Dell Technologies Inc. (NYSE:DELL) Q3 2023 Earnings Call Transcript

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However, I do think that if you look at our mix of products and where we’re focused on in markets, we’ve got, whether it’s due to configuration or attach rates in the client space or the fact that our servers that we’re shipping have a thicker content rate from a memory perspective, those would all be helpful as well. From an OpEx — so margins, I think we’ll have to work our way through. OpEx, look, I think we’ve taken cost actions that have demonstrated the fact that we can control OpEx. And if anything that we’re very much focused on how do you manage your way through a complex environment like this, we will adjust our spend targets and our cost envelopes as appropriate to manage the P&L. So, I feel pretty confident in our ability to do so.

The actions we’ve taken already, you can see them in the P&L, and we’ll continue to work our way through that. So look, I think it’s early to sort of talking full P&L at this point. Again, I just wanted to make sure you guys have some context around top line as we see it right now.

Operator: We’ll take our next question from Amit Daryanani with Evercore. Please go ahead.

Amit Daryanani: I guess, I was really hoping you could talk a bit more about the ISG side and the performance this quarter. Is there a way to understand and look at ISG in aggregate or maybe even server and storage? How much of this growth is backlog versus end demand? And it sounds like the end demand was weak as one of the related slides goes 2 buckets up. And then Tom, I think you mentioned the OpEx headwind or the OpEx impact from the extra week in Q4. I could have missed this, but could you just tell us what the revenue benefit in Q4 as well from an extra week? Thank you.

Chuck Whitten: Yes. Amit, I mean, maybe I’ll jump in on the business. I’m not sure I have a ton to add to our prior answers other than to say, look, the server business, we saw slowing server growth. We had hinted at that — not even hinted at that, stated that in Q2 and had anticipated coming into the quarter. I would say, look, it worsened over the course of the quarter vis-à-vis our Q2 earnings call. And therefore, our server revenue growth of 14% on the P&L was aided by server backlog reduction. And we would characterize server backlog is now roughly in its normal range. Storage is a bit of a different story. It fared better. We saw growth across multiple storage categories, high-end HCI, PowerStore. I would say storage backlog remains somewhat elevated relative to historical norms, given the larger business we’re in. And so, a little bit of different dynamics across server and storage, but all in all, a continuation of the trend that we saw in Q2.

Tom Sweet: As it relates to Q4, there is an extra week there given the dynamics of our fiscal year. Any impact of revenue/margin, and the results are already — we’ve already embedded that in our guide. Obviously, if you think about an extra week, there is some level of incremental transactional demand that you get from some of our more transactional businesses, but a big majority of our business is also project and bid based, which doesn’t really get impacted by an extra week end of quarter. So, our guide envelops all of those above.

Operator: We’ll take our next question from Aaron Rakers with Wells Fargo. Please go ahead.

Aaron Rakers: I want to go back a little bit to the margin profile and maybe understand the dynamics of deflationary component costs and how quickly you’re being able to capture that in your server business. I guess in the context of just thinking about the pressure on the model, how do we think about the sustainability of that operating margin given very strong performance this last quarter in terms of ISG in that context.

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