Welcome to day one of Bank of America's Global Tech Conference. Delighted to see many familiar faces over here. I'm Wamsi Mohan. I cover IT hardware and tech supply chain for the bank. Glad you could all make it. I'm delighted to welcome Dell here today. With us today, we have Arthur Lewis, who heads up the Infrastructure Solutions Group, which has been nothing short of amazing lately. Grateful to have you over here. I do have a quick safe harbor statement to read from Dell. This presentation contains forward-looking statements based on Dell Technologies' current expectations. These statements involve risks and uncertainties that could cause actual results to differ materially. Factors that could cause results to differ are discussed in Dell Technologies' periodic reports on Forms 10-K or 10-Q filed with the SEC.
Any forward-looking statements made today are based on assumptions as of today, Dell Technologies undertakes no obligations to update them. With that, I think Zach will give me some props from IR for reading that pretty fast. Welcome, Arthur. Thank you for being here today.
Wamsi, it's great to be here. Thank you for having me.
Yeah, no, absolutely. I know you're a busy guy, so we appreciate you being over here. We only got 30 minutes, so we'll make the most of it. Maybe to start, I would say this, by any standards, was maybe a really historical quarter for Dell, right? ISG was right in the center of all of that. How would you frame where ISG is today versus what you might have thought maybe a year ago?
Well, clearly, the market is growing significantly faster than we thought 12 years ago, significantly faster than anybody would have predicted. I think we've shown an incredible ability to navigate what is unprecedented demand in the industry. You take a look at Q4, overall revenue, $29 billion, up 181%. That's nine consecutive quarters of double-digit growth. That's on top of growth of 73% in Q4 and growth of 12% in Q1 of last year. It was growth, Wamsi, across the portfolio. $8.5 billion, excuse me, on the core server side. That's up 92%. $4.5 billion on the storage side, that's up 8%, and $16 billion on the AI side, up 760%. That's on top of $24 billion of orders and a record backlog of $53.1 billion, and a backlog that still sits at multiples of our backlog.
Operating margins, obviously strong at 10.5%, even with the higher mix. That's largely due to scale in our growth in storage. That's been great. Overall, operating dollars of $3.1 billion, up 206%, growing faster than revenue. If you look over the last two years, revenue is up 3.1x and operating margins are up 4.2x. We like to see that the revenue is growing, but that the profitability underneath it is even stronger than the revenue growth. You saw it in the absolute dollars, 206% versus 181%, and you see it over an elongated two-year period where operating margins are up 4.2x versus revenue up 3.1x. Pretty pleased that we're executing in the face of unprecedented demand.
Yeah. No, that's quite incredible, those stats that you just gave. I remember it was not that long ago that Dell was talking about $90 billion in full-year revenue, and here we are talking about double of that in a very short period of time. Most of that coming from the Infrastructure Solutions Group and particularly within AI servers. Maybe you can just give us some sense of the confidence in this updated guide. I think going into the quarter, the perspective that people had was, yeah, demand is strong. You could do your channel checks and say, yeah, there was maybe pull forward of demand, like Lewis is saying, a lot of demand's getting pulled forward. There was this notion of, look, it's going to be a great result, but we don't know about the guide. Well, we didn't know about the guide.
The guide was order of magnitude different from what everyone thought. What's giving you confidence in projecting this guide?
All right. The one first thing I want to communicate is the guidance went up $27 billion, $140 billion to $167 billion. That guide is only gated by supply. The demand that we're seeing far exceeds the supply that we have. That's point number one. More importantly, what we're seeing, and we now have deeper conversations with customers that are incredibly worried about their demand aspirations versus the supply that they're able to get. We now have visibility into 2026, into 2027, into parts of 2028. Across the portfolio, whether it's GPU, whether it's core server versus storage or networking, we have a pretty good view as to where the demand is coming.
Artificial intelligence has been sort of this existential defining technology of our generation, maybe for all of humanity, quite frankly, something that we said was going to be bigger than mobile, bigger than the internet, bigger than virtualization, bigger than all of those things combined. That's exactly how it's playing out. I think in the fall of last year, when you think about how fast this technology's evolving, there was an inflection point with agentic technology. It was really cool when generative AI came out, and you could train it on data, ask it a question, it gave you a really good answer. You get into these auto-regressive, long-thinking reasoning models, and it gave you a better answer. Now the technology can actually act, manage, orchestrate activities, which makes it even more useful than it was before.
You saw that as the enterprise accelerated AI adoption. We now have over 5,000 customers out there. More Neoclouds are popping up. The demand for power around the world is skyrocketing. Yeah, this is a pretty interesting demand cycle that we're in.
Yeah, no kidding. It is pretty unprecedented. On your point on agentic, maybe just to talk about how that is changing the business. You saw extremely strong performance in industry standard servers, and 97% year-on-year growth. Quite amazing. You also said you're gated more by supply than anything else. As you think about what is the evidence or what are some of the signs that you're seeing in the market that's giving you the confidence that this enterprise adoption is starting to finally pick up?
I almost got to 97%, 92%.
90%, yeah, 92%. Sorry. Too many earnings.
I would break it down into three components as you think about it. Component number one is that the current server TAM, sort of continues to grow in a lot of these legacy type workloads. We see things like these EDA farms continuing to grow, requiring more compute for all these really cool ASICs that are being created, around the world, across all these different semiconductor companies. We see modernization of current infrastructure. We see a modernization of the install base. Majority of our install base still sits on servers that are seven years and older. Your core market is growing. At the same time, that core market is expanding with more AI-driven workloads, agentic has accelerated that.
The reason for that is because, prior to agentic technology, the majority of artificial intelligence was really more math matrices-driven, which was really unique to the parallel processing that comes with a GPU. As you get into agentic technology, where these agents can act, manage, and orchestrate activities, that is a serial sequential process that requires a CPU. Right? We're starting to see those workloads come online. We've seen this kind of inversion of the GPU to CPU ratio. Honestly, I don't really like the CPU, GPU ratio because it's not a scientific thing, and I know the finance community likes to model stuff.
We like numbers.
Just to give you, conceptually how it works is, if you have an agentic task where there's, say, 50 calls to the model, there could be 250, 300 calls to the tools, right? The model is a math exercise where parallel processing works great, but the tools are, I got to go do this step, then the following step, then the following step after that, then the following step that. That's all sequential processing, better run on a CPU. You have a market that's growing, you have a market that's expanding, and we're taking share. We grew 500 basis points of share in Q4. We expect to take meaningful share of Q1 when the data comes out in June. You put all three of those things together, and we think that there's durable demand and opportunity for us to continue to win.
What is the reason that you're gaining share fundamentally? Obviously, there's strong demand you guys are able to deliver. I guess that's the answer.
Yeah
When you think about share gains, historically, people have not really associated. I know you've historically taken share in lots of markets, and you are standing at number one share in most of your end markets. What is the ability, what is special at Dell that allows you to take share and you have confidence in that ongoing?
Well, look, there's the practical consideration that, and obviously you're talking to a biased individual, but there's the practical consideration that we have a great portfolio, right? We have great products. They're reliable, they're performant, they're secure, they're the best in the industry. You have a practical component that we have a good amount of supply, right? We're able to meet the needs of the customers. When I zoom out and what's changed for me dramatically over the last four years is the strategic nature of the relationship that we have with customers. As we entered into the world of artificial intelligence, customers brought us in to have more board-level-like discussions. They really wanted to know, how do I think about ROI and use case selection? How do I think about model selection? How do I think about data preparation?
Obviously data is the fuel that feeds AI. How does that inform my architecture? How do I think about infrastructure as a result, right? Before AI, we would probably be brought in, customer has an infrastructure need. They send us a request for a quote, we quote it, we have great product, we win. Now the relationship has become more strategic, and our role as a trusted advisor has elevated greatly over the last four years. Our ability to communicate a full stack system has also resonated well with customers. The combination of a great portfolio, the availability of supply, but that trusted advisor where people have the confidence, and that we have the credibility to help them work through what is a very complicated transition from legacy data center to agentic data center. I think that's been key.
I meet, Wamsi, with a lot of customers, and I was joking in an earlier meeting, like I love talking about product speeds and feeds. Maybe 5% of my time is that. 95% of my time is talking more strategically around what does an agentic data center look like? What are your AI ambitions? How do I think about token economics? How do I think about my data? How does my data strategy need to change? Way more strategic conversations than individual product line speeds and feeds.
Any insight you can share around those strategic conversations? I ask this and it's kind of ironic, if you go back and we've covered Dell for a long time, if you go back some time ago when Michael decided that it would be good to spin off VMware, people were worried that Dell was going to be a pure hardware company with not a strategic seat at the table. Today we are talking about increasingly more strategic at the seat of the table to determine the architecture on a agentic AI basis for enterprises. Any insights you can share around token economics, time to first token? What are the discussions that are important to your customers?
I think, the way I would frame that is, data centers over the past 10 or 15, 20 years have sort of been an amalgamation or accumulation of workloads, right? These workloads were all very independent of each other. You could have a data center with 15, 20, 25 different workloads, and the infrastructure was sort of siloed based on that architecture. As you move to an agentic data center, you're now in a world where all of these systems have to talk to each other, right? These systems have to be connected, data silos have to be collapsed, and the quality of the data needs to significantly improve in order to drive optimal results. This transition from a legacy data center into an agentic data center is a big part of the conversation. Token economics is obviously a big part of the conversation.
There, customers want to talk about, how do I effectively generate tokens, and how do I effectively use tokens, right? That's kind of like the equation we work with customers on because they want to know that, hey, not only can I generate them effectively, but I'm using them optimally. Again, the breadth of our portfolio from the data center to the edge and the PC, gives us a lot of credibility in helping customers navigate where do I want to run a model, where do I want to run agents? You may want to run them in a data center, you may want to run them locally on a PC. We can have an end-to-end conversation with customers, which is also a pretty strong point of differentiation for us.
You kind of peel the onion on sort of those two big things, and then there's a bunch of strategic discussions. I think the third one I would probably call out is the data. This is a massive problem for companies. Majority of their data is sitting dark, sitting cold. We believe like in an agentic data center, there is no cold data, there is no dark data. This data is sitting in constant circulation, feeding engines, feeding artificial intelligence, driving optimal results. The richness and strategic nature of the conversation has changed pretty dramatically over the last three to four years.
Yeah. No, that's super interesting. You probably have a viewpoint on this as well. In general, when you think about the adoption of AI, we've seen a lot of spending by hyperscalers predominantly that are kind of driving this infrastructure spend, right? You just saw the Google announcement overnight. Hyperscalers spending a ton of money. This notion of where AI is running today is largely in the cloud. Would love to get some sense from you whether, just given that you mentioned data, how should enterprises think about bringing compute to data versus data to compute? It's sort of like an on-prem, bring the compute to the data or more of a cloud where you're taking data to the cloud.
Yeah. We wrote down a couple of different hypotheses when we first started down this path of artificial intelligence in the beginning of 2022 and one of them was that there's going to be strong gravity to data, right? That's proven out to be the case. 83% of data sits on-prem today in the world across majority of enterprises, and there's a strong proclivity to deploy on-prem for performance, cost, security reasons, and all three of those have very important characteristics for customers. We see more around, hey, over the last several years, I had a digital transformation strategy and a lot of it was cloud first. Now when we look at customers' digital transformations, it's data first, right?
Without the data, I don't have the fuel to feed the AI, and we have the portfolio to help customers turn that data into the premium-grade fuel that they need to drive optimal results for artificial intelligence. This is where we have new offerings like our Dell AI Data Platform, which brings data management capabilities to bear, where five years ago you might have said, "Why is Dell getting into the data management space?" Well, now it's a natural mandatory adjacency that we have to really solve agentic problems for customers.
Yeah. The market's always been very competitive, broadly speaking, in infrastructure. You guys have done an amazing job in being able to manage supply chain, being able to bring products to market quickly. When you think about the longer-term trajectory of the AI server business, how do you think about that? We've kind of gone through these unprecedented growth rates, right? You're talking about $15 billion that went to $25 billion, then $50 billion, now $60 billion. These numbers are growing at some very massive rates. As you plan for growth in the future, how are you thinking about that?
As much as I liked earnings last week, I liked the Dell Technologies World the week before even more. The amount of innovation that we're driving across the portfolio is like nothing that we've ever seen before. We like to say our innovation engine is running incredibly hot. It's not just across the GPU portfolio, which has been great, ARM, X86, air-cooled, liquid-cooled, but across the broader portfolio on core compute where we launched 17G, including a new family of high-performance compute systems built for high core count density, memory bandwidth. All kinds of innovation on the storage side with our Private Cloud Platform, our AI Data Platform, as well as our Cyber Resilience Platform, and bringing it all together within the AI Factory to deliver a full stack architecture for customers.
One of the things that we're seeing, Wamsi, is customers really appreciate the full stack solution because they don't want to be the integrator of systems, and agentic requires connected systems. That requires the compute, both the general purpose and the accelerated compute, the network, and the attached storage. Our portfolio is broad, our portfolio is deep, and our innovation engine is humming like never before. It's incredibly exciting. From my perspective, the opportunity is too big not to be driving this very, very hard.
Yeah. It's super interesting to watch GPU transitions as they happen. Yeah, it's no mean task to ship these things in high volume. What have you learned from past transitions, and how are you looking at the next couple of transitions coming up?
Well, we've gotten pretty good about this first to market with Hopper, first to market with GB200, first to market with GB300. You may have seen a post from Michael over the weekend where we shipped our first QS0 rack, full NVL72 working rack, to CoreWeave, the first in the world.
Yeah.
We've gotten pretty good at working very closely with NVIDIA, working closely with our customers to develop and bring up what is a very complicated technology. We have unique capabilities at the node level, but we have really unique capabilities at the L11 integration capabilities. We're now in a position where we can turn a rack into production at a customer site in under 6.5 hours and maintain up times of 99.9%, which is unheard of in the industry.
Yeah. Those are some impressive stats. Arthur, maybe just talking about memory pricing, which is being obviously very inflationary. I think a lot of people felt that this would be a hurdle for companies like yours to navigate, which would create margin pressure. You guys have actually managed this incredibly well. Your ISG margins were very strong, and this is AI servers growing pretty strongly, industry standard servers growing pretty strongly at 92%. As we think about that, why did people get it so wrong? What is it that you're doing that people don't have maybe full visibility into, and rate and pace of that, as you think about the future?
Yeah. Well, Jeff made a call early in December. Some people call it a cycle, I think it's sort of the new normal.
Regardless of how you thought about it was going to be a long period of time, and we needed to move quickly to communicate to customers what was going on in the industry. On December 9th, we moved the entirety of the business into the new cost structure that we were seeing. At the time, it caused a lot of consternation with customers, as you could imagine. Over time and over the next several months, that very transparent, clear message that we started to deliver on December 9th became appreciated, and customers saying, "We see now what you saw back then. We appreciate you having the courage to have that conversation with us early so we could think about this over the long term and plan for it accordingly." What you've seen since then is that we've driven pretty strong stability across AI servers.
We've driven stability across server margins. Importantly, we're in historical ranges from a server perspective, and we're actually below where we were in COVID. We've tried to drive stability there to make sure that we're not profiteering in any way. We've driven significant improvements in our storage portfolio, where we're seeing storage growth, and we're seeing growth in Dell IP storage, and that Dell IP storage is more valuable than partner IP, and that's been one of the bigger lever in the overall ISG profitability framework, scale would be the last component.
Yeah. No, that's really impressive. Maybe touching on storage for a bit, investors are all trying to figure out where the puck is going here, and it seems like we've seen this with compute, then it was sort of interconnect, then we've seen it with CPUs and industry standard servers. Should we be rethinking how storage is going to look in the future?
Well, look, there's no question. It was good to see the 8% growth that we saw in storage. We've been talking about Dell IP growing on a demand basis well ahead of the market for five consecutive quarters now, and you're starting to see it in the P&L. The innovation in that portion of the portfolio is probably some of the best innovation that we have anywhere within ISG. If you think about the AI data platform, something that's incredibly relevant for customers. We've introduced a data management capability with the Dell Orchestration Engine, and the Dell Data Engines that help to ingest, transform, query data at great scale. Customers that are deploying this are seeing 12 x faster vector indexing, 3x faster query, 19 x fast times to first token.
We've introduced new architecture with Lightning, which is not only the fastest parallel file system in the world, twice the throughput of our nearest competitors. It also represents the context memory extension and data storage access that you need for disaggregated inference. When you think about creating a token generation engine, you really want to go down the path of disaggregated inference because you can split the prefill and decode stage of inference to create larger context windows, so you're generating less tokens when you do an AI-type activity. We introduced Exascale, which is the world's only four-in-one unified rack architecture for storage that includes file, block, object, as well as disaggregated inference. A ton of innovation on the Dell AI Data Platform. We also introduced a lot of innovation into our Dell Private Cloud. At the core of that is PowerStore Elite.
PowerStore now eight consecutive quarters of double-digit growth, and the new PowerStore is absolutely amazing. 3 x the level of performance with 1.5 million IOPS, 4x the throughput performance of the previous generation. We improved the world's leading data reduction guarantee from 5 : 1 to 6 : 1. We now enable up to 6 petabytes of storage in a single 3U form factor. We've also built out the scale-out capabilities to include transactional file to allow customers to consolidate more workloads. Importantly, PowerStore is a relatively new architecture, and it's container-based, so it evolves with workloads and new technologies as they emerge. Customers know that this architecture is future-proofed. Right. Then you have all the innovation on the data protection side with cyber resilience and PowerProtect One.
From a table stakes perspective, customers get factory-to-site integration, silicon root of trust, zero trust controls, end-to-end encryption, embedded immutability, all combined with PowerProtect Data Manager and PowerProtect Data Domain, which brings the data reduction of 75:1. Across the portfolio, whether it's private cloud, AI data platform, cyber resiliency, the team's innovation is incredibly impressive, and we've seen it over the last five quarters with the growth in Dell IP, and you're starting to see it in the P&L.
Yeah. You're living and breathing these stats. As your customer conversations, I can see the pitch going right there on each of these stats, very impressive. Maybe a different storage question, but you guys have number one position enterprise storage. You have broad portfolio. As memory pricing has gone through the roof here, so to speak, are you seeing changes in the way customers are buying and changing their habits of all-flash versus hybrid versus disk? How's that changing from your vantage point?
It's not really changing. All-flash grew extremely strong for us.
Yeah
in Q1. I think what customers are appreciating is the efficiency and the density that they get with our storage portfolio. Again, 5:1 or now 6:1 now on PowerStore Elite, even more on PowerMax, improvements that we're seeing in PowerScale and ObjectScale, 75:1 on data protection. Storage requirements are only going to grow with agentic. Every single agentic conversation will be transcribed, recorded, and kept. So the growth there might be lagging a little bit on the compute side, but there's absolutely an explosion of data that's coming.
Yeah. It's a shame we've only got 30 minutes because there's just so much ground to cover over here. Maybe we're down to the last couple of minutes. To close, what are investors maybe under-appreciating about ISG post this quarter? It's hard to sort of say that the potential was not understood in the quarter, what would you focus investors to, I guess, as a takeaway?
Well, I would say the stock price would indicate that investors are appreciating a lot.
Yes.
Which thank you, and we appreciate that. I think, for me, one of the most exciting things about the portfolio is the breadth and depth of full stack solutions that we can bring for customers. Customers are looking for technology that just works, and this is, in an agentic world, all these systems are connected, the compute, the network, the storage, the data management, the ecosystem, the software, the deployment, the services capabilities. Our ability to deliver full stack validated solutions optimized to specific workloads, coupled with the credibility and knowledge that we've built over the last four years, deploying at the largest of the Neoclouds around the world, gives us a unique advantage that is incredibly hard to replicate.
Yeah. Well, that's amazing. Actually, I have one minute left. I'm going to ask you something else before we close out, which is tier 2 CSP demand has been very, very strong, and you guys obviously participate in that. Industry standard servers, as you're seeing the rollout of agentic, are you seeing that across broadly both tier 2 and enterprise? Within enterprise, what application set are people really leveraging these industry standard servers for? Sorry to close out on that.
Yeah. No, that's a great question. Look, it's across everybody, right? It's across the tier 2 CSPs. It's across the hyperscalers. It's across the enterprise. As we talked about a little bit earlier, when you get into the world of agentic, you're now By the way, it's another thing that Jeff called out three years ago, that AI is a heterogeneous mix of accelerated and general purpose compute because there will be workloads that require parallel processing versus workloads that require serial sequential processing. As you move from technologies that can think and reason to technologies that can act, manage, and orchestrate, it requires both the accelerated and general purpose compute. We see that demand coming from both sides.
We'll definitely have to get you a bigger room next time, Arthur, but we appreciate you taking the time. Thank you so much.
Thank you.