Dell Technologies(DELL) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - FY '25 revenue was $95.6 billion, up 8% year-over-year, with operating income of$ 8.5 billion [10] - Operating expenses were reduced by 4%, resulting in record EPS of $8.14, up 10%, and cash flow of$ 4.5 billion [11][50] - Q4 revenue was $23.9 billion, up 7%, with net income up 15% to$ 1.9 billion [16][30] Business Line Data and Key Metrics Changes - ISG revenue was $11.4 billion, up 22%, with servers and networking revenue at a record$ 6.6 billion, up 37% [31] - CSG revenue was up 1% to $11.9 billion, with commercial revenue up 5% and consumer revenue down 12% [35] - PowerStore saw strong demand growth for four consecutive quarters, with double-digit growth in the last three quarters [22][32] Market Data and Key Metrics Changes - AI orders demand in Q4 was$ 1.7 billion, with $2.1 billion in shipments and a backlog of$ 4.1 billion [17] - The AI hardware and services total addressable market (TAM) is expected to nearly double to $295 billion by 2027, growing at a 33% CAGR [25] - The installed base of PCs is aging, with a significant opportunity for a broader PC refresh as Windows 10 approaches end of life [24][138] Company Strategy and Development Direction - The company is focused on leveraging strengths in AI, traditional servers, and storage to capture new growth opportunities [25][50] - A significant pivot to Dell IP storage is underway, with a focus on disaggregated architectures in storage [22][113] - The company aims to simplify branding and broaden silicon options across Intel, AMD, and Qualcomm to prepare for the PC refresh [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth opportunities driven by AI, data center modernization, and PC refresh cycles [42][43] - The competitive environment is acknowledged, with expectations of flat to slightly declining margins in certain segments [46][60] - The company is modernizing operations to improve efficiency and drive innovation while reducing operating expenditures [129][130] Other Important Information - The company returned$ 1.1 billion to shareholders through stock repurchases and dividends, with an 18% increase in the annual dividend to $2.10 per share [40] - A$ 10 billion increase in share repurchase authorization was approved by the Board of Directors, reflecting confidence in the business [41] Q&A Session Summary Question: Can you discuss the fiscal '26 guidance and assumptions? - Management guided to a midpoint revenue of $103 billion, with ISG expected to grow in the high teens and CSG in the mid-single digits [56][57] Question: What are the risks of ODM encroachment in the AI server market? - Management acknowledged the presence of ODMs but emphasized Dell's engineering capabilities and differentiated solutions as key competitive advantages [65][70] Question: What is the company's exposure to the U.S. federal government? - Management indicated that while they do business with the federal government, they are confident in their ability to navigate budget cycles and demand for technology [75][78] Question: Can you elaborate on the free cash flow expectations for fiscal '26? - Management noted that free cash flow was impacted by lower-than-expected growth in CSG and increased investment in AI, but they expect improvements in FY '26 [126][128] Question: What is the confidence level regarding the PC refresh? - Management expressed optimism about the upcoming PC refresh driven by aging installed bases and the end of Windows 10 support [137][141]