Q3 2022 Dell Technologies Inc Earnings Call

Speaker 1: Good afternoon and welcome to the fiscal year 2022 third quarter.

Good afternoon, and welcome to the fiscal year 2022 third quarter results conference call for Dell technologies incorporated.

To inform all participants this call is being recorded at the request of Dell technologies.

Broadcast is copyrighted property of Dell technologies incorporated.

Broadcast 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.

A question simply press Star then one on your telephone keypad at any time during the presentation.

I'd like to turn the call over to Rob Williams head of Investor Relations. Mr. Williams, you may begin.

Speaker 2: Thanks, Jamiria, and thanks, everyone, for joining us. With me today are Jeff Clark, Chuck Whitten, Tom Sweet, and Tyler Johnson.

Thanks, Jim Maria and thanks, everyone for joining US with me today are Jeff Clarke, Chuck Witten, Tom Sweet and Tyler Johnson.

Speaker 2: Our press release, financial tables, web deck, prepared remarks, and additional materials are available on our IR website. The guidance section will be covered on today's call.

Our press release financial tables web deck prepared remarks, and additional materials are available on our IR website. The guidance section will be covered on today's call.

During this call unless we otherwise indicate all references to financial measures refer to non-GAAP financial measures, including non-GAAP revenue gross margin operating expenses operating income net income earnings per share EBITDA adjusted EBITDA adjusted free.

Cash flow as well as an estimated non-GAAP revenue operating income and EPS from continuing operations.

Speaker 2: A reconciliation of these measures to their most directly comparable GAAP measures can be found in our web deck and press release.

A reconciliation of these measures to their most directly comparable GAAP measures can be found in our web deck and press release.

Speaker 2: Also note that all growth percentages refer to year-over-year change unless otherwise specified.

Also note that all growth percentages refer to year over year change unless otherwise specified.

Certain items contained in our earnings materials are presented on a continuing operations basis, giving effect to the Vmware spin off these amounts represent managements current estimate of continuing operations financial results.

Speaker 2: Certain items contained in our earnings materials are presented on a continuing operations basis, giving effect to the VMware spinoff. These amounts represent management's current estimate of continuing operations financial results.

Speaker 2: Final amounts presented on a continuing operations basis will be provided in our Form 10-K for fiscal 2022 and subsequent Form 10-Q filings. Amounts are subject to change with no obligation to reconcile these estimates.

Final amounts presented on a continuing operations basis will be provided in our Form 10-K for fiscal 2022 and subsequent Form 10-Q filings amounts are subject to change with no obligation to reconcile these estimates.

Speaker 2: Additionally, I'd like to remind you that all statements made during this call that relate to future results and events are forward-looking statements based on current expectations.

Additionally, I'd like to remind you that all statements made during this call that relate to future results and events are forward looking statements based on current expectations.

Speaker 2: 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 SEC filings.

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 SEC filings, we assume no obligation to update our forward looking statements.

Speaker 2: We assume no obligation to update our forward-looking statements. Now I'd like to turn it over to Chuck. Thanks, Rob. And hi.

Now I'd like to turn it over to Chuck.

Thanks, Rob and hi, everyone. Thanks for joining us today.

Speaker 2: We're three-quarters into what will prove to be a historic year for Dell. As Michael said at our September Analyst Meeting, we're just beginning to write the next chapter of the Dell Technologies story.

We're three quarters into what will prove to be a historic year for Dell as Michael said at our September analyst meeting, we're just beginning to write the next chapter of the Dell Technologies' story.

Speaker 2: During that meeting and with industry analysts at our annual Dell Technology Summit in October , we shared our view on the IT industry, our strategy going forward, and our view on long-term value creation. We'd emphasize four key points from those sessions.

During that meeting and with industry analysts at our annual Dell Technology Summit in October we shared our view on the industry our strategy going forward and our view on long term value creation, we'd emphasize four key points from those sessions first we are uniquely positioned in the data and multi cloud era with durable advantages.

Speaker 3: First, we are uniquely positioned in the data and multi-cloud era with durable advantages, market-leading positions, and the financial flexibility to drive sustained profitable growth.

This market, leading positions and the financial flexibility to drive sustained profitable growth.

Speaker 3: Second, our ISG and CSG core businesses are attractive. They sit in large markets, estimated at $670 billion in TAM, and are projected to grow in the low single digits over the next few years.

Our ISG and CST core businesses are attractive they sit in large market estimated at $670 billion in Tam and are projected to grow in the low single digits over the next few years.

Speaker 3: We have ample headroom for growth, a track record of gaining share, and are pursuing a differentiated strategy to consolidate and modernize our core business, including through our APEX-branded as-a-service solution.

We have ample headroom for growth a track record of gaining share and are pursuing a differentiated strategy to consolidate and modernize our core business, including through our apex brand. It as a service solutions in DSG. Our differentiation comes from our unique direct sales motion and strategic channel program, our focus on the most stable and premium parts of the piece.

Speaker 3: In CSG, our differentiation comes from our unique direct sales motion and strategic channel program, our focus on the most stable and premium parts of the PC market, and our strong attached motion, which captures the value around the device as customers seek exceptional experiences and improved productivity by buying more software and peripherals.

The market and our strong attach motion, which captures the value around the device as customers seek exceptional experiences and improved productivity by buying more software and peripherals.

Speaker 3: And for ISG, our leadership positions give us a unique ability to solve customer problems as data proliferates and infrastructure becomes more distributed, hybrid, and software-driven. We're your number one in x86 and mainstream server revenue, and we are also number one in all external storage categories, with the most extensive and diverse storage portfolio in the industry. Our storage business addresses each segment of the market with a differentiated architecture optimized for workload needs.

And for ISG, our leadership positions give us a unique ability to solve customer problems as data proliferates and infrastructure becomes more distributed hybrid and software driven where you're number one in X 86 in mainstream server revenue and we are also number one in all external storage categories with the most extensive and diverse storage.

Portfolio in the industry, our storage business addresses each segment of the market with a differentiated architecture optimized for workload needs and of course, our alliance with Vmware is unique in the industry. We've honed our first and best technical and commercial motion that enables faster time to market and differentiated jointly engineered.

Speaker 3: And, of course, our alliance with VMware is unique in the industry. We've honed a first and best technical and commercial motion that enables faster time to market and differentiated, jointly engineered solutions.

Solutions.

Speaker 3: The third point we'd highlight is the attractive new growth opportunities that surround our business. 650 billion in additional market opportunity growing at an 8 percent kegger through 2024. These are markets where we have a unique right to win and are driving real innovation today. Markets like Telco and Edge, to name just two examples.

The third point, we'd highlight is the attractive new growth opportunities that surround our business 650 billion in additional market opportunity growing at an 8% CAGR through 2024. These are markets, where we have a unique right to win and are driving real innovation today markets like telco and edge to name just two examples and lastly.

Speaker 3: And lastly, we are firmly committed to creating shareholder value with an attractive long-term financial framework, balanced capital allocation strategy, and track record of delivering consistent results in any environment.

We are firmly committed to creating shareholder value with an attractive long term financial framework balanced capital allocation strategy and track record of delivering consistent results in any environment.

Speaker 3: Our year-to-date and Q3 financial results, along with our steady strategic progress, offer compelling proof of these points and our long-term strategy. Let's start with our core markets and execution. Demand for our solutions remains strong as global economic recovery and widespread digital transformation reset IT demand to higher levels.

Our year to date in Q3 financial results, along with our steady strategic progress offer compelling proof of these points in our long term strategy.

Let's start with our core markets and execution demand for our solutions remains strong as global economic recovery and widespread digital transformation reset it demand to higher levels against that backdrop and despite the difficult supply environment. We again delivered great performance in Q3 with strong growth in all three business.

Speaker 3: Against that backdrop, and despite the difficult supply environment, we again delivered great performance in Q3, with strong growth in all three business units, all regions, and broad strength across our commercial PC, server, and notably, most of our storage portfolio. We gained share in servers, storage, and PCs, according to the latest reported IDC results.

Units, all regions and broad strength across our commercial PC server and notably most of our storage portfolio. We gained share in servers storage and Pcs. According to the latest reported IDC results as we look forward all signposts point to continued strong market demand and we.

Speaker 3: As we look forward, all signposts point to continued strong market demand and we intend to continue winning in the consolidation and gaining share over the long term.

Intend to continue winning in the consolidation and gaining share over the long term.

Speaker 3: Our strategy is not just to win in the consolidation, but also to modernize our business and our apex branded solutions are important to that future, though it is still early days, we're pleased with our technical progress and the momentum across our family of as a service offerings, which will continue to expand going forward.

Our strategy is not just to win in the consolidation, but also to modernize our business and our apex branded solutions are important to that future.

It is still early days, we're pleased with our technical progress and momentum across our family of as a service offerings, which will continue to expand going forward. For example in October we announced apex cloud services with Vmware Cloud a terrific example of our first and best Alliance with Vmware that solution gives organizations the ability.

Speaker 3: For example, in October , we announced Apex Cloud Services with VMware Cloud, a terrific example of our first and best alliance with VMware. That solution gives organizations the ability to move workloads across multiple cloud environments and scale resources quickly with predictable pricing and transparent costs.

To move workloads across multiple cloud environments and scale resources quickly with predictable pricing and transparent costs.

Speaker 3: Turning to our growth engines, as I said, Edge and Telecom are two perfect examples of the types of markets we are looking to disrupt, and we delivered a steady stream of innovation in these spaces in Q3.

Turning to our growth engines as I said edge and telecom are two perfect. Examples of the types of markets. We're looking to disrupt and we delivered a steady stream of innovation in these spaces in Q3.

Speaker 3: For the Edge, we introduced VxRail satellite nodes and updates to our streaming data platform. For Telecom, we introduced new bare metal orchestrator software, multiple reference architectures to accelerate O-RAN and Edge deployments, and a new service offering called Respond and Restore for Telecom.

For the edge, we introduced VX rail satellite nodes and updates to our streaming data platform for telecom, we introduced new bare metal Orchestrator software multiple reference architectures to accelerate Oran and edge deployments and a new service offering called respond and restore for telecom.

Speaker 3: We're encouraged by our ability to simultaneously deliver in our core while driving innovation in new growth markets. And we will continue to pursue adjacent growth where our market positions, customer relationships, and durable competitive advantages give us a unique right to solve customer problems in the data and multi-cloud era.

We're encouraged by our ability to simultaneously deliver in our core while driving innovation in new growth markets and we will continue to pursue adjacent growth, where our market positions customer relationships and durable competitive advantages give us a unique right to solve customer problems in the data and multi cloud era.

Speaker 3: Let me conclude with our commitment to long-term shareholder value. Since the September meeting, we have hit a few major milestones in our efforts to simplify our corporate structure and create financial flexibility to drive future growth. We completed the transaction to spin off VMware, and we closed the boomy divestiture, each resulting in a more simplified corporate structure. In addition, we have returned to an investment-grade corporate rating, which opens up the opportunity for a more balanced capital allocation strategy.

Let me conclude with our commitment to long term shareholder value since the September meeting, we have had a few major milestones in our efforts to simplify our corporate structure and create financial flexibility to drive future growth. We completed the transaction to spin off Vmware and we closed the boomy divestiture, each resulting in a more simplified corporate structure.

In addition, we have returned to an investment grade corporate rating, which opens up the opportunity for a more balanced capital allocation strategy.

Speaker 3: To sum up, we remain confident that our market positions, articulated strategy, durable competitive advantages, commitment to disciplined capital allocation, and importantly, our culture and track record of execution are great for customers and our team members and create an attractive near and long-term opportunity for shareholders. Q3 was a great example of these winning elements coming together, and we're just getting started. With that, let me now turn it over to Jeff. Thanks, Chuck.

To sum up we remain confident that our market positions articulated strategy durable competitive advantages commitment to disciplined capital allocation and importantly, our culture and track record of execution are great for customers and our team members and create an attractive near and long term opportunity for shareholders.

Q3 was a great example of these winning elements coming together and we're just getting started.

With that let me now turn it over to Jeff.

Thanks, Chuck and Hello, everyone.

Speaker 4: I started off last quarter's call by saying in this incredibly unpredictable environment, we delivered our best second quarter ever. We now have delivered our best third quarter ever and we are on track for an historic year.

I started off last quarter's call by saying.

And this incredibly unpredictable environment, we delivered our best second quarter ever we now have delivered our best third quarter ever and we are on track for an historic year.

The constant through all the change over the past 18 months is the unprecedented demand for technology.

Speaker 4: The constant thrill of the change over the past 18 months is the unprecedented demand for technology.

Speaker 4: It is clear, technology is more essential today than ever before. We are clearly winning in the core, and this keeps us at the center of our customers' IT and digital agendas.

It is clear technology is more essential today than ever before.

We are clearly winning in the core and this keeps us at the center of our customers' and.

And digital agenda.

Speaker 4: three quarters into our fiscal year, Dell Technologies has seen a record of revenue of $79 billion up 16%, along with record operating income of $8.4 billion up 12%.

Three quarters into our fiscal year.

<unk> technologies has seen a record revenue of $79 billion up 16% along with record operating income of $8 4 billion up 12%.

Speaker 4: For the third quarter, we delivered 21 percent of revenue growth as we saw broad-based growth across our business. Similar to last quarter, demand remains ahead of revenue growth as we continue to navigate industry-wide supply constraints driven primarily by integrated circuits.

For the third quarter, we delivered 21% of revenue growth as we saw broad based growth across our business similar to last quarter demand remains ahead of revenue growth as we continue to navigate industry wide supply constraints, driven primarily by integrated circuits.

Speaker 4: We shipped a record number of products globally in Q3 and have leveraged our strengths, a multi-decade operational excellence.

We shipped a record number of products globally in Q3 and have leveraged our strengths a multi decade operational excellence.

Speaker 4: product design flexibility coupled with less complexity and our direct model with its high quality demand signal and ability to shape demand.

Product design flexibility, coupled with less complexity and our direct model with its high quality demand signal and ability to shape demand.

Speaker 4: We are also delivering on our commitment to innovation. We launched a number of new offerings during the quarter.

We're also delivering on our commitment to innovation, we launched a number of new offerings during the quarter.

Speaker 4: Out of our growing telecom business, we introduced bare metal orchestration software to give cloud service providers a flexible and cost-effective way to deploy and operate their open cloud-native network infrastructure.

Out of our growing telecom business, we introduced their metal orchestration software to give cloud service providers, a flexible and cost effective way to deploy and operate their open cloud native network infrastructure.

Speaker 4: In storage, we announced network-attached storage software and hardware innovation for PowerScale, providing organizations with more flexible consumption, management, protection, and cybersecurity capabilities.

In storage, we announced network attached storage software and hardware innovation for power scale, providing organizations with more flexible consumption management protection and cyber security capabilities. Additionally.

Speaker 4: Additionally, we launched the industry's first end-to-end MVME TCP SAN solution.

Additionally, we launched the industry's first end to end Nvme TCP San solution.

Speaker 4: featuring smart fabric storage software, which provides the intelligence for automated storage connectivity at scale.

Featuring smart fabric storage software, which provides the intelligence for automated storage connectivity at scale.

Speaker 4: And in client, we are pairing Windows 11 with our Dell Optimizer built-in intelligence to deliver the most personalized, productive computing experience on the world's most intelligent business PCs.

And in client, we're repairing windows 11, with our del Optimizer built in intelligence to deliver the most personalized productive computing experience on the world's most intelligent business Pcs.

Speaker 4: We believe the introduction of Windows 11 will continue to drive demand in PCs. Lastly, as Chuck mentioned, our first and best partnership with VMware continued to demonstrate our joint ability to deliver differentiated offers with the announcement of APEX Cloud Services with VMware Cloud at VMworld. It's multi-cloud done right.

We believe the introduction of Windows 11 will continue to drive demand in Pcs Lastly, as Chuck mentioned, our first and best partnership with Vmware continued to demonstrate our joint ability to deliver differentiated offers with the announcement of apex cloud services with Vmware cloud at van World.

It's multi cloud done right.

Turning to our segment results our infrastructure solutions group to continue to see positive momentum as enterprise it spending rebounded and our multi year investments in the portfolio took hold.

Speaker 4: Our infrastructure solutions groups continue to see positive momentum as enterprise IT spending rebounded and our multi-year investments in the portfolio took hold.

Speaker 4: ISG delivered revenue growth of 5% to $8.4 billion, which was our third consecutive quarter of year-over-year growth. Customers across all regions are investing in IT infrastructure, focused on multi-cloud solutions and accelerating digital transformation. This investment is driving very strong demand for compute and storage. Operating income was $892 million, or 10.6% of revenue.

ISG delivered revenue growth of 5% to $8 4 billion.

Which was our third consecutive quarter of year over year growth customers across all regions are investing in it infrastructure focused on multi cloud solutions and accelerating digital transformation. This investment is driving very strong demand for compute and storage operating income was $892 million or 10, 6%.

Our revenue.

Speaker 4: Server and networking revenue was $4.5 billion up 9%, our fourth consecutive quarter of growth. Both server and networking demand were exceptionally strong and ahead of revenue growth throughout the quarter. Our 15G server ramp accelerated over the quarter and we continue to see positive momentum in high value workloads.

Server and networking revenue was $4 $5 billion up 9%, our fourth consecutive quarter of growth both server and networking demand were exceptionally strong and ahead of revenue growth throughout the quarter, our <unk> server ramp accelerated over the quarter and we continue to see positive momentum in high value workloads.

We are pleased with our storage performance in Q3, where we saw storage returned to growth with revenue up 1% to $3 9 billion.

Speaker 4: We are pleased with our storage performance in Q3, where we saw storage return to growth with revenue up 1% to $3.9 billion. Our overall storage demand was strong, driven by orders growth of 47% for hyper-converged infrastructure, 26% for data protection, and 18% for mid-range storage.

Our overall storage demand was strong driven by orders growth of 47% for hyper converged infrastructure, 26% for data protection and 18% for mid range storage most.

Speaker 4: Momentum in our mid-range storage business continues to be led by PowerStore, CRN's 2021 Innovator Award for mid-range storage, where 23 percent of PowerStore customers were new to Dell storage and 28 percent were repeat buyers. PowerStore is the fastest ramping storage product in our history.

Momentum in our midrange storage business continues to be led by power store CRM in 2021 Innovator award for midrange storage, where 23% of power store customers were new to Dell storage and 28% will repeat buyers power stores, the fastest ramping storage product in our history.

Dell continue to lead the transition to software defined data center this quarter with customers leveraging the power of VX rail and power Flex is the foundation of their multi cloud strategy.

Speaker 4: Dell continue to lead the transition to software-defined data center this quarter, with customers leveraging the power of VxRail and PowerFlex as the foundation of their multi-cloud strategy.

Speaker 4: For example, Lowe's is bringing more power and resiliency to the edge, deploying VxRail to handle IT demands in each of its more than 2,200 home improvement and hardware stores in the United States and Canada, helping the company deliver new capabilities and services that allow its employees to better serve customers during this holiday season and beyond.

For example, <unk>.

<unk> is bringing more power and resiliency to the edge deploying VX rail to handle it demands in each of its more than 2200 home improvement in hardware stores in the United States and Canada, helping the company deliver new capabilities and services that allow us employees to better serve customers. During this holiday season and beyond.

Turning to <unk>, we had another record quarter driven by the global economic recovery and the new distributed work environment, requiring modern devices and advanced productivity solutions.

Speaker 4: CSG delivered revenue of $16.5 billion, which was up 35% driven by strong demand across the board, commercial and consumer, notebooks and desktops, and across all regions.

<unk> delivered revenue of $16 5 billion, which was up 35% driven by strong demand across the board commercial and consumer notebooks and desktops and across all regions commercial revenue was a record at $12 3 billion in Q3 up an unprecedented 40% we have.

Speaker 4: Commercial revenue was a record at $12.3 billion in Q3, up an unprecedented 40 percent. We have reached record commercial revenue for each of the last three fiscal years and are on track for another strong year.

Reached record commercial revenue for each of the last three fiscal years and are on track for another strong year.

Speaker 4: Consumer revenue was a record at $4.3 billion, up 21% driven by strong growth in notebooks as well as premium and gaming desktops. Our team did a good job navigating the inflationary component cost and logistics environment, resulting in a record CSG operating income of $1.1 billion, up 14%, and 6.9% of revenue.

<unk> revenue was a record at $4 3 billion up 21% driven by strong growth in notebooks as well as premium and gaming desktops.

Our team did a good job navigating the inflationary component cost and logistics environment, resulting in a record <unk> operating income of $1 1 billion up 14% and six 9% of revenue our long term focus on higher value and staples segments of the client market is what helps drive our consistent.

Speaker 4: Our long-term focus on higher value and stable segments of the client market is what helps drive our consistent results.

Results approximately 80% of the industry's revenue and nearly all of the industry's revenue growth has come from commercial Pcs and premium consumer Pcs and that is where we're focused.

Speaker 4: Approximately 80% of the industry's revenue and nearly all of the industry's revenue growth has come from commercial PCs and premium consumer PCs, and that is where we are focused.

Speaker 4: We are driving profitable share gains over the long term, especially in commercial client where we've gained nearly 400 basis points of share for calendar Q3 according to IDC.

We are driving profitable share gains over the long term, especially in commercial client, where we've gained nearly 400 basis points of share for calendar Q3. According to IDC for total client we gained more than 300 basis points of share in calendar Q3, outgoing outgrowing. The next four PC vendors.

Speaker 4: For total client, we gained more than 300 basis points to share in calendar Q3, outgrowing the next four PC vendors combined.

Speaker 4: In addition, we believe our leading share position in displays further expanded during calendar Q3 based on preliminary IDC data. We'll continue to leverage our strong attach motion to capture our share of the opportunity in the broader PC ecosystem.

<unk> combined in addition, we believe our leading share position in displays further expanded during calendar Q3 based on preliminary IDC data will continue to leverage our strong attach motion to capture our share of the opportunity in the broader PC ecosystem.

Speaker 4: Our client business has delivered dependable and consistent growth throughout multiple cycles, and we believe trends will remain healthy.

Our client business has delivered dependable and consistent growth throughout multiple cycles, and we believe trends will remain healthy.

Speaker 4: given businesses around the world are increasingly digitizing and utilizing technology to increase productivity and drive innovation.

Given businesses around the world are increasing lead digitizing and utilizing technology to increase productivity and drive innovation to close we are focused on driving consistent growth in our core businesses, where we build customer trust and create insights that power innovation and we are expanding into new growth business.

Speaker 4: We are focused on driving consistent growth in our core business.

Speaker 4: where we build customer trust and create insights that power innovation and we are expanding into new growth businesses where we have a unique right to win.

Where we have a unique right to win.

Speaker 4: With our durable advantages like our broad customer reach, world-class supply chain, and modern services delivery network, I believe we are well-positioned to win today and into the future. Now let me turn the call over to Tom.

With our durable advantages like our broad customer reach and world class supply chain and modern services delivery network I believe we are well positioned to win today and into the future now let me turn the call over to Tom.

Thanks, Jeff the digital trends in real time decision, making at the edge are tailwind for our infrastructure business and we continued to see differentiated opportunities and how we target and execute within the PC space. These trends along with our strategy and durable advantages lead us to be optimistic about our long term.

Speaker 5: Thanks, Jeff. The digital trends and real-time decision-making at the edge are tailwinds for our infrastructure business, and we continue to see differentiated opportunities in how we target and execute within the PC space. These trends, along with our strategy and durable advantages, lead us to be optimistic about our long-term growth prospects.

<unk> growth prospects.

Speaker 5: We continued to deliver strong results through any environment, and the third quarter was another example of this performance stability. We drove strong growth in revenue and delivered solid profitability growth despite some challenging dynamics.

We continued to deliver strong results through any environment in the third quarter was another example of this performance stability.

We drove strong growth in revenue and delivered solid profitability growth despite some challenging dynamics.

For the third quarter, we saw record revenue of $28 4 billion up 21% driven by growth in all three business units led by another record quarter for <unk> and continued growth in ISG.

I was pleased to see the improved demand growth in storage, although it did not all flow to the P&L given timing and deferrals.

Gross margin was eight 4 billion up 8% and was 29, 6% of revenue.

Speaker 5: Gross margin as a percentage of revenue was 340 basis points lower, primarily due to a revenue mix shift to CSG, along with an inflationary cost environment. As we told you on last quarter's call, component costs would be a headwind in Q3, particularly impacting our elevated units and backlog.

Gross margin as a percentage of revenue was 340 basis points lower primarily due to a revenue mix shift to <unk>, along with an inflationary cost environment. As we told you on last quarter's call component costs will be a headwind in Q3, particularly impacting our elevated units in backlog.

Hog.

Speaker 5: We took various actions around pricing and configurations as we navigated through the quarter because of the higher cost.

We took various actions around pricing and configurations as we navigated through the quarter because of the higher cost.

Speaker 5: In general, as we've discussed in the past, we will realize a portion of the benefit of these price increases in the quarter in which we take the pricing actions, as well as in future quarters.

In general as we've discussed in the past, we will realize a portion of the benefit of these price increases in the quarter in which we take the pricing actions as well as in future quarters.

Speaker 5: Operating expense was $5.5 billion, up 10% as we invest for long-term growth, and our variable costs, such as sales compensation and bonus, are running ahead of prior year levels given our strong performance.

Operating expense was $5 5 billion up 10% as we invest for long term growth in our variable costs, such as sales compensation and bonus are running ahead of prior year levels, given our strong performance.

Speaker 5: As all of us, we will prudently manage our spending and expenses even as we continue to invest in the business.

As always we will prudently manage our spending and expenses, even as we continue to invest in the business.

Operating income was a third quarter record at $2 9 billion up 5% and 10, 1% of revenue.

Speaker 5: Operating income was a third-quarter record at $2.9 billion, up 5%, and 10.1% of revenue.

Speaker 5: A decline in interest expense due to our reduced debt balances and a decline in our effective tax rate contributed to the 18 percent growth of consolidated net income to $2 billion, and 17 percent growth in diluted earnings per share to $2.37.

A decline in interest expense due to our reduced debt balances and a decline in our effective tax rate contributed to the 18% growth of consolidated net income to 2 billion.

And 17% growth in diluted earnings per share to $2 37.

Speaker 5: Adjusted EBITDA was $3.4 billion, up 6% at 12% of revenue. And for the trailing 12 months, adjusted EBITDA was $13.8 billion, up 14%.

Adjusted EBITDA was $3 4 billion up 6% at 12% of revenue for the trailing 12 months adjusted EBITDA was $13 8 billion up 14%.

Speaker 5: Our recurring revenue is approximately $6 billion a quarter, up 13%. Our remaining performance obligations, or RPO, is approximately $47 billion, up 26%. It includes deferred revenue plus committed contract value not included in deferred revenue.

Our recurring revenue is approximately $6 billion a quarter.

Up 13%, our remaining performance obligations or our Po.

It was approximately 47 billion up 26% and includes deferred revenue plus committed contract value not included in deferred revenue.

Speaker 5: Excluding VMware, Dell's RPO is approximately $36 billion, up 32% and up 3% sequentially. The sequential growth was driven by an expanded ISG backlog.

Excluding Vmware <unk> is approximately 36 billion up 32% and up 3% sequentially.

Sequential growth was driven by an expanded ISG backlog.

Dell financial services originations in Q3 were 2 billion down 7%.

Speaker 5: Dell Financial Service originations in Q3 were $2 billion, down 7 percent, given a number of customers have opted to use cash to fund their technology purchases.

Given a number of customers who have opted to use cash to fund their technology purchases.

Speaker 5: GFS ended the quarter with $12.6 billion in total managed assets, flat year over year.

GFS ended the quarter with $12 6 billion in total managed assets flat year over year.

Speaker 5: Now turning to our balance sheet and capital structure, which, excluding DFS debt, is now fully unsecured.

Now turning to our balance sheet and capital structure, which excluding DFS debt is now fully unsecured.

Speaker 5: Our cash flow continues to be strong, and as promised, we have repaid substantial debt and de-levered the balance sheet.

Our cash flow continues to be strong and as promised we have repaid substantial debt and delever the balance sheet.

Speaker 5: As of today, we have paid down approximately one-third of our debt balance from the end of the last fiscal year, and we have paid down $15.9 billion of core and margin loan debt.

As of today, we have paid down approximately one third of our debt balance from the end of the last fiscal year and we have paid down $15 9 billion of core margin loan debt.

Speaker 5: We are now solidly an investment-grade company, having received upgrades from all three of the major credit rating agencies.

We are now solidly in the investment grade company, having received upgrades small through the major credit rating agencies.

Speaker 5: For the third quarter, cash flow from operations was $3.3 billion, up 9%, and excluding VMware, it was $2.2 billion. On a trailing 12-month basis, cash flow from operations was $13.1 billion, up 45%.

For the third quarter cash flow from operations was $3 3 billion up 9% and excluding Vmware. It was $2 2 billion on a trailing 12 month basis cash flow from operations was $13 1 billion up 45%.

Speaker 5: and excluding VMware, it was $8.5 billion, up 76%.

And excluding Vmware it was $8 5 billion up 76%.

I'm happy with how we've managed our working capital, although we did see higher inventory levels given the supply chain dynamics and component availability. We expect inventory balances to come down as the supply chain situation improves over the next year.

I'm happy with how we've managed our working capital, although we did see higher inventory levels, given the supply chain dynamics and component availability, we expect.

Inventory balances to come down as the supply chain situation improves over the next year.

Cash and investments ended the quarter at $24.2 billion, and approximately $11.5 billion for Dell, excluding VMware. Finally, as of last Friday, November 19th, we have repurchased approximately 2 million shares.

Cash and investments ended the quarter at $24 2 billion and approximately $11 5 billion of for Dell Excluding Vmware.

Finally as of last Friday November 19th we have repurchased approximately 2 million shares.

Our intent is to continue buying shares going forward programmatically as we manage dilution and opportunistically return capital to shareholders.

Our intent is to continue buying shares going forward programmatically, because we manage dilution and opportunistically return capital to shareholders.

Before I talk to our outlook I would like to provide a review of our third quarter financial results on a continuing operations basis.

Before I talk our outlook, I'd like to provide a view of our third quarter financial results on a continuing operations basis.

which is how prior periods will be recast beginning in the fourth quarter.

Which is how prior periods will be recast beginning in the fourth quarter.

As explained in Appendix C of our web deck, we currently estimate Q3 revenue from continuing operations was $26.5 billion.

As explained in appendix C of our web deck. We currently estimate Q3 revenue from continuing operations was $26 5 billion Apo.

Operating income was $2 billion, and diluted earnings per share was $1.69.

Operating income was 2 billion and diluted earnings per share was $1 69.

Sure.

It's important to note that our continuing operations financials differ from the pro forma financials we've released to date, particularly in the treatment of interest and other and in diluted share count. Please refer to Appendix C of our web deck for further details.

It's important to note that our continuing operations financials differ from the pro forma financials, we've released to date.

Particularly in the treatment of interest and other and a diluted share count.

Please refer to appendix C of our web deck for further details.

Now to our outlook. The macroeconomic environment is healthy across multiple sectors, including IT.

Now to our outlook the macroeconomic environment is healthy across multiple sectors, including it.

Our demand velocity reflects that businesses continue to prioritize their digital transformations to help meet customer needs and improve productivity.

Our demand velocity reflects that businesses continued to prioritize their digital transformations to help meet customer needs and improve productivity.

Semiconductor shortages, supply chain challenges, heightened logistics costs, as well as inflationary input costs are common themes across the economy.

Semiconductor shortages supply chain challenges heightened logistics costs as well as inflationary input costs are common themes across the economy.

We'll leverage our durable competitive advantages to adapt and deliver consistent, predictable results over time.

We will leverage our durable competitive advantages to adapt and deliver consistent predictable results over time.

I'll provide more guidance this quarter than is typical to help facilitate our reporting transition to a post-VMware spin basis.

I'll provide more guidance this quarter than is typical to help facilitate our reporting transition toward posted Vmware spend basis.

As a reminder, our fourth quarter financial results will include VMware reseller revenue.

As a reminder, our fourth quarter financial results will include Vmware reseller revenue.

For Q4, on a continuing operations basis, we expect revenue in the range of $27 billion to $28 billion, which implies a 12 percent to 16 percent growth.

For Q4 on a continuing operations basis, we expect revenue in the range of 27 billion to 28 billion.

Which implies a 12% to 16% growth.

We expect GAAP operating income between $1.65 billion and $1.75 billion, and non-GAAP operating income between $2.25 billion and $2.35 billion, which is in line with historical trends. Operating income margin will be up sequentially, given Q4 is a seasonally strong storage quarter.

We expect GAAP operating income between $1 65 billion and $1 75 billion and.

Non-GAAP operating income between $2 25 billion and 235 billion, which is in line with historical trends operating income margin will be up sequentially. Given Q4 is a seasonally strong storage quarter.

We expect a continued net inflationary environment and estimate a modest increase in OPEX as we invest alongside our strong top-line growth.

We expect a continued net inflationary environment and estimate a modest increase in opex as we invest alongside our strong topline growth.

Below the operating income line, you should assume 17% plus or minus 100 basis points for non-GAAP tax rates.

Below the operating income line, you should assume 17% plus or minus a 100 basis points for non-GAAP tax rate.

diluted shares in the range of $810 million to $820 million.

Diluted shares in the range of $810 million to $820 million.

Additionally, we will benefit from lower interest expense given the debt reduction we discussed.

Additionally, we will benefit from lower interest expense given the debt reduction we discussed.

We expect diluted GAAP earnings per share between $0.97 and $1.16.

We expect diluted GAAP earnings per share between <unk> 97, and a dollar $1 16.

and non-GAAP diluted earnings per share between $1.85 and $2.05.

And non-GAAP diluted earnings per share between $1 85.

And $2.05.

I'll provide guidance for fiscal 23 on our Q4 earnings call, however, I'd reiterate that we expect to see growth in both our CSG and ISG businesses.

I'll provide guidance for fiscal 'twenty three on our Q4 earnings call.

However, I would reiterate that we expect to see growth in both our <unk> and ISG businesses, we expect.

We expect revenue growth and EPS growth to be consistent with our long-range financial framework, which we discussed during our analyst meeting in September .

Revenue growth and EPS growth to be consistent with our long range financial framework, which we discussed during our analyst meeting in September.

In closing, a quick reminder. ESG remains an important focus for Dow Technologies, and we have a long legacy of engagement with investors.

In closing a quick reminder, ESG remains an important focus for Dell technologies, and we have a long legacy of engagement with investors.

ESG marries our corporate purpose and commitment to value creation to help move societal and business progress forward together. You can find more details on slide 9.

ESG marries our corporate purpose and commitment to value creation to help move societal and business progress forward together.

You can find more details on slide 19 of the web deck.

As I look forward, I'm confident in our ability to deliver consistent and predictable financial performance across any economic or IT spending cycle.

So I look forward I am confident in our ability to deliver consistent and predictable financial performance across any economic or it spending cycle.

With our track record of strong operational and strategic execution and our durable competitive advantages, I'm optimistic about the long-term growth prospects for Dell.

With our track record of strong operational and strategic execution in our durable competitive advantages I'm optimistic about the long term growth prospects for Dell.

We are focused on executing our strategy to consolidate and modernize the core and build new growth businesses that enable the multi-cloud future, along with delivering an attractive long-term financial model of 3 to 4 percent revenue growth and 6 percent or better diluted earnings per share growth. With that, I'll turn it back to Rob.

We are focused on executing our strategy to consolidate and modernize the core and build new growth businesses that enabled a multi cloud future along with delivering attractive long term financial model of 3% to 4% revenue growth and 6% or better diluted earnings per share growth.

With that I'll turn it back to Rob to begin Q&A.

Thanks, Tom. Let's get to Q&A. We'll ask each participant to ask one question to allow us to get to as many of you as possible. Jymyria, can you please introduce the first question?

Thanks, Tom let's get to Q&A I will ask each participant to ask one question to allow us to get to as many of you as possible to Maria can you. Please introduce the first question.

We'll take our first question from Tony Sacanachi with Bern.

We will take our first question from Toni <unk> with Bernstein.

Yes, thank you for taking the question. I was wondering if you could comment a little bit on the dynamics for operating margins in ISG. They were down 90 basis points sequentially and 40 basis points year over year despite improving volumes and whether you could.

Yes. Thank you for taking the question I was wondering if you could comment a little bit on the dynamics for operating margins in ISG. They were down 90 basis points sequentially and 40 basis points year over year, despite improving volumes and whether you could comment.

uh on you know sort of order growth relative to a revenue growth for both storage

Uh huh.

Order growth relative to our revenue growth for both storage.

and for and for servers and networking. Thank you.

And for.

And for servers and networking thank you.

Hey, Tony, it's Tom. Let me sort of take you through how we thought about it and what we're seeing. So from an op margin perspective related to ISG, you correctly highlighted that we're down quarter on quarter about 90 basis points from 11.5 to 10.6.

Hey, Toni it's Tom Let me, let me sort of take you through how we thought about it and what we're seeing so from an op margin perspective related to ISG you correctly highlighted that were down quarter on quarter about 90 basis points from 11, 5% to 10 six.

I would remind all of you and remind you, Tony, that last quarter we talked about the increased component cost that would impact us in Q3.

I would remind all of you and remind you Tony that last quarter, we talked about the increased component costs that would impact us in Q3, and we clearly saw that as.

And we clearly saw that as we highlighted that we thought, you know, my overall operating margin guidance or operating income guidance last quarter was to be 1 to 2 percent sequentially. I think we ultimately came out at 2 percent this quarter.

As we highlighted that we thought my overall operating margin guidance, our operating income guidance last quarter was to be 1% to 2% sequentially and I think we ultimately came out at 2% this quarter.

We did have headwinds with component costs, particularly in the server space.

Did have headwinds with component costs, particularly in the server space.

And particularly with the, as I mentioned again last quarter, with the back log that was sitting, with the unit sitting in back log at the corner.

And particularly with these.

As I mentioned again last quarter with the backlog that was sitting with the unit sitting in backlog.

Well, we did try to adjust pricing on some of those units. We did have some negative or some headwinds, I would say, on those shipments as they went out. So that was the principal drag on operating margin in ISG.

Well, what we did try to adjust pricing on some of those units.

Did have some negative or some headwinds I would say on those shipments went out so that was the principal drag on operating margin and ISG.

From an orders growth, we don't really get into demand conversations here, but I would tell you that we saw healthy demand growth in both servers and in storage. Really pleased with what velocity of those two particular lines of business, which is why I highlighted in the RPO that the backlog dynamic that, you know, RPO expanded because of the backlog dynamic principally in ISG.

Orders growth, we don't really get into demand conversations here, but I would tell you that we saw healthy demand growth in both servers and in storage really pleased with what the velocity of those two particular lines of business, which is why I highlighted in the <unk> that the backlog dynamics.

<unk> expanded because of the backlog dynamic principally in ISG, so pleased with the velocity.

pleased with the velocity and pleased with the overall environment as we see the demand environment as we move forward.

I'm pleased with the overall environment as we see the demand environment as we move forward.

Thank you Tony.

We'll take our next question from Katie Huberty with Morgan Stan.

We'll take our next question from Katy Huberty with Morgan Stanley.

Yes, thank you. I wanted to follow up on ISG because, Tom, as you said, you made notable comments about ISG backlog growing and also strong storage demand not necessarily converting to the P&L in the quarter. Can you just talk about the shape of demand linearity, you know, why some of that revenue was pushed and how you see it flowing through in the January quarter, particularly as it relates to whether we should expect an acceleration in storage revenue growth?

Yes. Thank you I wanted to follow up on ISG, because Tom as you said you made notable comments about ISG backlog growing and also strong storage demand not necessarily converting to the P&L in the quarter can you just talk about the shape of demand linearity why some of that revenue was pushed in.

And how you see it flowing through in the January quarter, particularly as it relates to.

Whether we should expect an acceleration in storage revenue growth.

Yeah, look, Katie, you know, as it relates to storage demand, you know, I think we've talked about in the past that the storage demand tends to be more back in loaded in the quarter. And we clearly saw that again this quarter, perhaps a bit more than in prior quarters. And as a result of that.

Yes look KKR as it relates to storage demand.

I think we've talked about in the past that the storage demand tends to be more backend loaded in the quarter and we clearly saw that again this quarter, perhaps a bit more than in prior quarters and as a result of that.

We were not able to convert that backlog to revenue so much are that much of that order demand or revenue I should say

We were not able to convert that backlog to revenue so much or much of that order demand and revenue I should say so that was clearly a headwind.

So that was clearly a headwind. Also remember that within my storage solutions that I'm selling, I've got a high degree of software and service.

Also remember that within my storage solutions that I'm selling I've got a high high degree of software and services that are usually to get wrapped up into multi year arrangements that.

that usually get wrapped up into multi-year arrangements that result in being deferred to the balance sheet.

<unk> in the being deferred to the balance sheet. So I've got.

I've got, which I think is a good thing by the way, so I don't want to say that's a negative because ultimately that gives us a revenue stream in the future.

Which I think is a good thing by the way. So I don't want to say, that's a negative because ultimately that gives us a revenue stream in the future, but so that was the principal headwind that we saw both rebuilt backlog in storage as a result of the linearity and we also have deferred a fair amount of revenue to the balance sheet just given the.

But so that was the principal headwind that we saw. Both we built backlog in storage as a result of the linearity, and we also deferred a fair amount of revenue to the balance sheet, just given the

Service service attach rate as well as the software content within the within the storage

Service service attach rate as well as the software content within the within the storage.

Maybe Tom to add a little bit to that we're encouraged by the storage orders growth because in the most strategic category software defined storage we grew 47%.

Maybe, Tom, to add a little bit to that. We're encouraged by the storage orders growth, because in the most strategic category, software-defined storage, we grew 47%.

Mid-range orders grew 18%, which is now the fourth consecutive quarter our mid-range business has grown. That's on top of taking share in the last quarter in mid-range in Q2.

Mid range orders grew 18%, which is now the fourth consecutive quarter. Our range business has grown that's on top of taking share in the last quarter.

In Q2 data.

data protection group, unstructured data group, and our entry-level orders group as well in the storage business group. Katie, we remain encouraged by the orders growth. We have the conversion that Tom walked through that we have to continue to work on, but the demand environment in Q3. We're pleased.

Data protection group unstructured data rooms, and our entry level orders group as well and the storage business.

We remain encouraged by the orders growth we had the conversion that Tom walked through that we have to continue to work on.

The demand environment in Q3, we're pleased.

Yeah, and Katie, I should answer, I guess, the second half of your question, which is around, as you think about what's the implication for Q4 revenue. Look, I think the reality is, as we highlighted in the talk track, that we're continuing to face supply chain challenges.

Yes.

Sure to answer I guess, the second half of your question, which is around as you think about what's the implication for Q4 revenue look I think the reality is as we highlighted in the talk track that work continue to face supply chain challenges and so how much of server demand gets converted our backlog gets converted into shippable revenue.

And so how much of server demand gets converted, or backlog gets converted into shippable revenue is something that the teams are working every day. We have longstanding relationships with our supply chain.

<unk> is something that the teams are working every day, we have long standing relationships with our supply chain, but it is a pretty dynamic environment in semiconductors continued to be a challenge, particularly for Nic cards and pork cards for us so.

But it is a pretty dynamic environment. And semiconductors continue to be a challenge, particularly for NIC cards and PERC cards for us.

I think that's going to be one of the things that we're going to have to work our way through as we go through the quarter in terms of how much headwind does supply chain give us. Jeff, I don't know if you'd add anything to that. I think we're all set. All right. Hey, thanks, Katie.

Think thats going to be one of the things that we're going to have to work our way through as we go through the quarter in terms of how much headwind to supply chain give us Jeff I don't know if you'd add anything to that.

Hey, Thanks, Katie I appreciate the question.

We'll take our next question from Wamsi Mohan with Bank of America.

We will take our next question from one <unk> Mohan with Bank of America.

uh... yes thank you uh... i know you typically don't give uh... free cash flow guide but in the spirit of giving more color guidance tom can you talk about cash flow that you're expecting to generate from down here in fiscal four q and how should we expect that to track relative to net net income next year uh... you noted growth in both csg and isg next fiscal year with the long-term framework should we be thinking of applying that to free cash flow as well

Yes. Thank you I know you typically don't give free cash flow guide, but in the spirit of giving more color on guidance.

Can you talk about cash flow that you are expecting to generate from Dow here in fiscal <unk> and how should we expect that to track relative to net income next year did go up in <unk> next fiscal year with that long term framework should we be thinking of applying that to free cash flow as well. Thank you.

Yeah, Hey, <unk>, it's Tyler so.

Like you said, we don't typically have guidance on Q4, but I would say, look, Q4 tends to be a strong cash flow quarter for us, and I'm expecting, you know, those same trends. So looking for a good cash flow quarter. As I look into next year, look, we've talked about the relationship between net income and excess of 100 percent, and I expect that to continue to hold.

Like you said, we don't typically give guidance on Q4.

But I would say that Q4 tends to be a strong cash flow port for us and I'm expecting those same trends. So so looking for a good cash flow quarter.

As I look into next year look we've talked about the relationship between net income in excess of a 100% and I expect that to continue to hold.

Yeah, and that's adjusted free cash flow. Adjusted free cash flow. Yeah, that's right. All right. Thanks, Tyler. Thanks, Walmsley.

Yes, and that's adjusted free cash flow at Jessica free cash flow, yes, that's right.

Alright, Thanks, Tyler Thanks Lindsay.

We'll take our next question from Amit Daryanani from Evercore.

We'll take our next question from Amit <unk> from Evercore.

Thanks for taking my question. You know, I guess maybe a question on the CSG side, your ability to, I think, accelerate CSG growth despite compares getting difficult is fairly impressive. So I'm wondering if we could just talk about what are some of the drivers that's driving this outperformance and how should we think about the durability of the CSG growth as you go forward because it compares actually get more and more difficult, I think, through the next few quarters now. And related to CSG, maybe the margin discussion you had on ISG, could you just talk about margin performance in CSG, better volumes, I think, sequentially near where your margins are still down?

Thanks for taking my question.

Maybe a question on the CSD side.

<unk> growth despite compares getting difficult it's fairly impressive.

Can you just talk about what are some of the drivers that's driving this outperformance and how should we think about the durability of this ESG growth as you go forward because the compares that you get more and more difficult I think through the next few quarters now and related to CST maybe.

Maybe the margin discussion you had on ISG could you just talk about margin performance and CSD better volumes, I think sequentially and year over year margins are still down.

This job puts a lot of questions in there, Lisa, if I can work my way through them. What we're seeing and why we're encouraged about the demand environment that we've called out and you see it in our performance is our focus being in commercial PCs, premium consumer gaming, and professional workstations, that's where the demand is.

Okay, Jeff that's a lot of questions in there. So if I can work my way through them.

What we're seeing and why we're encouraged about the demand environment that we've called out and you see it in our performance.

As our focus being in commercial Pcs premium consumer gaming and professional workstations, that's where the demand is.

That's our strength, that's been our focus. And when we think about the trends that are underway, the do-from-anywhere, work-from-home, learn-from-home, buy-from-home, gain-from-home, entertain-from-home, the change in the usage pattern of hybrid workers, what we think is now a reentry of workers back into the office that...

That's our strength that's been our focus and when we think about the trends that are underway. The due from anywhere a work from home learn from home buy from home game from home entertained from home.

The change in the usage pattern of hybrid workers. What we think is now a reentry of workers back into the office that.

addition of Windows 11 and the ability now to move to more mobile platforms and an aged install base all set up for the demand environment we're seeing today, we believe continues into next year.

The addition of Windows 11, and the ability now to move to more mobile platforms in an aged installed base all set up for the demand environment, we're seeing today.

We believe continues into next year.

So we're encouraged by where the growth is in the marketplace. The areas that certainly has been challenged on the consumer side or the chrome side. We don't have great exposure to we have exposure to where the growth is our execution and I think what is differentiating us today is the fact that we have a differentiated model.

So we're encouraged by where the growth is in the marketplace. The areas that certainly have been challenged on the consumer side or the Chrome side, we don't have great exposure to. We have exposure to where the growth is.

Our execution, and I think what is differentiating us today, is the fact that we have a differentiated model. We're encountering the same supply chain challenges, the same integrated circuit semiconductor problems that Tom mentioned earlier that everybody else is.

We are encountering the same supply chain challenges the same integrated circuits semiconductor problems that Tom mentioned earlier that everybody else is.

What's different is our Dell Direct model, our ability to really understand the pure demand signals from our customers and then equally translate that quickly into our supply base, into the demand plan that we go build to. We're able to shape demand.

What's different is our Dell direct model, our ability to really understand the pure demand signals from our customers and then equally translate it quickly into our supply base into the demand plan that we go build two we're able to shape demand.

We built a R&D engine that is really optimized to be able to be aligned to our direct way of selling. Translation, we have fewer SKUs, less complexity.

We built a R&D engine that has really optimized to be able to be aligned towards direct way of selling translation. We have fewer skus less complexity, we have a design methodologies as interchange ability and leverage in Reeves that gives us tremendous flexibility where components are and being able to.

We have a design methodology that has interchangeability and leverage and reuse. That gives us tremendous flexibility where components are and being able to do, for example, fast pinquals or pin-to-pinquals and changing out of components.

For example, fast Penn calls Penn dependent clause and changing out of components.

The Dell model, all the way from its demand engine, to how we market, to how we shape demand, put that demand signal into the supply chain, the product model that goes with it, and then a responsive supply chain that's pretty darn quick. I mean, what I like about our supply chain is we've digitized it.

The Dell model all the way from its demand engine to how we market to how we shaped demand put that demand signal into the supply chain. The product model that goes with it and then a responsive supply chain, that's pretty darn quick I mean, what I like about our supply chain as we've digitized it.

Over the years, we're now able to do scenario planning and

Over the years, we're now able to do scenario planning.

That simulation allows us to make quicker decisions, and this time and day, quick decisions equal execution, and then you couple that with partnerships that we've built over the past three decades by the leaders that are currently in our organization that go multiple levels down. I think that's a distinguishing characteristic of our performance and our differentiated model today. Does that help?

Simulations that simulation allows us to make a quicker decisions and this time and day quick decisions equal execution, and then you couple that with partnerships that we've built over the past three decades.

By the leaders that are currently in our organization that go multiple levels them I think that's a distinguishing characteristic of our performance and our differentiated model today does that help.

Hey, Amit, I might add on your operating margin comment. I didn't say one thing, it was Amit. My mistake, thanks for reminding me. You know, you are correct. Year over year, CSG is down roughly 130 basis points on an op margin. I would tell you the phenomenon I just highlighted in server is...

And I might add on your operating margin comment.

It was on that.

Mistake. Thanks.

You are correct right year over year, <unk> down roughly 130 basis point on an op margin I would tell you the phenomenon I just highlighted in server.

played out in client as well, in the sense of, again, remember that we stepped in from Q2 into Q3 with the most significant component cost increases in the history of the company that we've ever seen.

Played out and client as well in the sense of again remember that we stepped up from Q2 into Q3 with the most significant component cost increases in the history of the company that we've ever that we've ever seen and as a result of that we also obviously with the elevated backlogs working our way through the backlog that was priced.

And as a result of that, we also obviously with elevated backlogs, working our way through the backlog that was priced at, you know,

Pat.

component cost frameworks that perhaps didn't fully reflect the amount of cost increases that were coming through was a challenge that we had to work our way through as we went through the quarter. So that was probably the principal reason you see the 130 basis points design are margin differential. There is some mixed dynamics in there as well, and I would recall if you would recall back to Q3 a year ago where you saw...

Component cost framework, perhaps didn't fully reflect the amount of cost increases that were coming through was a challenge that we had to work our way through as we went through the quarter.

So that was probably the principal reason you see the 130 basis points design or margin differential there is some mixed dynamics in there as well and we're levered recall, if you would call recall back to Q3, a year ago or you saw.

Consumer demand quite high, Chrome demand very high, which actually drove actually pretty better profit margins than typical. So there were some profit margin mixed dynamics in there as well that have subsided as we go into, as we look forward, you know, a year from a year ago.

Consumer demand quite high chrome demand very high which actually drove actually pretty better profit margins than typical so there were some profit margin mixed dynamics in there as well that have subsided as we go into <unk>.

We look forward to.

From a year ago.

Alright, great. Thanks, Amit.

We'll take our next question from Shannon Cross with Cross Research.

We'll take our next question from Shannon Cross with Cross research.

Okay.

Thank you very much. I wanted to ask about Project Apex. I realize it's pretty early, but I'm wondering if you could maybe give some more details on what you're hearing from customers, how we should think about

Thank you very much I wanted to ask about project apex.

It's pretty early but I'm wondering if you could maybe give some more details on what youre hearing from customers, how we should think about.

you know, growth in Project Apex than benefiting the $6 billion I think you're now running in terms of recurring revenue. If there's anything we should either, you know, not include as we think about growth there and then what runs through your recurring line or, you know, just anything because I'm sure everybody's going to be starting to focus on some of these numbers going forward.

Growth in project apex than benefiting the $6 billion I think you are now running in terms of recurring revenue.

There is anything we should either.

Not include as we think about growth there and then what runs through your recurring line or.

Just anything because I'm sure everybody is going to be starting to focus on some of these numbers going forward. Thank you.

Thank you. Hey, thanks, Shannon. It's Chuck. I'm going to start on this one. We'll lay her in. Look, as we've called out,

Thanks, Shannon, it's Chuck I'm going to start on that.

Later and look at as we've called out.

Our immediate focus in FY22 has been centered on engaging customers and ensuring that our APEX offers are resonating in the marketplace and that we are making progress against our multiyear plans to broaden our APEX portfolio of offers. So while I won't quote specific numbers to your question on customer feedback, you know, first and foremost, what I would say is interest in APEX continues to accelerate and our pipeline continues to build across the family of offers.

Our immediate focus in FY 'twenty, two it's been centered on engaging customers and ensuring that our apex offers are resonating in the marketplace and that we are making progress against our multiyear plans to broaden our apex portfolio of offers so while I won't quote specific numbers to your question on customer feed.

Back first.

First and foremost what I would say is interest in apex continues to accelerate and our pipeline continues to build across the family of offers.

And the customer feedback has been good. They're drawn to the simplicity of engaging through our console, the flexibility to adjust based on their needs, and the value, obviously, of only paying for what they use.

And the customer feedback has been good they are drawn to the simplicity of engaging through our console.

Our flexibility to adjust based on their needs and the value obviously have only paying for what they use the second thing I would call out as we continue to make good progress in broadening the portfolio as we called out in our remarks today, we were excited to announce the apex cloud services with Vmware cloud, which is available next year.

You know, the second thing I would call out is we continue to make good progress in broadening the portfolio as we called out in our remarks today.

We were excited to announce the APEX Cloud Services with VMware Cloud, which is available next year.

That's another great proof point of our joint engineering with VMware.

Another great proof point of our joint engineering with Vmware. So we feel like we're making good progress on apex from a financial impact look as you said, we're still in very early innings and will provide much more detailed commentary on guidance when it's appropriate but in the meantime, we are focused on.

So we feel like we're making good progress on APEX from a financial impact look. As you said, we're still in very early innings and we'll provide.

much more detailed commentary and guidance when it's appropriate. But in the meantime, we're focused on.

customers and delivering against the technical roadmaps, as I said. All right.

Customers and delivering against the technical Roadmaps as I said.

Alright, alright, thanks, Ken I appreciate the question.

We'll take our next question from Rod Hall with Goldman Sachs.

We'll take our next question from Rod Hall with Goldman Sachs.

Yes. Thanks for fitting me in guys I just have a couple of well one question really.

Yeah, thanks for fitting me in guys. I just have a couple of well one question really in it and a expansion on that, but I wanted to check Tom. You said you had really high backlog. I think.

Expansion on that but I wanted to check Tom you said, you had really high backlog I think very high backlog on <unk> due to commercial orders last quarter and I'm wondering if you work through any of that backlog this quarter or did it remain as high as it is and then kind of the other flip side of that is what's the visibility now in that <unk> in particular.

Very high backlog on CSG due to commercial orders last quarter. And I'm wondering if you worked through any of that backlog this quarter or did it remain as high as it is? And then kind of the other flip side of that is what's the visibility now in that CSG and particularly commercial?

Fully commercial Warner volume can you see out of February how far out can you see thank you.

order volume. Can you see out to February , you know, how far out can you see? Thank you.

Hey, Rod, I will tell you that, you know, we did work through some of the elevated backlog in CSGs. We worked our way through the quarter. It is still elevated.

Hey, Rod.

We'll tell you that we did work through some of the elevated backlog in CSU. So we've worked our way through the quarter. It is still elevated.

And that continues to be a challenge for us as we think about component availability as we work our way through Q4. That was why we called out within my talk track, anyway, the fact that we saw ISG backlog expand in terms of the...

And that continues to be a challenge for us as we think about component availability as we work our way through Q4.

That was why we called out within my talk track any way. The fact that we saw ISG backlog expand in terms of the debt.

elevated farther. CSG, although I didn't explicitly say it came down somewhat, but still elevated. In terms of order visibility, look, I mean,

Elevated farther.

Although I didn't explicitly say it came down somewhat but still elevated in terms of order visibility look I mean.

It's hard to call, but I mean, overall, the environment remains healthy. We're optimistic about the client space for the reasons Jeff just highlighted earlier.

It's hard to call, but I mean overall the environment remains healthy.

We're optimistic about the the client space for the reasons, Jeff just highlighted earlier so.

And as that's reflected in the guidance that I provided for Q4, and also I would remind you that we're also projecting growth for next year in CSG and in ISG.

So.

And is that reflected in the guidance that I provided for Q4 and also I would remind you that we're also projecting growth for next year in <unk> and in ISG. So I think overall, we feel good about the demand environment is going to continue to be challenging from a supply chain perspective.

I think overall we feel good about the demand environment. It's going to continue to be challenging from a supply chain perspective.

And it will be up to us to execute our way through that.

It will be up to up to up to us to execute our way through that.

Alright.

Thanks Rod.

We'll take our next question from Stephen Fox with Fox Advisory.

We will take our next question from Steven Fox with Fox Advisors.

Hi. Good afternoon. I was just wondering off of all the comments around how you're managing through the current environment, if we think about the current quarter relative to seasonality and mix and then your ability to shape demand versus manage supply chain, can you give us a sense for how it's impacting sort of the implied margins and where you're getting better, where it's sort of status quo versus what you've done the last couple of quarters? Thanks.

Good afternoon.

Was just wondering off of all the comments around how you're managing through the current environment.

If we think about the current quarter.

The seasonality and mix and then your ability to shape demand versus managed supply chain can you give us a sense for how it's impacting sort of the implied margins and where you are getting better where it sort of status quo versus what you've done the last couple of quarters. Thanks.

Yeah, hey, Steve, maybe I'll start and then Chuck and Jeff can jump in as appropriate. I mean, look, we're shaping demand, quite frankly, to the component availability that we have, recognizing that within the CSG space we're shaping demand towards those areas of focus for us, which is...

Yes, Hey, Steve maybe I'll start and then.

Chuck and Jeff can jump in as appropriate I mean look we're shaping demand quite frankly to the component availability that we have recognizing that within the <unk> space, we're shaping demand towards those areas of focus for us which is <unk>.

commercial, high-end, consumer gaming and the related peripheral environment around them.

Commercial high end consumer gaming and the related peripheral environment around them and so.

Pricing is relatively benign, or I should say stable, in terms of the pricing environment. So it really comes down to, can we get support?

Pricing is relatively benign or I should say, it's stable in terms of the pricing environment. So it really comes down to can we get supply.

and ensure that we can deliver against our customer commitments there.

And ensure that we can deliver against our customer commitments there so.

And Jeff and team are doing a nice job every day of trying to fight their way through the component dynamics that are impacting us.

And Jeff and team are doing a nice job everyday of trying to fight their way through the component dynamics that are impacting us. So look I feel good about our ability to shape demand given the direct model our ability to.

So look, I feel good about our ability to shape demand, given the direct model, our ability to have the sales organization, sell the configurations that we have.

The sales organization.

Other configurations that we have.

And in terms of how is that impacting profitability, I think it's a little bit harder to call. All I would tell you is that what we're trying to do is make sure we hit our customer commitments and that we're optimizing for our product given the shortage in the industry that there is. So, you know, we are trying to make sure that our pricing is consistent with the conditions that exist.

And in terms of how is that impacting profitability I think that's a little bit harder to call. All I would tell you is that what we're trying to do is make sure we hit our customer commitments and that we're optimizing for our product given the shortage in the industry that there is so we are trying to make sure that our pricing is consistent with.

The conditions that exist.

Yeah, Tom, I would add, look, our flexibility to shape demand to the available supply, I think, is well understood, and we do quite well.

Yes, Tom I would add look our flexibility to shape demand to the available supply I think is well understood and we do quite well.

With the.

for all of the known costs that we have coming into the system. We just went through our largest quarter-over-quarter cost increase that we have seen.

For all of the known cost that we have coming into the system. We just went through our largest quarter over quarter cost increase that we've seen.

The wild card for us, or the cost that we're continuing to work on, is logistics.

The wildcard for us or the cost that we're continuing to work on is logistics.

The logistics cost environment today is pretty challenging. Inbound freight and expedited freight.

<unk> cost environment today is it.

It's pretty challenging inbound freight and expedited freight the fact that we're expediting more things we've shifted from lesser option to more air that combination of thing, making sure that we understand those input costs into our pricing models. I think is clearly the challenge that we look.

the fact that we're expediting more things, we've shifted from less ocean to more air, that combination of things, making sure that we understand.

those input costs into our pricing models, I think is clearly the challenge that we look

to in Q4 and have to work our way through. But our component costs and component availability, I think it's well understood. We can shape it's all.

In Q4 and have to work our way through but our component costs and component availability I think it's well understood. We can shape. It's all good.

I guess the dynamic for us to work through is really this logistics cost and the variability there.

The dynamic for us to work through this really this logistics costs and the variability there.

Okay.

Okay great.

We'll take our next question from Simon Leopold with Raymond James.

I appreciate the question we will take our next question from Simon Leopold with Raymond James.

Thanks. Appreciate you taking the question. I imagine this may be a little bit tricky to answer, but I'm trying to get a better understanding of maybe a bridge for the gross market in terms of the factors, either sequential or year over year, leading to the results when I think about the input cost, the product mix.

Thanks appreciate you taking the question.

I imagine this may be a little bit tricky to answer, but what I am trying to get a better understanding of maybe a bridge for the gross margin in terms of the factors either sequentially or year over year, leading to the results when I think about the input cost the product mix.

and your ability to move to higher ASPs. If we could maybe get some order of magnitude of what are the factors affecting your gross margin and how to think about that as we're modeling going forward, particularly in light of the VMware spin. Thank you.

And your ability.

Due to higher Asps.

If we could maybe get some order of magnitude of what are the factors affecting your gross margin how to think about that as we're modeling going forward.

In light of the Vmware, Spain. Thank you.

Well, hey, Simon, it's Tom. So we don't typically comment on gross margin at a business unit level. I would tell you at a top line level, as we think about dynamics, it's principally going to come down to how do we think about mix as it moves forward into Q4, which I would remind you that Q4 tends to be a higher storage quarter for us. So generally, gross margins improve Q3 to Q4.

Hey, Simon it's Tom So we don't typically.

Comment on gross margin at a business unit level I would tell you at a top line level as we think about dynamics, it's principally going to come down to how do we think about mix as it.

Moves forward into Q4, which I would remind you that Q4 tends to be a higher storage quarter for us. So generally gross margins improve Q3 to Q4.

There is a seasonal pattern to storage as you move on to the next year. That's I think well understood at this point I think as it relates to CSG You know look again. We're focused on the higher areas in terms of commercial in terms of gaming in terms of high-end consumer

There is a seasonal pattern to storage as you move on into next year, That's I think well understood at this point I think as it relates to <unk>.

Look again, we're focused on the higher areas.

In terms of commercial in terms of gaming in terms of our high end consumer.

Component costs are going to be the driver there for us, right in the center.

Component cost are going to be the driver there for us right in the sense of.

of, you know, how we think about the environment. We did highlight that we do expect coupon component costs and logistics costs together are going to be inflationary.

How do we think about the environment. We did highlight that we do expect Q4 component cost and logistics cost together are going to be inflationary.

which we have priced for that with what we know today. So the input costs are going to be a dynamic you've got to think your way through. So you've got to think through your overall sort of what's the industry inflation, deflation look like. We don't...

Which so we have priced for that with what we know today.

So the mix dynamic.

So the input costs are going to be a dynamics you've got to think your way through so you got to think through your overall sort of what's the industry inflation and deflation look like as a we're not we don't quite mimic that.

quite mimic that dollar for dollar, but it's probably a good bellwether for you.

<unk> per dollar, but it's probably a good bellwether for you.

And then I missed server, but server is also going to be very much dependent upon component cost dynamics. And so you've got to think your way through that. And then think through the mixed dynamics. Q4 tends to be a higher ISG, higher storage quarter. We have some consumer impact in Q4 given the holiday season. You move into Q1, which tends to be our seasonally softest quarter.

And then I missed server, but server is also going to be very much dependent upon component cost dynamics right and so you got to think your way through that and then think through the mix dynamics Q4 tends to be a higher ISG higher storage quarter, we have some consumer impact in Q4, given the holiday season, you move into Q1.

One which tends to be our seasonally softest quarter.

as you come out of Q4, then it ramps again in Q2 with the higher volume coming through Q2, and then that seasonal pattern begins to repeat. So I think that's about the best guidance I can give you as you think your way through mix versus input cost dynamics.

You come out of Q4, then it ramps again in Q2 with a higher.

The higher volume coming through Q2, and then that seasonal pattern begins to repeat so I.

I think thats about the best guidance I can give you as you think your way through mix versus input cost dynamics.

Okay great.

We'll take our next question from Jim Suva with City.

Question, We will take our next question from Jim Suva with Citigroup.

Thank you very much it's well known a lot of component shortages are out there can you maybe help us get our arms around.

Thank you very much. It's well known a lot of component shortages are out there. Can you maybe help us get our arms around, you know, which ones are the most hardest to get now? Are they like power management integrated circuits? And what's the visibility that your suppliers are giving you for, you know, equilibrium for you to be able to catch up with demand? Thank you.

Which ones are the most hardest to get nowadays like power management integrated circuits and what's the visibility that your suppliers are giving you for.

Equilibrium, where you'd be able to catch up with demand. Thank you.

Sure, Jim. I'll take that one. This is Jeff. Look, we see integrated circuits, some conductors remain constrained, will remain constrained.

Sure Jim I'll take that one this is Jeff look we see integrated circuits.

<unk>.

Remain constrained.

Will remain constrained into next year.

The trailing nodes are the most constrained, so anything in an 8-inch network is certainly challenged as well as the 12-inch, 65, 55, and 40 nanometer networks are certainly most challenged across the board.

The trailing nodes are the most constrained so anything in an eight inch network is certainly challenged as well as the 12 inch 65, 55, and 40 nanometer networks are certainly most challenged.

Across the board.

You have wafer shortages that go along with that. I think I mentioned in the last two calls, the back end, the assembly and test had been impacted by COVID. That's improved a little bit, but still constrained. There's been a number of substrate shortages around the world that continue to impact this. And to answer your question specifically, we track 27 different categories of integrated circuits across our portfolio.

Have wafer shortages that go along with that I think I've mentioned in the last two calls the back in the Assembly and test had been impacted by Covid, that's improved a little bit, but still constrained theres been a number of substrate shortages around the world that continue to impact us and to answer your question, specifically, we tracked 20 <unk>.

Seven different categories of integrated circuits across our portfolio.

I think I've mentioned the usual suspects, but I'll do it again here. So anywhere from Kodak to.

I think I've mentioned, the usual suspects, but I'll do it again here so anywhere from codec too.

audio amplifiers, USB Type-C controllers, MOSFETs, power ICs, Tcons, sensor ICs, TPM, microcontrollers, driver ICs for our PC side, and then on our enterprise side, power ICs, BMCs, TPM, FPGAs, and MOSFETs. So power was one that you mentioned. Absolutely, power is front and center.

<unk> amplifiers USB type C controllers, MOSFET and power IC sensor Ic's TPM Microcontrollers driver Ics for RPC side, and then on our enterprise size power Ics DMC TPM FPGA and MOSFET. So power was one that you mentioned absolutely.

Power is front and center.

We are encountering the same shortages of everybody else. I think our team is navigating it quite well, I think, and primarily driven by long-term partnerships.

We aren't counting the same shortages of everybody else I think our team is navigating it quite well I think and primarily driven by a long term partnerships.

We've been doing this a long time. Again, the relationships that I have with our supply base go back from the very beginning of the time I was a developer here.

We've been doing this a long time again, the relationships that I have with our supply base to go back from the very beginning of the tomo with the developer here.

I think that helps serves us well doing this for three plus decades and continuing to know the folks at these companies and knowing our long-term history and the fact that we talk about long-term design prospects as well. I hope that answers your question.

I think that helps serves us well during this for three plus decades and continuing to know the folks at these companies and knowing our long term history and the fact that we talk about long term designed prospects as well.

I hope that answers your question.

Okay. Thanks question, we will take our next question from Aaron Rakers with Wells Fargo.

We'll take our next question from Erin Rakers with Wells Fargo.

Yeah, thanks for taking the question. And I won't ask about supply chain. What I want, what I wanted to ask about is just like, as you guys have executed, it looks like nearly all of the 16 billion of debt reductions completed.

Yes, thanks for taking the question and I won't ask about supply chain.

What I wanted to ask about just like as you guys have executed it looks like nearly all of the $16 billion.

Debt reductions completed.

Um, you know, do we look into fiscal 23 and assume any incremental the leverage of the balance sheet, or is the entirety of the capital return strategy focused on.

Do we look into fiscal 'twenty, three and assume any incremental deleverage of the balance sheet or is the entirety of the capital return strategy focused on.

focused on share repurchase at this point. And how do we think about, again, the bridge of free cash flow to adjusted free cash flow if we think about that targeted 40 to 60%?

Focused on share repurchase at this point and how do we think about again the bridge of free cash flow to adjusted free cash flow, if we think about that targeted 40% to 60%.

Hey, Aaron, it's Tom. And then maybe I'll have Tyler jump in here as well. As it relates to, as we think about debt reduction as we work our way through fiscal 23, I would expect that there will be some continued debt reduction next year. Now, clearly, we have cleaned up a lot of the near-term maturities. But we are still focused on a core leverage ratio target of 1.5. We're currently at 1.9.

Hey, Aaron It's Tom and then I'll, maybe I'll have Tyler jump in here as well as it relates to as we think about debt reduction as we work our way through fiscal 'twenty three I would expect that there will be some continued debt reduction next year now clearly we have cleaned up a lot of the near term maturities.

But we are still focused on a.

Our core leverage ratio target of one five we're currently at one nine.

So there will be some element of debt reduction this year, obviously not clearly to the extent that it has been in the past.

So there will be some element of debt reduction next year, not obviously not clearly to the extent that it has been in the past and I would remind you. We don't do you think about our capital allocation framework, we're 40% to 60% of our adjust.

And I would remind you, you know, as you think about our capital allocation framework, where 40 to 60 percent of our adjusted free cash flows that we go towards shareholder capital return is in the form of what we believe to be dividends, and the board approves those next year, our share buyback, and then obviously investment in the business and debt reduction.

Adjusted free cash flow as we go towards shareholder capital return in the form of what we believe to be dividends as the board approves those next year, our share buyback and then obviously investment in the business business and debt reduction.

Tyler, you want to take the free cash flow conversion question? Yeah, I mean, maybe, Aaron, it's easier to take that one offline. I mean, the intent or purpose of that adjustment is to reflect the impacts of DFS. You know, there is a walk in the web desk, I believe, but happy to take that one offline.

Tyler you want to take the.

Free cash flow conversion question maybe.

Maybe Aaron it's easier to take that one offline.

The intent or purpose of that adjustment is to reflect the impacts of DFS.

There is a walk in.

The web deck, I believe but happy to take that one offline.

We'll take our next question from Sidney Ho with Deutsche Bank.

Great, thanks for taking my question. I have a question on the VMware resale revenue. If I do my math right, the revenue will be somewhere around a billion dollar, maybe a little bit over a billion dollar quarter. But if I do the same math for operating margin, it doesn't seem like that business is that profitable. First, is that the right conclusion? Second, how should we think about this profitability of this business going forward? And lastly, how do you plan on disclosing that revenue in the future? Thanks.

Great. Thanks for taking my question I have a question on the Vmware resale revenue.

I do my math right the revenue will be somewhere around $1 billion, maybe a little bit over $1 billion quarter.

If I do the same math for operating margins, but does it seem like that that business has been profitable first is that the right conclusion second how should we think about this profitability profitability of this business going forward and lastly, how do you plan on disclosing net revenue in the future.

Hey, Sidney, it's Tom. So look, to help you guys think your way through it, I would think about Q4 VMware resale revenue somewhere in the range of $1.3 billion.

Hey, Sidney it's Tom So look.

I would.

To help you guys think your way through it I would think about Q4, Vmware resell revenue somewhere in the range of $1 3 billion.

Okay, and you are right, as we have discussed.

Okay.

And you are right as we have discussed.

A number of times in previous calls, the margin associated with that resale revenue is minimal. Right? Now, that's an area that we're focused on beginning to drive up, but it's never going to be, as we look at it today anyway, it's got a ways to go to get to more distributor-like margins. But today you should think about it as not really impacting or contributing in any meaningful way to operating margin performance.

A number of times in previous calls.

The margin associated with that retail revenue is minimal right now that's an area that we're focused on beginning to drive up but it's never going to be.

As we looked at it today anyway.

Got a ways to go to get to more distributor life margins, but today you should think about it is not really impacting our contributing.

The meaningful way to operating margin performance.

So, you know, and so that's probably the easiest way to think about it for right now.

And so that's.

That's probably the easiest way to think about it for right now.

Yes, hey, thanks for the thanks for the question Sidney Let's take one more question and we'll wrap it up.

We will now take our final question from David <unk> with UBS.

We'll now take our final question from David Boat with UPS.

Great. Thanks, guys for squeezing me in so this is more of a longer term question and I know youre not going to give guidance on the next fiscal year, but what I when I listen to you talk about the strength in the order book, whether it's in servers and storage and you're taking share.

Great, thanks guys for squeezing me in. So this is more of a longer term question, and I know you're not gonna give guidance on the next fiscal year, but when I listen to you talk about the strength in the order book, whether it's in servers and storage and you're taking share.

and what we're seeing relatively, at least from an industry perspective, a strong backdrop. You know, when I think about next year from the ISG side, you know, are you being a little bit conservative when you think about sort of the longer-term model in the context of what you're seeing near-term and how that might, you know, drive revenue growth next year in ISG, maybe a little bit faster than three to five percent or at least at the higher end of that range?

I think about next year from the ISG side.

Are you being a little bit conservative when you think about sort of the longer term model in context of what you are seeing near term and how that might drive revenue growth next year, and IHG, maybe a little bit faster than 3% to 5% or at least at the higher end of that range.

Hey, David look I think the message I wanted to get out for purposes of people begin to think your way through next year is that we expect growth.

Hey, David, look, I think, you know, the message I wanted to get out for purposes of people beginning to think your way through next year is that we expect growth.

And we expect, at a minimum, that our revenue frameworks will be in the range of the long-term framework that we provided, and that our profitability will be in the framework that we provided. And I don't want to go beyond that at this point, other than to tell you that when we get to the Q4 earnings, that we'll clearly have a conversation about any farther thinking around next year. So I'll leave it at that.

And we expect that at minimum that our revenue frameworks will be in the range of the long term framework that we provided and that our profitability will be in the framework that we provided and.

And I don't want to go beyond that at this point other than to tell you that when we get through get to the Q4 earnings.

We have a conversation about or any further thinking around next year. So I'll leave it at that.

All right. Hey, thanks David. Thanks. Thanks for giving us the opportunity to talk about the long-term. We like that and Thanks for everyone for joining We're going to be we will be participating in several conferences investor conferences over the next couple weeks And we will be on the road on both the east and west coast in early January So we do look forward to engaging with the investor community at these events in the fourth quarter with that. I thank you for joining us

Alright, Thanks, David Thanks, Thanks for giving us the opportunity to talk about the long term I like that and thanks for everyone for joining we're going to be we will be participating in several conferences investor conferences over the next couple of weeks and we will be on the road on both the east and West Coast in early January So we do look forward to engaging with the investor.

Community at these events in the fourth quarter with that I. Thank you for joining us.

This concludes today's conference call. We appreciate your participation. You may disconnect at this.

This concludes today's conference call. We appreciate your participation you may disconnect at this time.

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