand moderation - Management indicated that they expect to ship approximately $7 billion of AI servers in the first half, with optimism for converting more pipeline in the second half [46][49] Question: Storage and services attach opportunity alongside AI servers - Management highlighted improvements in storage and networking attach rates, emphasizing the importance of deployment and installation services [56][58] Question: Impact of tariffs on financials - Management confirmed that their guidance includes considerations for tariffs and that they have navigated the cost environment successfully [68][70] Question: AI server profit outlook and customer types - Management reiterated that AI server profitability is expected to contribute positively to overall margins, with a growing number of enterprise customers [75][80] Question: Customer behavior and demand pull forward - Management acknowledged some customers pulling forward demand but remains optimistic about growth despite a slowdown in traditional server business [84][88] Question: Competitive dynamics and pricing strategies - Management stated that ASPs remained stable, with no price increases, and noted competitive behavior in large deals [93][99] Question: Storage attach rate and object scale platform - Management expressed optimism about storage opportunities and the potential to improve attach rates through new product offerings [104][108] Question: Demand characteristics and backlog composition - Management characterized the backlog as primarily consisting of Blackwell technology, with a focus on engineering and innovation to meet customer needs [112][114]

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]