- Record Revenue and EPS Growth: Total revenue hit $27 billion (+11%), EPS rose to $2.59 (+17%) driven by AI/storage profitability and operational scaling.
- AI Server Momentum: Booked $12.3B in orders, shipped $5.6B, with a $18.4B backlog and 2026 shipment target of $25B (+150% YoY).
- Strong ISG Performance: ISG revenue reached $14.1B (+24%), with servers/networking up 37% to $10.1B, and margins improved 350 bps sequentially.
- Cash Flow and Shareholder Returns: Generated $1.2B cash from operations, returned $1.6B to shareholders, with Q4 EPS guidance of $3.5 (+31% YoY).
Segment Performance
The company's storage revenue was $4 billion, down 1% year-over-year, but with strong demand for Dell's IP portfolio, particularly PowerStore, which saw double-digit growth for the seventh consecutive quarter. CSG revenue was $12.5 billion, up 3%, with commercial revenue up 5%, while consumer revenue declined 7%. Dell's AI server orders were a record $12.3 billion, and shipments were $5.6 billion during the quarter, driven by strong demand for its AI solutions.
Guidance and Outlook
For Q4, Dell expects revenue between $31 and $32 billion, up 32% at the midpoint, with ISG and CSG combined expected to grow 34%. The company expects diluted non-GAAP EPS to be $3.5, up 31% at the midpoint. Dell is optimistic about its AI server business, citing a strong backlog of $18.4 billion and a five-quarter pipeline that's multiples of that. The company expects AI server shipments to reach $25 billion this year, a 150% increase over last year.
Valuation and Metrics
With a P/E Ratio of 16.76 and an EV/EBITDA of 13.05, Dell's valuation appears reasonable, considering its strong growth prospects. The company's Return on Invested Capital (ROIC) is 13.17%, indicating efficient use of capital. Analysts estimate next year's revenue growth at 12.0%, which is factored into the current valuation. The stock's Dividend Yield is 1.6%, providing a relatively stable return for investors.
Operational Highlights
Dell's ISG margins improved by 350 basis points sequentially in Q3, driven by demand growth for its Dell IP storage portfolio, pricing discipline, and improvements at a product level within the portfolio. The company expects to maintain a mid-single-digit operating margin in AI servers, despite competitive pressures. In PCs, Dell is working to recapture share in non-premium segments and is being more aggressive in the holiday season in consumer.