Q3 2024 Dell Technologies Inc Earnings Call

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You are currently holding for today's Dell technologies fiscal year 2024 third quarter results, we are getting additional participants and plan to be underway shortly.

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Speaker 2: I.

Speaker 1: Good afternoon and welcome to the fiscal year 2024 third quarter financial results conference call for Dell Technologies Inc.

Good afternoon, and welcome to the fiscal year 2024 third quarter financial results Conference call for Dell Technologies, Inc.

To inform all participants this call is being recorded at the request of Dell technologies. This broadcast is copyrighted property of Dell Technologies, Inc.

Speaker 1: call is being recorded at the request of Dell Technologies. This broadcast is the copy.

Speaker 1: Many rebroadcast of this information in whole or in part without the prior written permission of Dell Technologies is prohibited. Following prepared

Any rebroadcast of this information in whole or in part without the prior written permission of Dell technologies is prohibited.

Following prepared remarks, we will conduct a question and answer session. If you have a question simply press Star then one on your telephone keypad at any time during the presentation I'd like to turn the call over to Rob Williams head of Investor Relations. Mr. Williams, you may begin.

Speaker 1: If you have a question, simply press star, then 1 on your telephone keypad at any time during the...

Speaker 1: I'd like to turn the call over to Rob Williams, head of investigation.

Speaker 3: Thanks everyone for joining us. With me today are Jeff Clark, Evonne McGill and Tyler John .

Thanks, everyone for joining us with me today are Jeff Clarke Bond Mcgill and Tyler Johnson.

Speaker 3: Earnings materials are available on our IR website, and I encourage you to review these materials and the presentation, which includes additional content to complement our discussion this afternoon. Guidance will be covered on today's call.

Our earnings materials are available on our IR website and I encourage you to review these materials and the presentation, which includes additional content to complement our discussion. This afternoon guidance will be covered on today's call.

Speaker 3: During this call, unless otherwise indicated, all references to financial measures refer to non- GAAP financial measures, including non-gap gross margin, operating expenses, operating income, net income, and deluded earnings per share.

During this call unless otherwise indicated all references to financial measures refer to non-GAAP financial measures, including non-GAAP gross margin operating expenses operating income net income and diluted earnings per share.

Speaker 3: A reconciliation of these measures to the most directly comparable GAAP measures can be found in our web deck and our press release.

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

Speaker 3: Growth percentages refer to year-over-year change and let otherwise specify.

Growth percentages refer to year over year change unless otherwise specified.

Speaker 3: Statements made during this call to relate to future results in events or forward-looking statements based on current expectations.

Statements made during this call that relate to future results and events are forward looking statements based on current expectations actual results and events could differ materially from those projected due to a number of risks and uncertainties, which are discussed in our web deck and our SEC filings, we assume no obligation to update our forward looking statements now.

Speaker 3: Actual results and events could differ materially from those projected due to a number of risk fin and certain needs which are discussed in our web deck and our SEC filings. We assume no obligation to update our forward-looking statements. Now I'll turn it over to Jeff.

I'll turn it over to Jeff.

Speaker 4: Thanks Rob. We delivered Q3 revenue of $22.3 billion with solid profitability and strong cash.

Thanks, Rob we delivered Q3 revenue of $22 3 billion.

With solid profitability and strong cash flow.

Speaker 4: Operating income was $2 billion. The LUDADPS was a $1.88 and cash flow from operations was $2.2 billion.

Operating income was 2 billion diluted.

Diluted EPS was $1 88 in cash flow from operations was $2 $2 billion.

Speaker 4: NISG, the demand environment for traditional servers improved over the course of the quarter, and demand for AI servers continues to be strong across a wider range of customers. The demand for storage was...

In ISG the demand environment for traditional servers improved over the course of the quarter.

And demand for AI servers continues to be strong across a wider range of customers.

Demand for storage was down as expected.

Speaker 4: ISG Revenue was flat quarter on quarter was sequential growth and servers and networking revenue.

ISG revenue was flat quarter on quarter with sequential growth in servers and networking revenue drew.

Speaker 4: Driven by AI Optimized servers as we begin to convert more power edged XC-9680 backlogs into revenue.

Driven by AI optimized servers as we begin to convert more power edge XC 90, 680 backlog into revenue.

Speaker 4: For the quarter, we shipped over a half a billion dollars of AI optimized servers including our XE9680.

For the quarter, we shipped over a half a billion dollars of AI optimized servers, including our exited 90 680.

Speaker 4: XE 9640, XE 8640, and the R750 and R760XA service.

X gene 90, 640, <unk> $86 40, and the 750 <unk> are 760 <unk> servers.

Speaker 4: Customer demand for these AI servers nearly doubled sequentially and demand remains well ahead of supply.

Customer demand for these AI servers nearly doubled sequentially.

And demand remains well ahead of supply.

Speaker 4: In CSG, the demand momentum we saw in June and July continued into August , but slowed as the quarter progressed. The result was CSG revenue was down sequentially and short of our expectations.

And <unk> the demand momentum we saw in June July continued into August.

Slowed as the quarter progressed. The result was <unk> revenue was down sequentially and short of our expectations.

Speaker 4: operationally we executed well remaining disappointed on pricing and an increasingly competitive environment and we controlled our expenses focusing on profit and cash well including outstanding working capital performance.

Operationally, we executed well remaining disciplined on pricing and an increasingly competitive environment and we controlled our expenses focusing on profit and cash flow, including outstanding working capital performance.

Speaker 4: And lastly, we return another billion dollars to shareholders via share repurchase and dividends. Ivan will go into more details on cash flow and capital returns later.

And lastly, we returned another $1 billion to shareholders via share repurchase and dividends of one will go into more details on cash flow and capital returns later.

Speaker 4: AI continues to dominate the technology and business conversation.

AI continues to dominate the technology and business conversation cut.

Speaker 4: customers across the globe are turning their operations upside down to see how they can use generative AI to advance their businesses in meaningful ways.

Customers across the globe are turning your operations upside down to see how they can use generated AI to advance their businesses in meaningful ways.

Speaker 4: These AI initiatives are being driven at the CEO and board level.

These AI initiatives are being driven at the CEO and board levels.

Speaker 4: And as a result, we're at the front of a significant 10 expansion.

And as a result, we are at the front of a significant Tam expansion.

Speaker 4: AI Optimized Server Mix increased to 33% of total server orders, revenue and Q3, driven by strong demand from AI-focused cloud service providers and growing interest from other customer verticals.

AI optimized server mix increased to 33% of total server orders revenue in Q3, driven by strong demand from AI focused cloud service providers and growing interest from other customer verticals.

Speaker 4: We drove improved demand margins, increased services attached, and incremental unstructured storage attached over the course of the quarter.

We drove improved demand margins increased services attached and incremental unstructured storage attach over the course of the quarter.

Speaker 4: The XC-9680 is the fastest ramping solution in Dell history and in Q3. We continue to see strong demand and big wins including customers like CoreWeave, a cloud provider that specializes in GPU accelerated workloads and M-View, which is using high-performance computing clusters powered by the XC-9680 servers to train foundational models.

Z 90, 680 is the fastest ramping solution in <unk> history and in Q3, we continued to see strong demand and big wins, including customers like core we've.

A cloud provider that specializes in GPU accelerated workloads and in view, which is using high performance computing clusters powered by the <unk> $96 80 servers to train foundational models.

Speaker 4: Our AI optimized server backlog nearly doubled versus the end of Q2 with a multi-billion dollar sales pipeline including increasing interest across all regions.

Our AI optimized server backlog nearly doubled versus the end of Q2 with a multibillion dollar sales pipeline, including increasing interest across all regions.

Speaker 4: That all said AI hithes everywhere and we need to be measured in our expectations. We are still in the early innings with AI as customers continue to work through their AI strategies. Experience over multiple technology cycles tells us that progress will always be linear but we are excited about the opportunity in front of us.

That all said AI hype is everywhere and we need to be measured in our expectations. We are still in the early innings with AI as customers continue to work through their AI strategies.

Experience over multiple technology cycles tells us that progress won't always be linear, but we are excited about the opportunity in front of us.

Speaker 4: We believe Dell is uniquely positioned with our broad portfolio to help customers size, characterize and build Gen-AI solutions that meet their performance cost and security requirements.

We believe Dell is uniquely positioned with our broad portfolio to help customers size characterize and build gen. AI solutions that meet their performance cost and security requirements.

Speaker 4: Our AI strategy, AI Interproducts, AI built on our solutions, AI for our business, and AI for our ecosystem partners is the foundation for our actions, priorities, roadmaps and partnerships, and in Q3, we continue to build our capabilities. We are collaborating with Meta to make it easy for our customers to deploy Meta's Lama 2 models on premises with Dell AI optimized portfolio.

Our AI strategy AI in our products AI built on our solutions AI for our business and for our ecosystem partners as the foundation for our actions priorities Roadmaps in partnerships and in Q3, we continue to build our capabilities. We are collaborating with meta to make it easy for our customers to deploy.

That is Lama two models on premises with Dell AI optimized portfolio.

Speaker 4: We are also collaborating with HuggyFace to help users create and fine tune and implement their own open source Ginii models on Dell Infrastructure.

We are also collaborating with husky phase to help users create and fine tune and implement their own open source generic models on <unk> infrastructure.

Speaker 4: And earlier this month, we introduced the Object Scale, XF960, and all-flash scale-out appliance for GNII and real-time analytics.

And earlier this month, we introduced the object scale X F 960, and all flash scale out of appliance Virgin AI and real time analytics.

Speaker 4: based on our software-defined object storage solution, which can run on Linux and Red Hat OpenShift on PowerEdge servers. Looking forward, the recovery and ramp in PC demand we were expecting in Q3 has pushed out with large enterprises and corporate customers remaining cautious with their spending.

Based on our software defined object storage solution, which can run on Linux and <unk> had open shift on power edge servers looking forward the recovering ramp and PC demand. We were expecting in Q3 has pushed out with large enterprises and corporate customers remaining cautious with their spending.

The PC installed base continues to age and there are exciting changes coming to the PC next year, including advances in AI enabled architectures from Intel.

AMD and Windows on arm, which will help drive a PC refresh cycle. We are also seeing the beginning of a traditional server rebound and historically storage follows a couple of quarters later.

We are leveraging our strengths to extend our leadership positions in turn new opportunities, including multi cloud edge AI into incremental growth.

And we are positive on FY 'twenty, five and fully expect to return to growth next year, given the expected tailwind to our various businesses, including AI technologies.

Technology is everywhere and delek striving the amount and value of data continues to grow and as that happens the opportunity for Dell technology grows in tandem we have proven that over four decades through wave after wave of innovation.

Speaker 4: and we've proven our ability to capture the growth as our TAM expands and translate that into results for our stakeholders. Regardless of the economic cycle, expect us to focus on growing and extending our core businesses in the areas with the most attractive profits, deliver innovation for our customers, remain disciplined in our pricing and focus on cost. Now over to Avond for the detailed two-three financials.

And we've proven our ability to capture the growth as our Tam expands and translate that into results for our stakeholders, where godless of the economic cycle expect us to focus on growing and extending our core businesses in the areas with the most attractive profit deliver innovation for our customers remain disciplined in our pricing and folk.

On costs now over to Ivan for the detailed Q3 financials.

Thanks, Jeff.

Speaker 5: We're focused on driving a balance of growth, profitability, and cash flow in any demand environment. We delivered revenue of $22.3 billion down 10% with strong growth margins, lower operating expense, and improved working capital management.

We're focused on driving a balance of growth profitability and cash flow in any demand environment.

We delivered revenue of $22 3 billion down 10% with strong gross margin lower operating expense and improved working capital management.

Speaker 5: Gross margin was $5.3 billion and 23.7% of revenue. Flat your over here.

Gross margin was $5 3 billion.

And 23, 7% of revenue flat year over year.

Speaker 5: We continue to see increased pricing pressure in Q3, but remained focused on profitable opportunity.

We continue to see increased pricing pressure in Q3, but remained focused on profitable opportunities.

Speaker 5: and you should expect us to continue to maintain discipline and focus.

And you should expect us to continue to maintain discipline and focus.

Going forward.

Speaker 5: Operating expense was $3.3 billion or 14.9% of revenue, down 5% driven by lower SG&A costs, and down 7% sequentially as we actively manage our spend.

Operating expense was $3 3 billion or 14, 9% of revenue down, 5% driven by lower SG&A costs and down 7% sequentially as we actively manage our spend.

Speaker 5: Operating income was $2 billion, down 17% and 8.8% of revenue, with the impact of a decline in revenue partially offset by lower operating expense.

Operating income was $2 billion down, 17% and eight 8% of revenue with the impact of a decline in revenue, partially offset by lower operating expense.

Speaker 5: Our tax rate was 19.2% year to date, or 15.4% for the quarter. Net income was $1.4 billion, down 19% and deluded EPS, was $1.88, down 18%.

Our tax rate was 19, 2% year to date or 15, 4% for the quarter net income was $1 4 billion down.

Down, 19% and diluted EPS was $1 88.

Down 18%.

Speaker 5: Our recurring revenue in the quarter was $5.6 billion, up 4%, and our remaining performance obligation or RPO was $39 billion, flat year over year, with growth in deferred revenue offset by a decrease in backlog.

Our recurring revenue in the quarter was $5 6 billion up 4% and our remaining performance obligation or Rps was.

It was 39 billion flat year over year with growth in deferred revenue offset by the decrease in backlog.

Referred revenue.

Speaker 5: was up primarily due to increases in software and hardware maintenance agreement and VMware Resault.

Was up primarily due to increases in software and hardware maintenance agreements and Vmware resell.

Speaker 5: Iced U Revenue was $8.5 billion down 12% and flat sequential.

ISG revenue was $8 5 billion down, 12% and flat sequentially.

Speaker 5: Servers and networking revenue was $4.7 billion, up 9% sequentially.

Servers and networking revenue was $4 7 billion.

9% sequentially.

Speaker 5: We saw server ASPs continue to expand in both AI-optimized and traditional servers. And our AI mix of server demand accelerated again, sequentially, given customer interest in Gen AI.

We saw server Asps continue to expand in both AI optimized and traditional servers and our AI mix of server demand accelerated again sequentially given customer interest and Jen AI.

Speaker 5: We delivered storage revenue of $3.8 billion down 13% with demand growth in data protection and power scale.

We delivered storage revenue of $3 8 billion down, 13% with demand growth and data protection and power scale.

Speaker 5: ISG operating income was $1.1 billion, or 12.6% of revenue, down 170 basis points, driven by decline in revenue, partially offset by an increase in gross margin rate.

ISG operating income was $1 1 billion.

Or 12, 6% of revenue down 170 basis points, driven by a decline in revenue, partially offset by an increase in gross margin rate.

Speaker 5: Looking forward, our many number one positions are proof of our deep enterprise expertise. And with a tam of $200 billion growing at a 7% kager over the next few years, we are confident in our ability to grow the business as the market returns to growth.

Looking forward, our many number one positions are proof of our deep enterprise expertise and with a Tam of $200 billion growing at a 7% CAGR over the next few years, we are confident in our ability to grow the business as the market returns to growth.

Speaker 5: Our fiscal Q3 CSG revenue was $12.3 billion down 11%, primarily driven by the client and unit, while ASP's remained flat.

Our fiscal Q3, <unk> revenue was $12 3 billion down 11%, primarily driven by a decline in units while asps remained flat.

Speaker 5: Commercial and consumer revenue were $9.8 billion and $2.4 billion for respect.

Commercial and consumer revenue were $9 8 billion and $2 4 billion respectively.

Speaker 5: CSG profitability remains strong in Q3 with operating income of $0.9 billion or 7.5% of revenue.

ESG profitability remained strong in Q3 with operating income of <unk> 9 billion or seven 5% of revenue.

Speaker 5: Oping was down 20 basis points driven by a decline in revenue offset by lower operating expense and an increase in gross margin rate as we maintain pricing discipline and benefited from lower input costs.

<unk> was down 20 basis points, driven by a decline in revenue offset by lower operating expense and an increase in gross margin rate as we maintained pricing discipline and benefited from lower input costs.

Speaker 5: With a TAM of $400 billion growing at a 2% tanger, we will continue to focus on commercial, the high end of consumer, profitable relative performance, and executing our direct attach motion for services, software, peripherals, and finance.

With a tam of $400 billion.

Growing at a 2% CAGR, we will continue to focus on commercial.

The high end of consumer profitable relative performance and executing our direct attach motion for services software peripherals and financing.

Speaker 5: During the quarter, we saw continued strength in APEX and our data center utility and select funds and man offerings and added new multi-cloud offerings, including APEX Cloud Platform for Azure and Red Hat Open.

During the quarter, we saw continued strength in apex, and our data center utility and flex on demand offerings and added new multi cloud offerings, including apex cloud platform for Azure and Red hat open shift.

Speaker 5: Our Q3 Del Financial Services Originations were $1.8 billion.

Our Q3, Dell financial services originations were $1 8 billion.

Speaker 5: DFS ending managed assets reached $13.9 billion up 1%, while the overall DFS portfolio quality remains strong with credit losses near historically low level.

DFS ending managed assets reached $13 9 billion up 1%, while the overall DFS portfolio quality remains strong with credit losses near historically low levels.

Turning to our cash flow and balance sheet.

Speaker 5: Our cash flow from operations was $2.2 billion, primarily driven by working capital improvement and profitability.

Our cash flow from operations was $2 2 billion.

Primarily driven by working capital improvement and profitability.

Speaker 5: Working capital benefited from and approximately $200 million sequential decline in inventory.

Working capital benefited from an approximately $200 million sequential decline in inventory.

Speaker 5: collections performance and continued improvement in receivables agent.

Strong collections performance and continued improvement in receivables aging.

Speaker 5: Our cash conversion cycle improved again sequentially and is now at negative 52 days, a 20-day improvement since the end of last year.

Our cash conversion cycle improved again sequentially and is now at negative 52 days, a 20 day improvement since the end of last year.

Speaker 5: We did a quarter with $9.9 billion in cash and investment, flat sequentially, driven by free cash flow generation, offset by $1 billion in capital.

We ended the quarter with $9 $9 billion in cash and investments flat sequentially driven by free cash flow generation offset by $1 billion in capital returns.

Speaker 5: Core leverage was 1.6x exiting Q3 flat sequential.

Core leverage was one six X exiting Q3 flat sequentially.

Speaker 5: During the quarter, we repurchased 11.2 million shares of stock at an average price of $66.55 and paid a $0.37 per share quarterly dividend. Turning to guidance, enterprise and large corporate customers continue to be cautious in the current macro environment.

During the quarter, we repurchased 11 2 million shares of stock at an average price of $66 55.

Paid a <unk> 37.

Per share quarterly dividend.

Turning to guidance.

<unk> and large corporate customers continue to be cautious in the current macro environment.

Speaker 5: Against that backdrop, we expect Q4 revenue to be in the range of $21.5 billion and $22.5 billion with a midpoint of $22 billion.

Against that backdrop, we expect Q4 revenue to be in the range of $21 5 billion and $22 $5 billion with a midpoint of $22 billion.

Speaker 5: sequentially we expect ISG revenue to be up mid-single digits driven by sequential growth and traditional servers and seasonal growth in storage.

Sequentially, we expect ISG revenue to be up mid single digits, driven by sequential growth in traditional servers and seasonal growth in storage.

Speaker 5: We expect CSG revenue to be down low single digits sequential.

We expect <unk> revenue to be down low single digits sequentially.

Speaker 5: We're seeing pockets of stability in PC demand, that have yet to see a broader recovery in the PC market.

We're seeing pockets of stability in PC demand, but have yet to see a broader recovery in the PC market.

Speaker 5: And in our other business segment, we expect to be down in the low 20s sequential.

And in our other business segment, we expect to be down in the low 20% sequentially.

Speaker 5: Operating income rate should be down marginally versus Q3 driven by a more competitive pricing environment.

Operating income rate should be down marginally versus Q3, driven by a more competitive pricing environment in CST.

Speaker 5: And for our tax rate, you should assume roughly 20% plus or minus 100 basis points for Q4 and 19.5% at the midpoint for the full year.

And for our tax rate, you should assume roughly 20% plus or minus 100 basis points for Q4 or 19, 5% at the midpoint for the full year.

Speaker 5: We expect our Q4 diluted share count to be between 729,733 million shares. And our diluted EPS should be $1.70 plus or minus 10.

We expect our Q4 diluted share count to be between $729 million and 733 million shares and our diluted EPS should be $1 70, plus or minus.

Speaker 5: We're increasing our expectations for the full year deluded earnings per share to $6.63 plus or minus 10 cents.

We're increasing our expectations for the full year diluted earnings per share to $6 63, plus or minus <unk> 10.

Turning to FY 'twenty five.

Speaker 5: It's still early in our planning process. However, I recognize you're thinking about next year. So let me share our current.

It's still early in our planning process, However, I recognize youre thinking about next year. So.

So let me share our current thinking.

Speaker 5: We're seeing science, stability, and inflection in parts of the portfolio, including traditional and AI optimized servers.

We're seeing signs of stability and inflection in parts of the portfolio, including traditional and AI optimized servers.

Speaker 5: We expect revenue to return to growth next year above our long-term financial framework. The opportunity is the broader IT spending recovery with large corporate and enterprise customers, particularly in the U.S.

We expect revenue to return to growth next year above our long term financial framework the opportunity as the broader it spending recovery with large corporate and enterprise customers, particularly in the U S.

Speaker 5: We'll continue to focus on profitable growth, but we'll be mindful of the competitive environment and inflationary input cost as we move through the next year.

We will continue to focus on profitable growth, but we'll be mindful of the competitive environment and inflationary input costs as we move through the next year.

Speaker 5: Pricing discipline and cost controls will help mitigate these head

Pricing discipline and cost controls will help mitigate these headwinds.

Speaker 5: count on us to continue to execute our unique operational model focused on cash flow and returning capital to shareholders.

Count on us to continue to execute our unique operational model focused on cash flow and returning capital to shareholders and.

Speaker 5: And we look forward to updating our FY25 expectations in more detail on our Q4.

And we look forward to updating our FY 'twenty five expectations in more detail on our Q4 earnings call.

Speaker 5: In closing, we have strong conviction in the growth of our TAM over the long term with technology trends like AI, multi-cloud and edge in our favor.

In closing we have strong conviction in the growth of our Tam over the long term with technology trends like AI, multi cloud and edge in our favor.

Speaker 5: At the end of the day, our strategy is simple. Leverage our unique operating advantages to extend our number one leadership positions and capture new growth.

At the end of the day our strategy is simple.

Our unique operating advantages and to extend our number one leadership position and capture new growth.

Speaker 5: This strategy, coupled with our P&L leverage and strong cash generation, drives a resilient long-term financial framework and capital allocation plan.

This strategy, coupled with our P&L leverage and strong cash generation drives a resilient long term financial framework and capital allocation plan.

Speaker 5: We have proven our ability to generate strong cash flow through profitability and working capital efficiency, including $9.9 billion of cash flow from operations over the last 12 months.

We have proven our ability to generate strong cash flow through profitability and working capital efficiency, including $9 9 billion of cash flow from operations over the last 12 months.

Speaker 5: And at our analyst meeting last month, we committed to increasing capital returns to our shareholders.

And at our analyst meeting last month, we committed to increasing capital returns to our shareholders.

Speaker 5: expect us to continue to invest in innovation, be disciplined in how we manage the business, and focus on what we can control, delivering for our customers and our shareholders.

Spect us to continue to invest in innovation and be disciplined in how we manage the business and focus on what we can control delivering for our customers and our shareholders.

Speaker 5: We're excited about the future and confident in our ability to create meaningful long-term values for all of our key stakeholders. Now I'll turn it back to Rob.

We're excited about the future and confident in our ability to create meaningful long term value for all of our key stakeholders now I'll turn it back to Rob to begin Q&A.

Speaker 3: Thanks, Vaughn. Let's get to Q&A. We asked that each participant ask one question to allow us to get to as many views as possible. Let's go to the first question.

Thanks, Bob let's get to Q&A, we ask that each participant ask one question to allow us to get to as many of you as possible. Let's go to the first question.

Okay.

We will take our first question from Amit <unk>.

<unk> with Evercore.

Speaker 6: Thanks for being my question. You know, I guess maybe to go to the AI server demand discussion, Jeff, that you had, I think essentially said you're orders doubled, so does that imply it's something not a $4 billion right now? And then how do you think that manifests itself into revenues and to fiscal 25? And if you can touch about how broad the customer base is becoming versus perhaps the high-piscuit of these only half-pig.

Yep.

Thanks for taking my question.

Just maybe to go to.

Our server demand discussion, Jeff that you had I think since you said your orders doubled so does that imply something north of $4 billion right now.

How do you think that manifests itself into revenues into fiscal 'twenty five, but if you could touch about how broad this customer base is becoming versus perhaps a couple of hyperscale. It that'd be really helpful.

Speaker 4: Sure, let me pull that up hard on that. So, I mentioned our demand nearly doubled quarter of a quarter.

Sure, let me pull that apart on that so I mentioned, our demand nearly doubled quarter over quarter.

Speaker 4: And what was, I thought very interesting about that is every part of the AI optimized portfolio group, quarter over quarter. And we saw significant growth for enterprise customers.

And what was I thought very interesting about that is every part of the AI optimized portfolio.

Grew quarter over quarter.

And we saw a significant growth for enterprise customers. So I think that's important to note as we saw the.

Speaker 4: So I think that's important to notice we saw the entire portfolio row, we saw the number of customers grow and we saw the number of enterprise customers grow quarter.

The entire portfolio grow we saw the number of customers grow and we saw the number of enterprise customers grow quarter over quarter.

Speaker 4: When I think about the two billions that you mentioned, that was a backlog comment that we made in August . And what we talked to in August was a two billion dollars of backlog. And that included up until that point in time, the August first month of the quarter, because that was a real time update of our backlog, two billion dollars.

When I think about the $2 billion that you mentioned that was a backlog comment that we made in August and what we talked to in August was a $2 billion of backlog and that included up until that point in time. The August 1st month of the quarter because that was a real time update of our <unk>.

Backlog of $2 billion.

Speaker 4: We shipped over a half a billion dollars of AI optimized servers during the quarter.

We shipped over a half of $1 billion.

AI optimized servers during the quarter.

Speaker 4: So when we think about demand nearly doubling, and I mentioned backlog doubled, we'd like you to part with $1.6 billion of AI optimized servers backlog at the fiscal exit of Q3.

So when we think about demand nearly doubling and I mentioned backlog doubled we'd like you to part with $1 $6 billion of AI optimized servers backlog at the physical exit of Q3.

Speaker 4: Equally important we solve a pipeline in the quarter triple

Equally important we solve our pipeline in the quarter Triple.

Speaker 4: say that again, the pipeline for AI optimized servers tripled quarter over quarter during Q3. Lead times remain 39 weeks, demand is ahead of supply, we continued up to work to improve supply, and we're working now to convert that pipeline into real sales into orders so we can continue to ship and benefit from this exciting time.

I'll say that again, the pipeline for AI optimized servers tripled quarter over quarter during Q3.

Lead times remained 39 weeks demand is ahead of supply we continue to work to improve supply.

We're working now to convert that pipeline into real sales into orders. So we can continue to ship and benefit from this exciting time thus.

As far as next year I'm sure, we'll talk about this in greater detail, but we're still in the planning process. We think it's a tailwind we talked about it at each of our last financial engagements. It's a large market opportunity, 18% CAGR over the next four years growing to $121 billion Theres nothing that suggests that's not the case.

And it's not coming at the cost of our traditional servers.

Speaker 7: All right. Thanks, Jeff. Next question.

Alright. Thanks.

Thanks, Jeff next question.

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

Speaker 8: Yes, thank you so much. I appreciate the early look and do fiscal 25

Yeah. Thank you so much I appreciate the early look into fiscal <unk> 45.

Speaker 8: Given some of the puts and takes that you called out on revenues and margins.

Given some of the puts and takes that you called out both on on revenues and margins. Just wondering when you. When you say, it's going to be higher than your long term range is.

Speaker 8: Just wondering when you say, it's gonna be higher than your long-term range.

Speaker 8: Is the comment pertinent to overall Dell tech or is it also a comment that we can attribute both to CSG and ISG? Frankly, we're coming off cyclical bottoms and so many of your businesses that feel well you should be able to grow you know materially outgrow so any any kind of

Is the comment Berkman to overall Bell pack or is it also a comment that we can attribute both ESG and ISG frankly, we're coming off cyclical bottoms and so many of your businesses. It feels as though you should be able to grow.

<unk> outgrowth or any kind of.

Speaker 8: you know, maybe characterization of that would be helpful and

Maybe characterization of that would be helpful. In.

Speaker 8: Also on the cost side of one, I think you noted pricing discipline cost controls, but also some headwinds. So just thinking through that, would you say that there was also upside from a margin perspective or EPS growth rate perspective. Thank you.

Also on the cost side or on I think you'd noted.

Pricing disciplined cost controls, but also some headwinds so just thinking through that would you say that there is also upside from a margin perspective or EPS growth rate perspective. Thank you so much.

Speaker 5: Thanks, Monty. You know, I tell you we're certainly at the early stages of the planning process. We usually wrap that process in the January timeframe, but you know, I recognize everyone's interested in next year, so I wanted to give you a little bit more context there.

Thanks Monte.

I would tell you we're certainly at the early stages of the planning process, we usually wrap that process in the January timeframe, but.

Recognize everyone's interested in next year. So wanted to give you a little bit more context there.

Speaker 5: And we expect to return to growth, as I mentioned on the call already, above our long-term financial framework. And so we're seeing an inflection point in traditional servers, in addition to those AI-optimized momentum that we've been talking about. And we expect servers and networking, to be a bigger portion of our ISG mix in the next year.

And we expect to have returned to growth.

As I mentioned on the call already above our long term financial framework and so we're seeing an inflection point in traditional servers. In addition to those AI optimized.

<unk> that we've been talking about.

And we expect servers and networking holistically to be.

A bigger portion of our ISG mix in the next year.

I moved to Pcs.

Speaker 5: Our growth expectations will be dependent on the timing of the PC refresh site.

Our growth expectations will be dependent on the timing of the PC refresh cycle.

Speaker 5: We're also expecting a decline and mentioned for Q4 also in VMware reseller revenue with no impact to profitability.

Where were.

Our also.

Expecting a decline and mentioned it for Q4 also in Vmware reseller revenue.

With no impact to profitability.

Speaker 5: We're expecting a more competitive environment overall. We started to see that in the third quarter, so we'll expect that to continue, especially in the PC market into the next year.

We're expecting a more competitive environment overall, we started to see that in the third quarter. So we will expect that to continue especially in the PC market into the next year.

Speaker 5: Other things to consider, input costs are expected to be inflationary next year led by NAND and DRAM.

Other things to consider input costs are expected to be inflationary next year led by NAND and DRAM.

Speaker 5: And of course, as we always do, we'll continue to be mindful of our cost structure.

And of course, as we always do we will continue to be mindful of our cost structure.

But regardless of.

Speaker 5: The environment that we're operating on, right, we will continue to execute our proven operational model. You can continue to count on us to the financially disciplined, all while driving growth, profitability and cash flow. We're really optimistic about FY25 and really excited about returning to growth and look forward to giving you all even more context and update in our 24 earnings call in February .

In the environment that we're operating on right. We will continue to execute our proven operational model.

You can continue to count on us to be financially disciplined all while driving growth profitability and cash flow.

We're really optimistic about FY 'twenty five.

And really excited about returning to growth and look forward to giving you all even more context and update and our Q4 earnings call.

In February.

Alright, Thanks for the question Onesie next.

Speaker 7: Next question, Upper. We will take our next.

Next question operator.

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

Yes. Thank you.

Speaker 9: Your tone on the call around the demand environment sounds very, very different than it was 90 days ago where you talked about growth.

Your tone on the call around the demand environment. It sounds very very different than it was 90 days ago, where you talked about.

With accelerating and a rebound.

Speaker 9: rebound in spending better than you had thought. And it sounds like

And spending better than you had thought.

And.

It sounds like the complete opposite this quarter.

Speaker 9: You were wildly above normal seasonality in Q2.

You were wildly above normal seasonality in Q2, you were below normal seasonality in Q3, and you're guiding below normal seasonality again for Q4.

Speaker 9: low normal seasonality in Q3 and you're guiding below normal seasonality.

Speaker 9: Did you just misgage demand in Q2, like was there a pull-in from Q3 to Q2, and you just misgage the characterization of demand 90 days ago, or what really happened and changed?

Did you just missed gauge demand in Q2 like was there a pull in from Q3 to Q2.

And you just Miss gauged, the characterization of demand 90 days ago or or like what what really happened and changed and.

Speaker 9: And if I could, I just want to clarify the AI situation. So it would be helpful if you could just give an update right now in your backlog relative to 90 days ago, which was.

If I could I just wanted to clarify that.

So it would be helpful. If you could just give an update right now in your backlog relative to 90 days ago, which was $2 billion.

Speaker 9: And if I think about what you're seeing in terms of the pipeline, it sounds very credible to that backlog.

And if I think about.

What you are saying in terms of the pipeline it sounds very credible that backlog could be like $5 billion exiting this year, if it's a nine month lead time.

Speaker 9: $5 billion exiting this year if it's a nine-month lead time.

Speaker 9: Shouldn't we expect like five to $7 billion in AI server delivery? And if you're saying servers are demand is improving traditional servers, why shouldn't we expect that gargantuan-

Shouldnt, we expect like $5 billion to $7 billion in AI server delivery, and if youre, saying servers or demand is improving for traditional servers.

Why shouldn't we expect a gargantuan number for servers next year.

Speaker 4: Well, Tony, that's a few questions. Let me work my way through those. So what happened? You recall in Q2, we talked about the improved demand in June and July for peace.

Well, Tony that's a few questions. So let me work my way through those so what happened.

Call in Q2, we talked about the improved demand in June and July for Pcs.

And that certainly helped us close the quarter and we benefited from that and.

Speaker 4: And when we were together in August , we had seen that continue in August . And fact, through the month of August , the first month of the quarter, our PC business was up here over year.

And when we were together in August we had seen that continue in August in fact through the month of August the first month of the quarter, our PC business was up year over year.

Speaker 4: And then things changed. The business started to slow. It slowed in September . It slowed more in October .

And then things changed the business started to slow that slowed in September it slowed more in October.

Speaker 4: We saw more cautiousness from our customers. We saw them being more selective, particularly large commercial customers, enterprise customers, and in particularly North America. We saw the public sector slowdown. Well, at the same time, we actually saw stabilization and SB.

We saw more cautiousness from our customers, we saw them being more selective, particularly large commercial customers.

Enterprise customers and are particularly in North America, we saw the public sector slowdown while at the same time, we actually saw stabilization in SP.

Speaker 4: But the big change was the number of large deals slowed over the course of the quarter, as our customers again became more cautious and selective.

But the big change was the number of large deals.

Load over the course of the quarter as our customers again became more cautious and selective.

And as.

Speaker 4: The market slowed, which you've probably seen in some of the output numbers from the OEMs. We saw it.

The market slowed which you've probably seen in some of the output numbers from the Oems.

We saw increased pricing pressure.

Speaker 4: So the pricing pressure changed in T.C. East from August to October .

So the pricing pressure changed in Pcs from August to October.

Speaker 4: Those large deals became more competitive. I think you also saw inventory that was shipped in the June and July period. Now it was caught up and you saw promotional pricing throughout the quarter and it was more aggressive as we exited the quarter and we ended the quarter. So that did change the PC.

Those large deals became more competitive I think you also saw inventory that was shipped in the June and July period, now was caught up and you saw promotional pricing throughout the quarter and it was more aggressive as we exited the quarter and we ended the quarter. So that did change in Pcs.

Speaker 4: We did not see or call the slowdown on our guidance. The guidance that I bought and I gave a quarter ago is what we saw through August . And we were optimistic that we were seeing a recovery. It's clearly pushed things of slowly.

We did not see our call the slowdown in our guidance the guidance of the bond and I gave a quarter ago with what we saw through August and we are optimistic that we were seeing a recovery. It's clearly pushed things have slowed.

Speaker 4: Well, at the same time, we now have two consecutive quarters of quarter of a quarter growth of our traditional for data center servers, and we have the tailwind of AI continuing to grow. As I mentioned earlier, the pipeline of AI tripled.

While at the same time, we now have two consecutive quarters of quarter over quarter growth of our traditional for data center servers, and we have the tailwind of AI continuing to grow as I mentioned earlier the pipeline of AI tripled.

In the quarter.

Speaker 4: demand doubled, nearly doubled quarter and quarter.

Demand doubled nearly doubled quarter over quarter.

Speaker 4: So those are the tailwinds of the change that we see in the business. The biggest change was PC, Easter storage,

So those are the tailwind of the change that we see in the business is the biggest change.

Was pce's storage performed as expected.

Speaker 4: Backlog, the number I'm going to give you is the Q3 exit backlog was $1.6 billion. Orders nearly doubled. Pipeline trips.

Backlog the number I'm going to give you is the Q3 exit backlog was $1 6 billion.

Orders nearly doubled.

Pipeline tripled our job is to convert that.

Speaker 4: We're working with our field, our customers to convert that pipeline that grew significantly. The interest in our AI product continues to be strong. On premise deployment of AI, interest continues to be strong.

We are working.

With our field our customers to convert that pipeline that grew significantly the interest in our AI products continues to be strong on premise deployment of AI.

Interest continues to be strong.

Speaker 4: The fact that we now have been working with Meta and Lomit 2, bringing that on-prem, Huggie Face, and an open source environment to bring those models and tools on-prem, I think continuing to reiterate, AI is going to follow the data. The data's on-prem, and we believe the pipeline and opportunity continues to build for us.

The fact that we now have been working with meta in Loma to bringing that on Prem <unk> faced in an open source environment to bring those models and tools on Prem I think continuing to reiterate AI is going to follow the data. The data is on Prem and we believe the pipeline and opportunities continues to build for us.

Speaker 7: All right. Hey, thanks for the answer there. And thanks for the question, Tony. I'd like to think that, you know, our tone would be, you know, transparent and honest. And that's what I hope you hear from us is that we call it like we see it, and we give you the best view that we can give you at that point in time. So, appreciate the question, Tony. Next question, please. We'll take our next question from Eric Woodring with the

Alright, thank you.

Yes, thanks for thanks for the answers and thanks for the question Tony I'd like to I'd like to think that.

Tone would be transparent and honest and Thats, what I hope you hear from US is that we we call. It like we see it and we'll give you the best view that we can give you at that point in time. So I. Appreciate the question Toni next question. Please.

We will take our next question from Erik Woodring with Morgan Stanley.

Awesome. Thank you guys for taking my question.

Speaker 3: Jeff, I just wanted to dig into some of your comments about spending on AI optimizing.

Jeff I, just wanted to kind of dig into some of your comments about.

Spending on AI optimize infrastructure and the impact that might have on traditional hardware spending because obviously theres a lot of money is very clearly showing us being thrown at AI related infrastructure. So can you just maybe give us a bit more detail on what gives you confidence.

Speaker 3: very clearly showing us being thrown at AI related infrastructure. So can you just maybe give us a bit more detail on what gives you confidence?

Speaker 3: that this spending won't cannibalize traditional.

That this spending won't cannibalize traditional either general compute spend our overall hardware spending as we look out over the next 12 plus months what are the sign post that that youre looking at that gives you that confidence. Thank you so much.

Speaker 3: as we look out over the next 12 plus months, what are the signposts that you're looking at that give you that confidence? Thank you so much.

Of course, Eric let me try so.

Speaker 4: We believe what we've seen for two consecutive quarters on our traditional server businesses grow. It's grown sequentially from one to two, now two to three.

We believe what we've seen for two consecutive quarters and our traditional server businesses growth thats grown sequentially from <unk>.

Wanted to know two to three.

Speaker 4: What we saw for the first time this year was the pipeline actually grow in quarter for traditional service.

What we saw for the first time this year was the pipeline actually grow in quarter for traditional servers.

Speaker 4: That's a very encouraging sign. You saw the adoption of our brand new 16G server double portal of recorder.

That's a very encouraging sign.

We saw the adoption of our brand new <unk> server double quarter over quarter.

Speaker 4: We saw the activity with our Salesforce and our accounts increase.

We saw the activity with our sales force and our accounts increase.

Speaker 4: We saw the opportunities in large deals increase towards the end of the quarter.

Saw the opportunities in large deals increased towards the end of the quarter.

Speaker 4: our conversion improved over the course of the quarter.

Our conversion improved over the course of the quarter.

Speaker 4: And I think those signals tell us that this eight quarter digestion of what was built or bought, I should say, through the course of COVID, has now worked its way through the system that data centers need to be updated, upgraded, additional capacity. Those workloads continue to need to be fed. More data is being created. While at the same time, there's a whole new category of computing acceleration.

And I think those signals tell us that this eight quarter digestion of what was built or bought I should say through the course of Covid has now worked its way through the system that datacenters need that.

<unk> upgraded additional capacity those workloads continue need to be fed more data is being created while at the same time, there is a whole new category.

Of computing accelerated computing.

Speaker 4: AI optimized computing, said by all of the market momentum around genitive AI. That says that there's a big opportunity in both. We think early science, I won't use that word that you probably want me to use this recovery, but we have early positive signs that there's a changing in the demand profile of traditional servers.

AI optimized computing fed by all of the market momentum around generative AI.

That says that there is a big opportunity in both that we think early signs I'm not going to I won't use that word that you probably want me to use this recovery, but we are early positive signs that there is a changing of the demand profile of traditional servers.

Speaker 4: And we're seeing a lot of excitement across our broad portfolio of AI optimize servers that

And we're we're seeing a lot of excitement across our broad portfolio of AI optimized servers that.

Speaker 4: Have us feeling pretty good as Avant just mentioned about next year.

I was feeling pretty good as a bond just mentioned about next year.

Speaker 3: Is that good? Your question Eric. I'm so want to make sure that's absolutely very quick. Okay, great. Okay, thanks Eric. Appreciate it. Appreciate it. Next question.

Does that get out of your question, Eric I, just want to make sure Thats absolutely.

Absolutely very clear thank you very much okay. Thanks.

Thanks, Eric.

I appreciate it.

Next question.

We will take our next question from Ben Reitzes with Melius research.

Speaker 9: Hey guys, thanks. I appreciate it. I wanted to ask about PCs with regard to your comments around 2025. What is, are you expecting that growth to be above model? And what do you think the impact will be of the Windows 10 expiration and some of the new ships coming out that harness AI? If you don't mind touching on that, a big great thing.

Hey, guys. Thanks I appreciate it.

I wanted to ask about Pcs with regard to your comments around 2025.

What what is are you expecting.

That growth to be above model and what do you think the impact will be of the windows 10 exploration.

And some of the new chips coming out that harness AI.

If you don't mind touching on that that'd be great. Thanks.

Sure.

Speaker 4: Let me take a run and it been, it probably is important to set context as we're heading into calendar 24, our fiscal 25 in PC.

Let me take a run at it had been.

It is important to set context as we're heading into calendar 'twenty four our fiscal 'twenty five.

<unk>.

Speaker 4: We expect the market to close in Q4 being down. There will be eight quarters of negative growth in the PC industry. The longest I can recollect.

We expect the market to close in Q4 being down it will be eight quarters of negative growth in the PC industry, the longest I can recollect.

Speaker 4: and it's ripe for a refresh. Another data point for you to think about, there'll be 300 million PCs turning four years old.

And it's ripe for a refresh another data point for you to think about there'll be 300 million Pcs turning four years old next year.

Speaker 4: That's typically a tipping point for upgrading in commercial.

That's typically a tipping point for upgrading in commercial.

Speaker 4: And most of those are notebooks as everybody was working remote. The notebook makes one up 300 million PC that year. They're aging and time to refresh. And

And most of those are notebooks as everybody was working remote the notebook mix went up 300 million Pcs that year, they're aging and time to refresh.

And we have the opportunity.

Speaker 10: with new architectures from Intel AMD and Windows on ARM to really begin to see AI make its way out to the edge of PC.

With new architectures from Intel AMD and Windows on arm to really begin to see AI make its way out to the edge to the PC.

And it's a pretty exciting time.

Speaker 10: I've used the monocleure, the notion of this is the next great application, the next great use case of the greatest predictivity device on the planet and it's coming real next year.

I've used the moniker of the notion of this is the next great application. The next great use case of the greatest productivity device on the planet and it's coming real next year.

Speaker 10: So I think eight quarters of decline, an aging install base and install base of greater than 1.5 billion units, 750 million of them over four years, all 300 million more coming next year that will age to become four years old, the time to upgrade. None of those are capable of running the new AI workloads coming out to the edge in the PC, new architectures.

So I think eight quarters of decline in.

An aging installed base of installed base of greater than $1 5 billion units $750 million of them over four years old 300 million more coming next year that will age to become four years old the time to upgrade none of those are capable of running the new AI workloads coming out to the edge and the PC new.

Orca textures.

Speaker 10: coming that are exciting and interesting and we have what you said around Windows.

Coming that are exciting and interesting and we have what you said around windows.

Speaker 10: There's another forcing function of an upgrade. So historically, when a new version of Windows is available or one is retired, that drives a replacement cycle, and that's an opportunity for us. So we're excited about that, particularly given our bias towards commercial, 80% of our revenue comes from commercial PCs.

There is another forcing function of an upgrade so historically when a new version of Windows is available or one is retired that drives the replacement cycle and thats an opportunity for us. So we're excited about that particularly given our bias towards commercial 80% of our revenue comes from it.

Comes from our commercial Pcs.

Sure.

I think the opportunity is good for us.

Speaker 4: And then the other question was around the silicon alternative to that it. I remember correctly.

Then the other question was around the silicon alternatives will set it if I remember correctly.

Speaker 10: I think you you hit on everything. Um, I just the clarification is just PCs above a PC is also above model, um, as well as server and ISG. That was that's probably the five. Yes, specifically our internal model would have the PC market growing somewhere in the low single digits. Think three to four percent you would expect us to grow to take share.

Hi, Thank you you hit on everything.

Just a clarification is just Pcs above Pcs also above model.

As well as server and ISG.

That's probably the specifically our internal model would have the PC market growing somewhere in the low single digits think 3% to 4% you would expect us to grow to.

Take care.

Speaker 11: Thank you. Thanks a lot. Okay. Thank you. Thank you, Ben. Next question.

Thank you thanks, a lot guys.

Alright, Thanks, Kevin.

Next question.

We'll take our next question from Sam <unk> with Citi.

Speaker 12: Great, thank you very much. A couple of questions on Mayan. Just on the AI opportunity that you talked about in the end of Pride, maybe you could share with us, you know, the workloads and the use cases that you're now seeing, is this gone beyond the...

Great. Thank you very much.

Questions on my end just on the AI opportunity that you talked about in the enterprise, maybe if you could share with us.

The workloads and the use cases that are that you are now seeing is gone beyond the cloud service providers that you talked about that you're interacting with I think you mentioned <unk> in India on the call. If I recall there was some commentary as well on enterprises. So are you seeing an opportunity for your pipe.

Speaker 12: cloud service providers that you talked about that you're interacting with. I think you mentioned Corvieve and Indio on the call, but if I recall this in commentary as well on enterprises, so are you seeing an opportunity for your API sign growing with the enterprise use cases and if you can share on that, if you can share any anecdotes on that. And then on share by that, obviously you tick that up this quarter.

By growing with the enterprise use cases.

You can share on that if you can share any anecdotes on that and then on share buybacks, obviously, we kick that up this quarter.

Speaker 12: Should we expect this level of shared buybacks to continue into fiscal 25, or given improving cash from version cycles, improving top line, we should see a further step up in that one way.

Should we expect this level of <unk>.

Share buybacks to continue into fiscal 'twenty, five or given improving.

Cash conversion cycles, improving top line, we should see a further step up in that run rate. Thank you.

Speaker 10: So I'll lead with the AI question, a couple of maybe specific data points that I'll understanding characterize what we're seeing. Number of buyers up, number of enterprise buyers up significantly.

Sure I'll lead with the AI question.

Couple of maybe specific data points to help understand and characterize what we see.

Number of buyers up number of enterprise buyers up significantly.

Speaker 10: All of the portfolio saw quarter of a quarter growth. And the reason that's important, because not everybody needs a 90-60. Smaller models, smaller datasets, perfect setup for our other products, which line itself up with where we're seeing the opportunities in enterprise.

All of the portfolio saw quarter over quarter growth from the reason that that's important because not everybody needs. A 90 680 smaller models smaller datasets perfect setup for our other products, which lines itself up with where we're seeing the opportunities and enterprise.

So institutions of higher education financial services Health care and life services and manufacturing is where we're seeing pull for our products. That's data on Prem that's models, that's doing AI and ml work across the board.

Speaker 10: That's what we're seeing and we're pretty excited about that in the tripling of the pipeline included enterprise customers and enterprise demand.

That's what we're seeing and we're pretty excited about that and the tripling of the pipeline included enterprise customers and enterprise demand.

Speaker 13: And I'll take the the the share by back.

And I'll take the <unk>.

Share buyback.

Speaker 13: Look, I think, I think, you know, as you mentioned, but we tripled Sherry purchase this quarter versus last quarter. You know, as a reminder, you know, last year, you know, cash was really kind of running more on the weaker side and we had pulled back and focused more on dilution management. And then as we've seen cash accelerate this year, it's put us in a good position so that we could be a little bit more opportunistic. We don't typically guide around Sherry purchase.

Look I think I think as you mentioned, but we tripled share repurchase this quarter versus last quarter. As a reminder, last year cash was really kind of running more on the weaker side and we had pulled back and focus more on dilution management.

And then as we've seen cash accelerate this year has put us in a good position. So that we can be a little bit more opportunistic.

We don't typically guide around share repurchase.

Speaker 13: But I guess the way I would frame it is, we're obviously very focused on the 80% plus capital return. If you go back to when we first started, our dividend, which would have been FY23, the beginning of FY23, we're running at 96% return of capital. So I feel really good about that. And I do think recognizing we don't guide, I think it's fair to say, as we look forward, we'll definitely be repurchasing more than just solution management.

But I guess the way I would frame. It is we're obviously very focused on the 80% plus capital return.

If you go back to when we first started our dividend, which would have been FY2023 the beginning of FY2023.

We're running at 96%.

Churn of capital so I feel really good about that.

And I do think recognizing we don't guide I think it's fair to say as we look forward, we will definitely be repurchasing more than just dilution management.

Alright, great. Thank you. Thanks, Alastair I appreciate it.

We'll take our next question from Mike <unk> with Goldman Sachs.

Speaker 14: Hi, good afternoon. Thank you for the questions. Just have two quick ones on AI. First, on the AI margin profile, you obviously have very strong ISG margins in the quarter, despite rising contributions from AI server.

Hi, good afternoon, and thank you for the questions just had two quick ones on AI.

First on the AI.

Profile, you, obviously had very strong ISG margins in the quarter. Despite.

Despite rising contributions from AI server mix.

Speaker 14: So could you just talk a little bit about how much of a headwind to that ISG margin rate came from the rising mix of AI servers if that's the right way to think about it? And then second, I was just wondering if you could talk about the relationship.

So could you just talk a little bit about how much of a headwind to that ISG margin rate came from the rising mix of AI servers. If that's the right way to think about it.

And then second I was just wondering if you could talk about the relationship between.

Speaker 14: AI servers and networking and storage for you guys. Should we expect some of that AI sale is pipeline that you talked about to eventually include selling Ethernet for AI or in Finna Band or more storage in the near term.

Servers, and networking and storage for you guys.

Should we expect some of that AI <unk> pipeline that you talked about to eventually include selling Ethernet for AI or infiniband or more storage in the near term. Thank you.

Speaker 5: So let me start with the impact of margin range. And we did see a little bit of dilution, if you will, from the impact of the shim and says, we called out, but really not a material impact right now. We saw nice performance really across the server, holistic server portfolio. And so that increase that Jeff already talked about in the traditional servers.

So let me let me start with the.

The impact of margin rates, and we did see a little bit of dilution. If you will from from the impact of the.

The shipments as we called out that really not a material impact right now we saw.

Nice performance really across the <unk>.

The server holistic server portfolio, and so that increase that that Jeff already talked about in the traditional servers and was helpful. In that in that mix. So it does have an impact.

Speaker 5: was helpful in that mix. So it does have an impact, but we've talked about it being margin dollar accretive but margin rate dilutive. And so we saw a little bit of that but not to a significant extent in our third.

But yes, we've talked about it being margin dollar accretive that margin rate dilutive and so we saw a little bit of thought but not to a significant extent and in our third quarter.

Speaker 5: But expect as that grows, we will see more of an impact. Again, margin dollar accretive. And so, and as we have more services attached, as we expand that into the enterprise space, we'll see more and more margin accretions coming from those AIO.

We expect as that grows we will we will see more of an impact again margin dollar accretive and so and as we have more services attach as we expand that into the enterprise space.

See more and more.

Margin accretion coming from those AI offerings. So I think that's a great point upon is the team did a great job of improving margins of our AI optimized servers quarter over quarter.

Speaker 10: I think that's a great point of on is the team did a great job improving margins of our AI optimized servers quarter to quarter selling the value.

Selling the value of the design and performance attributes its thermal attributes its connectivity attributes and then attaching storage and services around it allowed us to see improved margins quarter over quarter.

Speaker 10: performance attributes, thermal attributes, it's connectivity attributes have been attaching storage and services around it allowed us to see improved margins quarter to quarter.

Speaker 10: And Mike, do you have a question? Is there a relationship between storage and, excuse me, networking with AI? Absolutely. These are.

And Mike to your question.

Is there a relationship between storage and excuse me networking with AI absolutely.

These are typically cluster.

Speaker 10: Small clusters, large clusters, high bandwidth needed. We see it ultimately deployed outward. The data is being created much of the data that will be created in the future is outside of the data center, much of that data is unstructured. Much of that opportunity is really nice.

Small clusters large clusters high.

High bandwidth needed.

See it ultimately deployed out where the data is being created much of the data that will be traded in the future is outside of the data center much of that data is unstructured much of that opportunity is really a nice.

Speaker 4: a really nice tie to what we do with our unstructured and object assets. And then networking is the high speed interconnect the faquer. They matter, they matter more whether it's in the van or ultra ethernet. Those are all exciting high new technologies for us.

A really nice tie to what we do with our own structured an object assets than networking is the high speed interconnect fabric <unk> matter they matter more whether it's incentive than our ultra Ethernet those are all exciting new technologies for us.

Great excellent thanks, Jeff our next one.

Yeah.

Of course.

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

Speaker 15: Great, thanks for taking the question. I wanted to see if you could unpack what you see going on trend-wise in storage, particularly given that I know you said it came in as expected, but...

Great. Thanks for taking the question.

Wanted to see if you could unpack what what you see going on trend wise in storage, particularly given that I know you said it came in as expected, but the revenue was a bit light versus street expectations and it looks like it's still down year over year in the next quarter and where my question is going.

Speaker 15: The revenue was a bit light versus street expectations and looks like it's still down year over year in the next quarter. And where my question is going is to think about the longer term trend because I'm wondering is AI pulling money away from storage and do you see essentially?

To think about the longer term trend because I am wondering is AI pulling money away from storage and do you see essentially margins trending better or worse, given shifts in input cost and the better margins that some of your peers have.

Speaker 15: trending better or worse given shift and input costs. And the better margins that some of your peers have called out recently, just wondering how you're seeing that trend as well. Thanks.

Have called out recently, just wondering how youre seeing that.

That trend as well thank you.

Speaker 10: Sure, maybe a couple of data points in a van can chime in as well. Me, from us, let me think about margins that was the last comment. We saw our storage margins improve quarter of a quarter in year-of-year on a debate.

Sure maybe a couple of data points and Ivan can chime in as well from US when you think about margins as that was the last comment we saw our storage margins improved quarter over quarter and year over year on it.

Speaker 10: We continue to spread the value of our products and the broad portfolio we have.

That's exciting.

We continue to sell the value of our products in the broad portfolio we have.

Speaker 10: We do see customers cautious, large concentration of the storage businesses and very large customers and they're absolutely being cautious and select.

We do see customers cautious.

Large concentration of the storage businesses and very large customers and they are absolutely being cautious and selective.

Speaker 10: and that clearly impacts our high-end product portfolio. But what was exciting during the quarter is we saw our data protection and our unstructured categories actually growing on order spaces year-of-year.

And that clearly impacts our high end product portfolio, but what was exciting during the quarter is we saw our data protection on our unstructured categories actually grown an orders basis year over year.

Speaker 10: So when I think about the opportunities around protecting valuable data, when I think about the opportunities of what data is going to be created again, unstructured, largely outside of the data center at the edge.

So when I think about the opportunities around protecting valuable data when I think about the opportunities of what data is going to be created again unstructured largely outside of the data center at the edge.

Speaker 10: I think it's a great opportunity for us to continue to protect these valuable workloads and the opportunity for us to be where the data is created out at the edge with our vast array of unstructured assets. So I don't think AI pulls a waste orage dollars. I think we'll...

I think it's a great opportunity for us to continue to protect these valuable workloads and the opportunity for us to be where the data is created out of the edge with our vast array of unstructured assets. So I don't think AI pulls.

Our waste storage dollars I think what we see is.

The.

Speaker 10: effect of eight quarters of server decline.

Effect of eight quarters of server decline.

Speaker 4: has impacted storage, customer's or cautious. Historically as the server business rebounds and recovers, we think our experience tells us that storage lags it by about a couple of quarters. That's what we're expecting. We see nothing that suggests that's different. And in the meantime, the opportunity around unstructured is immense. And we'll...

As impacted storage customers are cautious historically as the server business rebounds, and recovers we think our experience tells us that storage lags by about a couple of quarters. That's what we're expecting we see nothing that suggests that's different and in the meantime, the opportunity around.

<unk>.

Unstructured is immense and we will continue to focus on that.

Speaker 5: And I'd add Jeff on that, the margin accretion that you refer to on storage is real. And it's great because it's going to be recognized over time in the P&L, right, with the high services and software attached. So we don't see all that benefit today, but we'll see it going forward.

And I would add Jeff on that.

Margin accretion that you referred to on storage is is real and it's great because it's going to be recognized over time in the P&L right with the high services and software attach so we don't see all that benefit today, but we will see it going forward.

Thank you very much Russia.

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

Speaker 8: Great, thanks. I have a question on AI as well. It's great to see for a good momentum in that business. Are there any concerns that some of these orders could be just double booking just because supplies tight everywhere that that could ease over the course of next year? I assume you have great visibility into the backlog, the $1.6 billion you talk about in terms of timing, but how about the, quote, the multi-billion dollar pipeline? How comfortable are you?

Great. Thanks.

Question on AI as well that's.

It's great to see very good momentum in that business are there any concerns that some of these orders could be double booking just because supply is tight everywhere.

That should ease over the course of next year I assume you have great visibility into the backlog the $1 $6 billion you talk about in terms of timing, but how about the multi billion dollar pipeline.

Comparable are you with that and also.

Speaker 16: And also, what I'll ask about is that can you clarify what products and maybe services are included in that order number? Is that just AI Optimus service like the 1696 AD, or do you include like CTO only service in there? Any professional services or even eight?

Ask about is it can you clarify what products that may be services are included in that order number is that just AI optimize service like the 690 680 or do you include like CPU only service in there any professional services or even APAC service in there.

Speaker 10: Last one first, when we talk about our AI backlog in demand, it's not high performance computing, it's not CPU based, it's simply the portfolio that is optimized for artificial intelligence. Good night.

The last one first when we talk about our.

Backlog in demand, it's not high performance computing, it's not CPU based it's simply the portfolio that is optimized for artificial intelligence to $96 80.

Speaker 10: the 9640, the 8640, the 760, and the 750. That's it.

The 90 640 to $86 40 to 760 and the 750 that's it.

Speaker 4: So it's clear it is that portfolio that we built to be optimized for AI. The double book.

So it's clear it is that portfolio that we built to be optimized for AI.

The double booking.

Speaker 10: It's a very unusual way that the marketplace is working with the role that In Didia plays and helping the end of obviously the supplier for the

It's a very unusual way that the marketplace is working with the role that.

Nvidia plays in helping the obviously, it's the supplier for the.

Speaker 10: Car, they're out helping generate demand. I think there's reasonable...

Carve out helping generate demand.

There is reasonable.

Speaker 10: Fidelity and the demand signal that we see today is that possible. There's double booking. I can't sit here and tell you that there's not. I don't from my seat. I don't see it.

Fidelity and the demand signal that we see today.

Is it possible, there's double booking I can't sit here and tell you that there is not I don't from.

From my seat I don't see it.

Speaker 10: When we see the opportunity of, we are competing with others for the same opportunity, the opportunity is qualified, it's gotta be qualified for it. And they need to give the supply or to suggest the supply will be available. So I think there's a lot of control points in place that suggest there's great fidelity in the demand signal that we're seeing.

When we see the opportunity of we are competing with others for the same opportunity. The opportunity is qualified it's got to be qualified for Nvidia to give the supply or to suggest the supply will be available. So I think theres a lot of control points in place that suggests there's great fidelity in.

The demand signals that we're seeing.

Speaker 10: But I can't sit here and tell you what that 100% certainly isn't one or two, but I think it's a really

But I can't sit here and tell you where that 100% certainty that there isn't one or two but.

I think it's a really good demand signal.

Speaker 4: and given war team is and what we see across the globe and enterprise of CSPs, we know where the opportunities are. I hope that...

And given where our team is and what we see across the globe and enterprise with Csp's, we know where the opportunities are.

I hope that helps.

Okay. Thanks, and the next question.

We'll take our next question from Krish Shankar with TD Cowen.

Speaker 17: Yeah, hi, thanks for the question. Jeff, I had one for you. I'm kind of curious. You spoke about AI PC. What is your definition?

Yeah, Hi, Thanks for taking my question, Jeff I had one for you I am kind of curious you spoke about AIP fee.

What is your definition of an AIG PC and also how much do you expect the ASP uplift to be from the IPC and how much incremental growth could it drive from the current 250 million unit run rate Youre going through thank you.

Speaker 10: Our definition of a AI PC is going to be a PC that has the performance capability to run the workload on the PC.

Our definition of AI PC is going to be a PC that has the performance capability to to run the workload.

On the PC.

Speaker 10: Not a cloud service, the capability of running an AI workload and an app that has been AI optimized and to be able to run it looks.

Not a cloud service.

Capability of running an AI workload in a.

App that has been AI optimized and to be able to run it locally.

Speaker 4: The architectures that are coming, I'll meet that criteria.

The architectures that are coming all meet that criteria.

Speaker 10: There's variations in performance, but they're all meeting the threshold that we believe is required to call them PCs, if they'll be AI enabled and AI PCs, if that's a name.

There is variations in performance, but they're all meeting the threshold that we believe is required to call them Pcs that there'll be AI enabled AIP sees if thats a name.

Speaker 4: And I think we're quite, quite comfortable with that definition.

And I think we're quite quite comfortable with that definition.

Sure.

Speaker 10: whether it drives tremendous growth to the town, just to be seen. What I believe it is is...

Whether it drives tremendous growth to the Tam.

Just to be seen what I believe it is.

Speaker 10: You don't want to be a PC user that doesn't have an AI enabled chip in it.

You don't want to be a PC user that doesn't have an AI enabled chip in it.

Speaker 10: You're going to be next to people that have one, and yours doesn't, and it will perform differently. It won't be able to take advantage of some of the new, exciting workloads, whether that's new forms of search, new forms of security, new forms of interacting with your PC itself.

Youre going to be next to people that have one and yours doesn't and it will perform differently. It won't be able to take advantage of some of the new exciting workloads whether thats.

New forms of search new forms of security new forms of interacting with your PC itself.

Speaker 10: the ability to put some form of an assistant around you. Those are gonna be huge productivity.

The ability to put some form of assistant.

<unk>.

Uh huh.

Those are going to be huge productivity uplifts.

And I think thats going to drive a refresh cycle and.

Speaker 10: And again, the scale of this business is so large with a billion and a half plus units in the install base.

And again the scale of this business is so large with a 1 billion and a half plus units in the installed base.

Speaker 10: 950 million units sold over the last three years. This is a catalyst.

950 million units sold over the last three years. This is a catalyst.

Speaker 10: to increase the refress, or reduce the refresh cycle or increase the refresh rate, whatever you prefer. And I think that's an exciting time, but I can't call what that number is. Our estimate for the market place is low single digit growth. I think I mentioned three to four percent. That would take the market from roughly 250 to 260 next year. Let's get there. Let's get it growing again after eight quarters of the client. Well said.

To increase the refer a reduced the refresh cycle or increase the refresh rate whatever you prefer and I think thats, an exciting time, but I can't call what that number is our estimate for the marketplaces.

Low single digit growth I think I mentioned, 3% to 4% that would take the market from roughly $2 50 to $2 60 next year, let's get there lets get it growing again after eight quarters of decline.

Well said.

Next question.

We will take our next question from Aaron Rakers with Wells Fargo.

Speaker 10: Yeah, thanks for taking the question. There's been a lot of questions already answered, but Jeff, I just wanna ask you simplistically on the AI narrative. You mentioned 39 weeks of delivery time or lead time.

Yes, thanks for taking the question Theres been a lot of questions already answered, but Jeff I just wanted to ask you simplistically on the AI narrative, you mentioned 39 weeks of delivery time or lead times.

Speaker 4: Are you at all surprised that that's not starting to change? Have you seen any indications that lead times have pulled back with some of the China restrictions put in place? And I guess that with that context also, would you expect diversity? Are you another large GPU supplier to be a factor in unlocking and converting some of that pipeline as we move into next year? A couple things, the pipeline is.

Are you are you at all surprised that that's not starting to change.

Have you seen any indications that lead times have have pulled back with some of the China restrictions put in place and I guess with that context also would you expect diversity R E. Another large GPU supplier.

To be a factor in unlocking in converting some of that pipeline as we move into next year.

A couple of things the pipeline is in video pipeline today.

If not I'll turn it over pipeline that's in video.

Speaker 10: And I wish I could tell you, Aaron, that the backlog was less than, or excuse me, the least time was less than 39 weeks. I can't today.

And I wish I could tell you earn that back.

Backlog was less into our or excuse me. The lead time was less than 39 weeks I can't today.

Speaker 10: We are on the phone working every available channel opportunity. As you might imagine with our supply chain capabilities to improve supply, to improve supply availability.

We are on the phone working every available channel opportunity.

As you might imagine with our supply chain capabilities to improve supply to improve supply availability.

Speaker 10: We've offered our services, we'll help where we can. I'm hopeful for the day to tell you that supplies improve greatly, lead times have reduced, and we can work the backlog down faster.

We've offered our services will help where we can.

<unk>.

I am hopeful for the data to tell you that supply has improved greatly lead times have reduced and we can work the backlog down faster. That's our job I don't have those answers today, it's 39 weeks for trying to continue to get more supply.

Speaker 10: That's our job. I don't have those answers today. It's 39 weeks. We're trying to continue to get more supply. That's where we are.

That's where we are as.

Speaker 10: As we look forward into calendar year 24, there's clearly alternatives coming.

As we look forward into calendar year 2004, there is clearly alternatives coming.

Speaker 11: There's work to be done in those alternatives. Software stacks have to be taken care of, resolved the opportunities around them, but there's more options coming. Their adoption rate will see.

There is work to be done in those alternative software stacks has to be taken care of resolved.

The opportunities around them, but theres more options coming the adoption rate we will see.

But right now.

Speaker 10: that multi billion dollar pipeline that I referenced the backlog that we've talked about is in video based.

That <unk>.

Multibillion pipeline that I referenced the backlog that we've talked about is in video based <unk>.

Speaker 10: 39 week lead time we're working our behind-soft everyday to get more supply. Yep. Thanks, Joe.

39 week lead time, we are working our behinds off every day to get more supply.

Yeah. Thanks, Jeff.

That's it.

Thank <unk> question.

We will take our next question from stomach Chatterji with J P. Morgan.

Speaker 18: Hi, thanks for taking my question. I guess taking on the AI subject, you shipped over a half a billion dollars of AI optimized servers in the quarter.

Hi, Thanks for taking my question I guess sticking on the subject you shipped over half a billion dollars of AI optimized <unk> in the quarter, just curious with lead times holding where they are how should we think about the trajectory of sort of what we expect for shipments in the coming quarter or two is fairly stable.

Speaker 18: Just curious with lead times holding where they are, how should we think about the trajectory of sort of what to expect for shipments in the coming quarter? Does it fairly stable in that sort of half a billion range or should we expect some level of our ramp up if it supply easing?

And that sort of.

Half a billion range or should we expect some level of ramp up.

With supply easing and then just a quick clarification, Jeff you mentioned a few times now the improvement Youre seeing in traditional <unk>, even though that you sort of called out that customers are pulling back spending in most recent months you have some seen some signs of that just curious what's the driver there like why what's your insight in terms of his customer.

Speaker 18: and then just a quick clarification Jeff, you've mentioned a few times now the

Speaker 18: improvement you're seeing in traditional servers even as you set up.

Speaker 18: called out that customers are pulling back spending in most recent months. You've seen some signs of that.

Speaker 18: just curious what the driver there like why

Speaker 18: what's your insight in terms of as customers are pulling back? Why is there sort of this green shoot and traditional servers that runs a bit counter to that overall team? Thank you.

Pulling back why is there sort of a basic reinsurance traditional <unk> that runs a bit counter to that overall team. Thank you.

Speaker 10: Well, we don't forecast shipments in terms of specific dollars by product lines for the next quarter. Our shipments are for AI, or implied in the guidance that a bond gave. I really don't want to break it down into a specific of how many that will ship of AI servers. But 39-week-leaf time, nine months.

Well, we don't forecast.

Shipments in terms of specifics by product lines for the next quarter.

Our shipments are for AI or implied in the guidance that a bond gave I really don't want to break it down into specific of how many that will ship of AI servers, but.

39 week lead time nine months.

Speaker 4: and kind of look at the math and go, hmm, maybe that's probably the right sort of zip code to be in, but...

And kind of look at the math I'm go maybe.

Thats, probably the right sort of Zip code to be in but.

We're hand to mouth for parks.

Speaker 10: traditional servers and why we think there's a green shoot. I think it's the comments around, it's been an eight quarter digestion period, the longest that I can recollect in the server business. Ah.

Traditional servers and why we think there is a green shoot I think it's the the comments around it's been a quarter digestion period, the longest that I can recollect in the server business.

Uh huh.

Data centers have aged product in.

Speaker 10: They've worked through what they have bought in the early, the first half of the COVID era.

They've worked through what they are but in the early the first half of the Covid era.

Speaker 10: They now need to add capacity and we're seeing that.

We now need to add capacity and we're seeing that.

In different areas.

Speaker 10: And to the point now again, to be a slightly repetitive, two quarters in the row of sequential growth, a building pipeline.

And to the point now again to be slightly repetitive two quarters in a row of sequential growth.

A building pipeline, which hasn't happened this year.

Speaker 10: improved activity, increased activity, improved conversion makes us improved activity.

The improved activity or increased activity improved conversion makes us still.

Speaker 11: comfortable that something's changed. Again, I'm not using that word recovery, but something's changed. It's an inflection point that Avon mentioned earlier, and we're gonna continue to obviously feed that inflection and continue to look at the opportunity. All right.

Comfortable that something's changed again, I am not using that word recovery, but something's changed its an inflection point that Ivan mentioned earlier and.

And we're going to continue to obviously see that inflection.

And continue to look at the opportunity.

Thank you alright, and let's see if we can tier one last question.

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

Speaker 16: Great, thanks guys for squeezing me in at the end. Can you talk to sort of the sod process if AI lead times come in a little bit more next year?

Great. Thanks, guys for squeezing me in at the end can you Jeff can you talk to sort of the thought process. If AI lead times come in a little bit more next year.

Speaker 16: What that means for your networking, fabric, or equipment business.

What that means for your networking fabric or equipment business and then ultimately the pull forward maybe the pull through of storage I might've missed it earlier, but just wanted to get a sense for.

Speaker 16: And then ultimately the pull forward, maybe the pull through of storage, I might have missed it earlier, but just want to get a sense for how that would sort of impact the rest of the.

How that would sort of impact the rest of the IC business and then just quickly on <unk> can.

Speaker 11: And then just quickly on CSG, can you share with us your thoughts maybe a lot on the margin impact from prior component cost whether it's DRM or her or her, whatever you're thinking about it, thanks.

Can you kind of share with us your thoughts maybe yvonne on sort of the margin impact from higher component costs, whether it's DRAM NAND or however, you are thinking about it. Thanks.

Well clearly as.

GPU supply improves.

Speaker 10: fabric that is associated with those units will be shipped and aligned to that for the ability for us and our

Fabric that is associated with those units will be shipped and aligned to that so the ability for us and our.

Oh.

Speaker 10: business or networking business will benefit from an uplift or an increase in supply. And I think that's encouraging and as I talked about

Our networking business will benefit from an uplift or an increase in supply.

And I think thats encouraging and as I talked about storage attach is important we are certainly.

Speaker 10: Storage Attach is important. We are certainly working with our cells teams, working with it.

Working with our sales teams working with.

Speaker 10: Find the opportunities as this data is being created and increasingly greater rates outside of the data center to make sure that we're there.

To find the opportunities as this data is being created at.

An increasingly greater rates outside of the data center to make sure that we're there and.

Speaker 10: and it's landing on Dell Storage. And as it lands on Dell Storage, making sure that as AI follows the data, that our AI optimized portfolio is next to it, that's the sales model.

And it's landing on Dell storage and is it.

Lands on Dell storage, and making sure that as AI follows the data there.

Our AI optimized portfolio was next to me.

I mean thats the sales motion.

Speaker 10: a set of professional services around that, a set of services that attach around that. So think of every opportunity of a...

A set of professional services around that a set of services that attach around that so think of every opportunity of a.

Speaker 10: Model training fine tuning ultimately as we get to inferences and opportunity for compute assets Which drags a set of storage assets around that and it's got to be connected

Modeled training fine tuning ultimately as we get the inferences and opportunity for compute assets, which drags a set of storage assets around that and it's got to be connected.

Speaker 10: We kind of look at that as the AI estate, if you will, and that's the opportunity. It's real. And our teams are focused on it.

We kind of look at that as the AI is stage, if you will and thats the opportunity, it's real and our teams are focused on it.

Speaker 5: And then, you know, on your question around, you know, component cost and the potential pressure we put on more.

And then on your question around component costs and the potential.

Pressure on margin rates.

Speaker 5: You know, we do run a low inventory model and so when we have component cross increases

We do run a low inventory model and so.

When we have component cost increases and we tried to recover them as quickly as we can by raising prices and passing those through into into the market. So and Youll see us continue with that is certainly not the first time that we had.

Speaker 5: We try to recover them as quickly as we can by raising prices and passing those through into the market. So you'll see if continue with that, it's certainly not the first time that we've had this happen. And so it's an engine that's well tuned within Dell, but you will have to navigate through that and with a competitive environment and we will. But it usually takes a period of time to recapture that impact that they...

Happen and so.

Engine, while 10 within within Dell, but we'll have to navigate through that with the competitive environment and we will.

But usually it takes a period of time to recapture that impact us.

Good question.

Speaker 3: All right. Thanks, everyone for joining us. Yeah. Thanks, David. I will see you. We'll see many of you next week at Raymond James and Barclays and also the first week in January at the Consumer Electronics shop. Thank you. Have a good evening.

Alright, alright, Ron Thanks, Scott Thanks, everyone for joining us.

Thanks, David I will see you will see many of you next week at Raymond James and Barclays.

Also the first week in January at the consumer Electronics show. Thank you have a good evening.

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

Okay.