Please standby. Afternoon. And welcome to the Fiscal Year 2026 First Quarter Financial Results Conference Call for Dell Technologies Inc. I'd like to inform all participants this call is being recorded at the request of Dell Technologies. This broadcast is the copyrighted property of Dell Technologies Inc. Any rebroadcast of this information in whole or part without the prior written permission of Dell Technologies is prohibited. Following prepared remarks, we will conduct a question and answer session. If you have a question, simply press star then one on your telephone keypad at any time during the presentation. I'd like to turn the call over to Paul Frantz, Head of Investor Relations. Mister Frantz, you may begin.

Thanks everyone for joining us. With me today are Jeff Clarke, Yvonne McGill, and Tyler 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, which 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, that lead to 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 that relate to future results and events are forward-looking statements based on current expectations. Actual results and events could differ materially from those projected due to a number of risks and uncertainties which are discussed in our web deck and our SEC filings. We assume no obligation to update our forward-looking statements. Now I'll turn it over to Jeff.

Thanks, Paul, and thanks, everyone, for joining us. This quarter, we executed very well, achieving growth across our core markets and experiencing unprecedented demand for our AI-optimized servers. Our revenue reached $23.4 billion, up 5%, driven by growth across all of our core markets. ISG and CSG were up 8%. Earnings per share increased by 17% to $1.55, growing three times faster than revenue. This resulted in a record cash generation for the first quarter, and shareholder returns exceeding $2 billion. Turning to AI, we experienced exceptionally strong demand for AI-optimized servers, building on the momentum discussed in February and further demonstrating that our differentiation is winning in the marketplace. We booked $12.1 billion in orders in the first quarter, surpassing the entirety of shipments in all of FY 2025. We shipped $1.8 billion, leaving us with a backlog of $400 million. Our five-quarter pipeline continued to grow sequentially, across both tier two CSPs and private and public enterprise customers, and remains multiples of our backlog. Enterprise AI customers grew again sequentially, with good representation across key industry verticals including WebTech, financial services industry, manufacturing, media and entertainment, and education. AI momentum continues to remain strong. That said, given the scale of these opportunities, their ability and timing, and choices around technology, the inherent nonlinear nature of demand and associated shipments is likely to persist. This quarter is a clear indicator Dell offering resonates with customers. We are innovating at breakneck speed, designing bespoke custom solutions for customers while being agile to respond quickly to evolving next-generation architectures. Our ecosystem in this space is unmatched, with key partners such as NVIDIA, AMD, Hugging Face, Cohere, Meta, Mistral, and Google, and so many others. Our execution continues to be a key differentiator. We built a strong reputation for deploying large-scale clusters quickly and reliably, significantly reducing the time to first token and accelerating time to value for our customers. Beyond deployment, we provide ongoing comprehensive support, including managed services that ensure systems reliability and performance in customer data centers. And finally, our ability to offer flexible financing solutions enables customers to scale their AI infrastructure with confidence and efficiency. Looking ahead, we remain focused on expanding our leadership in this space by continuing to invest in innovation, deepening customer partnerships, and delivering the infrastructure and software solutions within our AI factories that will power the next wave of AI transformation.

Thanks, Jeff. Let me begin with an overview of our Q1 performance, then I'll move to ISG, CSG, cash, and guidance. In the first quarter, we saw continued P&L growth across all of our core markets and record Q1 cash flow from operations. Our total revenue was up 5% to $23.4 billion. Our combined ISG and CSG business grew 8%. Gross margin was $5.1 billion or 21.6% of revenue. This was down 80 basis points due to a more competitive pricing environment, predominantly in CSG, and geographical mix within traditional servers. Operating expense was down 2% to $3.4 billion or 14.5% of revenue as we continue to unlock efficiencies and modernize our processes. Now let's look at operating income. We delivered a 10% increase to $1.7 billion or 7.1% of revenue. This was driven by higher revenue and lower operating expenses. Q1 net income was up 13% to $1.1 billion, primarily driven by stronger operating income. And our diluted EPS is up 17% to $1.55, growing three times faster than revenue. Now let's move to ISG, where we delivered another quarter of strong performance. ISG revenue was $10.3 billion, up 12%. Servers and networking revenue was a Q1 record of $6.3 billion, up 16%. We saw very robust demand in AI servers, with $12.1 billion of orders in the first quarter, and we shipped $1.8 billion of AI servers. In traditional servers, we saw continued P&L growth, but the demand environment moderated compared to the last quarter. Additionally, we saw a lower mix of North America in traditional servers, which is a higher margin geography. Storage revenue was up 6% to $4 billion, our third consecutive quarter of growth. We saw strong demand in our Dell IP portfolio, specifically with PowerStore and data protection. We had ISG operating income of $1 billion, up 36%. This was driven primarily by higher revenue.

As Yvonne mentioned, we are focused on further increasing our mix of Dell IP versus partner IP storage, and are also driving continued product profitability improvement within our storage business. Now let's turn to CSG. CSG revenue was up 5% to $12.5 billion. Commercial revenue was up 9% to $11 billion, while consumer revenue was down 19% to $1.5 billion. CSG operating income was $700 million or 5.2% of revenue. TRUs remained stable sequentially, and we continue to see customers prioritize richly configured, AI-ready devices. As Yvonne mentioned, we saw strong performance across small and medium business, and large enterprise. In consumer, the demand environment remained soft, and profitability remains challenged. We are focused on executing within CSG, leveraging our leading go-to-market engine and broader portfolio of offerings to capture the PC refresh. Now let's move to cash flow and the balance sheet. We had a strong cash quarter, with record Q1 cash flow from operations of $2.8 billion. This was primarily driven by profitability and working capital improvement. We ended the quarter with $9.3 billion in cash and investments, up $4.2 billion sequentially. Our core leverage ratio was up sequentially to 1.6x given our recent debt issuance. We returned $2.4 billion of capital to shareholders with 22.1 million shares of stock repurchased, an average price of $90 per share, and paid a dividend of roughly 53¢ per share.

Our significant share repurchases this quarter reflect our continued confidence in the business, our ability to act opportunistically during periods of price dislocation, and commitment to disciplined capital allocation. Since our capital return program began, at the beginning of FY 2023, we've returned $13.2 billion to shareholders through stock repurchases and dividends. Turning to Q2 guidance. In CSG, we expect the PC refresh cycle to continue, as the install base upgrades to new devices, resulting in improved profitability sequentially. In ISG, we expect to ship roughly $7 billion of AI servers as we fulfill some of our large deals. We are expecting sub-seasonal performance in traditional server and storage, our larger profit pools that provide scale, as customers evaluate their IT spend for the year given the dynamic macro environment. Given that backdrop, we expect Q2 revenue to be between $28.5 billion and $29.5 billion, up 16% at the midpoint, of $29 billion. ISG and CSG combined are expected to grow 19% at the midpoint, with ISG growing significantly and CSG up low to mid-single digits. OpEx will be down low single digits year-over-year. We expect operating income to be up roughly 8%. We expect our diluted share count to be roughly 685 million shares. And our diluted non-GAAP EPS is expected to be $2.25 plus or minus $0.10, up 15% at the midpoint. Moving to the full year, it is early in what has been a very dynamic year. We're optimistic on our portfolio and our ability to execute. However, we want to be thoughtful on how customers think through their IT spend relative to the macro environment. Against that backdrop, we are reiterating our full-year revenue guidance and expect FY 2026 revenue to be between $101 billion and $105 billion, with a midpoint of $103 billion, up 8%. We expect ISG to grow high teens driven by over $15 billion in AI server shipments, and continued growth in traditional server and storage. And we expect CSG to grow low to mid-single digits.

Thanks, Yvonne. In order to ensure we get to as many of you as possible, please ask one concise question. Let's go to the first question.

We'll take our first question from Amit Daryanani with Evercore ISI.

Thanks a lot for taking my question. I guess my question was just on the AI server revenues. You folks had some really impressive performance in Q1. I think the backlog at $12.1 billion was up over $3 billion from ninety days ago. Can you just touch on kind of what are you seeing and how should we think about the fiscal twenty-six AI server revenue target, which I think was $15 billion before, especially as you've seen a bigger uptick in engagement from the sovereign side and also some of the neo cloud that you know raising the CapEx. Just any framework on how to think about the AI server market as we go forward would be really helpful.

Sure. Amit, thanks for the question. First of all, we're ninety-one days into the year. We got 273 more to go. But I like to start. All point $1 billion of orders in Q1, more than all of last year, we're off to a good start, but we have much in front of us. The customer deployments that we have in front of us are large, they're complex, they have very detailed scheduled deliveries, there's lots of dependencies on this. We've talked about this business being lumpy and nonlinear. Dependencies in this business are waiting for data centers to be built, power to be provided, direct liquid cooling infrastructure put in place, we're orchestrating a highly complex supply chain. You've probably seen rough that a g b two g b 200 NVL 72 rack has 1.2 million parts in it. Coordinating and orchestrating that across our value add, whether that be in CDUs, cold plates, the racks themselves, power shelves, what have you, that's what we're working here. It's driven the backlog. We love where the backlog is. It's healthy. It's reflected. I believe the backlog is $14.4 billion. On top of that $12.1 billion of orders. And probably the interesting thing, what I think is the most interesting thing is that we converted our five-quarter pipeline obviously, to generate the $12.1 billion in the growing backlog and the five-quarter pipeline grew. It grew sequentially. It's up significantly year over year. It's still through lots of multiple types of technology versions of Blackwell. And it now contains Sovereign. You may have seen an announcement earlier today from the Department of Energy around the 10 and our design win there. An example of sovereign AI. We're very excited about that. So got lots to go. Three quarters in front of us. I can really tell you we're on the plus side of $15 billion feel pretty good about it, but we'll update you now before year goes in another quarter.

Hey, Alex.

And our next question will come from Ben Reitzes with Melius Research.

Make this concise, from Paul there. So I'll do my best, Jeff. I wanted to talk about second-half guidance. I mean, you Amit went there a little bit. But if you do the $15 billion plus, let's call it, and including $8 billion in the first half for AI servers, that implies I don't know, $3.5 billion each quarter in the back half. And I think Amit was getting at this that is that indicative of demand? And Yvonne and Jeff, do you mind just talking about is that the kind of lumpiness we're really getting, seven going to 3.5? Or are you just being conservative? And then just sorry for the multipart, but Yvonne, you mind just saying again what you're looking for in ISG? What level of moderation for the second half of demand? In both ISG and CSG? Is it really significant in order to kind of keep your guidance you know, we actually have to slow down AI servers but I'm not so sure street numbers for the other two segments go down very much. Thanks. In the back half, I mean.

Thanks. Let's see if we can parse our way through that. So I believe, first of all, Yvonne made a reference that we expect to ship $7 billion of AI servers on top of the $1.8 billion that I referenced. So we're closer to $9 billion in the first half. I made reference that the five-quarter pipeline continues to grow and grow significantly. It remains multiples of our backlog. The enterprise component of that continues to grow, in fact, is growing at a faster rate than the CSP, part of that. Pipeline. And we're optimistic. It's early in the year. We're ninety-one days in. We have a couple of technology shifts in front of us. We're very excited about that. We continue to win and differentiate ourselves with our engineering and innovation. Ability to deliver in the deliver and deploy, and turning on our racks in twenty-four hours when they're operating and in business for our customers. We continue to focus on what differentiates us like our prospects of converting more pipeline in the second half. But at this point, we're on the 15 plus side. Our annual guidance that we just delivered us suggest that's exactly where we are, and I'll let Yvonne work our way through the ISG question again.

Yeah. So, you know, from an ISG perspective, as I think through the full-year guide, we are early early on. Right? And so, we have been thinking that, you know, as as we are, I'd say, historically, a bit conservative in in how we look at the year. We have really held holistically on on the year right now. Given what we're seeing in the dynamic environment. I'm really excited about the AI opportunity. Obviously, we have a significant backlog already, and that will continue to expand. But at this juncture, we think we should remain on on both what we have out for the guide and not not do any dynamic increases there. Thanks.

Alright. Thanks, Ben. And the next question comes from Erik Woodring with Morgan Stanley.

Hey, guys. Thank you so much for taking my question. Jeff, obviously, Ben and Amadev touched on it, really strong commentary on AI servers. I would love to just get a little bit more color from you on the potential for the storage and services attach opportunity alongside AI servers? Obviously, there was commentary more than a year ago about a pretty big opportunity there. And I'm just wondering, as you've kind of seen this market evolve with CSP customers, enterprises, sovereigns, when can we think about that attach opportunity really starting to materialize? Any way to size how to think about the attach? Anything that you could help us understand for margin impact there? Just some more context would be helpful there. Thanks so much.

Sure. And I think part of it is part of the answer lies in we announced at Dell Technology World, which is an expansion of our storage portfolio. The storage capability, our data management platform, the Dell automation platform, those things are all important as we're building out the portfolio pluses around the specific AI server node and the rack. We made reference to project lightning last week, continue to be excited about the opportunities there. We've made I would probably cast it as modest improvement. Our storage and networking attached. We've made significant improvement in our deployment and installation services attach. It is what's actually differentiating us in the marketplace. Our ability to do the L11, L12, get it deployed, installed, and ultimately operational in a short period of time. That continues to differentiate. It's being valued by our customers. And if I extrapolate that to what can be done in enterprise, it's the same sort of opportunity. In fact, we think the opportunity to attach storage particularly as the data structure leads to more object storage, and our assets in the unstructured space, have a differentiated advantage. We're going to continue to invest in that portfolio. The opportunity in networking is there. And, obviously, the services that I just mentioned are equally important in. They are in the largest clusters in the world. So we remain optimistic. We have work to do. I'd be I would not be I think truthful if I said we were satisfied. We are not satisfied with the attached today. I think that is all upside and opportunity. Our sales team is focused on that, and we continue to find opportunities to differentiate our portfolio look at some of the subsystems in our performance and the attributes that it brings to what's being done in these modern workloads, and we're very optimistic about that. I think I've made reference in the past as these modern workloads evolve. It's clear that the disaggregated storage architecture is the path of the future, and I think we have the best portfolio in that. We'll continue to focus on that with our customers.

Alright. And then Thank you, Jeff. Good luck, guys.

And the next question will come from Wamsi Mohan with Bank of America.

Yes. Thank you so much. Maybe a quick clarification. Are you assuming any impact from tariffs in your numbers at all? And for my question, given the significant ramp of AI servers, and and sort of what you're guiding incrementally for next quarter, I'm calculating a low single-digit operating margin on the AI servers. Would you agree with that? And how should we think about the progression of gross margin? Thank you.

Well, maybe a couple of sound bites and then Avant can add to this. Our guidance for the year and for Q2 includes everything that we know about tariffs as of today. We were able to navigate that, I believe, successfully. I think we viewed the input cost to our business as deflationary. In Q2? That's inclusive of tariffs. And we're very confident that what we conveyed in the form of our outlook is very inclusive. Of our cost. Associated with tariffs. We did not make any price moves in the quarter. We were steady. We have been through this before. And I think we weathered this storm quite well and ultimately took care of our customers and served them quite well. When I think about AI in the numbers that we gave, the $7 billion of incremental revenue. When you look at it, I believe it's roughly $4 billion on a year-over-year basis. It's roughly $5 billion on a quarter-over-quarter basis, and it drives significant gross margin dollar growth on both a year-over-year and quarter-over-quarter basis, and it drives significant operating income dollar growth on a quarter-over-quarter and year-over-year basis.

Yeah. I'd say embedded within the guide is a 10% quarter-over-quarter increase in gross margin dollars. As Jeff mentioned, we're seeing what we're seeing in ISG quarter-over-quarter is excuse me, about $5.3 billion more revenue. With roughly half a billion dollars more in operating income. Which is being driven by AI server profitability. And to a lesser extent, improvement in the profitability within our storage portfolio.

Excellent. Thank you, Yvonne.

And the next question will come from Michael Ng with Goldman Sachs.

Hi, good afternoon. Thanks for the question. Just have a two on AI servers. I was just wondering if you could comment on the AI server profit outlook for the full year. I think you reiterated the revenue and OpEx outlook despite the lower profit assumptions on CSG traditional servers and storage. So does that imply that the AI server profit outlook was was raised? Are you still expecting ISG margins to be flat year-over-year in fiscal twenty twenty-six? And then secondly, was just wondering if you could talk a little bit about some of the AI server orders that happened in the last two months after you you gave that update at the February. You know, were there any kinda key customer types or kind of texture to the orders that you could just help to characterize? Thank you.

Why don't I start with the guidance and the ISG profitability? So for the full year, I just talked on it. We're we are expecting rates to be down going forward, but, we're seeing that. Reflective of what we saw in the first half, right? So what we saw in the quarter plus what we're expecting in the second quarter. Overall, it's driven by lower profitability in traditional service and CSG. So holistically, when we're talking about AI, we're seeing those dollars being, accretive in into our P&L. Storage margins are also improving nicely, and we expect that to continue. Over the year as we lean more into our Dell IP mix. And so that's good to, to expect also. So ISG margins will expand throughout the year.

I don't know. Jeff, is there anything you'd add to that? I I would reemphasize the point that you've made that is it's our it's to be the driving behavior in our AI business. It's driving gross margin dollar accretion and operating income dollar accretion. There's a sizable AI business dilute the overall rate? Of course, it does. We're looking at it in absolute dollars in every scenario that we've now conveyed to you in our guidance for both the quarter and the year drives operating income dollar growth and gross gross margin dollar growth. So I think it's something we continue to focus on. That's important to us. And that is the driving behavior of how we're running this business. In terms of orders, clearly, I won't talk about specific customers. We saw CSP customers. We saw enterprise customers. The number of enterprise customers grew. The number of repeat enterprise customers grew as well. Our enterprise growth is exciting with over 3,000 customers now buying various forms of our Dell AI factories. We saw a mix from Hopper technology and Blackwell technology across those. We saw it with ARM and 86, so a great cross representation.

Great. Super helpful. Thank you.

Bye. And moving on to Samik Chatterjee with JPMorgan.

Great. Hi, thanks for taking my question. And maybe just more broadly, in terms of your customer behavior, just curious if you seen any sort of pull forward. I know you're managing the tariff environment pretty well, but not so much as everyone in the industry. So have you seen customers pull forward some demand? And particularly when we think about the caution that you have related to traditional servers and CSG, are you treating that more as customers just being cautious about the macro, or more being in digestion after a pull forward of demand from your customers? Thank you.

Sure. I'm certain we had some customers pulling demand. They certainly saw what was happening in the marketplace and how dynamic things were. And there's no way to say that, that that didn't happen. I'm sure it did. To what degree? I don't know. What we know is and for example, they separate the businesses. We're in the middle of a race to refresh. We have the Windows 10 expiration in the PC business. We've seen good traction. We're clearly in the refresh cycle. It's certainly behind others. But indications are we are seeing good growth. I think I mentioned in my remarks that North American and EMEA and APJ all grew double digits from a demand perspective. We did see a slowdown in month three. Month one was greater than January. Month two was greater than February. Month three slowed in weeks 10 through 12. And actually, three US businesses, commercial PCs, traditional servers, and storage. So, clearly, there is a bump along the journey there. Yvonne made reference to that with a slowdown in our traditional server business. So I'll pull ahead. We are still optimistic about the year. We have all of the businesses growing. We are maybe a little more needed in what we think in those business. They may be down a point in terms of their absolute market growth. I don't think anyone knows. But when you look at traditional servers, you look at storage, the other two that I was referring to, and, again, both were growing nicely. North America speed bump with 10 through 12 in month three. Worked our way through that. We now have that reflected in our guidance in Q2.

Thank you. Thanks, Yvonne.

And the next question comes from Asiya Merchant with Citi.

Great. Thank you for taking my question. You know, if you could just talk a little bit about the competitive dynamics just given the macro environment, bit of slowdown that you're seeing here, the fact that you didn't raise prices. Just help us understand how the competitive response were and if some of the guidance that you're providing you know, reflects maybe a heightened competitive intensity, or is this more just macro and just being prudent given your customer behavior that you just outlined? Thank you.

Sure. Let me let me take a run at that. And CSG specifically commercial PCs, Look, ASPs remain relatively stable in the marketplace. There were certainly some complications or some dynamic behavior associated with tariffs that we certainly would through. We did not raise list price. We saw an actual increase of AIPCs as we're ramping our new products to help us stabilize our ASPs. I talked about the speed bump that we had in months or excuse me. Weeks 10 through 12 and month three of the quarter. That was really The United States. Commercial bids, they're no different than they were in Q1 or they were in the latter part of last year. Large bids are typically aggressive. We see transactional pricing much more stable and disciplined. Consumer PCs remains aggressive with a promotional bent to it. So a high percentage of commercial p excuse me, consumer PCs remain in the promotional pricing kind of price bands. And let's what the business is. We are in this race to refresh in commercial PCs. We've launched a whole new series of products that are AI PCs that work excited about. We're actually seeing an uplift in those customers that buy AI PCs and uplift in ASPs. As I mentioned, that stabilized overall ASPs.

Thanks, Satya. That's great. Thank you.

And we'll take a question from Krish Sankar with TD Cowen.

Yes. Hi. Thanks for taking my question. Jeff, I just want to on an earlier on the storage attach rate. Last week at Dell Technologies, well, you introduced the object scale platform. Which can do up to 1,000 nodes I'm kinda curious, You know, a number one, do you think some of these private storage companies which have higher nodes are kinda eating share from the legacy storage companies? And number two, do you need to be designed in on AI training to get the AI inference business? Or do you think they're kind of, like, agnostic to each other? Agent.

I'll start with the latter one first. You know, there are two different use cases or two different applications in AI. Clearly, we're trying to win both. When you look at I think I've even made references on this call before that AI devours data. And training large models devours data. And quite frankly, even the example that I was on stage last week at DTW talking about our digital service assistant it consumes a lot of data inside our company around five, specific data sources are repair data or just data, our telemetry data, our knowledge base, and our call logs. That's very representative of a enterprise class use case. Lots of data, In that case, it is an object file system. And serving up that information quite fast with the computational engines to make the recommendation. And I think the same thing happens when we talk about large datasets and enterprises being consumed by AI inference, which ultimately becomes AI inference reasoning ultimately becomes NGINXIC technology going forward. So I'm very optimistic about the storage opportunities on enterprise, And then these fast subsystems, whether that's a true parallel file system like, project lightning that's designed for AI first, What we've done with our PowerScale object scale, building up the portfolio, a number of announcements we've made last week, We are building a high performance file systems and storage in this disaggregated storage world. Where it is really moved to a flexible, agile, high performance storage system. To meet the needs of these AI workloads. That's what we're building. That's what we're focused on. We got a big glimpse of it last week at Dell Technology World, and back to the attached conversation. We think that's the bridge for us to continue to improve our attach rate going forward.

Thanks, Krish.

And we'll take a question from David Vogt with UBS.

Great. Thanks guys for taking my question. So, Jeff, on AI, to keep it very simple, what is the type of demand that you're seeing in the quarter from an order perspective and what you're shipping? And and the reason I'm asking is you've got this fairly well documented GPU transition out there. That has sort of plagued maybe some of your competitors. So what are you doing differently? What are you seeing customers? And when you think about that backlog that you're sitting at, at 14%, spot four, how would you characterize sort of the flavor of that backlog from a technology? Thank you.

Well, the backlog is primarily Blackwell. And it has a combination of GB or ARM based black well with x 86 black well. It has some copper in it as well. And, yes, these systems are complex. They're not for the same heart at is where real engineering, I believe, matters, where innovation matters. The custom design nature in some of these very large deployments are unique. Pushing the envelope, working with our partner NVIDIA, and specifically our customers to design a custom solution that meets the needs. And now we're designing it delivering it, and having it work at volume or at scale is equally as difficult. And then when you deliver it, as I made reference earlier, it actually works. We are moving towards when we deliver and it is delivered at our customer site with this up and operational within twenty-four hours. Challenge anybody to see if they're close to that. I think we continue to differentiate ourselves. This is the opportunity. Blackwell challenges many engineering principles. We think we're working our way through them. We're excited about the new versions of Blackroll as they come out later in the year. And then, obviously, next year's design that we made reference to in the press release this morning on your ten, it's gonna provide 10 times more performance than the current implementation. And that's the next generation platform. Between Dell and Nvidia. So we're excited.

Great. Thanks, guys. Thanks, Dave.

And moving on to Simon Leopold with Raymond James.

Great. Thank you for taking the question. I want to see if maybe you could help us bridge the trends in your ISG operating margin. In that I I know there's some seasonal aspects to it. That we saw, but, last quarter, you did have significant operating margin improvement and less year-over-year improvement this quarter. So if you could unpack the trends there and included in that, did you have any inventory write downs or any excess inventory like copper or anything like that that might have affected the operating margins in ISG? Thank you.

So in in ISG, the operating rate was down quarter-over-quarter, and that's seasonally what happens, right, going from Q4, our highest performing quarter. In fact, we had record operating income of 18.1% in Q4. So normal seasonality there coming in, but, you know, slightly more than you know, in in Q1, slightly more than what we were expecting. That's because of a few things. Traditional servers were, impacted by lower North American mix, which we've already talked about. Which is higher margin. As well as more large deals. And, again, we we've talked about that, and they those large deals are continue to be competitive. We did improve our operating income rate, though, 170 basis points. And, you know, we're gonna maintain that. All that while driving up our Dell IP mix within our storage portfolio. And I'd mentioned also lower operating expense. So I think we're on the path normal seasonality in from Q4 to Q1, and then we'll see that as our storage portfolio continues to build across the year. Now in Q2, we've already talked about how we're going to have a high mix of AI servers that we're expecting, to be shipped. So know, if you're if you're gonna focus on rates, we'll have you know, we will have a rate impact there, but we will be driving, significant margin dollars and operating income dollars quarter-over-quarter. Based upon how we're guiding, and that's coming from the entire portfolio inclusive of our AI servers.

Thanks, Simon.

And the next question will come from Mehdi Hosseini with SIG.

Yes. Thanks for taking my question. One quick follow-up. Just going back to the backlog you reported for April, based on a $12 billion booking. It's a huge number. Should we expect this booking in the backlog is good for, like, the entire fiscal year. And I'm asking this because just to better set the expectation, should we expect a sharp decline in orders into July and then a rebound? Or is this order enough for the entire fiscal year?

Well, we're ninety-one days into the year with $12.1 billion of orders to date with a five-quarter pipeline that is significantly greater than the backlog of $400,000. We're gonna ship $7 billion of that backlog in Q2, and we're gonna go try to convert. That's our job. Convert the pipeline in Q2 and in second half into orders. Our best outlook is that we're in the fifteen plus range of shipment revenue. We'll continue to work and drive backlog and convert pipeline into backlog. The composition of the backlog does have orders that are delivered beyond Q2. Based on customer delivery schedules, which is dependent on their buildings, power, cooling us, solutions, their ability to take it. And we're pretty I think, tied out. I'm not pretty we are tied out with our customers there. We know our delivery schedules, and we've communicated delivery schedules our ability to ship, $7 billion in the quarter, and that's go convert more revenue of that pipeline going forward. And we'll update you on what we think the entire AI year looks like if there's an update. In Q2. So we're optimistic about the additional opportunity that's there. 15 plus with capital. With the plus. L, capital u, capital s. Thanks, Manny.

Thanks a lot, Matt. That's the last question. I'll hand it to Jeff to close.

Thanks, Paul. Thanks, everyone, for joining us today. As we wrap up, I want to emphasize a few key points from today's call. First, our momentum in AI is unmatched. We booked over $12 billion of orders this quarter alone, which will drive meaningful revenue and EPS growth going forward. Discipline, second, our supply chain is a unique advantage that enables us to respond with and agility to minimize any impacts as demonstrated in the first quarter. Third, in a dynamic environment, we are reiterating our full-year revenue guidance and raising our EPS guidance. We will continue to do what we do, drive growth, profitability, and shareholder return. Thanks for your time today.

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