Dell (DELL) 30 Nov 232024 Q3 Earnings call transcript

Good afternoon, and welcome to the fiscal year 2024 Third Quarter Financial Results Conference Call for Dell Technologies Inc. [Operator Instructions] This broadcast is the copyrighted property of Dell Technologies Inc. Any rebroadcast of this information in whole or in part without the prior written permission of Dell Technologies is prohibited. I'd like to turn the call over to Rob Williams, Head of Investor Relations. Mr. begin. may you Williams,

joining and me Tyler for Clarke, are Yvonne McGill Johnson. us. everyone, today With Jeff Thanks,

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

per During refer operating measures, earnings financial that gross our margin, A are results to those expenses, and press year-over-year and which relate percentages our to unless and income, share. We including directly indicated, income unless release. assume in of measures specified. and can statements. materially no references could a all these refer forward-looking otherwise to future SEC their otherwise number our call, forward-looking filings. be of web expectations. and Actual based non-GAAP this change to risks to call found events measures net our operating on measures and in financial reconciliation current update events due to obligation most deck Growth from differ GAAP non-GAAP web uncertainties, diluted to Statements made projected this our discussed statements results are deck during comparable

over I'll Now it to turn Jeff.

backlog revenue AI-optimized we networking revenue. was in delivered the of strong demand ISG, strong the down quarter, wider over revenue, $X.XX, with revenue and sequential billion. In and flow traditional Thanks, XEXXXX cash Rob. cash storage growth customers. into begin more of for $X $X.X continues We driven was servers with for Diluted for and billion, the quarter-on-quarter, to was EPS and QX operations range servers be a flow. of course PowerEdge convert as was solid by profitability flat $XX.X AI as billion. Operating to servers income environment expected. from ISG servers demand Demand improved across was

including doubled servers servers, of Customer and [ of remains shipped AI $X.X ahead demand the ] we and over quarter, our the RXXX nearly XEXXXX,XEXXXX, and sequentially, billion AI-optimized these For servers. for supply. well RXXXXA XEXXXX demand

momentum CSG short July continued as was controlled executed focusing down in In into revenue sequentially CSG, result the environment. saw on August, our competitive and flow, slowed cash outstanding was well, progressed. we performance. quarter expectations. The Operationally, expenses, And pricing and the demand working an but disciplined of remaining capital and our on profit we increasingly including June, we

another to into repurchase via and returned we've will capital flow lastly, billion go returns cash more details shareholders later. on $X share And dividends. Yvonne and

the how turning AI being businesses the in front technology can of Customers CEO expansion. driven result, levels. the across continues down to a dominate meaningful the AI we significant are in they to upside operations a initiatives see to AI advance are generative Board at And business and These use TAM as conversation. are their ways. their globe at

demand cloud margins, interest using improved provider big storage workloads, increased And course attached demand to Dell is and customers powered strong ramping over in history. The XX% ], clusters in wins, CoreWeave specializes quarter. QX, see growing customer mix accelerated in servers in XEXXXX unstructured increased by train high-performance that total revenue foundational incremental a the orders cloud services providers Imbue, is strong fastest server server AI-optimized models. attached and We verticals. other demand we AI-focused from by [ the from of the to computing of which XEXXXX QX, solution and service driven and drove like to continue including GPU the

expectations. need pipeline, to interest, is AI sales That and QX a in all everywhere, doubled multibillion-dollar nearly across hype backlog all the Our said, our of versus with AI-optimized we end regions. including increasing be server measured

linear, in still technology early progress through are cycles AI always are tells us their over be customers Experience that we with the won't multiple to continue AI as but innings strategies. work broad the excited and uniquely about solutions our meet portfolio build help customers to opportunity We believe and is their GenAI requirements. characterize size, in front us. Dell with that security positioned performance, of cost We

Our AI our actions, and for our built is in strategy, our to our for we products, solutions, partnerships. on build road business continue partners the QX, for our foundation maps in AI and AI capabilities. And AI our AI ecosystem priorities,

to it portfolio. make easy AI-optimized [ with We with models are collaborating customers ] MetislomaX deploy for Meta Dell to our on-premises,

Scale source infrastructure. We are the open software-defined and also Object help earlier scale-out our implement Dell GenAI [ PowerEdge with month, collaborating OpenShift Hugging their on fine-tune analytics and run introduced real-time can ], on this Face all-flash Red for an And users own appliance Storage and and Hat based models on Linux XFXXX Object which create to servers. we on solution, GenAI

age, enterprises spending. Looking their with continues forward, customers were and cycle. out, install on AMD and the PC a Windows large recovering in from ARM, cautious PC changes the ramp demand coming in there The to pushed and year, AI-enabled will advances remaining which including exciting QX architectures Intel, with PC refresh expecting in to base are corporate drive has we next PC help

later. server quarters are couple a of storage and We of the historically, rebound, seeing traditional also beginning a follows

we various growth and leadership and We growth. to into positions tailwinds opportunities, multi-cloud, given including expected and return our our to on expect positive AI including to AI. next fully edge our year strengths turn FY the to are leveraging are businesses, And incremental extend new 'XX

and And tandem. in happens, Technology everywhere, for grows value opportunity The ready. is Technology Dell to grow. that amount and continues the is Dell of as data

our innovation. pricing our our and our ability results expands to we expect in that X of deliver focus costs. most the TAM capture to focus areas innovation in customers, us growth wave translate on after remain profits businesses decades the attractive growing through on the extending economic have the our with wave cycle, We that and as core And disciplined proven stakeholders. have into and of over our Regardless proven for to for

for to over Now financials. Yvonne QX detailed the

Jeff. revenue gross down a revenue, of delivered balance $X.X margin of demand flat year-over-year. Thanks, margins, Gross with was of billion, and lower billion environment. strong on focused We're We expense improved operating cash profitability XX.X% and and $XX.X flow management. any driving growth, capital working in XX%

increased our continue in We sequentially X%, and by see profitable Operating SG&A was or remain down and to pricing QX revenue, billion continue discipline lower of focus maintain $X.X but should to down us driven XX.X% spend. costs actively manage as pressure you expense expect focused And we going X% forward. on to opportunities.

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

year-to-date was the tax XX.X% for rate Our XX.X% quarter. or

Net $X.X was diluted down income XX%. $X.XX, and EPS billion, down was XX%,

performance our in and flat Our recurring quarter revenue a backlog. was $XX $X.X billion, obligation, revenue billion, up was with RPO, or in the by growth decrease in year-over-year, X%, remaining offset deferred

primarily GenAI. was Deferred VMware sequentially up server AI and ASPs to hardware interest sequentially. $X.X increases software in $X.X XX% agreements sequentially. expand revenue X% and and We ISG again due mix our traditional demand up resell. billion, networking in flat continue was revenue accelerated was maintenance to Servers revenue saw and and server billion, customer both down servers, of in given AI-optimized and

or data offset and demand down driven growth basis an delivered XX.X% partially power margin operating revenue, by with revenue, We gross in a increase scale revenue points, [ XXX of storage XX%, of protection $X.X $X.X in in rate. decline ISG income ]. billion, down by billion was

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

operating or CSG revenue ASPs flat. billion, were Our fiscal decline decline respectively. input for $X.X OpInc a $XXX revenue ] pricing was motion of and and as profitable consumer expense profitability at strong focus and TAM billion of increase X.X% points, financing. CAGR, [ services, income revenue. $X.X in revenue, billion, up QX, we was driven down XX With a attach XX%, executing with billion from on QX and a of and high our driven and relative rate offset software, performance margin continue an by X% to will the units, end in CSG by Commercial lower remained growing $XX.X operating costs. commercial, down basis in while gross in direct by maintained peripherals remained we a discipline primarily benefited consumer, $X.X billion lower

including data Azure Apex demand During cloud our fund the offerings, for quarter, Apex added we saw continued center strength in Flex platform utility [ Hat multi-cloud new offerings OpenShift. Red and and and and ]

$X.X historically with assets ending Dell DFS while billion, credit DFS levels. portfolio QX $XX.X billion. Services near overall Financial up originations reached Our low X%, quality remains strong were the losses managed

cash our sheet. and balance flow to Turning

million an improvement receivables collections primarily driven billion, capital from Our inventory, improvement decline sequential was profitability. strong in from in working cash $X.X $XXX Working continued and benefited and flow operations by capital approximately aging. performance

conversion free and offset Our XX cash and flow cash improved last is flat cycle again of XX-day ended days, end since improvement billion cash the capital now in driven We the with a by at returns. investments, year. sequentially $X.X in quarter sequentially, negative by $X generation, billion

sequentially. was QX, exiting leverage X.Xx Core flat

repurchased an per $X.XX we quarterly XX.X quarter, of share average $XX.XX shares of at stock million a and the paid During dividend. price

the expect billion, in Enterprise Sequentially, range in be Against billion. and mid-single sequential QX $XX.X with a driven midpoint up $XX guidance. digits, and macro growth we to in cautious growth seasonal and we current $XX.X to be backdrop, corporate to the storage. continue be customers environment. Turning to in ISG billion servers large traditional of that revenue revenue by expect of

sequentially. in stability PC see be revenue have digits down recovery demand, PC market. the We but a We're expect of yet to CSG seeing low-single to pockets in broader

low by for to minus environment tax segment, roughly midpoint basis Other or assume points QX or be QX, in income CSG. more XX% down for plus be in year. our in rate, Operating a you And the we XXX And for marginally the sequentially. the full at versus should our driven business down should rate competitive XX.X% expect XXs pricing

be to million XXX minus increasing our earnings EPS $X.XX. for million QX share full and per our We and We're count plus diluted or the to year $X.XX. be or expect $X.XX, shares, between expectations diluted our diluted minus XXX share plus should $X.XX,

our 'XX. Turning in still process. early to planning It's FY

year. recognize next about you're I thinking However,

and in portfolio, me AI-optimized traditional seeing thinking. So signs of of parts servers. inflection let the including our stability current share and We're

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

on detail the Count and we these through next will controls to as the of profitable mitigate but more headwinds. continue shareholders. year. to earnings returning in and look updating help cost continue to flow, execute on mindful costs on cash focus FY call. QX we'll to and us inflationary focused We'll Pricing discipline operational our input forward capital move be model, we growth, to competitive 'XX environment on our our unique And expectations

growth. over and closing, unique strong our the framework trends the operating technology to with financial term and and generation, is we extend capture capital AI, and day, advantages conviction our leverage resilient cash end in a leadership have position #X our In strong Leverage edge plan. favor. our in long-term At coupled the P&L strategy, our of simple: with new drives strategy of TAM the This our like long allocation multi-cloud growth

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

in we to we And month, what for returns can last at the capital on and be continue committed our disciplined our innovation, increasing us shareholders. Expect in our how business manage our customers focus we and to delivering to control, Meeting invest shareholders. to Analyst

value key future our for confident We the in meaningful are all our stakeholders. and long-term to ability of about excited create

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

Thanks, Yvonne.

X allow to many Q&A. Let's get ask get participant that question to of as each you We to us possible. ask as to

the first to go Let's question.

question from Evercore. Amit We with first will Daryanani take our

guess to to demand discussion, Jeff, the AI had. go maybe I that you server

your I think essentially you said doubled. orders

broad revenues that be this you something maybe that imply hyperscaler, touch 'XX? would that now? becoming into can $X of And really itself manifests do how helpful. customer then perhaps a into base about does think versus is north you fiscal And So how billion right

Sure.

Let me on pull that apart it.

every I customers. doubled and nearly So AI-optimized quarter-over-quarter. is portfolio growth grew I of quarter-over-quarter, thought, for part that mentioned saw the demand significant what And we was, very our enterprise about interesting

grow in important that's we is And number We was the we made saw and think grow, entire quarter about And of saw that was of that grow. our that talked time, of of mentioned, backlog $X quarter-over-quarter. When saw up the the $X because billion we backlog point real-time $X backlog. update to I until number customers So billion August. billion. a in you we customers of enterprise August that I the portfolio the in that that a was think month note what comment the August included, a Xst

during $X.X We billion over shipped of the AI-optimized servers quarter.

think AI-optimized servers when doubling, nearly and I exit we we of backlog $X.X the QX. mentioned backlog like So fiscal billion to of part you demand about doubled, with at

we AI-optimized is times saw the servers say QX. pipeline triple. supply. remain for that XX of ahead important, pipeline the weeks, during quarter again, Lead the Equally in demand tripled quarter-over-quarter I'll

We continue to real time. from ship we're can And work continue we improve sales working that so to convert into and to into supply. to orders, this now benefit pipeline exciting

the last talked We Yvonne, our it still talk next but planning in a far As that's process. I'm each large case. this not to will nothing we're our coming that at billion. growing year, X not it's the $XXX-ish of We opportunity, It's next sure financial traditional over And the servers. CAGR of at years, as tailwind. the detail, think cost engagement. suggests about greater XX% about a There's it's market in

All Jeff. right. Thanks,

question? Next

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

wondering of into you than called the Tech? the should takes going we to puts coming it businesses, though to both can just of both out, you on able Is long-term so I when it's materially a CSG we're given early be as Dell Or range. Frankly, higher overall be to feels look and some fiscal the cyclical pertinent appreciate it revenues comment ISG? say and that bottoms is in to you many 'XX, comment attribute your off and that outgrow. margins, also your

on also Yvonne, I cost you So characterization also any that headwinds. the kind of but of some be controls, And maybe think side, pricing disciplined would noted helpful. cost

through a rate is thinking say growth that, perspective upside or perspective? from margin just there that you So would EPS also

We Thanks, the at you, early wrap interested frame. usually tell process recognize Wamsi. I certainly process. I'd that year. we're stages next in of time everyone's the But in the planning January

wanted context more So a there. I little bit to give you

to And already we framework. mentioned long-term return financial call, expect on to our as growth, I the above

we've expect seeing so of that servers next year. networking those in AI-optimized inflection addition momentum an point been traditional to be the we bigger about. and portion our in And holistically we're servers talking mix a in to And ISG

We're more growth impact our PC and the I profitability. the decline be also expecting it move third QX If -- expecting will in environment to revenue of see are VMware overall. we quarter. dependent also the PCs, for to mentioned a on to expectations We a timing reseller refresh started competitive cycle. that in no with We're

So the next expect continue, to the that market in PC we'll especially year. into

continue we of expected in, execute operational costs model. to But always led input DRAM next in of of mindful we're year, by consider, to things operating are environment cost proven Other regardless will be NAND And we continue ]. structure. the be do, to and [ as right, to we'll course, that our inflationary our

while can and about financially count to returning update And more earnings We're about growth, in to all you to on really FY in cash February. call QX profitability look disciplined, driving growth. really optimistic 'XX, our context even giving continue excited flow. all and You forward be and us to

the question, for Wamsi. Thanks

operator? question, Next

We take Bernstein. from Sacconaghi our Toni will next question with

Yes.

XX than you in the days thought. rebound about had on than call tone complete this accelerating better very, talked and growth a around the And ago, opposite like sounds was very environment it different the you it demand quarter. sounds Your where spending

normal above seasonality in You were QX. wildly

to QX? really ago? below QX? demand Did QX, you demand of and from QX. And in again characterization seasonality normal in pull seasonality you're what there below in misgauged Like like was guiding just you QX a XX the Or just normal days and were misgauge You changed? for happened

could, And to want if I the clarify I just AI situation.

like billion what I helpful backlog it we to shouldn't be update is billion why for an to days -- server if And which in it terms it's $X billion if backlog billion. X-month was delivery? just shouldn't think servers, are year? you're would could If And saying your pipeline, a servers like if relative sounds right be expect credible $X about give next in could of for So a gargantuan very XX the you seeing ago, that you're improving demand in expect exiting $X year. we servers number $X time, lead this AI traditional now

Well, Toni, that's questions. few a

Let me work way my through those.

August. and us we that what the And You talked certainly together seen in July demand we for June from happened? improved in that that. the And So recall when helped August, in continue in and close quarter, we were we benefited PCs. had QX, about

first In our is the PC fact, the through year-over-year. quarter, business month the up August, of of month

change And slowed We our in customers. public the and again September, in of customers, We as saw business more started changed. saw October. while large slowed them we from number being same ]. stabilization it particularly America. things [ to But time, particularly saw deals at SP more saw commercial our The then more was slowdown, the We cautiousness more quarter became selective, customers slowed the North the in sector slow. in big the the It large actually of enterprise customers and cautious course selective. over

market OEMs, output the increased in numbers some the probably And of which we you've from pricing as the seen saw pressure. slowed,

from PCs So more the to large deals became pricing pressure October. August changed in Those competitive.

the inventory saw also was June shipped July you and think in period. that I

quarter the aggressive throughout we it was the more caught as exited and up, And promotional Now quarter. and ended the quarter. it you was pricing saw we

change PCs. the that So did

optimistic through saw the have see pushed, in guidance. Yvonne ago seeing gave not I were that guidance was did and It's we were clearly call a quarter August, or things recovery. slowed. and our we The that We slowdown we what a

quarter-over-quarter traditional servers, our consecutive of AI now we the to data same of grow. While time, have the or quarters X tailwind of growth and we have at continuing center

-- the quarter-over-quarter. earlier, mentioned I of quarter. doubled in tripled doubled the pipeline nearly Demand As AI

are business. the of tailwinds the those So in we the change see that

biggest backlog going was is $X.X change as I'm PC storage you billion. nearly The to Backlog, was give doubled, expected. number exit because the the QX tripled. Orders performed pipeline

The Llama have working to environment models On-premise to and open our Hugging to AI Face grew products continues that AI I that interest our The strong. reiterate on-prem, strong. pipeline working our is at and that those tools convert and X continue to with customers source we that. pipeline to fact job on-prem, data going for in and bringing now that significantly. AI deployment continues in on-prem, field, us. be the Our The build convert opportunity been continues is We're with believe be to the bring interest is [ an data. ], think to to follow we Meta

All and we answer for we can that that is the thanks and would I question, view I'd Toni. best think you for to right. honest, tone that's transparent that give point time. the it us Thanks call give at see that in the we from and hear you hope it, be and what we there, you our like like

question, the Toni. appreciate So

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

Awesome. to AI-related there's comments infrastructure. us, spending. lot traditional being your just obviously, showing have Jeff, hardware AI, a money, optimized and want about clearly into thrown at of of that dig spending infrastructure very the Because might on impact you're of I as some kind on

bit either are that over traditional give us this gives looking What next compute a months? confidence what we you gives So at that general spending just confidence? you're cannibalize or as on more overall signposts you out XX-plus spend hardware look that spending the won't maybe the you detail can that

Of course, Erik.

try. me Let

X, the sales in we is servers. and was brand-new with increased from saw for That's consecutive of growth to We quarter. a deals quarter-over-quarter. of increased. force What our in sign. We traditional server to towards we very X. activity So grown saw the accounts We X our quarter we've X for the grow quarters traditional now encouraging double our end the the for time the large pipeline year server believe the saw first opportunities in X our seen this that's saw adoption XXG sequentially business what actually

way improved signals think say, need of has I created. be Our quarter. through Those that built what system this data should was through or additional that the course continue centers be to the worked of the COVID updated, us course over now I And digestion conversion bought, capacity. the more those being tell X-quarter data said, -- is its workloads upgraded need of

to accelerated the I at same that signs whole a that of that While fed big going computing computing, that you we there's servers. me generative won't in probably -- opportunity profile have says AI -- Yvonne the in next both that want year. seeing early time, a the by there's new we think but momentum computing, pretty word of mentioned demand -- we're around use category signs use changing this market feeling all have that I'm of across not to positive AI-optimized servers of good And lot recovery, our about there's early as of a we're just AI-optimized broad that a excitement portfolio traditional us

your that of make just I out get to sure Erik? Does that's... want question,

Yes, absolutely. clear. Very

Appreciate Erik. it, Thanks.

Next question.

our We'll from Melius Ben next Reitzes with Research. take question

impact out harness expecting chips above and If do AI? of I that, some will model? XXXX. regard you mind the coming I appreciate with be be -- to of to And XX comments are around you your wanted what think what growth be touching What you expiration -- the ask Windows that it. don't would about PCs is to that the on great. that new

Sure.

'XX me It is at heading fiscal probably PCs. calendar context our we're as into it, take set in Let a run to Ben. 'XX, important

industry, PC market of recollect. longest the close growth X in in We will QX expect down. being quarters can be I the negative It the to

for it's refresh. And a ripe

for are for turning a most to next typically year. be those upgrading point XXX old about. commercial. tipping point That's data in think There'll PCs million years of you Another notebooks. X And

refresh. million year, XXX As time went everybody was to that mix aging working remote, PCs in up, notebook they're the

AMD see of I've notion architectures next greatest the And we is next exciting begin the great ARM it's use PC. time. the its edge Windows to out great the moniker, case to real next And really the the opportunity make on device to way Intel, and it's of and AI pretty from to the this a new the planet, have used year. productivity application, with the on coming

to X base base decline, to units, think greater years, upgrade. None of Windows. X.X those age are upgrade. and aging capable the I you an are That of running X and that become the of And more edge installed have XXX new exciting next an and AI of the them around workloads said PC, time installed coming quarters So another years over interesting. coming X out we to than $XXX the of billion coming architectures of forcing old, all year. will what There's function million million new

Windows replacement version retired, cycle, opportunity X for when and is new us. that available historically, a or drives So that's a an is of

So our the we're excited PCs. of about XX% that, bias revenue comes from commercial particularly given our commercial. towards

it, I question good is other us. then the correctly? was silicon if Is opportunity I that And around the remember think alternatives. the for

think or I final... you also model, as and hit ISG. just just PC -- above -- everything. I is above That's the server PC clarification is probably as the is well -- on

share. internal growing think take somewhere market low to us our in to have X%, X% grow would PC to the model would you single Specifically, expect the digits,

question next Asiya our take We'll Merchant with Citi. from

of couple on questions my A end.

I think that on enterprises. on ] you [ Corbyn you about with cloud share AI the the talked this some there seeing, talked India commentary if you're beyond providers is that with? service now you opportunity that use the that interacting recall, could about us the But workloads gone and I the on the well you call. as and if you're enterprise, cases mentioned Just in was maybe

your ] can pipeline CI So with If for use the growing on are you you cases? anecdotes enterprise seeing that? an any [ opportunity share

run Should in And buybacks, step-up conversion level kicked Or further given a see 'XX? then improving of obviously, buybacks to improving should cash continue this this share rate? quarter? up cycles, you share line, fiscal into we that top we expect that on

of lead couple up I'll specific buyers the A characterize number question. understand with seeing. data enterprise we're help buyers Sure. maybe points significantly. of AI of what Number to up, and

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

pull that's demand. institutions work life services, higher and on-prem, manufacturing services our models, products. seeing about pretty where and included AI we're excited the education, for of across tripling that's ML seeing, data That's enterprise we're doing And board. So financial we're the pipeline and customers That's enterprise in the of is and care health what that.

I take the we quarter I'll And versus you last as Look, share look, buyback. share think, mentioned, tripled repurchase quarter. this

be that pulled the more year, it's accelerate frame a And on year, the typically focused last But side, little guess cash put XX% guide cash weaker bit very focused us so opportunistic. I we was running and around in really obviously more is way this reminder, share As We could kind it position had plus we're return. would a on good the repurchase. a don't capital we I seen of and back on more we've dilution management. then as

If capital. been our dividend, of FY you first we started which 'XX, we're 'XX, running FY go to XX% at would have when beginning back return the of

definitely So feel forward, I I repurchasing good be look it's really about think as just don't guide, than I And say, more do management. fair dilution we'll to recognizing we that. we think

Thanks, Asiya, it. appreciate

question next Sachs. our Ng Mike take with We'll Goldman from

Just quick on have AI. ones X

ISG in the despite contributions very the profile, had mix. First, from rising AI server quarter obviously strong you margin on AI margins

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

the pipeline eventually to sales just between wondering include the we And about then servers InfiniBand and storage for if AI and AI selling AI second, expect you of that you some term? more talked networking that in I or storage relationship for you guys. Ethernet Should or about near talk was [ could ]

from out, will, We a We impact So material portfolio. shipment, really nice margin as of performance the called the impact of we -- with bit right let a server did me rates. really not you saw see if impact server the but now. holistic little the start of across dilution,

already that the in talked traditional so helpful Jeff in that And increase about that servers mix. was

accretive, have margin So margin impact, dilutive. it we've talked it but being does rate an but dollar about

we bit as extent grows, our margin of accretive. impact. an saw that, quarter. will in to a but Again, significant of little third a dollar we expect so see more not But And that

expand accretion more we more more margin And we coming AI that and attached, and as services so we'll the see from have offerings. space, as -- those into enterprise

us opportunity and structured for us. ] new allowed We ultra exciting interconnect typically that No, -- high-speed to that's margins The question, a data margins the is cluster performance with out AI-optimized a a storage job servers what more, the outside connectivity small data quarter-over-quarter. And those did and we it of attributes, center. to nice being your its I think that they Mike, whether -- the really created it's relationship a then great tie data thermal then and improved design, quarter-over-quarter, Ethernet, is be between created, the is They data are the see Yvonne. point, great team there And clusters, Much the are is the Much in storage of networking see it's object of attaching matter services to and needed. a will own large or attributes with much networking of is around value, [ technologies that selling high our unstructured. of deployed clusters, nice our InfiniBand do improving attributes, AI? These bandwidth it Absolutely. assets. all future where really matter, is the ultimately fabric.

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

recently? could shifts given looks AI margins the trend-wise your as where on in to money some question is expectations going see is came you're wanted peers what and And wondering or away particularly you year-over-year trend see input called it's versus better seeing storage, said better unpack longer-term if -- I you given about the trend, I'm was and pulling Great. see I essentially my going the that like a but wondering, do out have think expected, from trending costs is that in next of And to Just worse it how down you in you storage? know margins that because well. still as light revenue the bit in Street it quarter.

Maybe when data as a of From margins, about storage on last and we improve in was margins that saw Yvonne our Sure. exciting. points, us, well. That's the chime can couple and a comment, [indiscernible]. year-over-year quarter-over-quarter think you since

our of that cautious high-end the businesses and categories clearly value have. We our quarter protection was year-over-year. the cautious. in impacts But the very customers, and do of being to actually And saw our continue data absolutely large portfolio we the We products our selective. they're during unstructured see storage product concentration broad sell portfolio. and large on customers is basis A we what exciting orders growing and

data the think to unstructured these when data for So think of to opportunities when workloads out I array it's us edge, the the think opportunity I created edge vast unstructured valuable data, at created, opportunity us to the is about protecting center a and the largely of assets. to valuable be what the is around where outside for with going continue opportunities our again, the great about at be protect I of data

think away don't AI I storage pulls So dollars.

nothing different. We on suggests see quarters. around has we expecting. And us as are couple think that. the the business server cautious Customers by what impacted storage think immense, storage. our to that decline we'll we continue historically lags a and is of it is I focus X the meantime, the recovers, that's and about of effect what of opportunity we're rebounds server unstructured experience see tells that quarters That's in

and that, Jeff, to the right, that software high the And is storage attached. margin accretion on on going with add, great P&L, referred be real, you and in time it's recognized services it's over I'd because the to

all it So today, that we don't benefit we'll but forward. see see going

very much. Thank you

Next question.

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

everywhere like service XEXXXX? a good or as to even the supply in just in that services the course CTU of great ask have only see about Is over billion have But comfortable what that the that that any ease Great. could would tight booking, is service that I in well. very there? are there include timing. on terms about number? pipeline? can I $X.X How service some how momentum what just included like AI-optimized question you And the next as just about you order like services maybe because into assume great Or is also, visibility with of could talk multibillion year? that that? do you you the dollar I of backlog, are business. in products clarify It's orders these there? you a Apex AI double be professional in concerns and Any Are

It's for the When simply backlog to first. the It's last that computing. the The artificial is about not it. CPU-based. XXXX, it's XXXX, the optimized XXX. demand, X our intelligence XXXX, and and the we not high-performance talk portfolio XXX That's AI

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

role plays very helping demand. The out the car booking. marketplace the supplier and the a they're generate double way that working the NVIDIA that unusual It's -- is obviously, with the helping or

I it reasonable demand I think see see seat, it. booking? Is there's my not. that sit I tell signal that in here there's don't can't double today. from the don't possible I there's you we and -- fidelity

we for is -- of opportunity be give be opportunity, are will It's others to same competing the see supply the to we NVIDIA opportunity suggest the for available. qualified. When or the supply got to qualified the with

given of suggests here there can't signal in tell we isn't enterprise our in think lot demand good I control we we're and X fidelity think globe seeing. that So in it's the points a I signal. really CSPs, Sidney. there's with I certainty that demand the sit that opportunities that And But see hope with team there's helps, I but what a where know are. where X, across great XXX% or the that place and you is

Sidney. Thanks,

question. Next

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

is do how spoke PC? And kind of of the could PC? also, And how an you're Just for incremental million AI through? run an curious, be much much that uplift I'm definition to PC. you your drive had X What unit about AI current going it for you. from you $XXX growth expect AI ASP the

that that service, run an AI performance running the a call the been Our definition but capability AI-enabled PC that that an them AI believe that an that's quite name. be if on they'll to be has PCs is PC. meeting in I all a required has PCs, PC that the workload to comfortable workload architectures locally. The to criteria. Not AI threshold capability run be it cloud definition. going of and the able a app meet are There's variations is of the all to they're to that we in coming And we're AI-optimized with and think performance,

TAM user it an be don't What believe drives the have -- is that seen. chip to at want you to in Whether a to AI-enabled tremendous is doesn't growth it. I be PC

to new of going put security, new yours and your You're forms form you. be PC will next won't It the forms interacting people whether perform to some be ability assistant around forms of that workloads, search, doesn't, some new X, of itself. differently. of to to with take it exciting and new have of able The of that's advantage

refresh and going And I units X.X are to refresh -- prefer. of a a this uplift, business you XXX call base, cycle. And X time, units is million in productivity going that's that or scale I is. increase drive an what exciting but with huge it's the I refresh or cycle to to think whatever installed the catalyst billion-plus again, is number last years. rate, so the the the over be think increase This large can't Those the reduce sold

the single-digit for is growth. estimate marketplace low Our

year. think XXX That to market mentioned roughly from I I take X%. X% to the would XXX next

there. get Let's

again of get quarters X after decline. growing Let's it

said. Well,

Next question.

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

questions a the just already been AI of narrative. ask Jeff, simplistically answered. you I But to lot on want There's

pipeline You time not XX restrictions seen some all Are that to of that's starting weeks put have or back lead China pulled mentioned of any you at times you the lead indications that with delivery change? times. diversity, be some guess surprised of Have that as in move large a another you i.e., in -- place? that supplier context and also, converting I with next that into GPU factor And to we year? and would unlocking expect

is pipeline I alternative today. today. me, an or you XX The things. Aaron, less tell than backlog I not was of NVIDIA than NVIDIA less pipeline that it's couple the weeks. I lead wish the excuse could -- pipeline. A was And It's can't pipeline, time

to down can. to as It's our phone, you with supply, services. have work can get chain improved our you more I are. We to we are imagine, to improve availability. on channel might job. opportunity, Lead we that hopeful times greatly. don't the weeks. supply tell We've day today. to supply help offered continue for supply capabilities, backlog working where our We'll XX improve supply. has we faster. We're every I'm those the and the have That's trying That's reduced, answers where available

backlog we're of, get we'll off every is into referenced, options more there's taken supply. work we've now, forward to NVIDIA-based that pipeline working alternatives the I that to XX-week them. rate, right behinds day clearly resolve have coming. there's more software There's done see. adoption about look in Their to But be those that lead time, calendar 'XX, coming. multibillion-dollar talked our we But care As be stacks alternatives, the year opportunities around

We'll next JPMorgan. question take Samik Chatterjee with our from

I billion guess AI $X.X the servers sticking quarter. on AI-optimized you of in the subject, shipped over

lead easing? we curious, of we some holding ramp where quarters? level that Just are, we billion with the trajectory of shipments it about times sort sort how should fairly it's they should expect Is coming of of up think sort in stable for the supply of if $X.X Or expect in range? what

a quick clarification, And Jeff. just then

you've seeing few that the customers times called you traditional spending a seen months, are in You've signs some mentioned of sort servers, of pulling improvement recent you're most as out even now, in that. back

your of why that this and that traditional of sort that terms theme? is customers counter shoot Just what's insight curious, what's bit driver green runs in are back? to Why Like a there? the gas overall pulling servers

Well, we specific quarter. don't terms product for forecast of next dollars the line by shipments in

how of specific Yvonne in down many want Our lead that a XX-week shipments the service. gave. are I ship of break that to -- into will time, But it why AI probably for AI really are implied there's X don't right to code -- look hand-in-mouth we of shoot. math think be a and ZIP that's and the for in, at go, months. Can kind of green servers the maybe we're sort parts. Traditional but guidance

be in seeing and which X that makes first the have row -- something's increased need an of that at around -- going that period, using that the worked that in COVID through but server recovery, again, business. I it's earlier, to the of the They pipeline, continue obviously They a in the mentioned and we're can not what I changed. been opportunity. comments continue building areas. changed. digestion capacity, something's Again, year. -- conversion product activity word look they quarters half X-quarter that hasn't growth, feed -- an point to inflection we're aged to Yvonne It's era. to the to happened now, a in. think to it's recollect this Improved still I'm improved inflection sequential slightly add in repetitive, different us -- comfortable centers and bought have early the longest the now Data And point

All right.

if last in. X question can see get we Let's

We'll now David with from question take Vogt final UBS. our

a that rest missed that whether Can Jeff, it? year? forward, your means of ultimately, the of component pull-through then on Yvonne higher then to margin you're of What sort talk DRAM, And in Can fabric I might can equipment about storage. you or get just lead however bit maybe of your NAND thoughts, sort you process you thought business? for quickly networking have I or little on the but the kind the costs, CSG. it's maybe with AI sense from thinking of the how to of would impact ISG us sort next share if wanted times the business. impact -- And come it a for pull more earlier, just

improves, to GPU that fabric shipped as supply units the those clearly, and aligned is associated Well, be that. will with

ability or the an from And important. attach about, will think that's networking uplift So an talked in I supply. I as our increase business storage for us And in encouraging. benefit is

the next with Dell And sales is that there. And created teams, that this making our certainly data working it. AI opportunities with the data greater follows working sure center are as portfolio make being that rates it is lands it's Dell in increasingly we're -- We as outside on to landing to sure on of to find AI-optimized storage, as our storage. data, the

of mean, attach around a I the set services that sales motion. that's around that. that, services A set of professional

every which We So and you we the drags training, around if kind it's are opportunity inference is think estate, of AI got get opportunity of our storage at look that, assets, to be as opportunity. an of to for and connected. and model set it. a the compute ultimately, that's fine-tuning as a will, real, It's assets of that focused teams on

a put component inventory rates, potential pressure margin model. run then we and the on costs your we question And do around on low

recover them we to and cost the And market. try those we by through when prices passing into quickly increases, as have raising we as so component can

with had see you'll this It's first we've the not continue us happen. certainly time that. So that

a it's of have And navigate of we that that's question. environment, to takes we'll engine so that through impact to period with the and will. Dell. well usually But it competitive recapture within an time the tuned But

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

This concludes participation. We today's call. your appreciate conference

at disconnect time. this You may