Press release·03/27/2025 02:17:46

Overview

During Fiscal 2025, Dell Technologies saw strong operating results, generating 8% growth in net revenue and 15% growth in operating income compared to the prior year. This was driven by an increase in the Infrastructure Solutions Group (ISG) segment, which offset declines in the Client Solutions Group (CSG) segment and the company’s other businesses.

The demand environment was robust for Dell’s servers and networking offerings, contributing to overall revenue growth. The company also benefited from increased demand for AI-optimized solutions as customers continue to adopt and integrate AI into their operations. However, the company faced a competitive pricing environment in its CSG business, which impacted profitability.

Dell maintained disciplined cost management and continued to invest in research and development to drive innovation and address customer needs. The company expects to see continued growth in its server and networking offerings, as well as a modest recovery in its PC business, in Fiscal 2026. However, it anticipates margin pressure due to the shift in mix towards AI-optimized servers and ongoing competitive dynamics.

Financial Performance

Net revenue increased 8% year-over-year to $95.6 billion in Fiscal 2025. This was driven by an 11% increase in product revenue, primarily from growth in ISG’s server and networking offerings, which offset a 1% decline in CSG revenue. Services revenue was flat compared to the prior year.

Gross margin increased 1% to $21.3 billion, but the gross margin percentage declined 160 basis points to 22.2%. This was due to a shift in mix towards lower-margin AI-optimized server offerings and competitive pricing pressure in the CSG segment.

Operating expenses decreased 4% to $15.0 billion, driven by a decline in selling, general, and administrative expenses. This, combined with the revenue growth, led to a 15% increase in operating income to $6.2 billion. Non-GAAP operating income increased 8% to $8.5 billion.

Net income grew 36% to $4.6 billion, benefiting from the increase in operating income and lower income tax expense. Non-GAAP net income increased 8% to $5.9 billion.

Segment Performance

Infrastructure Solutions Group (ISG) ISG net revenue increased 29% to $43.6 billion, driven by a 54% increase in server and networking revenue and a 1% increase in storage revenue. The growth was primarily attributable to strong demand for AI-optimized server offerings.

ISG operating income increased 30% to $5.6 billion, and the operating margin improved 20 basis points to 12.8%. This was due to the revenue growth, which outpaced a decline in the gross margin rate as the business shifted towards higher-volume, lower-margin AI-optimized servers.

Client Solutions Group (CSG) CSG net revenue declined 1% to $48.4 billion, with a 3% increase in commercial revenue offset by a 17% decrease in consumer revenue. The decline was driven by lower unit sales and, to a lesser extent, lower average selling prices.

CSG operating income decreased 20% to $3.0 billion, and the operating margin declined 150 basis points to 6.1%. This was primarily due to the competitive pricing environment, which pressured gross margins.

Other Businesses Dell’s other businesses, which include the resale of VMware offerings and Secureworks, saw a decline in net revenue as the company no longer acts as a distributor of standalone VMware products and services following Broadcom’s acquisition of VMware.

Cash Flow and Liquidity

Cash provided by operating activities was $4.5 billion in Fiscal 2025, down from $8.7 billion in the prior year. The decrease was primarily due to working capital dynamics, including higher inventory, accounts receivable, and accounts payable levels driven by the growth in AI-optimized server offerings.

Dell ended Fiscal 2025 with $3.6 billion in cash and cash equivalents and $5.9 billion in available borrowings under its revolving credit facility. The company’s total debt decreased by $1.4 billion to $24.6 billion, primarily due to net repayments of DFS debt and Senior Notes.

Dell continues to return capital to shareholders through share repurchases and dividend payments. During Fiscal 2025, the company repurchased approximately 22 million shares for $2.6 billion and paid $1.3 billion in dividends.

Outlook and Strategic Priorities

Looking ahead to Fiscal 2026, Dell expects to see continued growth in its server and networking offerings within ISG, as well as modest growth in its CSG segment, driven in part by an anticipated PC refresh cycle. The company also anticipates a further reduction in revenue from its other businesses as it transitions away from being a distributor of standalone VMware products.

Dell expects a modest decline in input costs during the first half of Fiscal 2026, but notes that cost trends will continue to be dependent on demand and supply dynamics. The company anticipates margin pressure due to the ongoing shift in mix towards AI-optimized servers and a competitive environment, particularly in CSG.

To address these challenges, Dell remains focused on executing its key strategic priorities, including driving innovation, expanding its customer base, and optimizing its business processes and cost structure. The company expects to continue making prudent investments to support growth and modernization, while also taking measures to reduce costs and align its workforce with strategic priorities.

Risks and Uncertainties

Dell faces several risks and uncertainties that could impact its financial performance, including:

• Macroeconomic conditions and trade policies: The company’s operations and financial results can be affected by global macroeconomic conditions, trade protection measures, and changes in government policies and international trade arrangements.

• Supply chain challenges: While Dell’s supply chain has operated efficiently, it continues to face input cost pressures, particularly for components used in its AI-optimized offerings. Frequent product transitions also create challenges in managing demand and supply.

• Competitive dynamics: Competitive pricing pressures, especially in the CSG segment, can impact the company’s margins and operating results.

• Reliance on strategic investments and acquisitions: Dell’s venture capital investments and targeted acquisitions carry risks, as the underlying technologies or products may not achieve commercial success.

• Foreign currency exposure: As a global company, Dell’s operating results can be impacted by fluctuations in foreign exchange rates, which it seeks to mitigate through hedging strategies and pricing adjustments.

Conclusion

Dell Technologies delivered strong financial performance in Fiscal 2025, driven by growth in its ISG segment and continued disciplined cost management. However, the company faces ongoing challenges, including competitive pressures, supply chain constraints, and the need to manage the transition away from its VMware distribution business.

To address these challenges, Dell remains focused on innovation, customer relationships, and operational efficiency. The company expects to see continued growth opportunities, particularly in its server and AI-optimized offerings, but also anticipates margin pressure as it navigates a shifting market landscape. By executing its strategic priorities and maintaining financial discipline, Dell is well-positioned to drive long-term value creation for its stakeholders.