Analyst(s): Olivier Blanchard
Publication Date: March 5, 2025
Dell Q4 FY 2025 earnings highlight strong AI-driven growth, with Infrastructure Solutions Group (ISG) revenue up 22% YoY, fueled by record AI server demand and a growing $9 billion AI backlog. Meanwhile, Client Solutions Group (CSG) saw a modest 1% YoY increase as consumer PC weakness persisted.
What is Covered in this Article:
- Dell’s Q4 FY 2025 financial results
- ISG revenue growth driven by AI infrastructure demand
- AI server orders, backlog expansion, and new platform launches
- CSG performance amid weak consumer PC sales and AI PC adoption trends
- Capital returns, financial discipline, and FY 2026 guidance
The News: Dell Technologies (NYSE: DELL) announced its Q4 FY 2025 financial results, reporting revenue of $23.9 billion (-2.6% below consensus estimates), up 7% year-on-year (YoY). Revenue in the Infrastructure Solutions Group (ISG) reached $11.4 billion, up 22% YoY, while the Client Solutions Group (CSG) posted revenue of $11.9 billion, a 1% YoY increase. Non-GAAP operating income rose 22% YoY to $2.7 billion (+7.2% above consensus estimates), with a non-GAAP operating margin of 11.2%, up from 9.8% in Q4 FY 2024. Non-GAAP net income increased 15% YoY to $1.9 billion (+5.6% above consensus estimates). At the same time, non-GAAP diluted earnings per share (EPS) reached $2.68, reflecting an 18% YoY rise and was ahead of street estimates by 6.1%.
Dell reported full-year FY 2025 revenue of $95.6 billion, up 8% YoY, with non-GAAP gross margins contracting to 22.8% from 24.5% in the previous year. Non-GAAP operating income rose 8% YoY to $8.5 billion, and the company achieved record non-GAAP diluted EPS of $8.14, a 10% YoY increase. Dell also announced an 18% dividend increase and a $10 billion share repurchase authorization.
“In Q4, we grew our Infrastructure Solutions Group revenue by 22%, and we’re well positioned to capture growth across every segment of our business,” said Jeff Clarke, vice chairman and COO of Dell Technologies. “Our prospects for AI are strong as we extend AI from the largest cloud service providers into the enterprise at scale and out to the edge with the PC. The deals we’ve booked with xAI and others put our AI server backlog at roughly $9 billion as of today.”
Dell Q4 FY 2025 Earnings Show Strong AI Momentum, ISG Revenue Up 22% YoY
Analyst Take: Dell’s Q4 FY 2025 earnings highlight its continued momentum in AI-driven infrastructure, with ISG delivering strong growth. Meanwhile, CSG continues to feel persistent strain from lukewarm consumer demand and aggressive discounting.
AI nonetheless remains a primary catalyst for Dell, with AI server orders hitting $1.7 billion in the quarter and a growing AI backlog now at $9 billion. This positions the company as a major player in enterprise AI, despite concerns around margin pressures and PC refresh cycle delays. Additionally, Dell reinforces shareholder returns, announcing an 18% dividend increase and a $10 billion boost to its share repurchase authorization.
ISG Powers Growth Through AI and Storage Strength
Dell’s ISG segment surged, with revenue rising 22% year-over-year (YoY) to $11.4 billion. This surge was fueled by record AI server demand and strong enterprise adoption. Servers and networking saw a remarkable 37% YoY revenue jump to $6.6 billion, while storage grew 5% YoY to $4.7 billion, continuing its trend of sequential improvement. We also note that ISG’s operating income reached a record $2.1 billion, up 44% YoY, reflecting Dell’s ability to scale its AI-driven infrastructure. Case in point: AI server shipments totaled $2.1 billion, with fresh orders of $1.7 billion pushing the AI backlog to $9 billion, highlighting the strength of enterprise adoption of AI servers.
It is also noteworthy that Dell became the first vendor to ship Nvidia’s NVL72-GB200-powered servers, while simultaneously introducing five new AI-optimized platforms, including support for Nvidia’s Blackwell architecture.
Beyond AI, demand for traditional servers remained strong, extending a streak of five consecutive quarters of growth. Enterprises continue consolidating data centers, driving increased adoption of Dell’s 16G servers, known for their improved compute density, energy efficiency, and expanded storage capacity.
Storage also maintained its upward trajectory, as evidenced by robust demand for Dell’s proprietary storage solutions: PowerStore, Dell’s flagship mid-range product, posted its fourth straight quarter of double-digit demand growth. PowerScale, Dell’s leading unstructured storage platform, saw similarly strong adoption. PowerFlex, meanwhile, continued to expand its customer base, further reinforcing Dell’s AI-ready storage ecosystem.
Looking ahead, Dell expects AI server shipments to surpass $15 billion in FY 2026. Its comprehensive “hybrid” AI infrastructure strategy – incorporating compute, storage, and networking – uniquely positions the company for deeper enterprise penetration and sustained long-term profitability as demand for AI solutions across every cross-section of the IT ecosystem and increasingly to the edge continues to expand.
CSG Sees Soft Consumer Demand While AI PCs Build Momentum
CSG posted modest revenue growth of 1% YoY to $11.9 billion, with commercial client sales rising 5% YoY to $10 billion. Consumer revenue, meanwhile, declined 12% YoY to $1.9 billion. Operating income fell 19% YoY to $631 million as pricing pressures and weak consumer demand weighed on profitability. The enterprise PC refresh cycle remains sluggish, with many businesses holding off on upgrades as they assess the viability and ROI of AI-enabled PCs.
Weakness in both consumer and enterprise demand for AI PCs is, however, mostly due to an absence of Copilot+ class AI PC options in volume sales price tiers. The reason behind this gap in Copilot+ PC offerings is a delay from incumbent PC processor vendors – namely Intel and AMD – in releasing Copilot+ class PC processors for sub-premium price tiers. Qualcomm’s Snapdragon X 8-core processor is the only Copilot+ class solution currently enabling PC OEMs to bring sub-premium priced Copilot+ PCs to market. Despite Arm-based Snapdragon X’s impressive market share growth since its release in mid-2024, many consumers, and even more enterprise buyers, are holding out for budget-friendly x86 options from Intel and AMD before pulling the trigger on AI PC upgrades.
This product gap in volume sales price tiers from both x86 processor vendors currently impacts all PC OEMs, and is therefore not limited to Dell. Relief on this front is expected to come in the May-June 2025 timeframe, with the release of AMD’s lower-priced iteration of its Ryzen AI 300 processors. Intel’s own Core Ultra update for sub-premium Copilot+ PCs is expected to follow in early 2026. We expect the PC refresh cycle to achieve desired velocity in FY 2026, driven by aging devices, end-of-life for Windows 10 support, and the expanding availability of AI-powered PCs at volume sales price tiers, but primarily coinciding with Intel’s release of its lower-priced Copilot+ PC processors.
On the bright side, Dell is already seeing strength in its small and medium-sized business (SMB) segment, a key early indicator of broader market recovery. Historically, SMBs upgrade ahead of large enterprises, suggesting potential for broader adoption in later quarters.
One data point to keep in mind is that over 500 million existing Windows 10 PCs lack Windows 11 compatibility. As this creates a significant upgrade opportunity, we can safely infer that the refresh cycle isn’t a matter of if but rather of when (and how fast).
Strong Capital Returns and Financial Discipline
Dell continues to prioritize shareholder value, increasing its dividend by 18% to $2.1 per share and expanding its share repurchase authorization by $10 billion. In FY 2025, Dell returned $3.9 billion to shareholders, including $755 million in buybacks and $311 million in dividends in Q4 alone. Since FY 2023, the company has distributed $10.8 billion through repurchases and dividends – equivalent to 106% of its adjusted free cash flow.
Despite its substantial AI investments, Dell maintained strong financial health, generating $4.5 billion in free cash flow for FY 2025 and closing the year with $5.2 billion in cash and investments. Its core leverage ratio improved to 1.2x, reinforcing balance sheet strength and financial flexibility.
FY 2026 Guidance: AI-Led Growth with Margin and PC Market Uncertainty
Dell’s FY 2026 guidance reflects confidence in its AI-driven trajectory, projecting revenue between $101 billion and $105 billion, an 8% YoY increase at the midpoint of $103 billion. ISG is expected to grow in the high teens YoY, driven by AI server shipments surpassing $15 billion, while storage and traditional server demand remain stable. Meanwhile, CSG is projected to see low to mid-single-digit growth as the broader PC refresh cycle continues to be held back by a temporary absence of Copilot+ PC availability in volume sales price tiers.
Full-year GAAP diluted EPS is forecasted to rise 23% YoY to $7.85, with non-GAAP diluted EPS expected to increase 14% to $9.30. For Q1 FY 2026, Dell anticipates revenue between $22.5 billion and $23.5 billion (up 3% YoY at the midpoint), with GAAP diluted EPS of $1.29 (-6% YoY) and non-GAAP diluted EPS of $1.65 (+25% YoY).
Dell’s Q4 performance highlights its AI-led growth strategy, with ISG delivering record profitability and AI infrastructure adoption accelerating. However, ongoing margin pressures, uncertainties in the PC market, and execution risks remain key challenges as Dell navigates enterprise demand and cost optimization.
Read the full Dell Q4 FY 2025 financial results press release on the Dell Technologies website.
Daniel Newman and his co-host of The Six Five Webcast, Patrick Moorhead of Moor Insights and Strategy discusses Dell Technologies’ earnings in their latest episode. Check it out here and be sure to subscribe to The Six Five Webcast so you never miss an episode.
Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.
Other insights from The Futurum Group:
Dell Q3 FY 2025: Strong Growth Driven by Infrastructure Solutions and AI
Insights from Dell, Qualcomm & More – A Recap from The Six Five Webcast
Author Information
Research Director Olivier Blanchard covers edge semiconductors and intelligent AI-capable devices for Futurum. In addition to having co-authored several books about digital transformation and AI with Futurum Group CEO Daniel Newman, Blanchard brings considerable experience demystifying new and emerging technologies, advising clients on how best to future-proof their organizations, and helping maximize the positive impacts of technology disruption while mitigating their potentially negative effects. Follow his extended analysis on X and LinkedIn.
