Q4 2025 Dell Technologies Inc Earnings Call

February 27, 2025

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Speaker Change: I'd like to turn the call over to Paul France head of Investor Relations Mr. France, you may begin.

Speaker Change: Thanks, everyone for joining us with me today are Jeff Clarke upon the Gale and Tyler Johnson, our earnings materials are available on our IR website and I encourage you to review those materials.

Speaker Change: So please take some time to review the presentation.

Speaker Change: Which includes additional content to complement our discussion this afternoon.

Speaker Change: Guidance will be covered on today's call.

Speaker Change: This call unless otherwise indicated all references to financial metrics refer to non-GAAP financial measures, including non-GAAP gross margin operating expenses operating income net income diluted earnings per share free cash flow and adjusted free cash flow.

You're holding them for today's Dell Technologies' Conference call. We are still in many additional participants of the call should begin shortly we do thank you for your patience and please continue to standby.

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

[music].

Speaker Change: Both percentages refer to year over year change unless otherwise specified.

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

Speaker Change: 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.

Thanks, Paul and thanks, everyone for joining us.

Jeff Clarke: I'm proud of the team's execution. This year, we navigated an incredibly dynamic AI environment and accelerating server consolidation a significant pivot to bill IP storage and the lagging PC refresh and delivered results above our long term value creation framework we.

Jeff Clarke: We grew our company, while reducing our operating expenditures over the course of the year. Our modernization efforts have made us more efficient and provided us the ability to invest in more innovation and in areas of strategic differentiation.

Jeff Clarke: Our FY 'twenty five revenue was $95 6 billion up 8% with operating income of $8 5 billion.

Jeff Clarke: Opex was reduced by 4% over the course of the year.

Yes.

Jeff Clarke: This resulted in record EPS of $8 14 up 10% and cash flow of $4 5 billion.

Please standby.

Good afternoon, and welcome to the fiscal year 2025 fourth quarter 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. This broadcast is copyrighted property of Dell technologies.

Jeff Clarke: We continue to differentiate ourselves with consistent performance through numerous economic cycles different technology buying and adoption cycles and are rapidly innovating technology ecosystems. Some examples of the innovation from this past year.

Jeff Clarke: We added five platforms through our AI optimized portfolio, including support of Blackwell architectures.

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Jeff Clarke: The highlight being the <unk> XC 90, 712, supporting Nvidia is <unk> 72, GBP 200, which we were the first to ship in the world.

Jeff Clarke: Wants to build infrastructure wrecked scalable system, our IR 7005, <unk> in both 'twenty, one inch and 19 into versions, providing up to 96 Gpus in Iraq, and 780, <unk> Gpus and a scalable unit.

Mr. France: I'd like to turn the call over to Paul Fred's head of Investor Relations Mr. France, you may begin.

Paul Fred: Thanks, everyone for joining us with me today are Jeff Clarke, our bond Mcgill and Tyler Johnson, our earnings materials are available on our IR website and I encourage you to review those materials.

Jeff Clarke: We have made significant advancements with CD use coal plates manifolds and power distribution with our IR 7000, supporting up to 480 kilowatts per rack.

Mr. France: Also please take some time to review the presentation.

Jeff Clarke: We introduced our direct to chip liquid cooling version of the 90, 680, <unk>, providing 32% density improvement and two five times improvement in energy efficiency.

Paul Fred: Which includes additional content to complement our discussion this afternoon.

Mr. France: Guidance will be covered on today's call.

Mr. France: During this call unless otherwise indicated all references to financial metrics refer to non-GAAP financial measures, including non-GAAP gross margin operating expenses operating income net income diluted earnings per share free cash flow and adjusted free cash flow a reconciliation.

Jeff Clarke: We've made significant advancements to power store with power store Prime our midrange storage solution addressing the fastest growing portion of the market.

Jeff Clarke: And we introduced the power scale <unk> 910 in F <unk> and our unstructured portfolio that is prime to support unstructured and AI workloads. We introduced the most co pilot plus Pcs powered by arm based Qualcomm Snapdragon processors, and also launched the broadest portfolio of Intel luminary.

Mr. France: All 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.

Jeff Clarke: Commercial Pcs.

Mr. France: Taken say during this call that relate to future results and events are forward looking statements based on current expectations.

Jeff Clarke: During our number one leadership position in commercial AIP sees worldwide.

Jeff Clarke: We continued our number one leadership and PC monitors with the world's first 14 monitors to achieve five star I comfort certification, we focused on expanding our peripheral portfolio of selling everything around the PC docking stations cameras mice keyboards, and headsets, including the first and only holistic solution to manage.

Jeff Clarke: 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 I'll turn it over to Jeff.

Jeff Clarke: Thanks, Paul and thanks, everyone for joining us.

Fleet of Pcs, and peripherals remotely, creating the best possible customer experience and finally, we simplified our branding redesigned our PC portfolio and broaden our silicon options across Intel AMD, and Qualcomm setting us up well for the PC refresh.

Jeff Clarke: I'm proud of the team's execution this year, we navigated an incredibly dynamic.

Jeff Clarke: The environment and accelerating server consolidation, a significant pivot to bill IP storage and.

Jeff Clarke: Lagging PC refresh and delivered results above our long term value creation framework.

Jeff Clarke: We are extremely well positioned to capture growth across every segment of our business and extend AI from the largest at scale csp's into enterprise workloads and out to the edge with the PC. These tail wins and our unique operating model that leverages, our leading product positions our go to market engine <unk>.

Jeff Clarke: Through our company, while reducing our operating expenditures over the course of the year. Our modernization efforts has made us more efficient and provided us the ability to invest in more innovation and in areas of strategic differentiation.

Jeff Clarke: Our FY 'twenty five revenue was $95 6 billion up 8% with operating income of $8 5 billion.

Jeff Clarke: <unk> and supply chain underpin our confidence that our opportunity continues to grow as we look ahead to FY 'twenty six moving to Q4, our revenue was $23 9 billion up 7% driven by a robust ISG growth, we executed, particularly strong with substantial operating margin improvement in ISG.

Jeff Clarke: Opex was reduced by 4% over the course of the year. This resulted in record EPS of $8 14 up 10% and cash flow of $4 5 billion.

Jeff Clarke: We continue to differentiate ourselves with consistent performance through numerous economic cycles.

Jeff Clarke: Driven by our del IP storage portfolio. This resulted in EPS of $2 68 up 18% growing faster than revenue.

Jeff Clarke: <unk> technology buying and adoption cycles and are rapidly innovating technology ecosystems. Some examples of the innovation from this past year.

Jeff Clarke: Turning to be results, let's start with ISG.

Jeff Clarke: Prospects for AI are strong and we are very well positioned.

Jeff Clarke: We added five platforms to our AI optimized portfolio, including support of Blackwell architectures.

Jeff Clarke: In Q4, AI orders demand was $1 7 billion.

Jeff Clarke: The highlight being the power edge exceeding 90 712 supporting Nvidia is in the 70 to GBP 200, which we were the first to ship in the world.

Jeff Clarke: With $2 1 billion and shipments ending the quarter with $4 1 billion in backlog as customers work through technology changes.

Jeff Clarke: We launched the Dell infrastructure rack scalable system, our IR 7000, 5000 in both 'twenty, one inch and 19 inch versions, providing up to 96 Gpus in Iraq, and 786, Gpus and a scalable unit.

Jeff Clarke: And in February our partnership with X AI and other customers continued we book deals, putting our AI backlog at roughly $9 billion as of today.

Jeff Clarke: Our pipeline expanded sequentially and has grown every quarter since the introduction of the $96 80.

Jeff Clarke: We have made significant advancements the CD use coal plates manifolds and power distribution with our IR seven supporting up to 480 kilowatts per rack.

Jeff Clarke: We are seeing continued progress in AI from enterprise customers, albeit still earlier in their journey with sequential growth in both orders and customers.

Jeff Clarke: In our engineering services financing and ability to optimize density and performance per watt are important differentiators for the largest at scale CSP and provide very efficient enterprise solutions.

Jeff Clarke: We introduced our direct to chip liquid cooling version of the 90, 680, <unk>, providing 33% density improvement and two five times improvement in energy efficiency.

Jeff Clarke: We've made significant advances to power store with power store upon our midrange storage solution addressing the fastest growing portion of the market.

Jeff Clarke: And traditional servers the growth trajectory continues up double digits. In Q4, we are announcing five quarters of year over year demand.

Jeff Clarke: And we introduced the Paris scale F 910 in F <unk> and our unstructured portfolio that is prime to support unstructured and AI workloads.

Jeff Clarke: Our mix of <unk> service continues to increase as customers remain focused on consolidation to improve power efficiency and increased floor space.

Jeff Clarke: Introduced the most copilot plus Pcs powered by arm based Qualcomm Snapdragon processors, and also launched the broadest portfolio of Intel Luminaire light commercial Pcs.

Jeff Clarke: The server consolidation and the data centers expanding server <unk> driven by service with more CPU cores storage and memory and.

Jeff Clarke: In storage, we saw P&L growth for the second consecutive quarter with very strong profitability driven by our Dell IP storage portfolio power store, our flagship mid range product.

Jeff Clarke: During our number one leadership position in commercial AIP.

Jeff Clarke: Why.

We continued our number one leadership and PC monitors with the worlds first 14 monitors to achieve five star I comfort certification, we focus on expanding our peripheral portfolio of selling everything around the PC docking stations cameras mice keyboards, and headsets, including the first and only holistic solution to manage.

Jeff Clarke: <unk> had strong demand growth for four consecutive quarters. The most recent three at double digit demand growth as I mentioned, the software and hardware updates we've made with power store prime resonate with customers and partners, we have industry, leading five to one data reduction delivered 30% improvement in.

Jeff Clarke: Our fleet of Pcs, and peripherals remotely, creating the best possible customer experience and finally, we simplified our branded redesigned our PC portfolio and broaden our silicon options across Intel AMD, Qualcomm setting us up well for the PC refresh.

Jeff Clarke: Native Metro sink in Q LC availability, we also saw double digit demand growth in power scale.

Jeff Clarke: Leading unstructured storage platform and continued growth in our buyer base with power reflects we are well positioned in some of the fastest growing categories within storage as customers shift towards disaggregated architectures and <unk>, we are seeing the recovery coming with strength in SMB, which historically is a leading indicator.

Jeff Clarke: We also saw a large opportunities within the quarter, which were very competitive.

Jeff Clarke: Commercial was up 5%, marking the second consecutive quarter of year over year growth and the fourth consecutive quarter of demand growth.

Jeff Clarke: <unk> and supply chain underpinning our confidence that our opportunity continues to grow as we look ahead to FY 'twenty six moving to Q4, our revenue was $23 9 billion up 7% driven by a robust ISG growth, we executed, particularly strong with substantial operating margin improvement in ISG.

System with what we saw coming out of Q3 customers are waiting to refresh to buy AIP see that future proof their purchases going forward.

Jeff Clarke: Consumer continues to be challenged with softer demand in elevating the levels of discounting.

Jeff Clarke: We expect that broader PC refresh this year as the installed base continues to age we get closer to the windows tend to end of life and <unk> are more broadly available.

Jeff Clarke: Driven by our del IP storage portfolio. This resulted in EPS of $2 68 up 18% growing faster than revenue.

Jeff Clarke: To close I am proud of our FY 'twenty five results and our ability to execute our strategy leveraging our strengths to extend our leadership positions and capture new growth.

Jeff Clarke: Turning to be results, let's start with ISG.

Jeff Clarke: Prospects for AI are strong and we are very well positioned.

In Q4, AI orders demand was $1 7 billion with $2 1 billion and shipments ending the quarter with $4 1 billion in backlog as customers work through technology changes.

Jeff Clarke: AI hardware and services Tam has nearly doubled over the course of the year to $295 billion in 2027 growing at a 33% CAGR, we are well positioned in AI traditional servers storage with our focus on Dell IP mpc's, including everything around the device, we continue to drive a disproportionate.

Jeff Clarke: And in February our partnership with X AI and other customers continued we booked deals putting our AI backlog at roughly $9 billion as of today.

Jeff Clarke: Level of AI growth by demonstrating the value we provide to our customers.

Jeff Clarke: Our pipeline expanded sequentially.

Jeff Clarke: And has grown every quarter since the introduction of the $96 80.

Jeff Clarke: And I am excited for the tailwind surrounding our business as we enter FY 'twenty six now over to Ivan for more details about Q4.

Jeff Clarke: We are seeing continued progress in AI from enterprise customers, albeit still earlier in their journey with sequential growth in both orders and customers.

Ivan: Thanks, Jeff Let me begin with an overview of our Q4 performance then I'll move to Isg's DSG cash and guidance.

Jeff Clarke: And our engineering services financing and the ability to optimize density and performance per watt are important differentiators for the largest at scale CSP and provide very efficient enterprise solutions.

Ivan: In the fourth quarter, we delivered strong profitability specifically in ISG.

Ivan: Total revenue was up 7% to $23 9 billion.

Jeff Clarke: And traditional servers the growth trajectory continues up double digits. In Q4, we are announcing five quarters of year over year demand.

Ivan: Seven by continued strength in servers.

Ivan: Our combined Isdn's ESG <unk> grew 10%.

Ivan: Gross margin was $5 8 billion or.

Jeff Clarke: Our mix of <unk> servers continues to increase as customers remain focused on consolidation to improve power efficiency and increased floor space.

Ivan: Or 24, 3% of revenue.

Ivan: This is down 50 basis points due to a more competitive pricing environment.

Ivan: <unk> and <unk> and an increase in our AI optimized server mix.

Jeff Clarke: The server consolidation and the data centers expanding server <unk> driven by service with more CPU cores storage and memory.

Ivan: Within gross margin, we discovered previously unrecognized accumulated credits from suppliers Youll find revised financial results within our Q4 press release to reflect higher gross margin and increased earnings per share for the relevant period.

Jeff Clarke: In storage, we saw P&L growth for the second consecutive quarter with very strong profitability driven by our Dell IP storage portfolio power store, our flagship mid range product.

Has had strong demand growth for four consecutive quarters. The most recent three at double digit demand growth as I mentioned, the software and hardware updates we've made with power store prime resonate with customers and partners, we have industry, leading five to one data reduction delivered 30% improvement in IAMS made us Metro Inc.

Ivan: Operating expense was down 6% to $3 1 billion or 13, 1% of revenue.

Ivan: 2025 was a transformative year as we reevaluated re imagined and modernize how we operate.

Ivan: This enabled us to unlock efficiencies and increase productivity, all while growing our core business double digits.

Jeff Clarke: In Q LC availability, we also saw double digit demand growth in power scale.

Ivan: Now, let's look at operating income.

Jeff Clarke: Our leading unstructured storage platform and continued growth in our buyer base with power Flex, we are well positioned with some of the fastest growing categories within storage as customers shift towards disaggregated architectures and <unk>, we are seeing the recovery coming with strength in SMB, which historically is a leading indicator.

Ivan: We delivered a 22% increase to $2 7 billion or 11, 2% of revenue. This was driven by higher revenue and lower operating expenses, partially offset by a decline in our gross margin rate.

Ivan: Q4, net income was up 15% to $1 9 billion.

Jeff Clarke: We also saw a large opportunities within the quarter, which were very competitive.

Ivan: Primarily driven by stronger operating income and.

Jeff Clarke: Commercial was up 5%, marking the second consecutive quarter of year over year growth and the fourth consecutive quarter of demand growth.

Ivan: Our diluted EPS was up 18% to $2 68.

Ivan: Now, let's move to ISG or we delivered another quarter of strong performance.

Jeff Clarke: Consistent with what we saw coming out of Q3 customers are waiting to refresh to buy AIP see that future proof their purchases going forward consumer.

Ivan: ISG revenue was $11 4 billion up 22% servers and networking revenue with a Q4 record at $6 6 billion up 37%, we continue to see strong demand across both AI and traditional servers.

Jeff Clarke: Continues to be challenged with softer demand in elevating the levels of discounting.

Jeff Clarke: We expect the broader PC refresh this year as the installed base continues to age we get closer to the windows tend to end of life and AI Pcs are more broadly available.

Ivan: Storage revenue was up 5% to $4 7 billion.

Ivan: Our second consecutive quarter of growth.

Jeff Clarke: To close I am proud of our FY 'twenty five results and our ability to execute our strategy leveraging our strengths to extend our leadership position and capture new growth.

Ivan: We executed very well in storage.

Ivan: Had a record demand quarter for power solar power scale grew double digits and our power flex buyer base great.

Ivan: While the overall demand environment is lagging that of traditional servers, we see some promising trends.

Ivan: We had record ISG operating income of $2 1 billion up 44%.

Ivan: This was driven primarily by higher revenue.

Jeff Clarke: What level of AI growth by demonstrating the value we provide to our customers.

Ivan: Our ISG operating income rate was up again sequentially to a record 18, 1% of revenue.

Jeff Clarke: And I'm excited for the tailwind surrounding our business as we enter FY 'twenty six now over to Ivan for more details about Q4.

Ivan: The rate improvement of 480 basis points was the result of improved gross margin, especially in storage and reduced operating expense.

Ivan: Thanks, Jeff Let me begin with an overview of our Q4 performance then I'll move to Isg's DSG cash and guidance.

Ivan: Within storage, we saw record profitability driven by a higher mix of Dell IP versus partner IP.

In the fourth quarter, we delivered strong profitability specifically in ISG.

Ivan: Improved product profitability and revenue scaling in what is seasonally our strongest quarter.

Ivan: Total revenue was up 7% to $23 9 billion.

Ivan: Now, let's turn to CST DST.

Ivan: This was driven by continued strength in servers.

Ivan: PSG revenue was up 1% to $11 9 billion.

Ivan: Our combined <unk> grew 10%.

Ivan: Commercial revenue was up 5% to $10 billion.

Ivan: Gross margin was $5 8 billion or.

Ivan: Consumer revenue was down 12% to $1 9 billion.

Ivan: Or 24, 3% of revenue.

Ivan: ESG operating income was <unk> 6 billion or five 3% of revenue.

Ivan: This is down 50 basis points due to a more competitive pricing environment.

Ivan: Continentally and PSG and an increase in our AI optimized server mix.

Ivan: This is down 90 basis points sequentially due to a more competitive pricing environment.

Within gross margin, we discovered previously unrecognized accumulated credits from suppliers.

Ivan: We saw some promising sign as we went through in November and December with pockets of strength in large deals, but overall saw a slowdown in January.

Ivan: Fine revised financial results within our Q4 press release to reflect higher gross margin and increased earnings per share for the relevant period.

Speaker Change: As Jeff mentioned, we saw strength in small and medium business, which is historically a leading indicator.

Ivan: Operating expense was down 6% to $3 1 billion or 13, 1% of revenue.

Speaker Change: Profitability in commercial with weaker than expected as demand continued to push into the next fiscal year.

2025 was a transformative year as we reevaluated re imagined and modernized how we operate.

Speaker Change: In consumer the demand environment remains soft and profitability remains challenged.

Speaker Change: We are ready and well positioned for PC refresh with our simplified rebrand leading go to market engine and focus on commercial Pcs and most profitable segment of the market.

Ivan: This enabled us to unlock efficiencies and increase productivity, all while growing our core business double digits.

Ivan: Now, let's look at operating income.

Ivan: We delivered a 22% increase to $2 7 billion or 11, 2% of revenue. This was driven by higher revenue and lower operating expenses, partially offset by a decline in our gross margin rate.

Speaker Change: Shifting gears Dell financial services continues to drive differentiated payment solutions for our customers.

Speaker Change: We exited the year with a record $15 billion in assets under management up 5%.

Ivan: Q4, net income was up 15% to $1 9 billion.

Speaker Change: And when you normalize for the exit of our <unk> retail business and the discontinuation of our commercial revolving product DFS originations were up 7% in Q4 with a strong attach rates across the business.

Ivan: Primarily driven by stronger operating income and.

Ivan: Our diluted EPS was up 18% to $2 68.

Ivan: Now, let's move to ISG or we delivered another quarter of strong performance.

Speaker Change: Now, let's move to cash flow and balance sheet.

Speaker Change: Q4 cash flow from operations was <unk> 6 billion.

Ivan: ISG revenue was $11 4 billion up 22% servers and networking revenue with a Q4 record at $6 6 billion up 37%, we continue to see strong demand across both AI and traditional servers.

Speaker Change: This was primarily driven by profitability, partially offset by working capital.

Speaker Change: Our cash conversion cycle was negative 31 days with $6 $7 billion in inventory.

Speaker Change: We ended the quarter with $5 2 billion in cash and investments down $1 4 billion sequentially.

Ivan: Storage revenue was up 5% to $4 7 billion.

Ivan: Our second consecutive quarter of growth.

Speaker Change: Our core leverage ratio was down sequentially to $1 two apps.

Ivan: We executed very well in storage.

Speaker Change: We returned $1 $1 billion of capital to shareholders was $6 4 million shares of stock repurchased at an average price of $117 51.

Ivan: Had a record demand quarter for power solar power.

Ivan: Our scale grew double digits, and our power flex buyer base.

Ivan: While the overall demand environment is lagging that of traditional servers, we see some promising trends.

Speaker Change: And pay the dividend of <unk> 45 per share.

Speaker Change: Our capital return program began at the beginning of FY2023 we returned $10 8 billion to shareholders through stock repurchases and dividends.

Ivan: We had record ISG operating income at $2 1 billion up 44%.

Ivan: This was driven primarily by higher revenue.

Speaker Change: We announced an 18% increase in our annual dividend to $2 10 per share well above our long term value creation framework. Additionally.

Ivan: Our ISG operating income rate was up again sequentially to a record 18, 1% of revenue.

Ivan: The rate improvement of 480 basis points was the result of improved gross margins, especially in storage and reduced operating expense.

Speaker Change: Additionally, the board of Directors has approved a $10 billion increase in our share repurchase authorization.

Ivan: Within storage, we saw record profitability driven by a higher mix of <unk> IP versus partner IP.

Speaker Change: This is a testament to our confidence in the business and our ability to generate strong cash flow.

Ivan: Improved product profitability and revenue scaling in what is seasonally our strongest quarter.

Speaker Change: Turning to FY 'twenty six guidance.

Speaker Change: Spending is expected to grow with three underlying trends that we see first businesses are leveraging AI to enable competitive advantages and we are seeing that in our opportunity pipeline that continues to expand second data center modernization is well underway with a focus on consolidation.

Ivan: Now, let's turn to CFC DSG.

Ivan: PSG revenue was up 1% to $11 9 billion.

Ivan: Commercial revenue was up 5% to $10 billion, while consumer revenue was down 12% to $1 9 billion.

Ivan: ESG operating income was <unk> 6 billion or five 3% of revenue.

Speaker Change: And power efficiency.

Speaker Change: Third customers are planning to refresh their PC installed base with AI enabled devices.

Ivan: This is down 90 basis points sequentially due to a more competitive pricing environment.

Speaker Change: As these trends materialize, we will leverage our operating model that has driven value creation over the last 40 years.

Ivan: We saw some promising sign as we went through November and December with pockets of strength in large deal, but overall saw a slowdown in January.

Speaker Change: Against that backdrop.

Speaker Change: We expect revenue and EPS growth in FY, 'twenty <unk> above our long term value creation framework.

Ivan: As Jeff mentioned, we saw strength in small and medium business, which is historically a leading indicator.

Speaker Change: We expect FY 'twenty six revenue to be between $101 billion and $105 billion with a midpoint of $103 billion up 8%.

Ivan: Profitability in commercial with weaker than expected as demand continued to push into the next fiscal year.

Ivan: In consumer the demand environment remains soft and profitability remains challenged.

Speaker Change: We expect ISG to grow high teens, driven by $15 billion of AI server shipments and continued growth in traditional server and storage and we expect <unk> to grow low to mid single digits more weighted towards the second half of the year.

Ivan: We are ready and well positioned for PC refresh with our simplified rebrand leading go to market engine and focus on commercial Pcs and less profitable segments of the market.

Ivan: Shifting gears Dell financial services continues to drive differentiated payment solutions for our customers.

Speaker Change: We expect the combination of ISG and <unk> to grow 10% at the midpoint.

Speaker Change: Given the higher mix of our AI optimized servers and the current competitive environment, we expect our gross margin rate to decline roughly 100 basis points.

Ivan: We exited the year with a record $15 billion in assets under management up 5%.

Ivan: And when you normalize for the exit of our <unk> retail business and the discontinuation of our commercial revolving product DFS originations were up 7% in Q4 with a strong attach rate across the business.

Speaker Change: As our modernization efforts continue we expect opex to be down low single digits year over year.

Speaker Change: We expect ISG operating income rate to be roughly flat year over year with PSG down slightly.

Ivan: Now, let's move to cash flow and balance sheet.

Speaker Change: We expect <unk> to be between one four and $1 5 billion.

Ivan: Q4 cash flow from operations, plus <unk> 6 billion.

Speaker Change: Diluted non-GAAP EPS is expected to be $9 30.

This was primarily driven by profitability, partially offset by working capital.

Speaker Change: Plus or minus 25 up 14% at the midpoint, assuming an annual non-GAAP tax rate of 18%.

Ivan: Our cash conversion cycle was negative 31 days.

<unk> six $7 billion in inventory we.

Ivan: We ended the quarter with $5 2 billion in cash and investments down $1 4 billion sequentially.

Speaker Change: For Q1, we expect revenue to be between 22, 5% and $23 5 billion.

Speaker Change: Up 3% at the midpoint of $23 billion.

Ivan: Our core leverage ratio was down sequentially to $1 two acts.

Speaker Change: ISG and CST combined are expected to grow 6% at the midpoint with ISG growing low teen and PSG flat year over year.

Ivan: We returned $1 $1 billion of capital to shareholders with $6 4 million shares of stock repurchased at an average price of $117 51.

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

Ivan: And pay the dividend at <unk> 45 per share.

Since our capital return program began at the beginning of FY2023 we've returned $10 8 billion to shareholders through stock repurchases and dividends.

Speaker Change: Opex will be down low single digits year over year leaves.

Speaker Change: We expect operating income rate to be down sequentially, given typical seasonality and ISG with lower storage mix.

Ivan: We announced an 18% increase in our annual dividend to $2 10 per share well above our long term value creation framework. Additionally, the board of directors has approved a $10 billion increase in our share repurchase authorization.

Speaker Change: We expect our diluted share count to be between $706 million and 710 million shares and our diluted non-GAAP EPS is expected to be $1 65, plus or minus 10.

Ivan: This is a testament to our confidence in the business and our ability to generate strong cash flow.

Speaker Change: 25% at the midpoint.

Speaker Change: In closing, we delivered solid FY 'twenty results.

Ivan: Turning to FY 'twenty six guidance.

Speaker Change: Well above our long term value creation framework, we generated $95 6 billion in revenue record EPS of $8 2014.

Ivan: Spending is expected to grow with three underlying trends that we see first businesses are leveraging AI to enable competitive advantages and we're seeing that in our opportunity pipeline that continues to expand second data center modernization is well underway with a focus on consolidation.

Speaker Change: And returned $3 $9 billion of capital to our shareholders.

Speaker Change: We executed our strategy and expanded our lead in AI, while positioning our core business for the opportunity ahead.

Ivan: Power efficiency.

Speaker Change: Internally, we began a transformation to future proof the company.

Ivan: Third customers are planning to refresh their PC installed base with AI enabled devices.

Speaker Change: Focusing on simplifying and automating and modernizing how we work and as we look forward I'm excited about the sustainable growth, we see and the value we will continue to deliver to our customers and our shareholders now I'll turn it back to Paul to begin Q&A.

Ivan: As these trends materialize, we will leverage our operating model that has driven value creation over the last 40 years.

Ivan: Against that backdrop.

Ivan: We expect revenue and EPS growth in FY 'twenty six above our long term value creation framework.

Paul France: Thanks, Yvonne we'll take the Q&A in order to ensure we get to as many of as possible. Please ask one concise question, let's go to the first question operator.

Ivan: We expect FY 'twenty six revenue to be between $101 billion and 105 billion.

Ivan: With a midpoint of $103 billion up 8% we.

Ivan: We expect ISG to grow high teens, driven by $15 billion of AI server shipments and continued growth in traditional server and storage and we expect <unk> to grow low to mid single digits more weighted towards the second half of the year.

Speaker Change: Thank you if you would like to signal with questions. Please press star one on your Touchtone telephone.

Speaker Change: And the first question comes from <unk> Mohan with Bank of America.

Speaker Change: Thank you so much.

Speaker Change: Could you talk through the fiscal 'twenty, six guide and what sort of maybe some of the assumptions that are incorporated beyond what you stated your revenues are going to be up roughly in total about seven 7% EPS up about 14% with your comments on <unk> TSV margins are flat to down.

Ivan: We expect the combination of ISG and <unk> to grow 10% at the midpoint.

Ivan: Given the higher mix of our AI optimized servers and the current competitive environment, we expect our gross margin rate to decline roughly 100 basis points.

Ivan: As our modernization efforts continue we expect opex to be down low single digits year over year.

Speaker Change: You noted a fairly competitive environment. So can you just bridge.

Ivan: We expect ISG operating income rate to be roughly flat year over year with PSG down slightly.

Speaker Change: Those sort of comments to your EPS growth, how much is coming potentially from from buybacks and have you made any tariff related assumptions in these margin guidance. Thank you so much.

Ivan: We expect <unk> to be between one four and $1 5 billion.

Ivan: Diluted non-GAAP EPS is expected to be $9 30, plus.

Bonnie: Thanks Bonnie.

Bonnie: So yes in the guide for the year, we guided to the excuse me $103 billion at the midpoint up 8%.

Ivan: Plus or minus 25 up 14% at the midpoint.

Ivan: Tuning and annual non-GAAP tax rate of 18% for.

Bonnie: With everything growing rate ISDN CSA expected to be up a combined about 10% if I look at ISG, which I think some of your questions coming from now.

Ivan: For Q1, we expect revenue to be between 22, 5% and $23 5 billion up.

Ivan: Up 3% at the midpoint of 23 billion.

Ivan: ISG and CST combined are expected to grow 6% at the midpoint with ISG growing low teen and PSG flat year over year.

Bonnie: We expect that to be in the high teens fueled by that $15 billion of AI server shipments that we referred to.

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

Bonnie: As well as continued growth in both traditional server and storage I mean, I'd say with storage in the low single digits.

Ivan: Opex will be down low single digits year over year.

Bonnie: G.

Bonnie: We do expect to grow in the mid single digits coming up for the year that has just begun with that refresh cycle that we're expecting to be more weighted towards the second half of the year.

Ivan: We expect operating income rate to be down sequentially, given typical seasonality and ISG with lower storage mix. Please.

Ivan: We expect our diluted share count to be between $706 million and 710 million shares and our diluted non-GAAP EPS is expected to be $1 65, plus or minus 10.

Bonnie: Opex is another area you know, we guided to it being down low single digits year over year. That's just a continuation of all of the efficiencies that we're driving.

Ivan: 25% at the midpoint.

Ivan: In closing, we delivered solid FY 'twenty five results well above our long term value creation framework, we generated $95 $6 billion in revenue record EPS of $8 14.

Bonnie: Across the entire company.

Bonnie: And then the Op Inc.

Bonnie: Proving year over year.

Bonnie: Two nine.

Bonnie: 9.1% up from eight nine so an improvement there when I when I think of what to expect from an ISG standpoint from an operating level.

Ivan: And returned $3 $9 billion of capital to our shareholders.

Ivan: We executed our strategy and expanded our lead in AI, while positioning our core business for the opportunity ahead.

Bonnie: We are saying roughly roughly flat year over year.

Bonnie: And we expect there to be continued.

Ivan: <unk>, we began a transformation to future proof the company.

Speaker Change: Competition, I guess is the right way to put it in <unk>.

Ivan: Focusing on simplifying automating and modernizing how we work and as we look forward I'm excited about the sustainable growth, we see and the value. We will continue to deliver to our customers and our shareholders now I will turn it back to Paul to begin Q&A.

Speaker Change: But again, we've guided embedded that in there and I go back to ISG real quick and say Hey, we are going to be growing the AI business, while continuing to drive profitability there.

Speaker Change: We'll continue to balance as we have been doing our growth and profitability and we're going to manage pricing, we're going to manage the competitive environment and we're going to continue to drive.

Paul Fred: Thanks, Yvonne, let's get the Q&A in order to ensure we get to as many of as possible. Please ask one concise question, let's go to the first question operator.

Speaker Change: Value for our shareholders.

Speaker Change: Thank you if you would like to signal with questions. Please press star one on your Touchtone telephone.

Sanjay: Thanks Sanjay.

Speaker Change: Okay.

Speaker Change: And the next question comes from Erik Woodring with Morgan Stanley.

Mohan: And the first question comes from <unk> Mohan with Bank of America.

Erik Woodring: Great guys. Thanks, so much for taking my question.

Erik Woodring: Jeff a question I often get from investors is kind of about the risk of ODM encroachment in the AI server market.

Speaker Change: Thank you so much.

Speaker Change: One could you talk through the fiscal 'twenty, six guide and what sort of maybe some of the assumptions that are incorporated beyond what you stated your revenues are going to be up roughly in total about seven 7% EPS up about 14%.

Erik Woodring: Customers get more sophisticated over time competition intensifies.

Erik Woodring: Potentially margins face downward pressure effectively the concern is AI servers become somewhat of a cloud <unk> type of disintermediation clearly your AI server backlog helps to refute this concern, but I would love if you could just maybe how would you respond to those concerns if you got that question. Thanks, so much.

Speaker Change: With your comments on <unk> margins are flat to down and you noted a fairly competitive environment. So can you just bridge.

Speaker Change: Sure. Thanks, Eric.

Speaker Change: Do we see the Odm's and these large opportunities of course, we do these are multibillion dollar opportunities.

Speaker Change: Everybody tends to show up and once an opportunity to win the business.

Speaker Change: Thanks Bonnie.

Speaker Change: So yes in the guide for the year, we guided to the excuse me the $103 billion at the midpoint up 8%.

Speaker Change: When I sit back and reflect.

Speaker Change: Why Dell and why we continue to be optimistic here is.

Speaker Change: With everything growing rate ISDN CSA expected to be up a combined about 10% if I look at ISG, which I think some of your questions coming from now.

Speaker Change: This is custom work it takes significant engineering capability. It takes significant architecture capability to win.

Speaker Change: And in many cases, we're building a unique and differentiated solution for each and every customer and our customers have learned to value, what we've been able to bring to them across their deployments.

Speaker Change: We expect that to be in the high teens fueled by that $15 billion of AI server shipments that we referred to.

Speaker Change: As well as continued growth in both traditional server and storage and I'd say with storage in the low single digits.

Speaker Change: Whether that is the service side when we extend beyond an L 10 server out of the factory with all 11, Enel 12, and full integration of Iraq.

Speaker Change: G.

Speaker Change: Yes, we do expect to grow in the in the mid single digits coming up for the year that has just begun.

Speaker Change: The network edge expertise, we bring to do the install and deployment of very complex network arrays.

Speaker Change: That refresh cycle that that we're expecting to be more weighted towards the second half of the year.

Speaker Change: When I think about service the ability that we have a global service footprint professional servers can show up anywhere to solve any related problem more hands on in these very large deployments with full time teams literally there are $24 $7 trying to get them up and running.

Speaker Change: Opex is another area.

Speaker Change: <unk> to it being down low single digits year over year is just a continuation of all of the efficiencies that we're driving.

Speaker Change: Across the entire company.

Speaker Change: I think about the financing capabilities that we have in our company and the ability to help these.

And then the Op Inc.

Speaker Change: Improving year over year.

Speaker Change: Csp's these SaaS.

Speaker Change: Two nine.

Speaker Change: SaaS growing companies grow at the rates they want with our financing capabilities I think about our go to market coverage and I think about the expertise we have in the top 30 years, So csp's digital natives, our ability to scale this to enterprise.

Speaker Change: Nine.

Speaker Change: 1% up from eight nine so soon improvement there and when I when I think of what to expect from an ISG standpoint from an op Inc level.

Or staying roughly roughly flat year over year.

Speaker Change: And we expect there to be continued.

Speaker Change: Eric I every time I look at this question and I don't really focus on Oems or for that matter. Other Oems I look at the differentiated value, we are bringing to the marketplace with the Dell company, bringing end to end solutions and right now it's valued.

Speaker Change: Competition, I guess is the right way to put it in <unk>.

Speaker Change: Again, we've guided embedded that in there and I go back to ISG real quick and say Hey, we are going to be growing the AI business, while continuing to drive profitability. There. So we'll continue to balance as we have been doing our growth and profitability and we're going to manage pricing we're going to.

Speaker Change: And right now we continue to differentiate right now we help these large.

Speaker Change: Scale clusters get deployed faster than anybody else.

Speaker Change: Mind, you I, probably did last time as well we were the first to bring to market a GBP 200 rack that's not by luck.

Speaker Change: Managed to the competitive environment, and we're going to continue to drive.

Speaker Change: It's by a lot of hard work detailed engineering collaborating in this case with Nvidia and our customer to be able to take out every ounce of time and run at the speed of light so to speak.

Speaker Change: Value for our shareholders.

Andre: Thanks Andre.

Speaker Change: Okay.

Speaker Change: And the next question comes from Erik Woodring with Morgan Stanley.

Erik Woodring: Great guys. Thanks, so much for taking my question.

Speaker Change: So we're going to continue to invest in that differentiation, we're going to continue to make us stand out to be different our customers really value. The full range of our capabilities. They like the notion of a one place to go.

Erik Woodring: Jeff a question I often get from investors is kind of about the risk of ODM encroachment in the AI server market.

Erik Woodring: As customers get more sophisticated over time competition intensifies.

Speaker Change: Not sure others bring that I know, we do and I know, we're extracting value from the marketplace for that with our customers on our deployment.

Erik Woodring: Actually margins face downward pressure effectively the concern is AI servers become somewhat of a cloud 2.0 type of disintermediation.

Awesome, Thanks, Jeff I appreciate it and good luck guys.

Speaker Change: Youre welcome.

Speaker Change: Clearly your AI server backlog helps to refute this concern, but I would love if you could just maybe how would you respond to those concerns if you got that question. Thanks, so much.

Speaker Change: And the next question will come from Simon Leopold with Raymond James.

Simon Leopold: Thank you very much for taking the question.

Simon Leopold: I was wondering if you could give us your thoughts on your exposure to the U S. Federal government basically how big is it typically as a percent of <unk>.

Erik Woodring: Sure. Thanks, Eric.

Erik Woodring: Do we see the Odm's and these large opportunities of course, we do these are multibillion dollar opportunities.

Simon Leopold: Your revenue and how are you thinking about the trend given all the.

Erik Woodring: Everybody tends to show up and once an opportunity to win the business.

Simon Leopold: The noise, we hear out of out of Washington around budget cuts and spending cuts. Thank you.

Erik Woodring: When I sit back and reflect.

Erik Woodring: Why Dell and why we continue to be optimistic here is.

Simon Leopold: So Simon I'll take a pass at that we do business.

Erik Woodring: This is custom work it takes significant engineering capability. It takes significant architecture capability to win.

Simon Leopold: 170, plus countries around the world, obviously, our largest country is if the United States than we do.

Simon Leopold: With the federal government.

Erik Woodring: And in many cases, we're building a unique and differentiated solution for each and every customer and our customers have learned to value, what we've been able to bring to them across their deployments.

Simon Leopold: Can't really parse out exactly what you're asking for.

Simon Leopold: Certainly going to lean into all opportunities that are ahead of us and continue to be successful in that space I don't know I would add to what our bonds said, we've had numerous times in our history, where a country or a particular segment demand was suppressed for various reasons, we've been able to navigate those cycle.

Erik Woodring: Whether that is the service side when we extend beyond an L 10 server out of a factory with all 11, Enel 12, and full integration of Iraq.

Erik Woodring: The network expertise, we bring to do the install and deployment of very complex network of arrays.

Simon Leopold: I think pretty successfully.

Erik Woodring: When I think about service the ability that we have a global service footprint professional servers can show up anywhere to solve any related problem more hands on in these very large deployments with full time teams literally there are $24 $7 trying to get them up and running.

Speaker Change: Our underlying belief is United States government.

Speaker Change: We will need technology AI plays a pretty significant role in our nation and I think the demand will materialize, we will get through whatever is happening today, and we have a broad business to be able to do that whether it's PC servers star.

Erik Woodring: I think about the financing capabilities that we have in our company and the ability to help these.

Speaker Change: Storage AI solutions, our services, making.

Erik Woodring: Csp's these SaaS.

Speaker Change: Making it up in other parts of the world other parts of the United States.

Erik Woodring: SaaS growing companies grow at the rates they want with our financing capabilities I think about our go to market coverage and I think about the expertise we have in the top 30, or so csp's digital natives, our ability to scale this to enterprise.

Speaker Change: <unk> proven we've done that consistently and will do so here, we can help drive efficiencies in every environment. So excited about the opportunity.

Speaker Change: Thanks, Kevin.

Speaker Change: And our next question will come from Aaron Rakers with Wells Fargo.

Speaker Change: Yes. Thanks for taking the question just building on Eric for your question I'm curious, Jeff is because we really start to see the materialization of the black oil product cycle.

Three are AI backlog.

Speaker Change: And right now we continue to differentiate right now we help these large.

Speaker Change: I am curious when you when youre engaged didn't like rack scale configurations, how would you compare the margin profile of those relative to the AI business on let's say the hopper product cycle.

Scale clusters get deployed faster than anybody else.

Speaker Change: I'll remind you I probably did last time as well we were the first to bring to market a GBP 200 rack.

Speaker Change: Can you talk a little bit about the levers that you see to improve that margin as we move through 2045. Thank you.

Speaker Change: Look it's by a lot of hard work detailed engineering collaborating in this case with Nvidia and our customer to be able to take out every ounce of time and ran at the speed of light so to speak.

Speaker Change: Sure Erinn I think I mentioned in the last call that the black low margins were lower than the hopper margins and it remains so today.

Speaker Change: So we're going to continue to invest in that differentiation, we're going to continue to make us stand out to be different.

Speaker Change: We're still early.

Speaker Change: The deals are there large upfront there's more competitors. So it's a more competitive landscape and I'll, probably sound a little redundant with the less.

Speaker Change: Our customers really value the full range of our capabilities. They like the notion of a one place to go I'm not sure others bring that I know, we do and I know, we're extracting value from the marketplace for that with our customers on our deployment.

Eric I: The answer with Eric.

Speaker Change: Look this is custom design and architecture work there is an ability to really distinguish your engineering and value add in that step, which is an opportunity for us to extract value and opportunity for us to reduce costs.

Jeff Clarke: Awesome. Thanks, Jeff I appreciate it good luck guys.

Speaker Change: Youre welcome.

Speaker Change: And the next question will come from Simon Leopold with Raymond James.

Speaker Change: These arent reference designs or as we would affectionately calling the engineering community. They are not cookie cutter designs, we're designing a unique rack.

Simon Leopold: Thank you very much for taking the question.

Simon Leopold: I was wondering if you could give us your thoughts on your exposure to the U S. Federal government basically how big is it typically as a percent of your revenue and how are you thinking about the trend given what.

Speaker Change: Our unique power distribution unit.

Speaker Change: Our cooling are manifold, the cold plate the ability to engineer that in to drive that through the scale of our supply chain are opportunities for us, helping our customers attached with our networking with our storage our opportunities and while still small it remains an opportunity because every large cluster and for that matter.

Simon Leopold: The noise, we hear out of out of Washington around budget cuts and spending cuts. Thank you.

Speaker Change: So Simon I'll take a pass at that we do business in 170 plus countries around the world obviously, our largest country is.

Speaker Change: AI workload requires data to fulfill its need.

Simon Leopold: The states and we do.

Simon Leopold: With the federal government, but I can't really parse out exactly what.

Simon Leopold: You are asking for and we're certainly going to lean into all opportunities that are ahead of us and continue to be successful in that space I don't know.

Speaker Change: They drive differentiation I think Ron and I have been consistent for the better part of the year that AI servers are margin rate dilutive.

Simon Leopold: I would add to what our bonds said, we've had numerous times in our history, where a country or a particular segment demand was suppressed for various reasons, we've been able to navigate those cycles I think pretty successfully.

Speaker Change: They are margin accretive.

Speaker Change: They are operating margin positive they are profitable for us and what's really interesting for us if we take the work that we're doing in these large clusters.

Simon Leopold: Our underlying belief is United States government will need technology AI plays a pretty significant role in our nation and I think the demand will materialize, we'll get through whatever is happening today, and we have a broad business to be able to do that whether it's PC servers.

Speaker Change: It really scales nicely to the enterprise.

Speaker Change: It allows us to really take the efficiencies and learnings from what we're doing with the largest clusters in the world and build optimized solutions for very specific domain specific AI use cases.

Speaker Change: And our experience to date is the AI margins in enterprise are better and I think there'll continue to be and Thats what were focused on focusing on.

Simon Leopold: Storage AI solutions, our services, making.

Simon Leopold: Making it up in other parts of the world other parts of the United States. We again proven we've done that consistently and will do so here, we can help drive efficiencies in every environment. So excited about the opportunity.

Speaker Change: Okay. Thanks, Eric.

Speaker Change: And our next question will come from Michael <unk> with Goldman Sachs.

Speaker Change: Thanks, Kevin.

Michael: Hi, Good afternoon. Thank you for the question I just have one on the ISG margin outlook of flat year over year for the upcoming year.

Speaker Change: And our next question will come from Aaron Rakers with Wells Fargo.

Speaker Change: Yes. Thanks for taking the question just building on Eric for your question I'm curious, Jeff is because we really start to see the materialization of the black oil product cycle.

Michael: It's a great outlook, particularly considering AI server revenues growing 50%.

Michael: So can you talk a little bit about the expectations for margins for some of the components traditional servers storage AI servers, I'm just trying to understand.

<unk> AI backlog.

Speaker Change: Im curious when you when youre engaged student like rack scale configurations, how would you compare the margin profile of those relative to the AI business on let's say the hopper product cycle.

Michael: The ability to keep margins flat.

Michael: Presumably the dilutive effect from the AI server margins. Thank you.

Speaker Change: Can you talk a little bit about the levers that you see to improve that margin as we move through 2045. Thank you.

Michael: Well I think maybe the way to look at this is the first and foremost as we think about holding ISG margins flat I love. The way that you asked the question, we're going to do that by growing at least $15 billion in AI servers.

Sure Erinn I think I mentioned in the last call that the black low margins were lower than the hopper margins.

So today.

Michael: I know your question is how we're going to do that but for us thats, a very important mark that we're going to be able to.

Speaker Change: We're still early.

Speaker Change: The deals are there large upfront there's more competitors. So it's a more competitive landscape and I'll, probably sound a little redundant with the less.

Michael: Meet that operating range that we've committed in our long term framework and we're going to grow at a minimum of $15 billion in AI servers and.

Eric I: Answer with Eric.

Michael: And we're going to do that by what we've done in traditional servers and what we've done in storage the storage leverage.

Michael: <unk> talked about earlier is front and center.

Michael: When we grow the storage business and we control our expenses scale matters.

Speaker Change: These arent reference designs or as we would affectionately calling the engineering community, they're not cookie cutter designs, we're designing a unique rack.

Operating margins improved when we pivot to Dell IP storage, which we have done our margins improve the margins of our own IP are vastly superior than third party.

Speaker Change: Our unique power distribution unit.

Speaker Change: Cooling are manifold, the cold plate the ability to engineer that in to drive that through the scale of our supply chain are opportunities for us, helping our customers attached with our networking and with our storage our opportunities and while still small it remains an opportunity because every large cluster and for that matter.

Michael: IP we.

Michael: We've been doing that for some time, we made mentioned I think in our remarks about power store, it's grown four consecutive quarters on the mainline the last three double digit and the largest space in the external storage marketplace mid range. It is differentiated features.

Speaker Change: AI workload requires data to fulfill its need.

Michael: We're going to continue to leverage our IP storage, we're building out the customer base with our direct sales force and our partner Channel program, we're continuing to invest in the innovation and differentiation in our storage and with our coverage the broadest coverage in our industry and the deepest specialty capability.

Speaker Change: Services installation deployment those are value add opportunities for us that we continue to build on and then obviously the ability to be a time to market advantage. Those are areas that we continue to focus on they drive differentiation I think Ron and I have been consistent for the better part of the year that.

Michael: To continue to grow the customer base, which I might add the power flex customer base group the power scale customer base group the power store customer base group.

Speaker Change: AI servers are margin rate dilutive.

Speaker Change: They are margin accretive.

Speaker Change: They are operating margin positive they are profitable for us now.

Michael: And then lastly, we're looking to attach more storage Devry AI opportunity that we have our traditional storage business continues to go five consecutive quarters of year over year growth.

Speaker Change: And what's really interesting for us if we take the work that we're doing in these large clusters.

Speaker Change: It really scales nicely to the enterprise.

Michael: We've seen an expansion of Tru use as we see the consolidation continuing to occur in the datacenter to free up more floor space and become more power efficiency, we see our <unk> and <unk> products ramping nicely and those are driving again more cores more memory more ssds more margin dollars per server.

Speaker Change: Our experience to date is the AI margins in enterprise are better and I think there'll continue to be and Thats what were focused on focusing on.

Michael: That we put in the marketplace. That's how we're doing it I missed anything upon.

Speaker Change: Okay. Thanks, Eric.

Speaker Change: And our next question will come from Michael <unk> with Goldman Sachs.

Michael: You got it.

Mike: Thanks, Mike.

Speaker Change: And the next question will come from Ben Reitzes with Melius research.

Speaker Change: Hi, Good afternoon. Thank you for the question I just have one on the ISG margin outlook of flat year over year for the upcoming year.

Mike: Hey, Thanks, guys I appreciate it.

Mike: Could you be more specific on the guidance for this year with regard to tariffs.

Speaker Change: It's a great outlook, particularly considering AI server revenues growing 50%.

Mike: What are you factoring in for China in particular is it the 10% or today. This morning, 20% and then.

Speaker Change: So can you talk a little bit about the expectations for margins for some of the components traditional servers storage AI servers, I'm just trying to understand.

Mike: Alright are you instituting any remedies and what are your thoughts about remedies like raising prices moving stuff around.

Speaker Change: The ability to keep margins flat.

Mike: And how are you adjusting for that thanks a lot.

Speaker Change: Presumably the dilutive effect from the AI server margins. Thank you.

Speaker Change: Well, then maybe I'll take a swing at it and our bond can play clean up on this one here.

Speaker Change: Well I think maybe the way to look at this is the first and foremost as we think about holding ISG margins flat I love. The way that you asked the question, we're going to do that by growing at least $15 billion in AI servers.

Speaker Change: Whatever was announced this morning, which we know things were announced this morning is not reflected in what we just said.

Speaker Change: That said this is a pretty darn dynamic.

Speaker Change: I know your question is how we're going to do that but for us thats, a very important mark that we're going to be able to.

Speaker Change: Environment as represented but we heard this morning, it's fluid.

Speaker Change: We built an industry, leading supply chain thats globally diverse agile resilient that helps us minimize the impacts of these trade regulations tariffs to our customers and shareholders.

Speaker Change: Meet that operating range that we've committed in our long term framework and we're going to grow at a minimum of $15 billion in AI servers.

Speaker Change: We've been monitoring this for some time, we've taken our digital supply chain with our digital twins actually using some AI modeling to look at every possible scenario that you might imagine of this country that country.

Speaker Change: And we're going to do that by what we've done in traditional servers and what we've done in storage the storage leverage.

Speaker Change: <unk> talked about earlier is front and center.

Speaker Change: When we grow the storage business and we control our expenses scale matters.

Speaker Change: Restrictions here rates here to help us understand how we optimize our network and how we do that in the least amount of time at the speed of Dell.

Speaker Change: Operating margins improved when we pivot to Dell IP storage, which we have done our margins improve the margins of our own IP are vastly superior than third party.

Speaker Change: And whatever.

Speaker Change: Whatever tariff, we cannot mitigate we view that as an input cost.

Speaker Change: IP.

Speaker Change: We've been doing that for some time, we made mentioned I think in our remarks about power store has grown four consecutive quarters on the mainline the last three double digit and the largest space in the external storage marketplace mid range. It is differentiated features.

Speaker Change: And as our input costs go up it may require us to adjust prices.

Speaker Change: That's what we've done in the past I can't imagine, we're going to do anything differently.

Speaker Change: And if I Miss something I think you hit it will take into account.

Speaker Change: The input costs.

Speaker Change: We're going to continue to leverage our IP storage, we're building out the customer base with our direct sales force and our partner Channel program, we're continuing to invest in the innovation and differentiation in our storage and with our coverage the broadest coverage in our industry and the deepest specialty capability.

Speaker Change: And price accordingly, and the <unk>.

Speaker Change: <unk> environment that we're operating.

Speaker Change: Continue continue onward.

Speaker Change: Thanks, Dan.

Speaker Change: And we'll take a question from David Loeb with UBS.

Speaker Change: Great. Thanks, guys.

Speaker Change: Just on IHG.

To continue to grow the customer base, which I might add the power flex customer base group the power scale customer base grew the power store customer base group.

Speaker Change: So if we take maybe one for you if we take your kind of outlook at face value and points to incredibly strong growth in traditional server and storage I know you just posted relatively good numbers, but what are you seeing in the marketplace vis vis.

Speaker Change: And then lastly, we're looking to attach more storage Devry AI opportunity that we have our traditional storage business continues to go five consecutive quarters of year over year growth.

Speaker Change: Your traction versus your competitors and kind of how do we think about getting to high single digit growth in that part of the business given sort of the macro environment that we just talked about.

Speaker Change: We've seen an expansion of Tru use as we see the consolidation continuing to occur in the datacenter to free up more floor space and become more power efficiency, we see our <unk> and <unk> products ramping nicely and those are driving again more cores more memory more ssds more margin dollars per server.

Speaker Change: So David where we are expecting to have growth across state across the full portfolio and ice Jade.

Speaker Change: As I talked about we're expecting to have.

Speaker Change: <unk> growing in the low single digits.

Speaker Change: That we put in the marketplace. That's how we're doing it I missed anything alone.

Speaker Change: Server higher than that and then that $15 billion at least and AI servers. So I guess, we'll continue theres lots of opportunities out there theyre continuing to be multiples of.

Speaker Change: You've had it.

Mike: Thanks, Mike.

Speaker Change: And the next question will come from Ben Reitzes with Melius research.

Ben Reitzes: Hey, Thanks, guys I appreciate it.

Speaker Change: What we've already seen that the pipeline continues to grow.

Ben Reitzes: Could you be more specific on the guidance for this year with regard to tariffs.

Speaker Change: I don't know if thats, what you would add to that around ISG I feel I feel confident and comfortable in the guide that we've laid out for the full year and opportune data perhaps yes.

Ben Reitzes: What are you factoring in for China in particular is it the 10% or today. This morning, 20% and then.

Speaker Change: Alright are you instituting any remedies and what are your thoughts about remedies like raising prices moving stuff around.

Speaker Change: Maybe a little bit of color the six storage as an example, youre seeing a pivot.

Speaker Change: Two our Dell IP storage.

Speaker Change: And how are you adjusting for that thanks a lot.

Speaker Change: Modern workloads demand a architecture that.

Speaker Change: Well, then maybe I'll take a swing at it and our bond can play clean up on this one here.

Speaker Change: Can be flexible sufficient optimizes performance and we think a disaggregated architecture, so right answer with the modern workloads.

Speaker Change: Whatever was announced this morning, which we know things were announced this morning is not reflected in what we just said.

Speaker Change: That presents a headwind of our large position that we have in HCI, which will become smaller.

Speaker Change: That said this is a pretty darn dynamic.

Speaker Change: Environment as represented but we heard this morning, it's fluid we built an industry leading supply chain thats globally diverse agile resilient that helps us minimize the impacts of these trade regulations tariffs to our customers and shareholders.

Speaker Change: But we're going to overcome that by taking share and our <unk> IP storage portfolio across the board in the mid range or softer find project like power product like power reflects and empower skilled lean structured space.

Speaker Change: So I mean, I think that gives you a sense of a headwind that may exist there that on the surface.

Speaker Change: May not be obvious, but it's certainly something that were challenges, we pivot towards our storage, which is more profitable than it was going to say, it's more profitable to do our owners revenue that we'll see go away at a lower margin rate. The HCI business, we have a secular decline in the high end space, where we are the market leader with our power mix.

Speaker Change: The restrictions here rates here to help us understand how we optimize our network and how we do that in the least amount of time at the speed of Dell.

Speaker Change: And.

Speaker Change: Product, so we're going to overcome those and drive the growth that Ivan mentioned and then traditional servers I don't know if you've seen some of the recent market forecast, it's low single digit growth.

Speaker Change: Whatever tariff, we cannot mitigate we view that as an input cost and.

Speaker Change: And as our input costs go up it may require us to adjust prices.

Speaker Change: So that's what we've done in the past I can't imagine, we're going to do anything differently.

Speaker Change: To take share we've now had five consecutive quarters of year over year growth, that's coming off eight quarters of a consolidation period.

Speaker Change: And if I Miss something I think you hit it will take into account.

Speaker Change: The input costs.

Speaker Change: Of a consumption period I should say.

Speaker Change: And price accordingly.

Speaker Change: And we think this consolidation continues with the consolidation drives fewer units those units are actually higher and tru because of the more cores memory and Ssds I mentioned earlier.

Speaker Change: The environment that we're operating.

Speaker Change: Continue continue onward.

Speaker Change: Thanks, Dan.

Speaker Change: And we'll take a question from David Loeb with UBS.

Speaker Change: <unk> continued to see that driving our traditional server business I hope that context helped a little bit.

Speaker Change: Great. Thanks, guys.

Speaker Change: Just on IHG.

Speaker Change: So if we take maybe one for you if we take your kind of outlook at face value and points to your incredibly strong growth in traditional server and storage I know you just posted relatively good numbers, but what are you seeing in the marketplace.

Speaker Change: Great. Thanks, Jeff Thanks, a lot.

Speaker Change: Thanks, David.

Speaker Change: And moving on to Amit <unk> with Evercore.

Speaker Change: Okay. Thanks, a lot I guess a question on free cash flow in fiscal 'twenty five it looks like your free cash was down a couple of billion dollars was 24 can you just talk about whats driving this contractual and free cash Lynn.

Speaker Change: Maybe if you could help us kind of understand how do we think about free cash flow expectations as we head into fiscal 'twenty six what is sort.

So David where we are expecting to have growth across the across the full portfolio and ISG.

Speaker Change: Puts and takes around it really helpful to kind of get the context at least for fiscal 'twenty six what's going on.

Speaker Change: Jeff If I could just have you talk a little bit more about.

Speaker Change: As I talked about.

Well I think it's really impressive that you folks are seeing operating leverage in fiscal 2006. Despite the mixed green negative I think that everyone seems to have is is this really durable or is it really driven by one off head count reduction was something else. So just maybe you can touch on the durability of that would be great as well. Thank you.

Speaker Change: Expecting to have storage growing in the low single digits.

Speaker Change: Server higher than that and then that $15 billion at least and AI servers. So I guess, yes.

Speaker Change: We'll continue theres lots of opportunities out there.

Speaker Change: We're continuing to be multiples of.

Speaker Change: First can you go to Tyler that all come in on the durability of the structural changes remain efficient hey.

Speaker Change: What we've already seen that the pipeline continues to grow.

Speaker Change: I don't know what you'd add to that around ISG I feel I feel confident.

Hey, Amit.

Speaker Change: So, yes I think.

Speaker Change: As I was sitting here last year I definitely start cash flow is going to be a little bit stronger.

Speaker Change: And comfortable in the guide that we've laid out for the full year and opportune data, perhaps yes, maybe a little bit of color those six storage as an example, youre seeing a pivot.

Speaker Change: If you look at where it played out one we didn't see the growth in CPG that we were expecting and as you know that throws off really good cash and then two we invested a lot in our AI business through inventory and so you can see that our inventory has gone up.

Speaker Change: Two our Dell IP storage.

Speaker Change: Modern workloads demand a architecture that.

Speaker Change: Can be flexible sufficient optimizes performance and we think a disaggregated architecture, so right answer with the modern workloads.

Speaker Change: That had a big impact of CCC.

Speaker Change: Now if I look where I am today, and I think about FY 'twenty six.

Speaker Change: I would say I've got a few things working in my favor. So one we're at CCC level, where historically, we've always shown improvement from here and.

Speaker Change: That presents a headwind of our large position that we have in HCI, which will become smaller.

Speaker Change: But we're going to overcome that by taking share and our <unk> IP storage portfolio across the board in the mid range or softer find project like power product like power Flex and then Paris scaling the unstructured space.

Speaker Change: And that works there are good cash.

Speaker Change: We expect good CSD this year and that will throw off good cash.

Speaker Change: And if I think about the growth in the P&L retro throw off good cash so.

Speaker Change: So I think we feel pretty good about cash.

Speaker Change: So I mean, I think that gives you a sense of a headwind that may exist there that on the surface.

Speaker Change: I do expect it to be greater than one times.

Speaker Change: And.

Speaker Change: Perfect.

Speaker Change: And then to your second question I, probably won't give you as much detail as you like because we think some of the changes we're making are very proprietary and differentiating us in the market. The fact that we can grow while reducing our operating expenditures.

Speaker Change: Ivan hit on it.

Speaker Change: Amit.

Speaker Change: Products, So we're going to overcome those and drive the growth that Ivan mentioned and then traditional servers I don't know <unk> seen some of the recent market forecast, it's low single digit growth.

Speaker Change: Simplify standardize automate we are building a new company, we are what we call modernizing it we've made reference to modernization. If you prefer we're future proofing the company and we're systematically going throughout all of the value streams in the company.

Speaker Change: To take share we've now had five consecutive quarters of year over year growth, that's coming off eight quarters of a consolidation period birth of a consumption period I should say.

Speaker Change: And we are modernizing the work the work flows taking steps out of processes, taking out manual touches simplifying and standardizing those processes applying automation in the very technologies that we've talked about that get us excited in this marketplace, which is why we believe this AI.

Speaker Change: Continue to see that driving our traditional server business I hope that context helped a little bit.

Speaker Change: <unk> makes its way to enterprise, we are deploying AI and the enterprise.

Speaker Change: Great. Thanks, Jeff Thanks, a lot.

Speaker Change: The broad categories of use cases are industry known whether that's content creation and management support assistance natural language search.

David: Thanks, David.

David: And moving on to Amit <unk> with Evercore.

Okay. Thanks, a lot I guess a question on free cash flow in fiscal 'twenty five it looks like your free cash was down a couple of billion dollars was 24 can you just talk about whats driving this contractual and free cash flow and <unk>.

Speaker Change: Design and data creation co generation or document automation those are broad enterprise use cases.

Speaker Change: Are deploying those types of technologies inside our company and seeing tremendous efficiency from that and it is durable it's not a one timer.

Speaker Change: Maybe if you could help us kind of understand how do we think about free cash flow expectations as we head into fiscal 'twenty six what are sort of puts and takes around it really helpful to kind of get the context at least for fiscal 'twenty six what's going on.

David: And then just if I could just have you talk a little bit more about it.

Speaker Change: Well I think it's really impressive that you folks are seeing operating leverage in fiscal 2006. Despite the mixed green negative I think that everyone seems to have is is this really durable or is it really driven by one off head count reduction was something else. So just maybe you can touch on the durability of that would be great as well. Thank you.

Speaker Change: But it's because we're driving all of these efficiencies that will enable us to invest off spending.

Speaker Change: That's very important I think I mentioned it in the remarks on it that we are reducing the cost and we've built if you will the ability to invest more in our innovation engines.

Speaker Change: And you go to Tyler that all come in on the durability of the structural changes remain efficient.

Speaker Change: More on our areas, where we drive distinct <unk>.

Speaker Change: So.

Speaker Change: Advantages our Salesforce, we've invested in our sales force over the past year, we've invested in services, we've invested in the supply chain, while reducing our cost.

Speaker Change: Yes, I think.

Speaker Change: As I was sitting here last year I definitely start cash flow is going to be a little bit stronger.

Speaker Change: And that's just the beginning.

Speaker Change: Thanks, Amit.

Speaker Change: And the next question will come from Matt Magnum with Deutsche Bank.

That had a big impact of CCC.

Matt Magnum: Okay. Thanks, so much for taking the question. My question is on <unk> can I ask about a different segment.

Speaker Change: Now if I look where I am today, and I think about FY 'twenty six.

Speaker Change: I would say I've got a few things working in my favor. So one we're at the CCC level, where historically, we've always shown improvement from here.

Speaker Change: The guidance implies an acceleration over the course of the year and I'm, just wondering what sort of visibility or confidence level you have there.

Speaker Change: And that works there are good cash.

Matt Magnum: Long awaited PC refresh will finally materialize and.

Speaker Change: We expect good <unk> this year and that work throw off good cash.

Speaker Change: I ask that in context of a relative slowdown that was referenced in January. Thank you.

Speaker Change: And if I think about the growth in the P&L that throw off good cash. So I think we feel pretty good about cash.

Matt Magnum: Yeah, Matt maybe.

Speaker Change: I do expect it to be greater than one times.

Matt Magnum: Missile shed some optimism and why we believe that.

Speaker Change: And.

Speaker Change: Yep.

Matt Magnum: This refreshed that we've talked about is is in the making and clearly we've talked about there is $1 billion five or so Pcs in the installed base.

Matt Magnum: We will say half of them are four years or older.

Matt Magnum: It's got a flip 360 million Pcs turned four years old that robot in 2021. This year those are normally flags for opportunity for refresh, but probably the more compelling reasons and I think there are two we're nine months away from the windows tend to end of life.

Speaker Change: Ivan hit on it.

Speaker Change: Amit.

Matt Magnum: There's over 500 million Pcs running today that cant running windows 10 that can't run Windows 11.

Matt Magnum: There is more than 200 million Pcs today running windows 10 that can run windows 11, those are prime targets for upgrades.

Matt Magnum: Got.

Matt Magnum: It's just a large pool of old machines running an older version of the operating system that can be upgraded.

Speaker Change: <unk> makes its way to enterprise, we are deploying AI and the enterprise.

Matt Magnum: If you were to reflect on where we were with the windows seven end of life compared.

Speaker Change: The broad categories of use cases are industry known whether that's content creation and management support assistance natural language search.

Matt Magnum: Compared to where we are today, let's just say we have a long way to go in the next nine months to catch up and be ready for the end of life.

Matt Magnum: We made reference that SMB for us at.

Speaker Change: Design and data creation co generation or document automation those are broad enterprise use cases.

Matt Magnum: <unk> strength.

Matt Magnum: It's always an indicator that things are beginning to move one of the countries that really show a.

Speaker Change: Are deploying those types of technologies inside our company and seeing tremendous efficiency from that and it is durable it's not a one timer.

Matt Magnum: Traditional or historical perspective that the refresh is underway as Japan, if you will.

Matt Magnum: Look at the dynamics in the Japan marketplace. It is clearly moving through refresh is it will get done towards the end of October.

Speaker Change: What's so exciting is we're making all these changes, we're making investments, but we're driving all of the sufficiency to enable that so then the net what youre seeing us guide to lower spend but it's because we're driving all of these efficiencies that will enable us to invest off spending.

Matt Magnum: And then probably the last thing and the most exciting thing and what is actually driving some of the eye.

Matt Magnum: I think reticence to refresh right now is AIP fees and the number of new AI Pcs that are coming out in the first half of the year, we clearly.

Speaker Change: That's very important I think I mentioned it in the remarks that we are reducing the cost and we've built if you will the ability to invest more in our innovation engines more.

Matt Magnum: <unk> launched a bunch of lunar Lake based notebooks in January.

Matt Magnum: Twice to say Theres more coming we've announced AMD AIP CS customers are going to want to look under the hood at each of those and then make a decision that will future proof their decision of what is the right correct AIP C for them because they will have the asset for at least four years.

Speaker Change: More on our areas, where we drive distinct <unk>.

Speaker Change: Advantages our Salesforce, we've invested in our sales force over the past year, we've invested in services, we've invested in the supply chain, while reducing our cost.

Speaker Change: And that's just the beginning.

Amit: Thanks, Amit.

Matt Magnum: All of that makes us feel more confident that.

Speaker Change: And the next question will come from Matt nickname with Deutsche Bank.

Matt Magnum: That the refresh is coming albeit delayed slower than any that I've encountered in my career, but all of the data suggest it's there it's coming it's coming at a good rate and probably expense.

Matt: Okay. Thanks, so much for taking the question. My question is on <unk> can I ask about a different segment.

Speaker Change: The guidance implies an acceleration over the course of the year and I'm, just wondering what sort of visibility or confidence level you have there.

Matt Magnum: Okay.

Matt Magnum: Help.

Matt Magnum: Yeah.

It did thank you thanks, Matt.

Speaker Change: Long awaited PC refresh will finally materialize and.

Matt Magnum: Youre welcome.

Speaker Change: I ask that in context of a relative slowdown that was referenced in January. Thank you.

Speaker Change: And the next question will come from Ananda Baruah with loop capital.

Ananda Baruah: Yes. Good afternoon, guys. Thanks for taking the question really appreciate it.

Speaker Change: Yes, Matt maybe.

Speaker Change: One for me.

Speaker Change: This will shed some optimism and why we believe that.

Ananda Baruah: Maybe two parts but related.

Speaker Change: Could you talk to you Jeff.

Speaker Change: This refreshed that we've talked about is is in the making and clearly we've talked about theres, a 1 billion and a half or so Pcs in the installed base.

Speaker Change: How you guys are thinking about the server refresh durability I believe after the last call you talked about.

We will say half of them are four years or older.

Speaker Change: Part of the current catalyst.

As folks sort of refreshing older Pcs.

Speaker Change: It's got a flip 360 million Pcs turned four years old that robot in 2021. This year those are normally flags for opportunity for refresh.

Speaker Change: For space and power savings and some part of it.

Speaker Change: For Gen AI.

Speaker Change: This is ahead of you.

Speaker Change: Ahead of processor refreshes, so, yes sort of the context of durability of the traditional server.

Speaker Change: Probably the more compelling reasons and I think there are two we're nine months away from the windows tend to end of life.

Speaker Change: There is over 500 million Pcs running today that cant running windows 10 that can't run Windows 11.

Speaker Change: Growth you see going on now and then just.

Speaker Change: Let's sort of add on to that as you had mentioned.

Speaker Change: Focusing on our target to increase attach storage attached to your Gen. AI servers, so we'd just love.

Speaker Change: There's more than 200 million Pcs today running windows 10 that can run windows 11, those are prime targets for upgrades.

What youre thinking about there and.

Speaker Change: Yes.

Speaker Change: Got.

Speaker Change: It's just a large pool of old machines running an older version of the operating system that can be upgraded.

Speaker Change: What are the mechanics of getting that taken care of at with job. That's it for me. Thanks guys.

Speaker Change: Sure let me try the several one again.

Speaker Change: If you were to reflect on where we were with the windows seven end of life.

Speaker Change: As I mentioned, we're five quarters now of year over year growth, that's coming off a quarter digestion period.

Speaker Change: <unk> to where we are today, let's just say we have a long way to go in the next nine months to catch up and be ready for the end of life.

Speaker Change: And our guide and what we're trying to articulate is that continues for another four quarters. So five quarters becomes nine quarters of growth tempering a little bit.

Speaker Change: We made reference that SMB for us.

Speaker Change: Had strength.

Speaker Change: That's always an indicator that things are beginning to move.

Speaker Change: One of the countries that really show a.

Speaker Change: Still driven by the same dynamics that so well said is freeing up floor space and driving.

Speaker Change: Traditional or historical perspective that the refresh is underway as Japan. If you look at the dynamics in the Japan marketplace. It is clearly moving through refresh is it will get done towards the end of October.

Speaker Change: Energy.

Speaker Change: <unk> cooling efficiency.

Speaker Change: The consolidation occurs as you look at the installed base and we have just just Dell has a very large installed base of <unk> and <unk> servers.

Speaker Change: And then probably the last thing and the most exciting thing and what is actually driving some of the I think reticence to refresh right now is AIP CS and the number of new AIP Sis that are coming out in the first half of the year. We clearly just launched a bunch of lunar Lake based.

Speaker Change: All right to be replaced with a new <unk> server and 17 score is <unk> server those conversion rates are roughly as.

Three to four of the old servers can be.

Speaker Change: If you will replace by a single <unk> server.

Speaker Change: Notebooks in January.

Speaker Change: I used to say Theres more coming we've announced AMD AIP CS customers are going to want to look under the hood at each of those and then make a decision that will future proof their decision of what is the right correct AIP C for them because they will have the asset for at least four years.

Speaker Change: In six to seven of the old servers can be replaced by a single <unk> server why because they have more cores or more.

Speaker Change: More memory and more storage theyre more energy efficient and again that continues we believe throughout the fiscal 2006 calendar 'twenty five.

Speaker Change: All of that makes us feel more.

Speaker Change: And we're confident that.

Speaker Change: <unk> seen no signs that is going to go away from us in that period of time.

Speaker Change: That the refresh is coming albeit delayed slower than any that I've encountered in my career, but all of the data suggest it's there it's coming it's coming at a good rate in probably expense.

Speaker Change: If you flip over to your other question.

Speaker Change: Again, the fundamental premises.

Speaker Change: AI needs data it devours data you got to feed the Beast.

Speaker Change: Okay.

Speaker Change: The feeding of the Beast. If you will has to be closer to where the computational capability is so hot and warm storage the notion of parallel file systems unstructured file systems.

Speaker Change: That help.

Speaker Change: It did thank you thanks, Matt.

Speaker Change: Youre welcome.

Speaker Change: And the next question will come from Ananda Baruah with loop capital.

Speaker Change: Data management tools that help.

Ananda Baruah: Yes. Good afternoon, guys. Thanks for taking the question really appreciate it.

Speaker Change: Find data and health data be ingested are the opportunities.

Speaker Change: We have the leading platform for unstructured data, we continue to make it better with the S. 92% and 710 that I mentioned earlier nearly a year ago, we talked about a parallel file system that we are building project lightning, we referred to it so we're coming to the marketplace with a AI driven parallel file.

Speaker Change: One for me.

Ananda Baruah: Maybe two parts but related.

Speaker Change: Could you talk to you Jeff.

Speaker Change: How you guys are thinking about the server refresh durability I believe after the last call you talked about.

Speaker Change: Part of the current catalyst.

Speaker Change: As folks sort of refreshing older Pcs.

Speaker Change: System and our del data Lake House allows us to help customers prepare their information manage their information and just their information our sales forces incentive to attach storage with AI opportunities.

Speaker Change: For space and power savings and some part.

For Gen AI.

Speaker Change: This is ahead of you.

Speaker Change: Ahead of processor refreshes, so, yes sort of the context of durability of the traditional server.

Speaker Change: They will continue to be incentive.

Speaker Change: We inspect that and we continue to see progress in that area.

Speaker Change: Growth you see going on now and then just.

Speaker Change: Let's sort of add on to that as you had mentioned.

Ananda Baruah: Thanks Ananda.

Speaker Change: Focusing on our target to increase attach storage attached to your journey II survey. So we just love.

Ananda Baruah: And our next question will come from Simic Chan <unk> with J P. Morgan.

Speaker Change: What youre thinking about there and.

Speaker Change: Yes.

What are the mechanics of getting that taken care of at with job. That's it for me. Thanks guys.

Speaker Change: Again <unk> <unk>. Your line is open. Please go ahead with your questions, perhaps you placed us on mute.

Speaker Change: Sure let me try the several one again.

Speaker Change: As I mentioned, we're five quarters now of year over year growth, that's coming off an eight quarter digestion period.

Ananda Baruah: Hi.

Ananda Baruah: You can hear me now Jeff I, just wanted to go back to.

Speaker Change: Some of your prepared remarks about the $15 billion revenue that you were highlighting that you expect to grow to that level. Just wondering how much of that is gated by supply, particularly what's the visibility into supply that youre getting and how much of that growth commentary around sort of FTE is growing there is a supply dynamic versus the demand dynamic.

Speaker Change: And our guide and what we're trying to articulate is that continues for another four quarters. So five quarters becomes nine quarters of growth tempering a little bit.

Speaker Change: Still driven by the same dynamics that you. So well said is freeing up floor space and driving.

Speaker Change: And should we be expecting more sort of linear growth for the quarter was as we think about the euro.

Speaker Change: Yes.

Speaker Change: Energy efficiency and clean efficiency.

Speaker Change: With visibility onto play thank you.

Speaker Change: The consolidation occurs as you look at the installed base and we have just for just Dell has a very large installed base of <unk> and <unk> servers.

Speaker Change: Well.

Speaker Change: I think clearly hopper supply is available today.

Speaker Change: I believe there's references yesterday that block well is in production and ramping.

Speaker Change: All right to be replaced with the new <unk> server and 17 scores <unk> server those conversion rates are roughly as.

Speaker Change: We're open for business and taken orders.

Speaker Change: The message that I really wanted to drive in our remarks is on day 27 of the fiscal year.

Speaker Change: Three to four of the old servers can be.

Speaker Change: We're trying to communicate that we are at least $15 billion in AI shipments.

Speaker Change: If you will replace by a single <unk> server.

Speaker Change: Our five quarter pipeline continues to grow.

Speaker Change: Six to seven of the old servers can be replaced by a single <unk> server why because they have more cores or more.

Speaker Change: It's several multiples of our backlog, we're going to pursue every opportunity with the csp's and in enterprise.

Speaker Change: More memory and more storage theyre more energy efficient and again that continues we believe throughout the fiscal 2006 calendar 'twenty five.

Speaker Change: These large scale systems are accelerating and getting bigger models are quickly moving to reasonably models, which consume and require more computational capability.

Speaker Change: <unk> seen no signs that is going to go away from us in that period of time.

Speaker Change: E more computers.

Speaker Change: And the use cases continue to get clearer for enterprise to drive the return on investments they want to see to actually use AI more broadly.

Speaker Change: If you flip over to your other question.

Speaker Change: Again, the fundamental premises.

Speaker Change: AI needs data it devours data you got to feed the Beast.

Speaker Change: Algorithm innovation continues to accelerate again, these reasoning models or consumer will consume more.

Speaker Change: The feeding that Beast, if you will has to be closer to where the computational capability is so hot and warm storage.

Speaker Change: Computational capability theyre moving to be multimodal, which even consumes more.

Speaker Change: Notion of parallel file systems unstructured file systems.

Speaker Change: Kind of like where this is going.

Speaker Change: Data management tools that help.

Speaker Change: We're optimistic.

Speaker Change: Find data and health data be ingested or the opportunities.

Speaker Change: See supply as an issue clearly these are about building the right architecture.

Speaker Change: We have the leading platform for unstructured data, we continue to make it better with the F. 910 in 2010 that I mentioned earlier nearly a year ago, we talked about a parallel file system that we are building project lightning, we referred to it so we're coming to the marketplace with a AI driven parallel file.

Speaker Change: There is a customer preparation of customer readiness component of this new data centers getting power getting water getting cooling there's other materials beyond the GPU getting the rack getting the coal plaids getting the <unk> to use the PD use all of that is what we orchestrate.

Speaker Change: Our system and our del data Lake House allows us to help customers prepare their information manage their information and just their information our salesforce has an incentive to attach storage with AI opportunities.

Speaker Change: We have line of sight that is at least $15 billion, we will continue to update as that.

Speaker Change: Might change.

Speaker Change: And we're all in.

Speaker Change: I don't know what else I can tell you I hope that helped.

Speaker Change: They will continue to be incentives.

Chuck: Okay. Thanks, a lot of furniture, Chuck main who will take who will take one more question. Please and then we'll hand it over to Jeff for a code.

Speaker Change: We inspect that and we continue to see progress in that area.

Speaker Change: Okay. Thanks Ananda.

Speaker Change: Okay.

Speaker Change: Our final question will come from <unk> merchant with Citigroup.

Speaker Change: And our next question will come from Nick Chatter G with J P. Morgan.

Speaker Change: Great. Thank you for squeezing me in here.

Speaker Change: Yeah.

Speaker Change: Jesse if I can just ask about your pipeline and the backlog itself I mean to the extent that you would see enterprises and sovereigns in that mix how has that changed.

Speaker Change: Again <unk> <unk>. Your line is open. Please go ahead with your questions, perhaps you placed us on mute.

Speaker Change: Relative to a quarter ago.

Speaker Change: Hi.

Speaker Change: And how you see that progressing as you ramp up or as you flushed through your pipeline and your backlog. Thank you.

Speaker Change: Hopefully you can hear me now Jeff I just wanted to go back to.

Speaker Change: Some of your prepared remarks about the 15 billion of AI Sogou revenue.

Speaker Change: Paul.

Speaker Change: You were highlighting that you expect to grow to that level.

Paul France: Slightly repetitive to the previous question the five quarter pipeline grew quarter over quarter and has grown every quarter since the $96 80 was launched.

Speaker Change: Wondering how much of that is gated by supply, particularly worst visibility into supply that youre getting and how much of that growth commentary around sort of FTE is growing there is a supply dynamic versus the demand dynamic and should we be expecting more sort of linear growth for the quarter was as we think about the euro with visibility on to play. Thank you.

Speaker Change: The CSP component grew.

Paul France: The enterprise component grew.

Paul France: The enterprise customer base grew.

Paul France: Sectors like education technology manufacturing and government grew.

Well I think clearly hopper supply is available today.

Paul France: Our buyer base and AI continues to grow what we shipped in Q4. The revenue in Q4 was up the number of new buyers was up.

Speaker Change: I believe there is references yesterday that block well is in production and ramping.

Speaker Change: We're open for business and taken orders.

Paul France: We're well over several a couple a couple of thousand of unique customers.

Speaker Change: A message that I really wanted to drive in our remarks is on day 27 of the fiscal year.

Paul France: Ah.

Paul France: So it has a healthy mix of enterprise. It clearly has a healthy mix of Csp's. It continues to grow to this notion of several multiples.

Speaker Change: We're trying to communicate that we are at least $15 billion in AI shipments.

Speaker Change: Our five quarter pipeline continues to grow.

Paul France: The technologies that are available today.

It's several multiples of our backlog, we're going to pursue every opportunity with the csp's and in enterprise.

Paul France: And we're excited to see that and quite honestly I can't remember the second half. Your question. So if you refresh me.

Speaker Change: These large scale systems are accelerating and getting bigger models are quickly moving to reasoning models, which consume and require more computational capability.

Paul France: My memory I will answer it.

Speaker Change: No. That's good and then just to the extent that you see your attach with those enterprises.

Speaker Change: How much of that is really factored into your fiscal 'twenty six guide.

Speaker Change: E more computers.

Speaker Change: And the use cases continue to get clearer for enterprise to drive the return on investments they want to see to actually use AI more broadly.

Speaker Change: To the best of our ability we factor in the attach of services, our professional services our deployment services, our installation services the ability to sell networking and network installation the ability to sell storage. It's an all inclusive number when we look at that at least $15 billion of AI.

Speaker Change: Algorithm innovation continues to accelerate again, these reasoning models or consumer will consume more.

Speaker Change: Computational capability theyre moving to be multimodal, which even consumes more.

Speaker Change: Servers in the marketplace shipped in the marketplace.

Speaker Change: Thank you and I'll hand, it over to Jeff for a close.

Speaker Change: Kind of like where this is going.

We're optimistic.

Jeff Clarke: Sure. Thanks, everybody.

Speaker Change: I don't see supply as an issue clearly these are about building the right architecture.

Jeff Clarke: Hope you can tell FY 'twenty five was a strong year, we delivered 8% revenue and 10% EPS growth with $3 $9 billion in capital returned to shareholders.

Jeff Clarke: Our AI business grew to $10 billion, while also improving ISG margins year over year.

Jeff Clarke: In FY 'twenty six we expect to grow revenue and EPS in excess of our long term value framework.

Speaker Change: We have line of sight that is at least $15 billion, we will continue to update as that.

Jeff Clarke: We expect our AI business will grow to at least $15 billion.

Jeff Clarke: Given our robust opportunity pipeline, our engineering, our services and financing advantages. This AI business drives incremental operating profit and is EPS accretive.

Speaker Change: Might change.

Speaker Change: And we're all in.

Speaker Change: We will also I can tell you I hope that helped.

Chuck: Okay. Thanks, a lot of furniture, Chuck main who will take we'll take one more question. Please and then we'll hand it over to Jeff <unk>.

Jeff Clarke: We will continue to modernize the company, reducing operating expenses as we grow driving further leverage in the P&L, we remain committed to our capital allocation framework, where we've announced an 18% increase in our annual dividend and our share repurchase authorization increased by $10 billion. We're excited for the year ahead. Thanks.

Speaker Change: Okay.

Speaker Change: Our final question will come from Merck.

Speaker Change: Merchant with Citigroup.

Merchant: Great. Thank you for squeezing me in here.

Merchant: Jeff If I can just ask about your pipeline and the backlog itself I mean to the extent that you would see enterprises and sovereigns in that mix how has that changed.

Your time today.

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

Merchant: Relative to a quarter ago, and how you see that progressing as you ramp up or as you flushed through your pipeline and your backlog. Thank you.

Merchant: Well, it's maybe slightly repetitive to the previous question the five quarter pipeline grew quarter over quarter and has grown every quarter since the $96 80 was launched.

Merchant: The CSP component grew.

Merchant: The enterprise component grew.

Merchant: The enterprise customer base grew.

Merchant: Sectors like education technology manufacturing and government grew.

Our buyer base and AI continues to grow what we shipped in Q4. The revenue in Q4 was up the number of new buyers was up.

Merchant: We're well over several a couple a couple of thousand of unique customers.

Merchant: Ah.

Merchant: So it has a healthy mix of enterprise. It clearly has a healthy mix of Csp's. It continues to grow to this notion of several multiples.

Merchant: The technologies that are available today.

Merchant: And we're excited to see that and quite honestly I can't remember the second half. Your question. So if you refresh me.

Merchant: My memory I will answer it.

Merchant: No. That's good and then just to the extent that you see your attach with those enterprises.

Speaker Change: How much of that is really factored into your fiscal 'twenty six guide.

Speaker Change: To the best of our ability we factor in the attach of services, our professional services our deployment services, our installation services the ability to sell networking and network at installation and the ability to sell storage. It's an all inclusive number when we look at that at least $15 billion of AI.

Speaker Change: Servers in the marketplace shipped in the marketplace.

Jeff Clarke: Thank you and I'll hand, it over to Jeff for a close.

Jeff Clarke: Sure. Thanks, everybody.

Jeff Clarke: Hope you can tell FY 'twenty five was a strong year, we delivered 8% revenue and 10% EPS growth with $3 $9 billion in capital returned to shareholders.

Jeff Clarke: Our AI business grew to $10 billion, while also improving ISG margins year over year.

Jeff Clarke: In FY 'twenty six we expect to grow revenue and EPS in excess of our long term value framework.

Jeff Clarke: We expect our AI business will grow to at least $15 billion.

Given our robust opportunity pipeline, our engineering, our services and financing advantages. This AI business drives incremental operating profit and is EPS accretive.

Jeff Clarke: Your time today.

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

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