Dell Technologies (DELL) Q3 FY2026 Earnings Call Transcript

Date: November 25, 2025 | Source: Motley Fool (Motley Fool Transcribing)

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Paul Frantz (Head of Investor Relations, Dell Technologies): Thanks everyone for joining us. With me today are Jeff Clarke, David Kennedy, and Howard Johnson. Our earnings materials are available on our IR website and I encourage you to review these materials. Also, please take some time to review the presentation, includes additional content to complement our discussion this afternoon. Guidance will be covered on today's call. During this call, unless otherwise indicated, all references to financial measures refer to non GAAP financial measures, including non GAAP gross margin, operating expenses, operating income, net income, diluted earnings per share, free cash flow and adjusted free cash flow. A reconciliation of these measures to their most directly comparable GAAP measures can be found in our web deck and our press release. Growth percentages refer to year over year change unless otherwise specified. Statements made during this call relate to future results and events and are forward looking statements based on current expectations. We assume no obligation to update our forward looking statements. Now I'll turn it over to Jeff.

Jeff Clarke (Vice Chairman and Chief Operating Officer, Dell Technologies): Thanks, Paul, and thanks, everyone, for joining us. Before we get started, I'd like to congratulate David on his appointment to CFO. We worked together closely for the past couple of decades, and I look forward to what's ahead. Now moving to our results. We delivered a strong third quarter. With a record for both revenue and earnings per share and an all time high in AI server orders. Total revenue reached $27 billion, up 11%. CSG and ISG combined were up 13%. Year to date, total revenue was up 12% with ISG revenue up 28%. EPS was up 17% to $2.59 driven by improved profitability in AI and storage and continued operational scaling.

Our strong performance and operational led to continue robust cash flow and significant capital returns for shareholders. Now let's move to AI, where momentum has accelerated meaningfully the second half of the year building on an already strong first half. AI server demand remained exceptionally strong. We booked $12.3 billion in orders in the quarter, bringing year to date orders to $30 billion, both record figures. The large scale customer base continues to broaden with expansion across Neo Clouds, tier two CSPs and sovereigns. Our strong orders and customer base expansion clearly shows customers value unique ability to design, deploy, and maintain large at scale AI factories especially our engineering and rapid deployment capabilities.

We have AI racks operational within twenty four to thirty six hours of delivery with up time exceeding 99%. We shipped $5.6 billion in AI servers during the quarter for a total of $15.6 billion year to date. We ended the quarter with a record backlog of $18.4 billion. Our five quarter pipeline continue to grow sequentially across Neo Cloud sovereigns and enterprises and remains multiples of our backlog. As expected, AI server profitability improved sequentially. Moving to traditional servers. Overall demand grew double digits with growth accelerating sequentially in both EMEA and North America. We saw growth across units, TRUs, our buyer base, and the mix of the sixteenth and seventeenth generation reflecting customers preference for dense, high performing compute configurations. Traditional x86 compute demand continues to benefit from workload expansion and AI driving broader IT modernization and consolidation.

Moving to storage. While revenue declined 1% year over year, demand for our Dell IP portfolio remained strong. For two consecutive quarters, our all flash array portfolio has delivered double digit demand growth supported by strong double digit growth from PowerStore, PowerMax, ObjectScale, and PowerFlex. PowerStore demand has now grown for seven consecutive quarters with six quarters of double digit growth. Profitability improved as we increased both the mix and margin of Dell IP offerings.

In CSG, we saw momentum continue. CSG revenue increased 3% with commercial up 5%. International growth accelerated sequentially, up double digits year over year. North America also showed improvement. Demand for small and medium business remained strong, and we now have five consecutive quarters of P&L growth and seven consecutive quarters of commercial demand growth. Consumer revenue declined 7%, although the demand environment turned to growth. The PC refresh cycle remains durable, supported by an aging installed base and a significant portion of system not yet upgraded to Windows 11.

And before I wrap up, I'd like to briefly touch on the commodity supply environment. We are well positioned across our commodity basket. Q3 was strong and our outlook for Q4 is largely unchanged from last quarter. Looking ahead to next year, there will be dynamics that we will have to navigate, but we are confident in our ability to secure supply and adjust pricing as needed. As always, we'll leverage our world class supply chain to deliver the best outcomes for our customers and shareholders. In closing, we delivered a record third quarter with strong performance across all segments and continued operational discipline. AI momentum remains exceptional with record orders, backlog, and a growing diverse customer base. We are well positioned to capitalize on AI infrastructure build outs, expanding traditional infrastructure demand and the ongoing PC refresh cycle. Now let me turn it over to David to talk more about Q3 in detail.

David Kennedy (Chief Financial Officer, Dell Technologies): Thanks, Jeff. I'm pleased with the team's strong execution this quarter. Delivering Q3 records for both revenue and EPS along with strong cash generation and above trend capital return. Total revenue was up 11% to $27 billion. ISG and CSG combined grew 13%. Gross margin was up 4% to $5.7 billion or 21.1% of revenue. 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. Operating expense was down 2% to $3.2 billion or 11.8% of revenue as we continue to drive scale within the P&L. Operating income grew 11% to $2.5 billion or 9.3% of revenue. Q3 net income was up 11% to $1.8 billion primarily driven by stronger operating income. And our diluted EPS increased 17% to $2.59 a Q3 record.

Moving to ISG. ISG revenue was a Q3 record $14.1 billion up 24% marking seven consecutive quarters of double digit revenue growth. Servers and networking revenue reached a Q3 record $10.1 billion up 37% and is up 43% year to date. AI server demand accelerated. With a record $12.3 billion in orders, $5.6 billion in AI server shipments, and a record ending backlog of $18.4 billion. In traditional servers, we saw demand improve throughout the quarter and stability within the P&L. Storage revenue was $4 billion down 1% with strong demand across parts of our Dell IP portfolio. PowerStore continued its double digit growth trajectory with seven consecutive quarters of growth. ISG operating income a Q3 record $1.7 billion up 16% marking six consecutive quarters of double digit growth. Our ISG operating income rate was up three hundred sixty basis points sequentially to 12.4% of revenue. This improvement was driven by mix of AI servers, sequential improvement in AI server margins, and stronger profitability from storage.

Turning to CSG. CSG revenue was up 3% to $12.5 billion. Commercial revenue grew for the fifth consecutive quarter up 5% to $10.6 billion while consumer revenue declined 7% to $1.9 billion. CSG operating income was $700 million or 6% of revenue. Commercial profitability was stable, driven by steady pricing sequentially as customers prioritize rich config AI ready devices. In consumer, profitability improved year over year and demand returned to growth.

Moving to cash and the balance sheet. We delivered another strong cash quarter, with cash flow from operations of $1.2 billion. This was primarily driven by profitability and working capital improvements. We ended the quarter with $11.3 billion in cash and investments, up $1.6 billion sequentially. Our core leverage ratio is 1.6x. We returned $1.6 billion of capital to shareholders, including 8.9 million shares of stock repurchased at an average price of $140 per share. And paid a dividend of approximately $0.53 per share. Through 3 quarters, have returned $5.3 billion and repurchased over 39 million shares.

With record Q3 results in hand, I'll now walk you through our outlook for Q4. In ISG, we expect to ship roughly $9.4 billion of AI servers in Q4, bringing full year shipments to roughly $25 billion or over a 150% year over year. Our Q4 outlook for traditional server and storage remains unchanged from last quarter supported by continued data center modernization and consolidation and above market growth in Dell IP storage. In CSG, with the ongoing PC refresh cycle, we are improving our execution to drive revenue growth and gain market share. Given that backdrop, we expect Q4 revenue between $31 and $32 billion up 32% at the midpoint of $31.5 billion. ISG and CSG combined are expected to grow 34% at the midpoint with ISG growing mid-60s and CSG up low to mid single digits. Operating expenses will be flat sequentially. We expect operating income to be up roughly 21% with continued sequential improvement in ISG operating income rate. We anticipate a diluted share count of roughly 672 million shares and an 18% non GAAP tax rate. Our diluted non GAAP EPS expected to be $3.50 plus or minus $0.10 up 31% at the midpoint. Our Q4 guidance implies a strong FY 2026 with revenue of $111.7 billion up 17% and non GAAP EPS of $9.92 up 22% at the midpoint both well above our long term framework.

And briefly on FY 2027, it's still very early in our planning process. We wanted to give you some context on how we are thinking about next year. We have strong conviction in our AI business, supportive of what we see in our backlog, the pipeline, and ongoing customer discussions. We've proven we can execute and deliver for our customers in this space. For the rest of the business, the long term framework we outlined at our Securities Analyst Meeting remains a solid starting point as you think about next year. We are highly confident in our ability to drive EPS growth, supported by multiple levers including leveraging our go to market engine, improving gross profit, scaling operating expenses, and ongoing share repurchases.

In closing, we delivered a record Q3, with revenue of $27 billion and EPS of $2.59 both quarterly highs, driven by strong execution across ISG, CSG and disciplined cost management. ISG continues to see sustained double digit growth, and accelerating AI demand, evidenced by $30 billion in AI server orders over the past three quarters. We are focused on capitalizing on the ongoing PC refresh and expect continued growth from CSG. Thank you all for your time. I'll turn it back to Paul to begin our Q&A.

Questions & Answers

Samik Chatterjee (JPMorgan): Hi. Thanks for taking my question. Jeff and David, I mean, maybe since this is sort of the topic of investor conversation mostly at this point, if you can flesh out your thoughts on the kind of reaction you expect from customers in relation to the pricing discussions by sort of the product categories. Do you think it's more sort of easier to take some of those pricing actions versus not relative to your overall portfolio? And David, if I heard you correct, you're saying to sort of use your invested targets for about mid teens EPS growth as still a starting point for next year despite those sort of dynamics of headwinds on the memory side.

Jeff Clarke (Vice Chairman and COO, Dell Technologies): Sure, Samik. Let me wade my way through that. I it will be the first question this afternoon. Or the only question I should say. Look, 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. First rule of our supply chain is to get the parts. Supply matters. Mix matters. And as we get to supply and mix, our job is to minimize the impact of that to our customers. But clearly, we're in a situation that is not typical. We've learned a great deal since COVID, since previous cycle of this last super cycle of this magnitude was 2016 through 2017. And we're gonna do everything we can to minimize the impact. But the fact is the cost basis is going up across all products. No one more unique than others. Everything uses a CPU, has DRAM, has storage in it.

David Kennedy (Chief Financial Officer, Dell Technologies): And, David, that's in relation to — Yeah. Hey, Samik. Yeah. Like we said, it's very, very early in our planning process, obviously. But the framework from our security analyst meeting is a good reference point to start with. We'll be looking out to leverage our go to market engine, which is differentiated. All the things Jeff has just outlined there in relation to our supply chain, we'll continue to drive significant scale in our OpEx. And then obviously stay committed to our capital return KPIs, right, whether it's share repurchase, or staying committed to our dividend. So look, we feel we have many tools in that toolbox that allow us to stay agile and deliver on our EPS numbers.

Mark Newman (Bernstein): Hi. Thanks for taking my question. Congrats on a great quarter, particularly impressive on the AI server orders. I wondered on AI servers, if you could talk about some of the recent comments that have been coming from NVIDIA around the potential vertical integration that they're doing, getting a little bit more involved in the supply chain, and how that may impact on how or how Dell is navigating around that. And, also, on AI servers, any color on the mix of AI servers, any change on the mix, for example, enterprise as a portion of AI server orders would be useful.

Jeff Clarke (Vice Chairman and COO, Dell Technologies): For Mark, let me make my way through that. I mean, first of all, as we look forward to the new technologies that are in front of us, we remain excited. We think there's ample opportunity for us to continue to differentiate. These large scale deployments are very complex. Our value add is at the rack level, is at the solution level, L11 and beyond. That differentiation, we believe, remains for the next several cycles easily. We focus on optimizing performance per watt, performance per dollar at the data center level. When I look at the mix, two forms of the mix that I'll address is we saw a change in the quarter towards GB300. So in our backlog of $18.4 billion there's been a significant shift towards GB300 as expected. And then lastly, we continue to see great build on our five quarter pipeline around sovereigns and around enterprise and remain very encouraged about the opportunities in both.

Ben Reitzes (Melius Research): Hey. Great. Good with the commodity environment guys, and I'll try to be concise for Paul. The question is around your AI server margins. You mentioned it was up sequentially. Was wondering if you guys can talk about, you know, order of magnitude there. And is that gonna continue into the four Q? And are you starting to see more product attach, more high margin attach? To that end?

Jeff Clarke (Vice Chairman and COO, Dell Technologies): I'll take a run at it, Ben, and then David can certainly add to this. Clearly, we made reference in Q2 that we had some onetime cost elements that hit us. If you recall, we talked about expedites and supply chain reconfiguration. Those went away in Q3 as expected. We also talked about shipping a lot of the early aggressive GB200 deals in the quarter. Those went through the system. And we continue to now see the ability to add differentiation that we see in the GB200 and GB300 designs. And our margins move to safe right in that range that we've talked about, mid single digits. We see that continuing as part of our long term value creation framework that we laid out eight weeks ago. We also had a mix change or, if you will, a change in customer mix to the good. When you look at the broad portfolio and diverse customer set that we have within the AI portfolio, shipping to a broader set of customers across a greater range of solutions helps margin.

Eric Woodring (Morgan Stanley): Hey guys. Thank you for touching my question tonight. I wanted to touch on PCs. Jeff, you sound very bullish on the PC opportunity into year. Some of the channel partners earlier in earnings were talking about maybe the seventh inning of a PC refresh. And I'd love to just get your comments because you sound more bullish. So where do you think we are on the PC refresh? And is that still Windows end of life upgrades that still need to get done? Or are there new factors that you think could elongate the PC cycle well into 2026?

Jeff Clarke (Vice Chairman and COO, Dell Technologies): Sure, Eric. One, we have not completed the Windows 11 transition. In fact, if you were to look at it relative to the previous OS end of service, we are 10, 12 points behind at that point with Windows 11 than we were the previous generation. So we still have ample opportunity to convert. If memory serves me right, the installed base is roughly 1.5 billion units. We have about 500 million of them capable of running Windows 11 that haven't been upgraded. And we have another 500 million that are four years old that can't run Windows 11. Those are all rich opportunities to upgrade towards Windows 11 and modern technology. Equally important AIPCs. The use of an NPU, the capability of an NPU in future PCs, gives me the view that the PC market will continue to flourish going forward. We have the PC market in our outlook roughly flat year over year. That's after a year that we grew mid to high single digits. I think it's flat as we look into next year's planning horizon, and we're building plans accordingly that would take share against that outlook.

Wamsi Mohan (Bank of America): Yes. Thank you so much. I was wondering if you could just, maybe give some color around this AI business. You noted very strong conviction going into fiscal twenty seven. Obviously, you just raised your guide here from 20 to 25 billion. Can you just put that in context of some of financing issues at NeoClouds? And how much of your conviction and growth is predicated on some of these neo clouds being able to procure financing versus maybe other customers that you might have visibility into?

David Kennedy (Chief Financial Officer, Dell Technologies): Maybe I'll start and Jeff can add some color. Look. I think if you look at our Q4 guidance, $9.4 billion. That represents $25 billion obviously for a full FY '26. So you look at that appetite for AI demand, and it's across the neo clouds, sovereign opportunities, and obviously within the enterprise. Shipments of $5.6 billion in Q3, orders of $12.3 billion. That's year to date at $30 billion. Backlog at $18.4 billion. And as Jeff referenced in his opening remarks, the next five quarter pipeline is multiples of that.

Jeff Clarke (Vice Chairman and COO, Dell Technologies): Yeah. I would add to that maybe some color. $25 billion this year. 150% increase over last year. On the guidance that David called out, we will ship nearly as much in Q4 as we did all of last year. The need for compute, what we see as token generation increasing at an incredible rate, and the corresponding compute that has to be behind that. It's reflected in that five quarter pipeline that David said is up across all three customer types: Neo Clouds, sovereigns, as well as enterprises. And we're seeing progress in all three. If I flip to the other question about the cost basis and our ability to recover. We've said over the years in normal times, when our input costs go up, we can recover roughly two thirds of that cost in a ninety day period. I would tell you this is not normal times. This is extraordinary times, and we put extraordinary actions in place weeks ago as we saw this to be able to mitigate the impact upon our company, our customers, and our shareholders.

Amit Daryanani (Evercore): Thanks a lot for taking my question. I guess, maybe you could just spend a little bit of time on ISG's margins that improved rather well by about 350 basis points sequentially. Can you just touch on like what drove the strength in ISD margin in Q3 versus Q2? And then, your guide, I think, reflects the largest AI server revenue number you guys gonna put up in Q4 at $9.4 billion plus. How should we think about that impacting your P&L?

David Kennedy (Chief Financial Officer, Dell Technologies): Yes. Thanks, Amit. Yes, look, really pleased with the team's execution in Q3 around ISG. At 12.4%, like you said, up three hundred fifty basis points quarter on quarter, so a lot to like here. A couple of things to call out. First, on the storage side. Look, Q3 was no different than what we've seen year to date, where we've seen demand growth at a premium to market for our Dell IP storage portfolio. PowerStore, six consecutive quarters with double digit growth. Obviously, that Dell IP portfolio gives us better operating margins as you'd expect. So there's a natural mix effect that creates a tailwind there. Secondly, in storage, our pricing discipline was something I was very pleased with also. And then thirdly, look at the focus of the teams looking to find improvements at a by product level within the portfolio also. Also within that, on the AI margins, like Jeff said earlier, Q3 on track to what we've consistently committed to mid single digit up-tick here. And we obviously didn't have those Q2 one timers that were there, and we'll keep that consistency as we go into Q4.

Aaron Rakers (Wells Fargo): Yes. Thanks for taking the question. I want shift gears a little bit away from the AI to the more traditional server business. Jeff, I think in your prepared comments, you've mentioned double digit demand growth. I think if my math's correct, I don't think revenue grew necessarily at that clip. So I'm curious if you could talk a little bit about what you're seeing as far as the aged install base, where we're at in the upgrade cycle for traditional servers? And do you think double digit growth is a good baseline that we could think about going into fiscal '27?

Jeff Clarke (Vice Chairman and COO, Dell Technologies): Sure. A couple of comments, yes. So the double digit was demand, the P&L certainly didn't track that, but we obviously would have built backlog as a result. We talked about North America recovered or improved quarter over quarter and that the international market demands were double digits, and that's two in a row now. We continue to see modernization in the data center, consolidation in the data center, which is reflected in the fact that our TRUs continue to go up, our content continues to go up, the number of cores, how much DRAM, how much NAND per server is corresponding with that. And we still see a pretty significant opportunity with roughly 70% of our install base is still the older generation servers that we have shipped many years ago. So the ability to continue to upgrade them, modernize them, is the opportunity that we have in front of us. And we see that cycle continuing into next year.

Michael Ng (Goldman Sachs): Hey, good afternoon. Thank you for the question. I just wanted to follow-up on the commodity costs recovery point, which was encouraging to hear. When you talk about the actions that you've taken to help mitigate the impacts, do you expect to see a benefit from below market costs, strategically purchased commodities and, if so, how long can that be a benefit for? And I think you may have alluded to opportunities to maybe reprice longer term commercial contracts in response to the rising commodity costs. Just wanted to see if that was the case or are there any longer term contracts that might inhibit your ability to price at all?

Jeff Clarke (Vice Chairman and COO, Dell Technologies): Well, I mean, maybe working backwards towards the first parts of your questions. Clearly, we have to do what's right by customers. And where we have contracts, we have contracts and we will honor those contracts and work through the situation. I think what maybe I didn't convey correctly or to the right balance that's needed is we tend to talk about the commodity cost here. There's a commodity scarcity too. In other words, there's not gonna be enough parts. So there's a combination of the demand that's in the marketplace, one's ability to procure the part, which is why job one of our supply chain is to get the material, never run out of parts, and then price it to the commensurate value with having that material. It's not uncommon in the PC industry to see configurations come down. That's happened before. Likely to happen again. That tends to happen in the lower price bands. You tend to see mix where what comes out of the factory isn't necessarily what was forecasted. We think we have a unique ability to adjust our demand faster than anybody. And all of these tools that I've mentioned are in effect now. Our special pricers know the cost for all of next year, our best guess for next year, what's available. Our sales force, our product business leaders all know and we're acting working as one team to collectively work this real time, as I mentioned before, to get the best outcome for the company, our shareholders, and customers. So our ability to recover, I think, is better than the normal times.

Asiya Merchant (Citigroup): Great. Thank you for taking my question. Just looking ahead into storage, seems like that business, you know, is doing perhaps a little bit better than what was previously expected. As you look into the server demand that is driving up the revenues for this core server, and as you look into next year, just given all the backdrop of commodities headwinds here, how are you thinking about storage from here on? And if we can get that inflection towards more Dell IP storage, which is obviously positive for your margins, quicker relative to some of the unwinding of the HCI storage?

David Kennedy (Chief Financial Officer, Dell Technologies): Yeah. I think, again, just to clarify, in Q4, what we're looking at in terms of guidance, continuing to show that Dell IP storage growth and seeing that sequentially hopefully above normal sequentials. That'll allow us, along with the pricing discipline, to keep that margin improvement coming along for the P&L. On the server comment again, strong demand in Q3, particularly in month three. So to Jeff's point earlier, building a bit of that backlog. So I think you can expect high single digit growth in that business for Q4, which would end us on a high point as we exit the quarter. That said, look, as we head into FY '27, still very early. I would still reference you back to the long term framework that we've got. I think it's a good reference starting point. But strategy wise, we made the pivot to Dell IP. Not looking back. It is serving us well. The mix continues to increase. Across our storage revenue dollars. The margins within the portfolio continue to improve. We talked in our comments about the all flash portion of the portfolio growing double digits for the second quarter. So thank PowerMax, PowerScale, PowerStore, Object Scale, and PowerFlex all growing. We've talked about PowerStore in seven quarters of growth, six of those double digits. The buyer base is growing. The net new customers buying Dell Storage with PowerStore is up.

Simon Leopold (Raymond James): Thanks for taking the question. I wanted to see if you could maybe unpack the elements that contribute to the roughly $5 billion of incremental AI revenue for the full year. I guess what I'm trying to get at is how much is this about your ability to get key components, new orders, or existing orders occurring earlier? Just help us unpack what factors led to the raised forecast for AI.

Jeff Clarke (Vice Chairman and COO, Dell Technologies): Well, at the highest level, $12.3 billion of new orders and a growing backlog and then a supply chain that I think is unmatched that finds materials and gets materials lined up with customer availability. This is equal parts customer readiness. Buildings, power, direct liquid cooling. So we've used the word lumpy before, which we purposely didn't use here, but it's really driven by a customer's readiness and our ability to deliver matched up with the supply chain's ability to get the material and matched up with our sales force out winning new opportunities across the Neo Cloud customer base, the sovereign customer base, and enterprise customer base. So it's that combination and why you see one quarter $5 billion, next quarter $9 billion in shipments. It really is equal parts customer readiness, customer delivery acceptance, that drives that. And the stars align in Q4 with the amount of orders with the GB200 and GB300 business that we have booked that we'll be able to deliver at that rate in Q4.

David Vogt (UBS): Great. Thanks, guys. Maybe just one for David. So you talked about margins and commodity pressures quite extensively. Can we look at your purchase commitments as barometer for how you're thinking about margins going into next year? I know a big chunk of that is probably tied to the AI server business. But is there anything in sort of those purchase commitment numbers that we could look at as sort of evidence of how you're thinking about where DRAM and NAND prices could be?

David Kennedy (Chief Financial Officer, Dell Technologies): Yeah. Sure. Look, have no discernible change in the pattern of our purchase commitments. Or in relation to positioning on things like inventory, etcetera. So if you think of AI, and this is a good kind of litmus test for us within the finance side as well as we observe it. You take that $12.3 billion that Jeff just referenced, sequentially, we actually took down our inventory values about $300 million. If you look at it on a year over year basis, the year over year inventory is roughly flat, give or take. Yet our year to date demand is up over $19 billion in that period too. So obviously, we have our normal supply chain procurement processes kicked in as part of it. So no real discernible change from last quarter, or anything to read in as we look into FY '27 just yet.

Tim Long (Barclays): Thank you for squeezing me in. Two parter, if I could, on gross margins. First part, talking about the mix in AI servers, as you start to convert more of the Neo Cloud and sovereign and enterprise to revenues, would you expect to change to that mid single digit operating margin? Could that move higher? And the second part, on the PC side, think there was a comment at the analyst day about really doing well in the high end commercial but trying to recapture share in other parts of the PC market. Is that something that we could expect might impact operating margin on the PC business?

David Kennedy (Chief Financial Officer, Dell Technologies): Yes. Maybe let's start with the AI side. Look. We're gonna stay consistent on our mid single digit delivery in terms of operating profit. You will stay within that range. While we'd like to in every deal, the reality is we won't write on a lot of those can be competitive, particularly the larger ones. So look, we'll remain judicious as we manage the profitability and the ongoing activities there. Some will flow slightly lower. Other deals will be slightly higher, but we'll stay pretty consistent as an objective within that mid single digit. The other element for me is making sure every deal is accretive from a dollar perspective too. So, again, cash flow is something that at the forefront of all our operations. And Tim, your second question on PCs, when we were last together, you're exactly right, I talked about the PC business being a scale business. And our share had slipped in the non premium segments. And we leaned in this past quarter with our Dell Pro Essential and education boxes in commercial, and we were more aggressive in the holiday in the consumer and the results are encouraging. International growth accelerated sequentially up double digits in demand year over year. And while it is a very competitive marketplace, we made a slight reference to it, but I'm going to call it out specifically. We returned to demand growth in consumer for the first time in three years. We're gonna continue to work on our cost position, tuning the products so they're the right products at the right cost for the right price span.

Jeff Clarke (Vice Chairman and COO, Dell Technologies): Thanks, Jim. Sure. Thank you all for joining us today. A few as we wrap up. First, we achieved record Q3 results across both revenue and EPS underscoring disciplined execution and the strength of our business models. Second, our AI momentum remains exceptional. We saw record orders in Q3 and have booked $30 billion through the first three quarters of this year. Our pipeline and customer base continues to expand and we remain well positioned to capitalize on accelerating demand for AI solutions. And lastly, we saw improved profitability and strong cash generation enabling above trend capital return to shareholders. We are set up well to close the year strong and to drive long term value. Thanks for joining us today and happy Thanksgiving everybody.

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