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

Steven Fox: I had a margin question also. I was just curious, when we look at sort of the big beat in gross margins this quarter, you mentioned a lot of different dynamics, including things that seem under your control a little bit, like configuration and content attach rates. So, how much were you able to manage the margins up versus just circumstance? And how much can we sort of think about Dell going forward in the tough environment, being able to manage the gross margins a little bit better? Thanks.

Chuck Whitten: Yes, let me start. I think, look, Q3 highlights — I think it’s both the advantages of our model and very good execution in quarters. So look, foundationally, if you unpack Q3, clearly, we saw higher ISG mix. And as we’ve said, a relatively stable pricing dynamic. And that pricing dynamic is a combination on the PC side, richer configurations and a more favorable mix of product along with higher attach rates, helping offset PC unit declines. And then, on the server side of the business, higher content rates, so think memory, SSDs, richer GPUs, offsetting the unit pressure. So I think that’s just foundationally. But I think the real margin story is what we were talking about a couple of questions ago, with Q3 being deflationary and our lower inventory model, it allows us to access component deflation faster than the industry.

And then when you couple that with our ability to see the demand signal quickly and react, we were able to lower OpEx as we put in the prudent cost controls that Tom described. So, those were the puts and takes across Q3. A lot of that is in our control. Some of that is the advantages of our model in this environment.

Jeff Clarke: Maybe to add to that, another view of inventory is we don’t have excess channel inventory. We’re not in a position of having to discount that, not in a position to have to promote that. We’re not in a position where you have to go chase volume. We have a conscious strategy in the high-price band consumer and the focus on commercial. That gives us historically, and I think we’re seeing it today, an advantage in the market. So, we’re not having to respond to that discounting and promotional activity to burn down excess inventory. Plus by the fact that we have lower inventory, just as Chuck said, we were able to take advantage of lower input costs, component costs throughout the quarter. Coupled with that, like — maybe I wasn’t clear earlier, but I think it’s worth emphasizing again, the logistics costs have come down.

As supply now is ahead of demand, we’re able to put things on the ocean. We don’t have to expedite as much. We’re not using as much expedited air freight. Those all go into our input cost equation, which obviously helped us in the bottom line and the performance of this quarter.

Operator: We’ll take our next question from Wamsi Mohan with Bank of America. Please go ahead.