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    DELL
    Earnings call· Oct 2025(Q3 FY26)

    Dell Technologies Inc. DELL

    Nov 25, 2025 Source

    Executive summary

    Dell Technologies Q3 FY26 — Record Revenue & EPS Driven by Exceptional AI Server Momentum

    Dell Technologies delivered record Q3 FY26 revenue and EPS, primarily fueled by exceptional momentum in AI server orders and shipments, alongside strong performance in its ISG and commercial CSG segments. The company is navigating an unprecedented environment of rising commodity costs by leveraging its supply chain and direct model to mitigate impacts and maintain profitability. Management expressed strong conviction in its AI business and the ongoing PC refresh cycle, expecting continued EPS growth through strategic execution and capital returns.

    Highlights

    5

    • Total revenue reached a Q3 record of $27 billion, up 11%.

    • Diluted EPS increased 17% to a Q3 record of $2.59.

    • AI server orders reached a record $12.3 billion in the quarter, bringing year-to-date orders to $30 billion.

    • ISG revenue grew 24% to a Q3 record of $14.1 billion, marking 7 consecutive quarters of double-digit growth.

    • Commercial CSG revenue grew 5% to $10.6 billion, marking 5 consecutive quarters of growth.

    Concerns

    3

    • Storage revenue declined 1% year-over-year, despite strong demand for Dell-IP portfolio.

    • Consumer revenue declined 7% year-over-year, though demand returned to growth.

    • Commodity costs (DRAM, NAND, hard drives) are rising, creating an "extraordinary" environment, which will impact all product categories.

    Guidance & targets

    15
    CategoryTargetConfidence
    AI server shipments
    roughly $9.4 billion
    high materiality
    High
    Full-year AI server shipments
    roughly $25 billion
    high materiality
    High
    Q4 Revenue
    between $31 billion and $32 billion
    high materiality
    High
    Q4 ISG and CSG combined growth
    34% at the midpoint
    medium materiality
    High
    Q4 ISG growth
    mid-60s
    medium materiality
    High
    Q4 CSG growth
    low to mid-single digits
    medium materiality
    High
    Q4 Operating expenses
    flat sequentially
    medium materiality
    High
    Q4 Operating income
    up roughly 21%
    high materiality
    High
    Q4 ISG operating income rate
    continued sequential improvement
    medium materiality
    High
    Q4 Diluted share count
    roughly 672 million shares
    low materiality
    High
    Q4 Non-GAAP tax rate
    18%
    low materiality
    High
    Q4 Diluted non-GAAP EPS
    $3.50, plus or minus $0.10
    high materiality
    High
    FY26 Revenue
    $111.7 billion
    high materiality
    High
    FY26 Non-GAAP EPS
    $9.92
    high materiality
    High
    FY27 EPS growth
    mid-teens
    high materiality
    Medium

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    ISG
    Q3 record revenue, 7 consecutive quarters of double-digit growth. Operating income was a Q3 record, marking 6 consecutive quarters of double-digit growth, driven by higher revenue, improved AI server margins, and stronger profitability from Dell-IP storage.
    Operating income rate: 12.4% of revenueServers and networking revenue: $10.1 billionServers and networking growth: 37%Storage revenue: $4 billionStorage growth: -1%
    		$14.1 billion24%—$1.7 billion
    CSG
    Commercial revenue grew for the fifth consecutive quarter. Commercial profitability was stable due to steady pricing and demand for rich-configured, AI-ready devices. Consumer demand returned to growth, and profitability improved year-over-year.
    Operating income rate: 6% of revenueCommercial revenue: $10.6 billionCommercial growth: 5%Consumer revenue: $1.9 billionConsumer growth: -7%
    		$12.5 billion3%—$0.7 billion

    Operational metrics

    20
    Non-GAAP gross margin
    $5.7 billionup 4%
    Q3 FY26

    Gross margin rate was driven primarily by a mix shift to AI servers with shipments doubling year-over-year, partially offset by improved profitability in storage.

    Non-GAAP operating expense
    $3.2 billiondown 2%
    Q3 FY26

    As we continue to drive scale within the P&L.

    Non-GAAP operating income
    $2.5 billionup 11%
    Q3 FY26

    Increase driven by higher revenue and lower operating expenses, partially offset by a decline in our gross margin rate.

    Non-GAAP net income
    $1.8 billionup 11%
    Q3 FY26

    Primarily driven by stronger operating income.

    Non-GAAP EPS
    $2.59up 17%
    Q3 FY26

    A Q3 record.

    Cash and investments balance
    $11.3 billionup $1.6 billion sequentially
    Q3 FY26 end

    Ended the quarter with $11.3 billion in cash and investments.

    Core leverage ratio
    1.6x
    Q3 FY26 end
    Capital returned to shareholders
    $1.6 billion
    Q3 FY26

    Including stock repurchases and dividends.

    Shares repurchased
    8.9 million
    Q3 FY26
    Dividend per share
    $0.53
    Q3 FY26

    Approximately.

    Total capital returned year-to-date
    $5.3 billion
    YTD Q3 FY26
    Total shares repurchased year-to-date
    39 million
    YTD Q3 FY26
    PowerStore demand growth
    double-digit growth7 consecutive quarters of growth, 6 of those double-digit
    Q3 FY26
    All-flash array portfolio demand growth
    double-digit growth2 consecutive quarters
    Q3 FY26
    PC installed base (older than 4 years)
    500 million
    current

    Cannot run Windows 11.

    PC installed base (capable of Windows 11, not upgraded)
    500 million
    current
    Traditional server installed base (older generation)
    70%
    current
    Consumer demand growth
    growthfirst time in 3 years
    Q3 FY26

    Demand environment turned to growth as we refocused on expanding where we play in the market.

    Commodity cost recovery rate (normal times)
    2/3
    90-day period

    Historically, Dell can recover roughly 2/3 of cost increases in a 90-day period.

    Inventory value
    down $300 million sequentiallyroughly flat year-on-year
    Q3 FY26 end

    Despite $12.3 billion in AI orders in Q3 and $19 billion YTD demand.

    Industry KPIs

    6
    MetricValueDetails
    Capital return FCF$1.6 billion (Q3 capital return); $5.3 billion (YTD capital return)USD
    Gross margin drivers21.1%%
    Component supply constraintsDRAM, NAND, hard drives, leading-edge nodes
    Installed base refresh runway1.5 billion units (total PC installed base)units
    Ai server orders revenue backlog$12.3 billion (orders), $5.6 billion (shipments), $18.4 billion (backlog)USD
    Revenue mix by end market segmentISG: $14.1 billion; CSG: $12.5 billionUSD

    Orderbook & backlog

    2
    AI server orders$12.3 billionQ3 FY26

    record

    Year-to-date orders: $30 billion.

    AI server backlog$18.4 billionQ3 FY26 end

    record

    5-quarter pipeline remains multiples of backlog.

    Risks & headwinds

    2
    Rising commodity costs (DRAM, NAND, HDDs)Q4 outlook largely unchanged, but dynamics to navigate next year

    unprecedented

    Mitigation: Leverage world-class supply chain, adjust pricing, reconfigure products, redirect demand, active real-time management, direct model flexibility.

    Competitive environment in consumer and education CSG segmentsQ3 FY26

    competitive

    Mitigation: Refocusing on expanding market play, working on cost position, tuning products.

    What to watch in Q4 FY26

    5

    AI server shipments

    Q4 FY26 and FY27
    Current$5.6 billion (Q3 FY26)
    TargetProgress towards FY26 target of $25 billion, and early FY27 trajectory

    Why it matters

    AI server growth is the primary driver of Dell's revenue and backlog, critical for investment thesis.

    In ISG, we expect to ship roughly $9.4 billion of AI servers in Q4, a record, bringing full year shipments to roughly $25 billion or over 150% year-over-year.

    Q&A highlights

    5

    How will Dell manage rising commodity costs across its portfolio, and is the mid-teens EPS growth target for FY27 still valid given memory headwinds?

    Jeff Clarke stated that rising costs are unprecedented across all components (DRAM, NAND, HDDs) due to demand exceeding supply. Dell will leverage its direct model, supply chain, and pricing flexibility to mitigate impact, expecting to recover more than the usual two-thirds of cost increases. David Kennedy confirmed the Investor Day mid-teens EPS growth framework is a good starting point for FY27, supported by go-to-market engine, gross profit improvement, OpEx scaling, and share repurchases.

    “We're in a very unique time. It's unprecedented. We have not seen costs move at the rate that we've seen. And by the way, it's not unique to DRAM. It's NAND. It is hard drives, leading-edge nodes across the semiconductor network. There is a -- if you will, I'd categorize it as demand is way ahead of supply.”

    asked by Samik Chatterjee · answered by Jeffrey Clarke

    2 min read6 chapters

    Detailed Narrative

    01

    AI Momentum and Strategy

    Dell reported record AI server orders of $12.3 billion in Q3 FY26, contributing to $30 billion in year-to-date orders and an exiting backlog of $18.4 billion. The company shipped $5.6 billion in AI servers during the quarter. Dell highlights its unique capability in designing, deploying, and maintaining large-scale AI factories, achieving rapid deployment within 24-36 hours and uptimes exceeding 99%. The customer base is expanding across Neoclouds, Sovereigns, and Enterprises, with a notable shift towards GB300 designs in the backlog.

    02

    Commodity Headwinds and Mitigation

    Dell is confronting an unprecedented🌐 environment of rising costs for key components such as DRAM, NAND, and hard drives, driven by demand outstripping supply. The company plans to mitigate these impacts by leveraging its direct sales model, extensive supply chain expertise, and pricing flexibility. Historically, Dell recovers approximately two-thirds of cost increases within 90 days, but anticipates a more effective recovery this cycle due to proactive management and the prevailing scarcity of parts.

    03

    ISG Performance and Profitability

    The Infrastructure Solutions Group (ISG) achieved a Q3 FY26 record revenue of $14.1 billion, representing a 24% increase and marking its seventh consecutive quarter of double-digit growth. Servers and networking revenue surged 37% to $10.1 billion. ISG operating income also hit a Q3 record of $1.7 billion, up 16%, with the operating income rate improving 360 basis points sequentially to 12.4%. This improvement was attributed to a favorable mix of AI servers, sequential enhancements in AI server margins, and stronger profitability from Dell's proprietary storage offerings.

    04

    Storage Portfolio Strength

    Despite a 1% year-over-year revenue decline in storage, Dell's IP-driven storage portfolio demonstrated robust demand. All-flash arrays experienced double-digit growth for two consecutive quarters, while PowerStore demand grew for seven consecutive quarters, with six of those quarters showing double-digit growth. The company's strategic focus on Dell Private Cloud, AI and unstructured storage assets, and cyber resilience, all utilizing Dell-IP, is yielding positive results.

    05

    CSG Dynamics and PC Refresh

    Client Solutions Group (CSG) revenue increased 3% to $12.5 billion. Commercial revenue grew 5% to $10.6 billion, marking its fifth consecutive quarter of growth. While consumer revenue declined 7%, demand in this segment returned to growth for the first time in three years. The PC refresh cycle is considered durable, supported by an aging installed base and a significant number of systems yet to be upgraded to Windows 11, alongside the emerging opportunity presented by AI PCs.

    06

    Capital Allocation and Financial Strength

    Dell generated $1.2 billion in cash flow from operations during Q3 FY26, ending the quarter with a strong cash and investments balance of $11.3 billion. The company returned $1.6 billion to shareholders, including the repurchase of 8.9 million shares at an average price of $140 per share. Year-to-date, Dell has returned $5.3 billion to shareholders and repurchased over 39 million shares, demonstrating strong capital allocation discipline.

    AI-generated summary of the company’s earnings call. Not investment advice.