Q4 2024 Dell Technologies Inc Earnings Call

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Speaker Change: Good afternoon, and welcome to the fiscal year 2020 for fourth quarter and year end financial results Conference call for Dell Technologies, Inc. I'd like to inform all participants this call is being recorded at the request of Dell technologies.

Speaker Change: This broadcast is the copyrighted property of Dell Technologies, Inc. Any rebroadcast of this information in whole or part without the prior written permission of Dell technologies is prohibited.

Unknown Executive: Thanks, everyone, for joining us. With me today are Jeff Clarke, Yvonne McGill, and Tyler Johnson. 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. 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, diluted earnings per share, and adjusted free cash flow. The reconciliation of these measures to their most directly comparable GAAP measures can be found in our web deck and our press release.

Speaker Change: 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.

Speaker Change: I'd like to turn the call over to Rob Williams head of Investor Relations.

Robert L. Williams: Williams you may begin.

Robert L. Williams: Thanks, everyone for joining us with me today are Jeff Clarke, Gabon, Mcgill and Tyler Johnson, 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.

Robert L. Williams: 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 diluted earnings per share and adjusted free cash flow.

The reconciliation of these measures to their most directly comparable GAAP measures can be found in our web deck and our press release growth percentages refer to year over year change unless otherwise specified.

Unknown Executive: Growth percentages refer to year-over-year change unless otherwise specified. Statements made during this call that relate to future results and events are forward-looking statements based on current expectations. However, actual results and events could differ materially from those projected due to a number of risks and uncertainties, which are discussed in our web deck and SEC filings. We assume no obligation to update our forward-looking statements.

Robert L. Williams: Statements made during this call that relate to future results and events are forward looking statements based on current expectations.

Robert L. Williams: Actual results and events could differ materially from those projected due to a number of risks and uncertainties, which are discussed in our web deck and SEC filings, we assume no obligation to update our forward looking statements now ill turn it over to Jeff.

Jeffrey W. Clarke: Now I'll turn it over to Jeff. Thanks, Rob. And thanks, everyone, for joining us. As I reflect back on this past year, it's increasingly clear that data and technology are essential to everything our customers do, and Dell is well positioned to thrive in this environment. Our FY 24 revenue was $88.4 billion, with operating income of $7.7 billion, and EPS of $7.13. In a year where revenue declined, we maintained our focus on operational excellence, delivering solid earnings per share and outstanding cash flow. FY 24 was one of those years that didn't go as planned.

Jeffrey W. Clarke: Thanks, Rob and thanks, everyone for joining us.

Jeffrey W. Clarke: As I reflect back on this past year. It is increasingly clear that data and technology are central to everything our customers do and Dallas is well positioned to thrive in this environment.

Jeffrey W. Clarke: Our FY 'twenty four revenue was $88 4 billion with operating income of $7 $7 billion and EPS of $7 13.

Jeffrey W. Clarke: In a year, where revenue decline, we maintained our focus on operational excellence delivering solid.

Jeffrey W. Clarke: Earnings per share and outstanding cash flow.

Jeffrey W. Clarke: Slide 24 was one of those years that didn't go as planned, but I really like how we navigated. It we showed our grit and determination by quickly adapting to a dynamic market focusing on what we can control and extending our model into the high growth AI opportunity.

Jeffrey W. Clarke: But I really like how we navigated it. We showed our grit and determination by quickly adapting to a dynamic market, focusing on what we could control and extending our model into the high-growth AI opportunity. Our operating margin rate improved as we delivered higher gross margins with disciplined operating expense management. We focused on cash and working capital improvements, generating $8.7 billion in cash flow from operations, and we improved our cash conversion cycle to negative 47 days at the end of the year, a 15-day improvement. We delivered on our capital allocation commitments, and we have returned $7 billion to shareholders since the initiation of our dividends.

Jeffrey W. Clarke: Our operating margin rate improved as we delivered higher gross margins with disciplined operating expense management.

Jeffrey W. Clarke: He's focused on cash and working capital improvements generating $8 $7 billion of cash flow from operations and we improved our cash conversion cycle to negative 47 days exiting the year, a 15 day improvement we delivered on our capital allocation commitments and we have returned $7 billion to shareholders since the initiation of our <unk>.

Jeffrey W. Clarke: Evidently earlier.

Jeffrey W. Clarke: Earlier today, we announced an increase to our dividend, which Yvonne will cover in more detail. We have positioned ourselves well in AI, and we've already started to benefit from the momentum we're seeing.

Jeffrey W. Clarke: Earlier today, we announced an increase to our dividend, which Ivan will cover in more detail.

Ivan: We have positioned ourselves well in AI.

Ivan: We've already started to benefit from the momentum we're seeing we saw strong demand continued for our AI optimized server portfolio, including our flagship parage exceed $96 80, which remains our fastest ramping solution in company history.

Jeffrey W. Clarke: We saw strong demand continue for our AI optimized server portfolio, including our flagship PowerEdge XE9680, which remains the fastest ramping solution in company history. We have just started to touch the AI opportunities ahead of us, including broader adoption of AI by enterprise customers and the projected growth in unstructured data, where we are well positioned with industry-leading storage solutions. We believe the long-term AI action is on-premises, where customers can keep their data and intellectual property safe and secure. PCs will become even more essential, as most day-to-day work with AI will be done on a PC.

Ivan: We have just started to touch the AI opportunities ahead of us, including broader adoption of AI by enterprise customers and the projected growth in unstructured data, where we are well positioned with industry, leading storage solutions.

Ivan: We believe the long term AIA action is on prem or customers can keep their data and intellectual property safe and secure Pcs will become even more essential as most day to day work with AI will be done on the PC. We remain excited about the long term opportunity and our CSD business look for us to make a number of new <unk>.

Jeffrey W. Clarke: We remain excited about the long-term opportunity in our CSG business. Look for us to make a number of new product and solution announcements at Dell Technology World in May that will help customers get started with AI and make it easy. Turning to Q4, we saw positive signs in the business as we exited the year, but enterprise and large customers remain cautious with their spend. Our Q4 execution was solid, given the environment, with ISG faring better than CSG. We delivered revenue of $22.3 billion with strong profitability and cash flow. Operating income was $2.1 billion. Diluted EPS was $2.20, and cash flow from operations was $1.5 billion.

Ivan: Product and solution announcements at Dell technology World in May that will help customers get started with AI and make it easy.

Ivan: Turning to Q4, we saw positive signs in the business as we exited the year, but enterprise and large customers remain cautious with their spend our.

Ivan: Our Q4 execution was solid given the environment with ISG faring better and CST, we delivered revenue of $22 3 billion with strong profitability and cash flow operating income was $2 1 billion.

Ivan: Diluted EPS was $2 20, and cash flow from operations was $1 5 billion NIH.

Jeffrey W. Clarke: In ISG, traditional server demand grew year over year and a third consecutive quarter of sequential growth, and storage demand grew above normal seasonality, though down year over year as expected. Storage recovery typically lags servers by a couple of quarters. Our strong momentum in the AI build-out continues as we believe Dell is uniquely positioned with our broad portfolio to help customers build Gen AI solutions that meet their performance, cost, and security requirements. In Q4, we saw strength across a wider range of customers and geographies with an expanding pipeline. AI optimized server orders increased by nearly 40% sequentially. We shipped $800 million of AI optimized servers, and our backlog nearly doubled sequentially, exiting the fiscal year at $2.9 billion.

Ivan: In ISG traditional server demand grew year over year, and a third consecutive quarter of sequential growth and storage demand grew above normal seasonality, though down year over year as expected.

Ivan: Recovery typically lag servers by a couple of quarters, our strong momentum in the AI Buildout continues as we believe <unk> is uniquely positioned with our broad portfolio to help customers build gen AI solutions that meet their performance cost and security requirements.

Ivan: In Q4.

Ivan: We saw strength across a wider range of customers and geographies with an expanding pipeline.

Ivan: AIA optimize several orders increased by nearly 40% sequentially, we shipped $800 million of AI optimized servers, and our backlog nearly doubled sequentially exiting the fiscal year at $2 9 billion.

Jeffrey W. Clarke: Demand continues to outpace GPU supply, though we are seeing H100 lead times improving. We are also seeing strong interest in orders for AI-optimized servers equipped with the next generation of AI GPUs, including the H200 and the MI300X. Most customers are still in the early stages of their AI journey, and they are very interested in what we are doing at Dell. We are helping them get started and work through their use cases, data preparation, training, and infrastructure requirements.

Ivan: Demand continues to outpace GPU supply, though we are seeing <unk> hundred lead times improving we.

Ivan: We are also seeing strong interest in orders for AI optimized servers equipped with the next generation of AIG to use including the H 200, and the <unk> 300 ex most customers are still in the early stages of their AI journey and they are very interested in what we're doing at del we're helping them get started and work through their use cases data preparation.

Ivan: Training and infrastructure requirements.

Jeffrey W. Clarke: They appreciate our perspective, our collaborative approach, and the capabilities we can provide to help them create holistic AI solutions, including our end-to-end portfolio, engagement with our engineering teams, consulting services, and financing options. Progress in this space won't always be linear, but we're excited about the opportunity ahead. In CSG, we remain optimistic about the coming PC refresh cycle as the PC install base continues to age, Windows 10 reaches end of life later next year, and the industry makes advances in AI-enabled architectures and software applications.

Ivan: Appreciate our perspective, our collaborative approach and the capabilities, we can provide to help them create holistic AI solutions, including our end to end portfolio engagement with our engineering teams consulting services and financing options.

Ivan: Yes in this space won't always be linear, but we're excited about the opportunity ahead.

Ivan: In <unk>, we remain optimistic about the coming PC refresh cycle as the PC installed base continues to age.

Ivan: Windows 10 reaches end of life later next year and the industry makes advances in AI enabled architectures and software applications.

Jeffrey W. Clarke: In Q4, we maintained pricing discipline and managed our costs well in an increasingly competitive environment, delivering solid operating margins. In the near term, the PC market is still soft, and we expect the recovery to push into the second half as enterprise and large customers remain cautious with their spend. We will continue to execute our CSG strategy, which has served us well across various economic cycles, focusing on commercial and high-end consumers with a strong attached motion. As we enter FY25, our strategy remains simple.

In Q4, we maintain pricing discipline and managed our cost well in an increasingly competitive environment delivering solid operating margins.

Ivan: In the near term the PC market is still soft and we expect that recovery to push into the second half as enterprise and large customers remained cautious with their spend we will continue to execute our <unk> strategy, which has served us well across various economic cycles, focusing on commercial and high end consumer with a strong.

Ivan: <unk> motion as we enter FY 'twenty five our strategy remains simple we are leveraging our strengths to extend our leadership positions and turning new opportunities and to incremental growth.

Jeffrey W. Clarke: We are leveraging our strengths to extend our leadership positions and turning new opportunities into incremental growth. We are well positioned with our unique operating model and a number of tailwinds. We are driving a disproportionate level of AI server growth, fueled by our technology leadership, engineering expertise, and service capabilities, and our traditional server business is gaining momentum. Our storage business will benefit from the exponential growth expected in unstructured data, and we are bullish on the coming PC refresh cycle, where we are well positioned. We are optimistic about FY25 and expect a return to growth above our long-term framework. Now, over to Yvonne, for more details about Q4. Thanks, Jeff.

Ivan: We are well positioned with our unique operating model and a number of tailwind we are driving a disproportionate level of AI server growth fueled by our technology leadership engineering expertise service capabilities and our traditional server business is gaining momentum.

Ivan: Our storage business will benefit from the exponential growth expected in unstructured data and we are bullish on the coming PC refresh cycle, where we are well positioned.

Ivan: We are optimistic about FY 'twenty, five and expect a return to growth above our long term framework now over to Ivan for more details about Q4.

Ivan: Thanks, Jeff.

Yvonne McGill: In Q4, we delivered revenue of $22.3 billion, down 11% with strong gross margins and lower operating expenses; gross margin was $5.5 billion and 24.5% of revenue, up 70 basis points with a mixed shift to ISG. We saw increased pricing pressure in Q4 in PCs and servers that remained focused on profitable opportunities, and we will continue to maintain that discipline and focus going forward. Operating expense was almost half a billion dollars lower than this time last year at $3.3 billion, or 14.9% of revenue, down 12% as we actively manage our overall spend.

Ivan: In Q4, we delivered revenue of $22 3 billion down 11% with strong gross margins and lower operating expense.

Ivan: Gross margin was $5 5 billion and 24, 5% of revenue up 70 basis points with a mix shift to ISG.

Ivan: We saw increased pricing pressure in Q4, and Pcs and servers that remained focused on profitable opportunities and we will continue to maintain that discipline and focus going forward.

Ivan: Operating expense was almost $5 billion lower than this time last year at $3 3 billion.

Or 14, 9% of revenue down 12% as we actively manage our overall spend.

Yvonne McGill: Operating income was 9.6% of revenue and $2.1 billion, down 1%, with lower operating expense and an increase in our gross margin rate, largely offsetting the revenue decline. Q4 net income was $1.6 billion, up 22%, driven by a lower tax rate and lower I&O. Diluted EPS was $2.20, up 22%.

Ivan: Operating income was nine 6% of revenue and $2 1 billion down 1% with lower operating expense and an increase in our gross margin rate largely offsetting the revenue decline.

Q4, net income was $1 6 billion up 22% driven by a lower tax rate and lower INR diluted EPS was $2 20.

Up 22%.

Yvonne McGill: ISG revenue was $9.3 billion, down 6% and up 10% sequentially. Servers and networking revenue was $4.9 billion, down 2% year over year and up 4% sequentially. Server order growth was strong, with the majority of our AI-optimized server orders going into backlog. Our AI mix of server demands increased again sequentially, given strong customer interest in Gen AI. We delivered storage revenue of $4.5 billion, down 10% year over year and up 16% sequentially, with better profitability as we increased our mix of proprietary storage software. Demand improved sequentially across the storage portfolio above our normal seasonality. ISG operating income was 15.3% of revenue and $1.4 billion, down 7%, driven by a decline in revenue and a lower gross margin rate, given the higher AI optimized server mix, partially offset by lower operating expense. Our Q4 CSG revenue was $11.7 billion, down 12%, largely driven by a decline in units. Commercial and Consumer revenue were $9.6 billion and $2.2 billion, respectively.

Ivan: ISG revenue was $9 3 billion down.

Ivan: Down, 6% and up 10% sequentially.

Ivan: Servers, and networking revenue was $4 9 billion down 2% year over year and up 4% sequentially.

Ivan: Several order growth was strong with the majority of our AI optimized server orders going into backlog.

Our AI mix of server demand increased again sequentially given strong customer interest in <unk>.

Ivan: We delivered storage revenue of $4 5 billion down 10% year over year and up 16% sequentially with better profitability as we increased our mix of proprietary storage software demand.

Ivan: Demand improved sequentially across the storage portfolio above our normal seasonality.

Ivan: ISG operating income was 15, 3% of revenue and $1 4 billion down.

Ivan: Down 7% driven by a decline in revenue and a lower gross margin rate given the higher AI optimized server mix, partially offset by lower operating expense.

Ivan: Our Q4, <unk> revenue was $11 7 billion down 12% largely driven by a decline in units.

Marshall and consumer revenue.

Ivan: $9 6 billion and $2 $2 billion respectively.

Yvonne McGill: CSG operating income was $0.7 billion, or 6.2% of revenue. Op Inc. was up 8%, driven by lower operating expense and higher gross margin rates partially offset by a decline in revenue. Earlier this week, we announced that Dell will have the broadest portfolio of commercial AI PCs in the industry and new XPS systems, which feature built-in AI acceleration with the addition of the Neural Processing Unit, or NPU, helping to improve performance, productivity, and collaboration. While PC demand recovery has pushed out, we remain bullish on the coming PC refresh cycle and the longer-term impact of AI on the PC market. Our Dell Financial Services originations were $8.4 billion for the year and $2.5 billion in Q4, down 19% driven by the sale of our consumer revolving portfolio and lower VMware resale. DFS managed assets ended the year at $14.4 billion, while the overall DFS portfolio quality remains strong, with credit losses near historically low levels.

<unk> operating income was <unk> 7 billion or six 2% of revenue.

Ivan: <unk> was up 8% driven by lower operating expense and higher gross margin rates, partially offset by a decline in revenue.

Ivan: Earlier this week, we announced that Dell will have the broadest portfolio of commercial AIP season, the industry and new Xps systems, which feature built in AI acceleration with an addition of the neural processing unit or NPL, helping to improve performance productivity and collaboration.

Ivan: <unk>.

Ivan: While PC demand recovery has pushed out we remain bullish on the coming PC refresh cycle and the longer term impact of AI on the PC market.

Ivan: Our Dell financial services originations were $8 4 billion for the year and $2 5 billion in Q4 down 19% driven by the sale of our consumer revolving portfolio and lower Vmware resale.

Ivan: DSS managed assets ended the year at $14 4 billion, while the overall DSS portfolio quality remained strong with credit losses near historically low levels.

Yvonne McGill: Turning to cash flow and balance sheets, our Q4 cash flow from operations was $1.5 billion, primarily driven by profitability. We ended the quarter with $9 billion in cash and investments, down $0.9 billion sequentially, driven by capital returns of $1.1 billion and debt paydown partially offset by free cash flow generation. And we reached our core leverage target of 1.5x by exiting the year. During the quarter, we repurchased 11.2 million shares of stock at an average price of $74.67 and paid a $0.37 per share quarterly dividend.

Ivan: Turning to cash flow and balance sheet.

Ivan: Our Q4 cash flow from operations was $1 5 billion, primarily driven by profitability.

Ivan: We ended the quarter with $9 billion in cash and investments down 0.9 billion sequentially driven by capital returns of $1 1 billion and debt Paydown, partially offset by free cash flow generation and we reached our core leverage target of one five X exiting.

Ivan: Sure.

Ivan: During the quarter, we repurchased 11 2 million shares of stock at an average price of $74 67.

Ivan: And paid a <unk> 37 per share quarterly dividend and earlier today, we announced a 20% increase in our annual dividend to $1 78 per share well above our long term financial framework and a testament to our confidence in the business and our ability to generate strong cash flow.

Yvonne McGill: And earlier today, we announced a 20% increase in our annual dividend to $1.78 per share, well above our long-term financial framework and a testament to our confidence in the business and our ability to generate strong cash flow. Turning to guidance. There are several trends that give us confidence in our view of FY25. First, the momentum around AI. Second, the improvement we're seeing in traditional servers. And third, the aging PC install base that is due for a refund. The macro environment, however, is leading customers to be more thoughtful about their infrastructure budgets, particularly in the first half. Against that backdrop, we expect Dell Technologies' FY25 revenue to be in the range of $91 and $95 billion, with a midpoint of $93 billion and 5% growth above our long-term value creation framework.

Ivan: Turning to guidance there are several trends that give us confidence in our view of FY 'twenty five.

Ivan: First the momentum around AI.

Ivan: The improvement we're seeing in traditional servers and third the aging PC installed base.

Ivan: That is due for a refresh.

The macro environment, however is leading customers to be more thoughtful about their infrastructure projects, particularly in the first half.

Ivan: Against that backdrop, we expect Dell technologies FY 'twenty five revenue to be in the range of 91% to 95 billion.

Ivan: With a midpoint of <unk> 93 billion and 5% growth.

Ivan: Above our long term value creation framework.

Yvonne McGill: We expect ISG to grow in the mid-teens fueled by AI with a return to growth in traditional servers and storage and our CSG business to grow in the low single digits for the year. We expect the combination of ISG and CSG to grow 8% at the midpoint, offset by a decline in other business. Given the higher mix of AI-optimized servers, inflationary input costs, and the current competitive environment, we do expect our gross margin rate to decline roughly 100 basis points, will maintain our cost discipline, and expect OPEX to be roughly flat. We expect I&O of roughly $1.4 billion. Diluted non-GAAP EPS is expected to be $7.50 plus or minus 25 cents, up 5% at the midpoint, assuming an annual non-GAAP tax rate of 18%.

Ivan: We expect ISG to grow in the mid teens fueled by AI with a return to growth in traditional servers and storage and our CSD business to grow in the low single digits for the year.

We expect the combination of ISG and CST to grow 8% at the midpoint offset by a decline in other businesses.

Ivan: Given the higher mix of AI optimized servers inflationary input costs and the current competitive environment.

We do expect our gross margin rate to decline roughly 100 basis points.

Ivan: We will maintain our cost discipline and expect opex to be roughly flat.

Ivan: We expect <unk> of roughly $1 4 billion.

Ivan: Diluted non-GAAP EPS is expected to be $7, 50, plus or minus <unk> 25.

Ivan: Up 5% at the midpoint, assuming an annual non-GAAP tax rate of 18%.

Yvonne McGill: For Q1 of fiscal 25, we expect Dell Technologies revenue to be in the range of $21 and $22 billion, with a midpoint of $21.5 billion, up 3%. We expect the combination of ISG and CSG to grow 5% at the midpoint, with ISG up in the mid to high teens. Gross margin rates will be lower sequentially given seasonally lower storage mix and a higher AI optimized server mix. OpEx will be up slightly with the typical season out. The T1 diluted share count should be between 723 and 727 million shares.

Ivan: For Q1 of fiscal 'twenty, five we expect Dell technologies revenue to be in the range of 21% and $22 billion with.

Ivan: With a midpoint of 21 5 billion up 3%.

Ivan: We expect the combination of ISG and <unk> to grow 5% at the midpoint with ISG up in the mid to high teens.

Ivan: Gross margin rate will be lower sequentially, given seasonally lower storage mix and a higher AI optimized server mix.

Ivan: Opex will be up slightly with typical seasonality.

Ivan: Q1 diluted share count should be between 723 and 727 million shares.

Unknown Executive: Diluted non-GAP EPS is expected to be $1.15 plus or minus $0.10. In closing, we are optimistic and expect a return to growth in FY25 and beyond with a number of tailwinds. We have strong conviction in the growth of our TAM over the long term, and we are committed to delivering against our long-term financial framework with average annual revenue growth of 3 to 4 percent, diluted EPS growth of at least 8 percent, and a net income to adjusted free cash flow conversion of 100 percent or better over time. We are also committed to returning 80% or more of our adjusted free cash flow to shareholders over the long term. We're excited about the future and confident in our ability to create meaningful long-term value for all our key stakeholders. Now, I'll turn it back to Rob to begin the Q&A.

Ivan: Diluted non-GAAP EPS is expected to be $1, 15, plus or minus 10.

Ivan: In closing, we are optimistic and expect a return to growth in FY 'twenty, five and beyond with a number of tailwind.

Ivan: We have strong conviction in the growth of our Tam over the long term and we are committed to delivering against our long term financial framework with average annual revenue growth of 3% to 4% diluted EPS growth of at least 8%.

Ivan: And our net income to adjusted free cash flow conversion of 100% or better over time.

Ivan: We are also committed to returning 80% or more of our adjusted free cash flow to shareholders over the long term.

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

Unknown Attendee: Thanks, Yvonne. Let's get to the Q&A. We ask that each participant asks one question to allow us to get to as many of you as possible. Now, let's go to the first question.

Robert L. Williams: Thanks, Yvonne, let's get to Q&A, we ask that each participant ask one question to allow.

Robert L. Williams: To get to as many of you as possible, let's go to the first question.

Robert L. Williams: Okay.

Jeffrey W. Clarke: Great. Thanks, guys, for taking my question. I just wanted to go back to a comment that Jeff made in the prepared remarks about the unstructured data opportunity going forward. I just would love to kind of get a sense for how you're thinking about, you know, the storage opportunity as AI broadens out in your server portfolio, and how should we be thinking about the timing? I know, generally speaking, storage kind of follows servers by one to two quarters, but, you know, with the AI opportunity, did that change in any way? And how are you thinking about leveraging your existing portfolio to take advantage of all this data that's being created? Sure.

Thank you.

Robert L. Williams: We will take our first question from David <unk> with.

Robert L. Williams: UBS.

David: Great. Thanks, guys for taking my question I just wanted to go back to a comment that Jeff made in the prepared remarks about.

David: The unstructured data opportunity going forward, just would love to kind of get a sense of how youre thinking about the storage opportunity as AI broadens out and your share of the portfolio and how should we be thinking about the timing I know generally speaking storage kind of follow servers by one to two quarters, but with DAA opportunity does that change in any way.

David: How youre thinking about leveraging your existing portfolio to take advantage of all this data that's being created.

Jeffrey W. Clarke: Thanks for the question, David. I will look at it, and maybe in the simplest terms. To feed these GPUs with the data they need to train models, fine-tune models, and ultimately drive them into production via inference is data-intensive, and we look at that sort of architecture that these things need to be fed and fed with incredibly high bandwidth to make sure the GPU engines aren't idle. And when we reflect on what's happening in the marketplace with training, a lot of training initially has been done in text. And as we get to richer data sets, and we move into enterprise, which we think the big opportunity is as AI tracks to where the data is created, which is on-premises or out at the edge of the network, it lends itself to a growing storage opportunity.

Speaker Change: Sure. Thanks for the question David.

Speaker Change: Look at it.

Speaker Change: And maybe in the simplest terms.

Speaker Change: To feed these gpus with the data they need to train models fine tuned models and ultimately drive them into production via influence is data data intensive.

Speaker Change: And we look at the sort of architecture that these things need to be fed and set an incredibly high bandwidth to make sure the GPU engines arent idle.

Speaker Change: And when we reflect on what's happening in the marketplace with training a lot of training initially has been done in Texas and as we get to Richard datasets, and we move into enterprise, which we think the big opportunity is as AI tracks to where the data is created which is on prem or out at the edge of the network. It lends itself to a growing.

Speaker Change: Storage opportunity for us and I really like our portfolio I think about what we've done with power scale recently launched the up 17% to 10, where would increase the right performance. We've increased the read performance. We've increased the performance around some of these high concurrency latency sensitive workloads.

Jeffrey W. Clarke: And I really like our portfolio. I think about what we've done with PowerScale, recently launched the F710 and 210, where we've increased the write performance, we've increased the read performance, and we've increased the performance around some of these high concurrency, latency-sensitive workloads. It's aligned with what is going to be a growing need as this gets deployed inside the enterprise. And I think the same is true about our object scale product, the XF960.

Speaker Change: It's aligned with what is going to be the growing need as this gets deployed inside the enterprise and I think the same is true around our object scale product. The excess 90 60. These are the types of assets and capabilities that our customers are going to need as they really move from training to inference out into.

Jeffrey W. Clarke: These are the types of assets and capabilities that our customers are going to need as they really move from training to inference out into what we call the real production world. And we like our portfolio. You may have seen an announcement from us early in the quarter around a super pod certified with Ethernet. We think that is an absolutely critical capability for bringing storage into the enterprise. Many, and most, enterprises are Ethernet based.

Speaker Change: To what we call the real production World and we like our portfolio you may have seen announced announcement from us early in the quarter around soup, a superpower certified with Ethernet.

Speaker Change: We think that is absolutely critical capability of bringing storage into the enterprise.

Speaker Change: Many and most enterprises are Ethernet base, that's a huge opportunity being in the marketplace with that and the new storage products that I referenced I think sets up quite well to be able to feed these.

Jeffrey W. Clarke: That's a huge opportunity. Being in the marketplace with that and the new storage products that I referenced, I think HP sets up quite well to be able to feed these new workloads with high-performance storage, which we tend to be the leader in. All right, thanks Jeff for the call. That helps, of course.

Speaker Change: New workloads.

Speaker Change: High performance storage, which we tend to be the leader.

Speaker Change: Great. Thanks.

Speaker Change: Data for the color.

Speaker Change: Of course.

Speaker Change: Okay.

Speaker Change: And we will take our next question from Erik Woodring with Morgan Stanley.

Jeffrey W. Clarke: Super guys, thanks so much for taking my question. Jeff, I was wondering if you could expand maybe a bit on some of the qualitative characteristics around your AI optimized server backlog, order, and pipeline, meaning, you know, the mix of tier two cloud customers that you've talked about in the past versus enterprises, you know, how that looks from a dollar or client count perspective, if or what you are hearing from any sovereigns, linearity in the quarter, and any kind of quality qualitative details that Thanks.

Erik William Richard Woodring: Super guys. Thanks, so much for taking my question.

Erik William Richard Woodring: Jeff I was wondering if you could expand maybe a bit on some of the qualitative characteristics around your AI optimized server backlog of order and pipeline, meaning the mix of tier two cloud customers that you've talked about in the past versus enterprises, how that looks like from a dollar or a client count perspective if.

Erik William Richard Woodring: Or what you are hearing from any sovereigns linearity in the quarter and any kind of call. It qualitative details that you could share with us. Thanks, so much.

Jeffrey W. Clarke: Sure there is a lot.

Jeffrey W. Clarke: Sure, there's a lot to answer there. Let me start with, maybe, the demand. And you heard us talk about the demand growing sequentially 40%, and that demand was across a rich customer set; the number of CSPs grew, and the number of enterprise buyers grew. So for us, two important indicators were less concentrated this quarter than the previous quarter, with more customers in both the CSP category and the enterprise category buying from us, and that demand was spread across DH 100, H800, the H200, and the MI300X.

Jeffrey W. Clarke: Excellent.

Speaker Change: Answer there, let me start with maybe the demand.

Speaker Change: You heard us talk about the demand up sequentially, 40%.

Speaker Change: And that demand was across our rich customer set the number of Csp's grew the number of enterprise buyers group.

Speaker Change: So for us two important indicators.

Is less concentrated this quarter than the previous quarter with more customers in both the CSP category and the enterprise category volume from Us.

Speaker Change: That demand was spread across.

Speaker Change: The H 100.

Speaker Change: H 800.

Speaker Change: <unk> 200, and the 300 <unk>. So we sold a broad portfolio or a broad portfolio of silicon diversity into the marketplace for our customers and that's reflected in our backlog.

Jeffrey W. Clarke: So we sold a broad portfolio or a broad portfolio of silicon diversity into the marketplace for our customers. That's reflected in our backlog. And the backlog is hard to parse in the sense of a single lead time because it's now a Complex Backlog with Multiple Variants, the four that I mentioned, across deployments needed today, deployments needed through the balance of the quarter and or the balance of the first half and the balance of the second half. So we have delivery dates planned for new data center capabilities or new data center buildout. So,

Speaker Change: And the backlog is hard to parse in the sense of a single lead times gives us now a.

Speaker Change: Complex backlog with multiple variance before that I mentioned.

Speaker Change: Across deployments needed today deployments needed through the balance of the quarter and our balance of the first half and balance of the second half. So we have delivery dates planned on new data center capabilities or new data center build out.

Speaker Change: So.

Jeffrey W. Clarke: We're excited about that. Probably another important characterization about the demand and how the backlog looks is that the pipeline grew. We talked about our 5-quarter pipeline last call. The 5-quarter pipeline grew this quarter as well. So who we sold to grew.

Speaker Change: We're excited about that probably another important characterization about the demand and how the backlog looks.

Speaker Change: Is.

Speaker Change: The pipeline grew we talked about our five quarter pipeline last.

Paul the five quarter pipeline grew this quarter as well, so who we sold to grow our group the potential of who we're going to sell two grew the number of shipments that we had during the quarter grew in the backlog and we expect to ship more in Q1 than we shipped in Q4.

Jeffrey W. Clarke: The potential of who we're going to sell to grew. The number of shipments that we had during the quarter grew, and the backlog grew. And we expect to ship more in Q1 than we shipped in Q4. I hope that was the color that you're looking for, and maybe the last part of your question is, there's certainly a lot of energy and opportunity around these emerging nation-state opportunities, building out AI and rebuilding their economies around these modern technologies.

Speaker Change: I hope that was the color that you were looking for and maybe the last part of your question is there's certainly a lot of energy and opportunity around these emerging nation state opportunities building out AI and.

Speaker Change: Rebuilding their economies around these modern technologies that we believe we are in those discussions we believe that's a very untapped opportunity in the marketplace and we're certainly with our geographic coverage and our go to market coverage I believe we're in the game.

Jeffrey W. Clarke: We believe we're in those discussions. We believe that's a very untapped opportunity in the marketplace, and we're certainly, with our geographic coverage and our go-to-market coverage, believe we're in the game. Beautiful, thank you.

Speaker Change: Yes.

Speaker Change: Beautiful. Thank you thanks, Eric.

Speaker Change: Well take our next question from Aaron Rakers with Wells Fargo.

Jeffrey W. Clarke: Thanks, Eric. Yeah, thanks for taking the question and congrats on the good results. I'm guessing getting away from maybe the AI because I'm sure a lot of people are focused there. But I'm curious about your comments on the traditional server market. I know some of the Gartner data suggests we're still seeing overall units down quite a bit on a year over year basis, and servers offset by AI. But what's giving you the confidence or the visibility that you're starting to see the traditional server market recover? And just, you know, any thoughts on the pace of that as we look through the calendar? Well, maybe a couple of data points. I'm sure Yvonne will add to this. The traditional server business grew year over year in demand. It was the third consecutive quarter of sequential growth. We look into the pipeline for the coming year, and it continues to improve. This is the longest digestion period that I can recollect in this industry.

Aaron Christopher Rakers: Yes, thanks for taking the question and congrats on the good results.

Aaron Christopher Rakers: I guess getting away from maybe the AI because I'm sure a lot of people are focused there, but I'm curious in your comments on the traditional server market.

Aaron Christopher Rakers: I know some of the Gartner data suggests we're still seeing overall unit down quite a bit on a year over year basis in servers offset by AI, but.

Aaron Christopher Rakers: What's giving you the confidence or the visibility that you are starting to see the traditional server market recover.

Aaron Christopher Rakers: Just any thoughts on the pace of that as we look through the calendar year.

Speaker Change: Well, maybe a couple of data points that I'm sure Obama will add to this but I think we mentioned in our talking points.

Speaker Change: The traditional server business grew year over year in demand in Q4, it was the third consecutive quarter of sequential growth.

Speaker Change: Looking to the pipeline in the coming year and it continues to improve this is the longest digestion period that I can recollect in this industry.

Jeffrey W. Clarke: Everything is setting up for an investment in traditional servers to run traditional server workloads, which are very different than accelerated AI work. So our line of sight into what our customers need gives us confidence that we believe that traditional servers are recovering. The question will be the rate, and at what rate will they recover?

Speaker Change: Everything is setting up for an investment in traditional servers to run traditional server workloads, which are very different than these accelerated AI workloads.

Speaker Change: Our line of sight.

Speaker Change: Into what our customers need gives us confidence that we believe that traditional servers or recovery.

Speaker Change: The question will be rate what rate will they recover but we're optimistic.

Jeffrey W. Clarke: But we're optimistic. A long digestion period, those workloads are still very important for running mission critical workloads in many of our largest customers all the way down to small and medium businesses. The performance that we exit or the momentum that we exited the year with, I think gives us the ability to look going forward and, our own internal modeling says that our traditional server market is experiencing modest growth on a year-over-year basis. Yvonne, anything?

Speaker Change: Long digestion period, those workloads still very important running mission critical workloads in many of our largest customers all the way down to small and medium businesses.

Speaker Change: Performance that we exit or the momentum that we exited the year with I think gives us the ability to look going forward.

Speaker Change: Our on internal modeling says that our traditional server market is.

Speaker Change: Modest growth on a year over year basis.

Jeffrey W. Clarke: No, I think you had it. And it's really just the moving forward into the next year and the continuation of that, of the trend we've been seeing after three quarters in a row. Excellent. Thank you. Thanks, Aaron, www.microsoft.com. www.microsoft.com.

I think I think you've heard it and it's really just the moving forward into into the next year and the continuation of that.

Speaker Change: A trend we've been seeing after the three quarters in a row of growth.

Speaker Change: Excellent. Thank you thanks.

Speaker Change: Thanks Aaron.

Speaker Change: Okay.

Speaker Change: And we will take our next question from Tony.

Tony: <unk> with Bernstein.

Yvonne McGill: Yes, thank you; I wanted to explore the marching question a little bit. I think he talked about growth margins being down sequentially. And the first cited reason was higher AI, you know, AI. AIService with less than 5% of your revenues this quarter, probably will be next quarter. So for 5% of your revenues to have the impact on Gross Margins that you're calling out, I would suggest that AI server margins are really low, so can you explicitly address that mat, where AI server margins are relative to company average gross margin? And can you talk about what you think about PC margins in fiscal Q1 and for fiscal 25? Thanks.

Tony: Yes. Thank you I just wanted to explore the margin question a little bit.

Tony: I think you talked about gross margin being down sequentially.

Tony: The FERC cited reason was higher AI mix.

Tony: AI with Blackstone.

Tony: With less than 5% of your revenues this quarter, probably will be next quarter.

Tony: 5% of your revenues to have.

Tony: And the impact on gross margins that youre, calling out with suggest that AI <unk> margins are really low.

Tony: So in U a.

Explicitly address.

Tony: That math.

Tony: Where AI server margins are relative to company average gross margin.

Tony: And can you talk about how you think about the margins.

Tony: In fiscal Q1.

Tony: And for fiscal 'twenty five thank you.

Yvonne McGill: Thanks, Tony. You know, we obviously, you know, now we closed out FY 24 with really strong profitability. And moving into Q1, there's a number of factors that we're looking at; we've got CSG and ISG combined and expect them to grow about 5% year over year at the midpoint. We have total revenue at the midpoint expected to grow and deliver at $21.5 billion, or up 3%. ISG is expected to grow in the teens, driven by traditional and AI servers. CSG is expected to be down in the low single digits, so minus three percent year over year.

Speaker Change: Thanks, Tony.

Speaker Change: We obviously know now we close out FY 'twenty, four with really strong profitability and moving into Q1, there's a number of factors that we're looking at we've got <unk> combined.

Speaker Change: And expect them to grow about 5% year over year at the midpoint. We are total revenue at the midpoint expected to grow and deliver at $21 5 billion or up 3%.

Speaker Change: ISG is expected to grow in the teens driven.

Speaker Change: Driven by traditional and AI servers.

Speaker Change: ESG is expected to be down in the low single digits.

Speaker Change: Minus three about year over year, and then we get to gross margin rate, which I think is the key to your question. So we expect that to be down quarter on quarter about 200 basis points.

Yvonne McGill: And then we get to gross margin rate, which I think is the key to your question. So we expect that to be down quarter on quarter, about 200 basis points. Now, what is supporting that expectation? We are seasonally lower in storage next. So we see that every Q4 to Q1. So that's one of the drivers.

Speaker Change: What is supporting that.

Speaker Change: That expectation, we are seasonally lower in storage next so that's we see that every Q4 to Q1. So that's one of the drivers.

Yvonne McGill: We will have a higher AI optimized server mix in Q1. Jeff already talked about that in question. And then, holistically, we have another few influences on the margin. We've got an inflationary component cost environment. We're moving from deflationary last year to inflationary in the year that we are in right now. And then, you know, I'd say there's more competitive pressure. We're seeing more and more of that.

Speaker Change: It will have higher AI optimized server mix in Q1, Jeff already talked about that in question and then Holistically. We have another another few influences on on the margin and we've got an inflationary component cost environment.

We're moving from deflationary last year to inflationary and the year that we are in right now.

Speaker Change: And then I.

Speaker Change: I'd say, there's more competitive pressure, we're seeing more and more of that and so that's that's what we are.

Yvonne McGill: And so that's what we expect to be impacting gross margin, and the operating margin rates will be down quarter over quarter due to all the items I just mentioned. But for the year, we're expecting improved performance as the quarters progress, so I think we're starting this way with what we're seeing now. But again, we expect this to continue to progress as the year progresses. Good All right. Thanks, Tony. Yeah, good afternoon, guys.

Speaker Change: Expect to be impacting the gross margin and operating.

Speaker Change: Operating margin rate.

Speaker Change: We'll be down quarter over quarter due to all of the items I just mentioned, but for the year, we're expecting improved performance as the quarters progress.

Speaker Change: And I think thats.

Speaker Change: We're starting this way with what we're seeing now, but again, we expect us to continue to progress.

Speaker Change: As Sierra desk.

Speaker Change: Alright, Thank you Tony.

Speaker Change: We will now take our next question from Santa Barbara with loop capital.

Yvonne McGill: Thanks for taking the question. Congratulations on Gen AI and the customer base, and I was just interested, Jeff, in getting the company's view on the opportunity over time to maybe participate in with the hyperscalers. And one of the reasons that I'm thinking of asking this is that what we're hearing as we get, you know, maybe into calendar 25, B 100 of volume. Hyperscale is a real desire, sort of get fully integrated racks delivered, fully integrated racks, something that the OEMs like yourself would do well. I would maybe be in your warehouse.

Santa Barbara: Yes. Good afternoon, guys. Thanks for taking the question congrats on that.

Santa Barbara: On the good results and solid execution.

Santa Barbara: I guess I guess I'll use my question just on Gen, AI and customer base and.

Speaker Change: Just interested in getting the company's view on the opportunity.

Speaker Change: Over time to maybe participate in.

Speaker Change: With the Hyperscale and what are the reasons for that.

Speaker Change: Im thinking to ask this is that what we're hearing as.

Speaker Change: As we get yes.

Navy into calendar 'twenty, five b, well 100 volume.

The Hyperscale has real desire.

Speaker Change: So to get fully integrated rach delivered.

Speaker Change: Fully integrated Iraq, something that the Oems like yourself would be well.

Speaker Change: Maybe in your warehouse. So just wanted to get your thoughts on that and that's it for me. Thanks a lot.

Jeffrey W. Clarke: So just wanted to get your thoughts on that and that. Sure, I'll see if I can address the question. I mean, the first thing you probably noticed in our web deck is that we increased our view of the opportunity marketplace to $152 billion. 20% CAGR going forward to 2027. And quite frankly, that's probably a lagging indicator. It's still catching up.

Speaker Change: Sure I'll see if I can address the question I mean, the first thing you probably noticed in our web deck as we increased our view of the opportunity in the marketplace to $152 billion.

Speaker Change: 90% CAGR going forward to 2027, and quite frankly, that's probably a lagging indicator. It's still catching up we think demand continues to be ahead of that primarily driven as the overall desire demand for the computational components to do AI exceed.

Jeffrey W. Clarke: We think demand continues to be ahead of that, primarily because the overall desired demand for the computational components to do AI exceeds the supply picture. And quite frankly, it's refreshing to see we have a high growth category here. That growth is happening, certainly in the public cloud, but increasingly so in enterprises, which is, certainly, given our reach and the vast capabilities that we have in business to help customers adopt AI into their business flows, I think it's a big opportunity for us. It's where the data is stored.

Speaker Change: The supply picture and quite frankly, it's refreshing to see we have a high growth category here that.

Speaker Change: That growth is happening certainly in the public cloud.

Speaker Change: But increasingly more so than enterprises, which is certainly.

Speaker Change: Given our reach and the vast capabilities that we have in business to help customers adopt AI into their business flows I think it's a big opportunity for us, it's where the data is 83% of all data is on Prem.

Jeffrey W. Clarke: 83% of all data is on-premises. AI moves to the data. More data will be created outside of the data center going forward than inside the data center today. That's going to happen at the edge of the network, a smart factory, an oil platform, a deep mine, all variations of this.

Speaker Change: AI moves to the data more data will be created outside of the data center going forward that inside the data center today, that's going to happen at the edge of the network Smart factory.

Speaker Change: And oil Derrick or platform a deep mine all variations of this we believe AI will.

Jeffrey W. Clarke: We believe AI will ultimately get deployed next to where the data is created driven by latency. And when we think about this, the opportunity is to get the training and fine tuning, which is well underway now. But I mentioned earlier this notion about AI in production, inferencing, running the actual tool in production to get the outcomes that businesses want. We believe that's the enlarged or the untapped large opportunity, get my words in the right order, going forward for us. So this notion of enterprise, our enterprise customer base is growing; we sell to education customers, manufacturing customers, governments. We've sold to financial services, business, engineering, and consumer services companies.

Speaker Change: Ultimately gets deployed next to where the data is created driven by latency.

Speaker Change: And we think about this the opportunity is yet the training and fine tuning, which is well underway now, but I mentioned earlier this notion about AI and production inferencing running the actual tool in production to get the outcomes that businesses want we believe thats the unlocking the untapped long.

Speaker Change: <unk> opportunity to get my words in the right order going forward for us. So this notion of enterprise our enterprise customer base growing we sold to education customers manufacturing customers governments, we've sold the financial services business engineering and consumer services companies, we're seeing vast deployments.

Jeffrey W. Clarke: They're seeing massive deployments, proving out the technology, and in some cases, they are using the tooling of the public cloud. But then they quickly find that they want to run AI on-premises because they want to control their data. They want to secure their data.

Speaker Change: Proving out the technology and some cases are using the tooling of the public cloud.

And then they quickly finds that they want to run AI on primm, because they want to control their data they want to secure their data it's their IP and they want to run domain specific and process specific models to get the outcomes. They're looking for hopefully that gave you a rich context to what we're seeing across the customer base the opportunity for us going forward.

Jeffrey W. Clarke: It's their IP, and they want to run domain-specific and process-specific models to get the outcomes they're looking for. Hopefully, that gave you a rich context of what we're seeing across the customer base, and the opportunity for us going forward. And this is at node scale, rack scale, and data center scale. Thanks a lot.

Speaker Change: And this is at node scale rack scale and data center scale.

Speaker Change: Yes, Thanks, a lot thanks for the call another thank you.

Speaker Change: Very welcome.

Speaker Change: We will take our next question from <unk> <unk> with Bank of America.

Jeffrey W. Clarke: Thanks for the call, Amanda. Thanks. You're very welcome. Thank you so much.

Speaker Change: Alright, thank you so much.

Speaker Change: You called out pricing pressure and AI servers.

Speaker Change: How are you responding to that.

Unknown Attendee: You called out pricing pressure and AI servers. How are you responding to that?,,,,,,,,, If you could just clarify this acceleration in the ISG world that we're looking at.

Speaker Change: You think that youre, leaving any revenue or orders on the table with the financial returns were not acceptable or are we not anywhere close to that point yet.

Speaker Change: You could just clarify this acceleration in ISG growth that way.

Speaker Change: Okay got it.

Jeffrey W. Clarke: Next quarter, you know, this quarter's server revenue growth was still relatively weak with the servers and networking despite a very strong 800 million in AI servers. So just hoping to think through how you're expecting the AI or non-AI. Maybe a couple of market, Scripters, and then Yvonne can weigh in on the financial impact. Well, the competitive market for PCs increased quarter over quarter, and particularly in low price bands. So, when we made remarks about us being selective or focusing on profitability, that's how you decode it in the PC business, that this sub-$500 market opportunity is certainly less profitable. And we were much more guarded about how much we participated in that, which led to our share; we actually took share in mid-range and high-end price bands and mature markets. So I think that's a component of this. When I look at AI and then the comments around AI and margins, are margins actually improved quarter over quarter with AI? That's encouraging. Are there still less than traditional servers on a rate basis?

Quarter.

Speaker Change: This quarter, it's over revenue growth.

Speaker Change: We are still relatively weak within servers and networking to slide.

Speaker Change: So very strong 800 million in AI servers. So just hoping to think through how you're expecting the AI or AI or component of that and that ISG growth overall next quarter. Thank you.

Speaker Change: Maybe a couple of market.

Speaker Change: The scriptures of van can weigh in on the financial impact.

Speaker Change: Competitive market in Pcs increased quarter over quarter, and particularly in low price Vince.

Speaker Change: So when we made remarks about us being selective or focusing on profitability, that's how to decode it and the PC business is that this the sub 500 dollar market opportunity.

Speaker Change: It is certainly less profitable and we are much more guarded of how much we participated which led to our share we actually took share in midrange and high end price plans in mature markets.

So I think thats a component of this when I look at AI and the comments around AI and margins, our margins actually improved quarter over quarter with AI.

Speaker Change: That's an encouraging sign.

Still less than traditional servers on a rate basis.

Jeffrey W. Clarke: But improving; it's the second consecutive quarter of improvement. So that's some color about what's happening in the marketplace. We did see in traditional servers that in large bids, the competitiveness did increase quarter over quarter in Q4. We expect that to continue. That's not uncommon, Yvonne?

Speaker Change: But improving into the second consecutive quarter of improvement. So that's some color about what's happening in the marketplace.

Speaker Change: We did see in traditional servers that in large bids that competitiveness did increase quarter over quarter. In Q4, we expect that to continue that's not uncommon.

Speaker Change: Yes.

Yvonne McGill: Yeah, no, I would, you know, as we look at the holistic server portfolio for Q1, we're seeing obviously strong growth driven by the AI servers. But we're seeing growth, as we've talked about sequential growth over traditional servers. Yeah, that's close.

Speaker Change: As we look at.

Speaker Change: The holistic server portfolio for Q1.

Speaker Change: We're seeing obviously strong growth driven by the.

Speaker Change: AI servers.

Speaker Change: But we are seeing.

Speaker Change: Growth as we've talked about sequential growth over traditional servers.

Yvonne McGill: We're not, you know, we're not seeing, or expecting growth to return year over year in traditional servers, but it's a very competitive market, as Jeff just mentioned. And you know, what I'm really excited about is the other thing that Jeff talked about, really getting more and more value out of our GPU servers, really as we move more and more into the enterprise and get more richly configured, more services, et cetera, attached. So that's the path, storage, deployment services, pro support, our consulting services, networking, so the entire basket of the solution.

Speaker Change: It's close we're not we're not seeing we're seeing exciting growth to return year over year and in traditional servers that it's a very competitive market as Jeff just mentioned.

Speaker Change: What I'm really excited about is the other thing that Jeff talked about on really getting more more and more value out of our out of our GPU servers, and really with as we move more and more into the enterprise and get more richly configured more services et cetera are catalyst capacity storage.

Speaker Change: Claimants services <unk> support our consulting services networking selling the entire basket of the solution, but it is a competitive environment out there and we will continue to maximize our opportunity, yes, so modest growth in traditional stronger growth in an AI enabled servers and.

Yvonne McGill: But it is a competitive environment out there, so, you know, we'll continue to maximize our opportunities. Yeah, so modest growth in traditional, stronger growth in AI-enabled servers, and opportunities with storage as the year progresses. Thanks, Wamsi. Hi, thanks for taking my question. And Yvonne and Jeff, thanks. Yvonne, maybe this is more for you, just how should we think about the higher memory costs playing through the cross margins, particularly in the fourth quarter itself that you reported, and then as we think through fiscal 25, are the headwinds more in the sort of early quarters, and how much of that is sort of baked in in relation to a headwind? 5 guide that you gave me for free, Thanks.

Speaker Change: And opportunity with stores is the year for growth.

Speaker Change: Thanks Ravi.

Speaker Change: Okay.

Speaker Change: We will now take our next question from stomach Chatterji with J P. Morgan.

Samik Chatterjee: Hi, Thanks for taking my question and Jeff Thanks for all the comments.

Samik Chatterjee: Do you want maybe this is more for you just how should we think about the higher memory costs.

Samik Chatterjee: So the gross margins, but again in the fourth.

Speaker Change: Fourth quarter. Thank you.

Speaker Change: And as a team so fiscal 'twenty volume.

Speaker Change: And we had the headwinds more and be sort of early quarter. Then how much of that is sort of baked in relation to the headwind of the fiscal 'twenty Guide that you gave 400 basis points moderation in gross margin. Thank you.

Yvonne McGill: We have taken into account all the information that we have available, and it's embedded that into the guide, right? So we are expecting it to be an inflationary environment going forward. And we will price that to the best of our ability in the market. Obviously, it's a competitive market. So the guide embeds those expectations. And, you know, I don't know, Jeff, if there's anything else you would add to that.

Speaker Change: Thanks.

Speaker Change: We have taken into account all the information that we have available and is embedded that into the guide right. So we are expecting it to be an inflationary environment.

Speaker Change: And going forward and we will we will price that thus far our ability in the market. Obviously, it's a competitive market. So the guide embeds those those expectations and.

Speaker Change: I don't know, Jeff there is anything else you would add to that.

Speaker Change: Pat.

Jeffrey W. Clarke: Well, we know we have planned that into the guidance that we've provided both for the quarter and the year and how we're pricing deals. We have visibility into it, and we're doing what we need to do to maximize our profitability. Good. Thanks, Simon.

Jeffrey W. Clarke: <unk> not at all with what we know we have planned that into the guidance that we provided both for the quarter in the year and how we're pricing deals we have so its ability to it and we're doing what we need to do to maximize our profitability.

Jeffrey W. Clarke: Alright.

Speaker Change: Thanks, Amit.

Speaker Change: Yeah.

Okay.

Speaker Change: And we will now take our next question from Amit <unk> with Evercore.

Jeffrey W. Clarke: Thanks for taking my question and congrats on a nice set of numbers here. I'll stick with the AI team because that seems to be what matters right now. And so, Jeff, if you think about sort of the AI backlog of 2.9 billion that you're sitting on, you know, how do you think about that converting to revenue? So sort of what's the cadence to convert that to revenues as you go forward? And then, as you folks have talked about this mid-team growth in ISG, could you maybe parse that and tell us how much you think will be Storage versus traditional servers versus what is going to be driven by the AI servers for the whole Fiscal 25? Well, Amit, there's no easy answer to your question, because the backlog is a mixed array, as I mentioned earlier, of H-100s, H-200s, H-800s, as well as MI-300Xs, with varying supply commitments and varying delivery commitments, as well as converting new demand into this five-quarter pipeline that I just mentioned.

Amit: Thanks, a lot for taking my question and congrats on a nice set of numbers here.

Amit: I'll stick to the AIP because that seems to what models right now.

Amit: Jeff as you think about sort of the AI backlog of $2 9 billion that you're sitting on.

Amit: How do you think about that converting to revenue sort of what's the cadence you couldn't without two revenues as you go forward.

Jeffrey W. Clarke: You folks have talked about a mid teens growth in ISG.

Jeffrey W. Clarke: Could you maybe parse out and tell us how much you think will be storage versus traditional servers versus what is going to be driven by the AI Bot service.

Jeffrey W. Clarke: For the full fiscal 'twenty five thank you.

Jeffrey W. Clarke: Well there is no easy answer to your question because the backlog is a mixed array as I mentioned earlier of H, one hundred's H 200, H eight hundreds as well as semi 300 Xs with.

Jeffrey W. Clarke: Varying varying supply commitments and varying delivery commitments as well as converting new demand of this five quarter pipeline that I. Just mentioned, we believe we will ship more in Q1 than we shipped in Q4 as well.

Jeffrey W. Clarke: We believe we will ship more in Q1 than we shipped in Q4. As we look forward in our annual guidance, Yvonne has our best estimate of our demand and fulfillment of that demand that we've put into the annual guidance. To be able to parse it down in more detail, we have a product transition that's in front of us that we have to work on, H100 and H200 to be specific, and we're taking orders on the new stuff as well as converting a current pipeline on the current product, the XC9680 with H100s in it as well. So that's what we're working through. You might have noticed that our lead times have improved. That's reflective of the H-100.

Jeffrey W. Clarke: We look forward in our annual guidance.

Jeffrey W. Clarke: Has our best estimate of our demand and fulfillment of that demand that we've put into the annual guidance.

Jeffrey W. Clarke: To be able to parse it down in more detail, we have a product transition that sits in front of us that we have to work on <unk>.

Jeffrey W. Clarke: <unk> 100, H 200 to be specific and we're taking orders on the new stuff as well as converting our current pipeline on the current product the XC $96 80, with each 100 vintage as well so that's what we're working through.

Jeffrey W. Clarke: You might have seen on our pipe our lead times have improved.

Jeffrey W. Clarke: Reflective of the <unk> hundred and our lead times from the other parts are certainly longer and Thats, what were working our way through and supply commitments and as the demand comes in I hope that was helpful.

Jeffrey W. Clarke: And our lead times from the other parts are certainly longer, and that's what we're working our way through when supply commitments and demand come in. I hope that was helpful. Yeah, I might add, you know, from a traditional server standpoint, we're expecting modest growth, so growth in the upcoming year, AI, AI servers, certainly very strong growth, especially from a year over year standpoint, and then storage, you know, will lag a bit, but we expect tailwinds as the year progresses in storage. That's perfect.

Jeffrey W. Clarke: And I might add from a traditional server standpoint, we're expecting modest growth so growth in the coming year AI.

Jeffrey W. Clarke: AI servers certainly.

Jeffrey W. Clarke: <unk> strong growth.

Jeffrey W. Clarke: Growth, especially from a year over year standpoint, and then storage and will lag a bit, but we expect tailwind as the year progresses and the storage portfolio.

Speaker Change: That's perfect. Thank you very much.

Okay.

Speaker Change: We will now take our next question from Krish Shankar with TD Cowen.

Yvonne McGill: Thank you very much. Hi, thanks so much for taking the time to answer that question. This is Steven calling on behalf of Krish. Jeff, if I could, I wanted to double-click a little bit on the storage business. During the January quarter, just given the better than seasonal strength there, can you talk about whether that was driven by sort of the early wave of follow-on AI storage demand, following several quarters of AI server demand, or is that coming from traditional storage demand? And secondly, sort of looking out here in the near term, I guess when we look at your PowerStore and PowerScale products, which part of the portfolio are your AI-focused customers spending more of their And any thoughts on, you know, for every dollar of server, AI server being spent, is it like 50 cents or 75 cents or about another dollar of incremental AI storage spending for the downline? Sure, let's see if I can unpack that question into a few answers.

Speaker Change: Hi, guys. Thanks, so much for taking my question. This is Steven calling on behalf of Krish.

Steven: Jeff if I could I want to double click a little bit on the storage business.

Steven: During the January quarter, just given the better than seasonal strength. There can you talk about whether that was driven by the early.

Dave.

Steven: <unk> AI storage demand following several quarters of AI server demand or is that coming from traditional storage demand and secondly, it's sort of looking out here in the near term.

Steven: I guess when we look at your power store in power scale products.

Steven: Which which.

Steven: Portfolio or your AI focused customers.

Steven: Spending more of the Capex dollars on.

Steven: And any thoughts on yield for every dollar of server AI server being spend is it like 50 or 75 central another dollar of incremental AI stores spending for gambling.

Speaker Change: Sure ill see if I can.

Speaker Change: Can unpack that question.

Speaker Change: A few answers so if we look at the demand that we referred to which was beyond normal seasonality.

Jeffrey W. Clarke: So we look at the demand that we refer to, which was beyond normal seasonality. We had year-over-year demand growth in the unstructured space, ECS, as well as power scale. They grew quarter of a quarter and year over year on a demand basis. Those are generally good indicators, as I mentioned earlier, around AI file and object, which are the data classes that generally feed the AI engine.

Speaker Change: We had year over year demand growth in the structured space ECS as well as power scale.

Speaker Change: They grew quarter over quarter and year over year on a demand basis. Those are generally good indicators as I mentioned earlier around AI file and object, which is the data classes that generally feed the AI engines.

Jeffrey W. Clarke: So when I think about AI and the now new products that I mentioned earlier with better read and write performance, better coherency performance, these complex workloads, better density, the F710 to be specific and F210 on the power scale and the object scale XF960, those are the types of products that go into these AI works. Our progress in traditional storage was good too. We were ahead of our normal seasonality, but we expected a decline from Q3 to Q4 across our traditional storage business. Although we commented on this in our talking points, it was down year over year, but better than we expected across the mid-range, across our data protection products, and our high-end storage products. And then, if I think long term going forward, as we look at the opportunity, and again, we referenced the $152 billion in our web deck. We've done some analysis that is available in the public domain.

Speaker Change: So when I think about AI in the now new products that I mentioned earlier with better read and write performance better Coherency performance. These complex workloads better density.

Speaker Change: 710 era of seven tend to be specific enough to turn on power scale. The object scale excess 960 <unk>. Those are the types of products that go into these AI workloads are progress in traditional storage was good too.

Speaker Change: We were ahead of our normal seasonality, what we expected from Q3 to Q4 across our traditional storage business, although com.

Speaker Change: Commented this in our talking points it was down year over year.

Speaker Change: But better than we expected across mid range across our data protection products and our high end storage products.

Speaker Change: And then if I think long term going forward as we look at the opportunity and again, we referenced the $152 billion in our web deck.

Speaker Change: We've done some analysis that's available out in the public domain.

Jeffrey W. Clarke: But we're looking at an opportunity where every dollar that is for an AI, server, GPU server, there are two to growing $3 of professional services around that networking around that storage room that I won't parse down specifically. But what was really important is that there is a drag that the opportunity in the marketplace continues to grow not only around the computational asset itself but the network fabric that it's needed, the storage subsystem it's defeated on, and then ultimately the professional services to help customers deploy it. But more importantly, figure out where their data is and how to prepare the data.

Speaker Change: But we're looking at an opportunity where every dollar of that is for a AI.

Speaker Change: Server GPU server Theres, two growing $3 of professional services around that net working around that storage room that I won't parse it down specifically, but.

Speaker Change: But what's really important is there is a drag that the opportunity in the marketplace continues to grow not only around the computation of asset itself with network fabric that it's needed the storage subsystem defeated and then ultimately the professional services to help customers deploy it but more importantly figure out where their data is how to prepare the data.

Jeffrey W. Clarke: And then ultimately, one of our additional value propositions across that whole spectrum is financing for the ability to provide the infrastructure of all types. The ability to provide services around that and then the financing around it, we believe is very much part of our differentiation in the marketplace, particularly as it scales to the enterprise. Hey, thanks for the question, Steven. Hi, good afternoon.

Speaker Change: And then ultimately one of our additional value propositions across that whole spectrum has a financing arm to.

Speaker Change: So the ability to provide the infrastructure of all types.

Speaker Change: The ability to provide services around that and then the financing around it. We believe is very much part of our differentiation in the marketplace, particularly as this scales to the enterprise.

Speaker Change: Thanks for the question Steve.

Speaker Change: And your next question comes from the line of Steven Fox with Fox Advisors.

Steven Bryant Fox: Hi, good afternoon.

Jeffrey W. Clarke: I guess, Jeff, just to follow up on that, I understand the traditional lag between storage and servers, but it seems like, based on everything you said, there's a chance that storage continues to have a little bit more momentum in the near term relative to servers. I guess, what, what am I missing in that, I guess, between going from inference to production type of workloads and seeing some of that extra two to three dollars? Like, why wouldn't, why wouldn't we expect better server growth, rather than better storage growth? Quicker this year.

Steven Bryant Fox: Yes, Jeff just to follow up on that I understand that traditional lag between storage and servers, but it seems like based on everything you said there is a chance that storage continues to have a little bit more momentum near term relative to servers. I guess, what is what am I missing in that I guess between going from entrance to production type of workload.

Steven Bryant Fox: And seeing some of that extra two to $3 like why wouldn't why wouldn't we expect better server growth.

Steven Bryant Fox: The better storage growth quicker this year fiscal year. Thanks.

Jeffrey W. Clarke: Well, we believe we've reflected that in our guidance for the year, NISG. The opportunities are as the richer data sets that are beyond text; text today isn't very data-intensive and Can Be Compressed Quite Efficiently. If we go to richer data structure data sets, this unstructured data opportunity exists as we move towards inference and it in production.

Speaker Change: We believe we've reflected that in our guidance for the year and ISG.

Speaker Change: The opportunities as the Richard datasets that are beyond text text today isn't very.

Speaker Change: Data intensive and can be compressed quite efficiently and as we get a richer data structured data sets. This unstructured data opportunity exists as we move towards and for incentives in production. So thats the opportunity to be able to call the rate of which.

Jeffrey W. Clarke: So that's the opportunity to be able to call the rate at which enterprises will deploy AI at scale. It's all upside from my point of view that we are literally in the early innings of enterprises deploying and moving from proof of concept and understanding this helps them drive massive productivity inside their enterprises and allow them to really disrupt how they bring their products and services to the marketplace and how they serve their customers. Just like we are internally, many customers are going through the process of understanding that and building their agendas. And this is a multi-year cycle.

Speaker Change: Enterprise will deploy AI at scale.

It's all upside from my point of view that we are literally in the early innings of enterprises deploying and moving from proof of concept and understanding this helps them drive a massive productivity inside of their enterprise and to allow them to really disrupt how they bring their products and services to the marketplace and how they serve their customers.

Speaker Change: <unk> just like we are internally many customers.

Speaker Change: We're going through understanding that and building their agenda and this is a multi year cycle.

Jeffrey W. Clarke: We believe that's the opportunity here. We've said publicly the productivity benefit alone is a once in a generation or once in several generations productivity uplift. And then the ability to think about how you build products and build your services to serve your customers.

Speaker Change: We believe that's the opportunity here, we've said publicly the productivity benefit alone is a once in a generation or <unk> several generation productivity uplift and then the ability to think about how you build products and build your services to serve your customers. There's tremendous capability here that we believe and.

Jeffrey W. Clarke: There's tremendous capability here that we believe enterprises are in their early characterization and understanding of, and it's a long deployment cycle that we believe enterprises will benefit from and that we're leading the industry in. That's helpful. Thank you for the questions. I appreciate it.

Speaker Change: Prices are in their early characterization and understanding and it's along deployment cycle that we believe will benefit from and that we're leading the industry.

Speaker Change: That's helpful. Thank you for the questions I appreciate it of course.

Unknown Attendee: Of course. Hey, thank you very much for taking my question. Great results, by the way. Just a quick question.

Speaker Change: We will take our next question from <unk> merchant with Citigroup.

Merchant: Okay. Thank you very much for taking my question Greg.

Merchant: Great results by the way.

Merchant: Just a quick question I know you guys refresh sort of your AI Pan.

Jeffrey W. Clarke: I know you guys refresh sort of your AI TAM as part of this, as part of this presentation. Just the questions that I get from investors, you know, as you think about the 150 billion TAM that you guys are highlighting now in 27, given Dell's share in storage, obviously your server, mainstream server share, and overall TAM share in servers, how do you guys think about your share in this 152 billion market by 2020? Could we assume that the share that you guys have now for servers and storage translates itself into the $150 billion shared TAM global investment? Well, that's an interesting question.

Merchant: As part of this slide as part of this presentation.

Merchant: The question that I get from investors can think about the 150 billion Tam that you guys are highlighting now in 2007, given <unk> share in storage. Obviously your server mainstream server share in overall share Tan and surgery. How do you guys think about your share in this $1 52 billion market.

Merchant: 2007.

Merchant: He assumed the share that you guys have now for servers and storage translates itself into the $1 50 billion sure Tom equivalents. Thank you.

Merchant: Well.

Speaker Change: That's an interesting question.

Jeffrey W. Clarke: The inside baseball view here is that we are leading the market, and we continue to expect to lead the market with our broad capabilities. Going forward, I believe it's reasonable that as we think about this internally, we have our target set on having a larger percentage of this market than we do in our traditional market, that's inclusive of the PC. I think one of the things again that makes us special and different here is that we can reach a large set of customers, from the smallest businesses in the world to the largest multinationals in the world. We can service the CSP. We can bring them the hardware, the GPU servers in the future, our AI PC, so all the way out to the edge. We have a broad range of network fabric. We have a storage portfolio that's unmatched in the industry. Our 30 plus thousand service organizations, with its service organization with the consultant and professional services organization that we have in 180 different countries, allows us incredible breadth to reach customers to deploy this gear wherever they might have it.

Speaker Change: The inside baseball view here is we are leading the market.

Speaker Change: And we continue to expect to lead the market with our broad capabilities.

Speaker Change: Going forward I believe it's reasonable and how we think about this internally that we have our targets set on having a larger percentage of this market than we do in our traditional marketplaces.

Speaker Change: That's inclusive of the PC.

Speaker Change: One of the things again, I think it makes us special and different here, we can reach a large set of customers from the smallest businesses in the world to the largest multinational some level we can service the CSP.

Speaker Change: We can bring them the hardware the GPU servers in the future our AIP C. So all the way out to the edge.

Speaker Change: We have a broad range of network fabric, we have the storage portfolio, that's unmatched in the industry.

Speaker Change: Our 30, plus thousand service organizations with its the service organization with the consulting and professional services organization that we have servicing and 180 different countries allows us incredible breadth to reach customers to deploy this gear wherever they might have it.

Jeffrey W. Clarke: The partners that we have with our GSIs and our go to market allow us further reach. So we kind of think of it that way, that this is a market that's developing really aligned with the strengths of our company and allows us to extend our model in a very differentiated way to access this marketplace in a different in a differential manner. Not to mention.

Speaker Change: The partners that we have with our size and our go to market allow us further reach.

Speaker Change: So we kind of think of it that way that this is a market that's developing.

Speaker Change: <unk> <unk>.

Speaker Change: Aligned with the strengths of our company and allows us to extend our model in a very differentiated way to access this marketplace in a different and a differential manner.

Speaker Change: Not to mention.

Jeffrey W. Clarke: And you'll be shocked to hear that I think our engineering capabilities here are pretty unmatched. And this stuff is really hard, to tune these models to build clusters to get every ounce of performance that you're paying for is real engineering work. And we believe we have the engineering scale to help many customers do this. Great. Welcome.

Speaker Change: I wouldn't be shocked I said this and I think our engineering capabilities here are pretty unmatched in this stuff is really hard.

To tune these models to build clusters to get every ounce of performance that you are paying for is real engineering work and we believe we have the engineering scale to help many customers do this.

Speaker Change: Okay.

Speaker Change: Great. Thank you.

Speaker Change: And welcome to stick our neck.

Jeffrey W. Clarke: Thanks for taking the question. I wanted to see if you could give us a little bit of insight from your perspective of what's going on in various verticals or geography. So we've really been sort of tackling things sounding a little bit better on traditional and storage, but I'm just wondering if there's any nuance as to where it's coming from, from either market verticals, market geographies, what's getting better. Simon, was that an AI specific question or broadly across the business? Yeah, broadly across the business, I really try to get a sense of what's affecting the business most apart from this focus on AI. I'll try to clear that with you that Yvonne will help me along the journey here.

Speaker Change: And we will take our next question from Simon Leopold with Raymond James.

Simon Matthew Leopold: Thanks for taking the question I wanted to see if you could give us a little bit of insight from your perspective of what's going on in various verticals or geographies.

Simon Matthew Leopold: We've really been sort of tackling things sounding a little bit better on traditional in store it but I'm just wondering if there's any nuance as to where it's coming from from either market verticals market geographies.

What's getting better.

Simon Matthew Leopold: Simon was that an AI specific question or broadly across the business.

Simon Matthew Leopold: Yeah broadly across the business.

Simon Matthew Leopold: Really trying to get a sense.

Simon Matthew Leopold: What's influencing the business most apart from this focus on AI.

Simon Matthew Leopold: Sure.

Speaker Change: I'll try to be clear with that of <unk> will help me along the journey here, what we talked about Pcs is clearly a cycle, where there's caution you've.

Jeffrey W. Clarke: Well, we talked about PCs being clearly a cycle where there's caution. You've seen that reflected in our performance and our upcoming guidance. So PCs isn't an area where we're seeing the upside yet. Do I expect the PC market to be bigger in calendar 24 than in 23? Yes.

Speaker Change: You've seen that reflected in our performance and our upcoming guidance. So Pcs isn't an area, where we're seeing the upside yet do I expect the PC market to be bigger in calendar 'twenty more than 23, yes.

Jeffrey W. Clarke: Do I think the PC market is likely bigger in the second half of 24 than it is in the first half? Absolutely so. Hence our remarks that we believe the opportunity in PCs is second half driven. That is primarily a result of an aging installed base. It's never been bigger and older than it is today.

Speaker Change: I think the PC market is likely bigger than the second half of 'twenty four.

Speaker Change: And then it is in the first half absolutely. So hence our remarks that we believe the opportunity in Pcs is second half driven that is primarily a result of an aging installed base, it's never been bigger and older than it is today, we have a version of Windows, that's retiring and we have hardware enabled AIP six with an <unk>.

Jeffrey W. Clarke: We have a version of Windows that's retiring, and we have hardware-enabled AI PCs with an application base coming that should make it an exciting opportunity to own an AI PC. So that's sort of how that one plays out. We talked about traditional servers. There's momentum there. Three consecutive quarters of sequential growth and demand. First quarter in a long time of year over year.

Speaker Change: Implication based coming that should make it an exciting opportunity to own an IPC. So let's sort of how that one plays out we talked about traditional servers, there's momentum there three consecutive quarters of sequential growth and demand.

Speaker Change: First quarter in a long time of year over year demand growth, we exit with good momentum we tried to reflect that in our guidance that is in all geographies.

Jeffrey W. Clarke: Demand growth. We exit with good momentum. We try to reflect that in our guidance. That is all geography.

Jeffrey W. Clarke: Storage. Better than we planned. It was good to see. That was across the unstructured products, as I mentioned, that actually grew demand year over year and quarter over quarter, and our mid-range data protection class products and our high-end products that performed better than we expected on a quarter over quarter basis. Yvonne reflected that in our guidance, that uplift in Q4 comes down in Q1.

Speaker Change: Storage.

Speaker Change: Better than we've planned it was good to see that was across the unstructured products as I mentioned that actually grew demand year over year and quarter over quarter and our mid range data protection class products on our high end products that perform better than we expected on a quarter over quarter basis of bond reflected that in our guidance that uplift in Q4.

Speaker Change: <unk> down in Q1, that's one of the challenges we have when we talk about the storage mix is changing in Q1 over Q4.

Jeffrey W. Clarke: That's one of the challenges we have when we talk about the storage mix changing in Q1 over Q4. And then there's just the tremendous uplift with AI. That is clearly the opportunity, it's large, and we believe we're disproportionately participating in it, and it's an exciting category, and that's driving tremendous momentum. Yvonne, what did I miss?

Speaker Change: And then there's just a tremendous uplift with AI.

Speaker Change: That is clearly the opportunity.

Speaker Change: It's large and we believe we are disproportionately participating in it and its an exciting category and that's driving tremendous momentum for us of which though.

Speaker Change: What I missed I think you I think you covered it well.

Yvonne McGill: I think you covered it well. We're really expecting growth across the portfolio and across the globe, and the year program. Yeah, and clearly, Simon, from a vertical standpoint, small business, medium business, is starting to come back, public has been strong this year, federal has been strong, and education business has been strong. But what we're really waiting on is that large corporate, global, multinational enterprise business. And it's natural, I think, for them to be a little bit cautious, given the macroeconomic, geopolitical, and interest rate environment that we have found ourselves in over the course of the last several quarters.

Speaker Change: We're expecting really growth across the portfolio and across the globe.

Speaker Change: As the year progressed.

Speaker Change: And then.

Speaker Change: Clearly Simon from a vertical standpoint, you know small business.

Speaker Change: Medium business starting to come back publicly public telephone strong this year federal trying and going strong.

Speaker Change: And the education business has been strong what we're really waiting on is that large corporate global multinational enterprise business and it's natural I think for them to be a little bit cautious given the macro economic geopolitical and an interest rate environment that we find to send over the course of the last fed ourselves in over the last several quarters. So that's the <unk>.

Yvonne McGill: So those are the verticals that we're really looking forward to coming back later this year. And as you know, that's kind of a sweet spot for Dell from a customer standpoint. So I appreciate your question. Hey guys, thanks a lot. Jeff and Yvonne.

Speaker Change: Verticals that we're really looking forward to come back later this year and as you know thats kind of a sweet spot for Dell from us from a customer standpoint, so I appreciate it.

Speaker Change: Great question.

Speaker Change: Okay.

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

Benjamin Alexander Reitzes: Hey, guys. Thanks, a lot.

Benjamin Alexander Reitzes: Jeff and Yvonne.

Jeffrey W. Clarke: How confident are you that you're going to get enough GPUs to grow from about a 1 billion level and AI servers in the first quarter? And then Jeff, if you don't mind, can you give us some more color on, you know, what you're excited about? I mean, do you feel like the H200 is a multi-quarter cycle like the B100?

Benjamin Alexander Reitzes: How confident are you that youre going to get enough Gpus to grow from about a $1 billion level.

Benjamin Alexander Reitzes: AI servers in the first quarter.

And then Jeff if you don't mind can you.

Benjamin Alexander Reitzes: Just give us some more color on what you're excited about I mean do you feel like the H 200 is a multi quarter.

Jeffrey W. Clarke: Cycle. The B 100, do you feel like Youre going to get them in and be able to drive that into 2025 and any color on AMD and your your early momentum there would be appreciated thanks a lot.

Jeffrey W. Clarke: Do you feel like you're going to get them and be able to drive that into 2025? And any color on AMD and your early momentum there would be appreciated. Thanks a lot.

Jeffrey W. Clarke: Hey, Ben, let me try to work my way through the look. It's our job in the Dell supply chain to get the supply that is aligned with our demand. I think there are others who have commented. I'll make our comment. The demand for these things is in excess of the supply. That will certainly continue in the next. We're doing everything we can to get as much of that as we need for our customers. The methodology and allocation haven't maturely changed.

Speaker Change: Hey, Ben let me try to work my way through that it's our job and the Dell supply chain to get the supply that is aligned with our demand.

Speaker Change: I think there are others have commented all make our comment the demand for these things is in access of the supply.

Does that continue certainly into next year.

Speaker Change: We're doing everything we can to get as much of that is we need for our customers the methodology and allocation hasnt materially changed.

Jeffrey W. Clarke: We understand that we're working on it, and we'll continue to do so. I like what we've been able to accomplish thus far. I like our view. With what I know at this moment in time for calendar 24, fiscal 25, I'd also tell you it's a little more complex this year. Last year was basically the H-100 show.

Speaker Change: We understand that we're working that and we will continue to do so.

Speaker Change: I like what we've been able to accomplish thus far I like our view.

Speaker Change: With what I know at this moment in time for calendar 'twenty for fiscal 'twenty five.

Speaker Change: I'd also tell you it's a little more complex this year last year. It is basically the H 100 show.

Jeffrey W. Clarke: This year, I think I rattled off four different variants, and there's a transition associated with that. Some customers will more rapidly move to that than others. We have to manage through that, and it's reflected in our pipeline and our pipeline conversion, and ultimately, our backlog and what we call inside the company our delivery date schedules of what commitments we've made to different customers. We understand that we know when we need the parts, and we work through that. This easily continues to next; I don't see any line of sight that changes it.

Speaker Change: This year I think I rattled off four different variants and there is a transition associated with that some customers will more rapidly move to that than others. We have to manage through that and it's reflected in our pipeline and our pipeline conversion and ultimately our backlog in what we call inside the company or.

Speaker Change: Our delivery date schedules of what commitments, we've made to different customers. We understand that we know when we need the parts. We worked through that this easily continues next year.

Speaker Change: I don't see any line of sight the changes that we're excited about what's happening with the H 200, and its performance improvement. We're excited about what happens to be 100 and the.

Jeffrey W. Clarke: We're excited about what's happening with the H200 and its performance improvement. We're excited about what happens with the B100 and the B200, and we think that's where there's actually another opportunity to distinguish engineering competence. Our characterization of thermal size shows that you really don't need direct liquid cooling to get to the energy density of 1000 watts per GPU.

Speaker Change: 100, and the <unk> 200 and.

Speaker Change: And we think Thats, where there is actually another opportunity to distinguish engineering confidence our characterization in the thermal side is you really don't need direct liquid cooling to get to the energy density of a thousand watts per GPU.

Jeffrey W. Clarke: That happens next year with the B200. It is the opportunity for us to really showcase our engineering and how fast we can move. And the work that we've done as an industry leader to bring our expertise to make liquid cooling perform at scale with things like fluid chemistry and performance, our interconnect work, the telemetry we're doing, the power management work we're doing, it really allows us to be prepared to bring that to the marketplace at scale to take advantage of this incredible computational capacity or intensity or capability that will exist in the marketplace. What I'm excited about is this continues to rapidly This continues to rapidly move to businesses really using it to drive business out. Again, that's what we're in business to do. Our large portfolio, broad portfolio, allows us, we believe, for us to do that in a very differentiated manner at scale. That's the opportunity. Someone was kicking me out of the desk chair.

Speaker Change: That happens next year with the B 200, the opportunity for us really to showcase our engineering and how fast we can move.

Speaker Change: And the work that we've done as a industry leader to bring our expertise to make liquid cooling performance scale.

Speaker Change: That things in fluid chemistry performance, our interconnect work the telemetry we're doing the power management work, we're doing it really allows us to be prepared to bring that to the marketplace at scale to take advantage of this incredible computational capacity or intensity or capability that will exist in the marketplace, what I'm excited about.

Speaker Change: As this continues to rapidly move to the enterprise. This continues to rapidly move to businesses really using it to drive business outcomes.

Speaker Change: Again, that's what we're in business to do.

Speaker Change: Our large portfolio of broad portfolio allow us we believe for us to do that in a very differentiated manner at scale that's the opportunity.

Speaker Change: Someone was kicking me under the desk I need to mentioned, we got the storage opportunity in there that we have a networking opportunity in there and we have the services opportunity in there and to go for the last of the bunch of financing opportunities. So those how could you not be excited about that given the demand environment.

Jeffrey W. Clarke: I need to mention we have a storage opportunity in there, that we have a networking opportunity in there, and we have a services opportunity in there, and to go for the last of the bunch of financing opportunities. So those, how could you not be excited about that given the demand environment? All right, I appreciate that question. Hey, we've got a very tight reporting cycle with some others in the space. And so we're going to take one last question, and Jeff is going to do a quick close. I appreciate everyone joining me. I'll, Hey, good afternoon.

Alright, I appreciate that question, Hey, we've got a very tight reporting cycle with some others in the space and so we're going to take one last question and Jeff is going to do a quick close I appreciate everyone joining.

Speaker Change: Okay.

Speaker Change: We will now take our final question from Michael <unk> with Goldman Sachs.

Unknown Attendee: Thanks for squeezing me in. I just had a question on the full-year guidance; talk about how you're thinking about each segment relative to their respective long-term range and any swing factors that may cause performance towards the higher end or the lower end. Sure. Thanks, Michael, for that.

Hey, good afternoon, Thanks for squeezing me in.

Michael: Just had a question on the full year guidance.

Michael: Could you talk about how youre thinking about.

Michael: The segment margin.

Michael: Relative to their respective long term ranges.

Michael: And any swing factors that may cause performance towards the higher end or the lower end. Thank you.

Speaker Change: Sure and thanks, Michael for that we are actively as we think through the full year guide we are as I as I talked about thinking of not only the inflationary component cost environment.

Yvonne McGill: We are, you know, as we think through the four-year guide, we are, as I talked about, thinking of not only the inflationary component cost environment but the, you know, the more competitive environment that we've been seeing. We are expecting, and we talked about, the dilutive rate impact within ISG over our AI-optimized servers. And so, you know, if we play that through, we're looking to have better performance holistically at a company level, but I think it will be different by quarter, and especially with the mix we're seeing from an AI standpoint. Jeff just talked about all of the variants that are at play.

Speaker Change: The more competitive environment that we've been seeing and we are expecting and we've talked about the dilutive rate impact within ISG of our AI optimized servers and so if we play that through where we're looking to have.

Speaker Change: Better performance Holistically.

Speaker Change: Four.

At a company level, but I think it will it will be different by by quarter, especially with the mix. We're seeing from an AI standpoint, Jeff just talked about all of the variant that that are at play and so expecting continued are expecting improvement as the year progresses.

Jeffrey W. Clarke: And so, I'm expecting, you know, continued, or expected improvement as the year progresses from a margin standpoint, but, you know, it'll be quite dynamic with the component cost environment and the competitive environment. So with that, let me wrap up the call. We clearly have AI momentum; whether engineering services or financing expertise, we are well positioned to continue to grow. And more broadly, we expect to return to growth across ISG and CSG for the year, led by ISG, growing in the mid-teens. We're pretty excited about that, and with that comes solid cash generation that you'd expect us to return to our shareholders. Thank you for joining us.

Speaker Change: From a margin standpoint, but it'll be quite dynamic with the.

Speaker Change: Component cost environment, and the competitive environment.

So with that let me wrap up the call. We clearly have AI momentum, whether engineering services and financing expertise, we are well positioned to continue to grow and more broadly we expect to return to growth across ISG and <unk>.

Speaker Change: For the year.

Speaker Change: Led by ISG.

Speaker Change: Growing in the mid teens.

Speaker Change: Pretty excited about that.

Speaker Change: With that comes solid cash generation that you would expect us to return to our shareholders. Thank you for joining us today.

Speaker Change: Okay.

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

Speaker Change: Okay.

Speaker Change: Yes.