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Item 1. Financial Statements

2023-09-12 compared with 2023-06-12 · 320 added, 195 removed, 1097 unchanged (32% of the section changed)

ITEM 1 — FINANCIAL STATEMENTS (UNAUDITED)

C ondensed C onsolidated Statements of Financial Position as of May 5 , 2023 and February 3, 2023

C ondensed C onsolidated Statements of Income for the three months ended May 5 , 2023 and April 29 , 2 022

C ondensed C onsolidated Statements of Comprehensive Income for the three months ended May 5, 2023 and A pril 29, 2022

Con densed Con solidated Statements of Cash Flows for the three months ended May 5 , 2023 and April 29, 202 2

Con densed Con solidated Statements of Stockholders’ Equity (Deficit) for the three months ended May 5, 2 023 and April 29, 202 2

Condensed Consolidated Statements of Financial Position as of August 4 , 2023 and February 3, 2023

Condensed Consolidated Statements of Income for the three and six months ended August 4 , 2023 and July 29, 2022

Condensed Consolidated Statements of Comprehensive Income for the three and six months ended August 4 , 2023 and July 29, 2022

Condensed Consolidated Statements of Cash Flows for the six months ended August 4 , 2023 and July 29, 2022

Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the three and six months ended August 4 , 2023 and July 29, 2022

Notes to the Condensed Consolidated Financial Statements

20 unchanged sentences

(in millions;

May 5, 2023 February 3, 2023

August 4, 2023 February 3, 2023

Current assets:

1 unchanged sentence

Accounts receivable, net of allowance of $ 80 and $ 78

10,351 12,482

Due from related party, net 404 378

2 unchanged sentences

Other current assets 11,047 10,827

Current assets held for sale 442 —

Total current assets 38,999 42,351

22 unchanged sentences

Common stock and capital in excess of $ 0.01 par value (Note 13)

$ 8,554 $ 8,424

Treasury stock at cost ( 4,320 ) ( 3,813 )

10 unchanged sentences

(in millions, except per share amounts;

Three Months Ended

May 5, 2023 April 29, 2022

Three Months Ended Six Months Ended

August 4, 2023 July 29, 2022 August 4, 2023 July 29, 2022

Products $ 16,935 $ 20,810 $ 31,971 $ 41,274

28 unchanged sentences

(in millions;

Three Months Ended

May 5, 2023 April 29, 2022

Three Months Ended Six Months Ended

August 4, 2023 July 29, 2022 August 4, 2023 July 29, 2022

Net income $ 455 $ 506 $ 1,033 $ 1,575

6 unchanged sentences

Pension and other postretirement plans:

Recognition of actuarial net gains from pension and other postretirement plans 1 17

Recognition of actuarial net gains (losses) from pension and other postretirement plans — ( 4 ) 1 13

Net change in actuarial net gains from pension and other postretirement plans — ( 4 ) 1 13

Total other comprehensive income, net of tax expense (benefit) of $ 5 and $ 16 , respectively

Total other comprehensive income (loss), net of tax expense (benefit) of $ 7 and $( 8 ), respectively, and $ 12 and $ 8 , respectively

111 ( 282 ) 244 ( 275 )

Comprehensive income, net of tax 566 224 1,277 1,300

Net income (loss) attributable to non-controlling interests ( 5 ) ( 3 )

Net loss attributable to non-controlling interests ( 7 ) ( 5 ) ( 12 ) ( 8 )

Other comprehensive loss attributable to non-controlling interests — ( 1 ) — ( 1 )

Comprehensive income attributable to Dell Technologies Inc.

4 unchanged sentences

(in millions;

Three Months Ended

May 5, 2023 April 29, 2022

Six Months Ended

August 4, 2023 July 29, 2022

Cash flows from operating activities:

31 unchanged sentences

Cash, cash equivalents, and restricted cash at beginning of the period 8,894 10,082

Cash, cash equivalents, and restricted cash $ 7,927 $ 7,276

Cash, cash equivalents, and restricted cash at the end of the period $ 8,650 $ 6,093

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

(in millions;

(in millions, except per share amounts;

continued on next page;

Common Stock and Capital in Excess of Par Value Treasury Stock

Issued Shares Amount Shares Amount Accumulated Deficit Accumulated Other Comprehensive Income/(Loss) Dell Technologies

Three Months Ended August 4, 2023 Issued Shares Amount Shares Amount Accumulated Deficit Accumulated Other Comprehensive Income/(Loss) Dell Technologies

Stockholders’ Equity (Deficit) Non-Controlling Interests Total Stockholders’ Equity (Deficit)

Balances as of May 5, 2023

817 $ 8,339 88 $ ( 4,064 ) $ ( 6,430 ) $ ( 868 ) $ ( 3,023 ) $ 99 $ ( 2,924 )

Net income (loss) — — — — 462 — 462 ( 7 ) 455

Dividends and dividend equivalents declared ($ 0.37 per common share)

— — — — ( 281 ) — ( 281 ) — ( 281 )

Foreign currency translation adjustments — — — — — ( 6 ) ( 6 ) — ( 6 )

Cash flow hedges, net change — — — — — 117 117 — 117

Issuance of common stock, net of shares repurchased for employee tax withholding

— ( 4 ) — — — — ( 4 ) — ( 4 )

Stock-based compensation expense — 215 — — — — 215 8 223

Repurchases of common stock — — 5 ( 256 ) — — ( 256 ) — ( 256 )

Impact from equity transactions of non-controlling interests — 4 — — — — 4 ( 5 ) ( 1 )

Balances as of August 4, 2023

817 $ 8,554 93 $ ( 4,320 ) $ ( 6,249 ) $ ( 757 ) $ ( 2,772 ) $ 95 $ ( 2,677 )

Common Stock and Capital in Excess of Par Value Treasury Stock

Six Months Ended August 4, 2023 Issued Shares Amount Shares Amount Accumulated Deficit Accumulated Other Comprehensive Income/(Loss) Dell Technologies

Stockholders’ Equity (Deficit) Non-Controlling Interests Total Stockholders’ Equity (Deficit)

Balances as of February 3, 2023

11 unchanged sentences

Impact from equity transactions of non-controlling interests — — — — — — — ( 5 ) ( 5 )

Balances as of May 5, 2023

Balances as of August 4, 2023

817 $ 8,554 93 $ ( 4,320 ) $ ( 6,249 ) $ ( 757 ) $ ( 2,772 ) $ 95 $ ( 2,677 )

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

in millions, except per share amounts;

Common Stock and Capital in Excess of Par Value Treasury Stock

Issued Shares Amount Shares Amount Accumulated Deficit Accumulated Other Comprehensive Income/(Loss) Dell Technologies

Three Months Ended July 29, 2022 Issued Shares Amount Shares Amount Accumulated Deficit Accumulated Other Comprehensive Income/(Loss) Dell Technologies

Stockholders’ Equity (Deficit) Non-Controlling Interests Total Stockholders’ Equity (Deficit)

Balances as of April 29, 2022

795 $ 7,777 48 $ ( 2,446 ) $ ( 7,369 ) $ ( 424 ) $ ( 2,462 ) $ 107 $ ( 2,355 )

Net income (loss) — — — — 511 — 511 ( 5 ) 506

Dividends and dividend equivalents declared ($ 0.33 per common share)

— — — — ( 248 ) — ( 248 ) — ( 248 )

Foreign currency translation adjustments — — — — — ( 137 ) ( 137 ) ( 1 ) ( 138 )

Cash flow hedges, net change — — — — — ( 140 ) ( 140 ) — ( 140 )

Pension and other post-retirement — — — — — ( 4 ) ( 4 ) — ( 4 )

Issuance of common stock, net of shares repurchased for employee tax withholding

1 ( 5 ) — — — — ( 5 ) — ( 5 )

Stock-based compensation expense — 227 — — — — 227 9 236

Repurchases of common stock — — 14 ( 608 ) — — ( 608 ) — ( 608 )

Impact from equity transactions of non-controlling interests — 6 — — — — 6 ( 5 ) 1

Balances as of July 29, 2022

796 $ 8,005 62 $ ( 3,054 ) $ ( 7,106 ) $ ( 705 ) $ ( 2,860 ) $ 105 $ ( 2,755 )

Common Stock and Capital in Excess of Par Value Treasury Stock

Six Months Ended July 29, 2022 Issued Shares Amount Shares Amount Accumulated Deficit Accumulated Other Comprehensive Income/(Loss) Dell Technologies

Stockholders’ Equity (Deficit) Non-Controlling Interests Total Stockholders’ Equity (Deficit)

Balances as of January 28, 2022

777 $ 7,898 20 $ ( 964 ) $ ( 8,188 ) $ ( 431 ) $ ( 1,685 ) $ 105 $ ( 1,580 )

Net income — — — — 1,072 — 1,072 ( 3 ) 1,069

Net income (loss) — — — — 1,583 — 1,583 ( 8 ) 1,575

Dividends and dividend equivalents declared ($ 0.66 per common share)

8 unchanged sentences

Impact from equity transactions of non-controlling interests — — — — — — — ( 8 ) ( 8 )

Balances as of April 29, 2022

Balances as of July 29, 2022

796 $ 8,005 62 $ ( 3,054 ) $ ( 7,106 ) $ ( 705 ) $ ( 2,860 ) $ 105 $ ( 2,755 )

10 unchanged sentences

These Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

In the opinion of management, the accompanying Condensed Consolidated Financial Statements reflect all adjustments of a normal recurring nature considered necessary to fairly state the financial position of the Company as of May 5, 2023 and February 3, 2023 and the results of its operations, corresponding comprehensive income, changes in stockholders’ equity, and cash flows for the three months ended May 5, 2023 and April 29, 2022.

In the opinion of management, the accompanying Condensed Consolidated Financial Statements reflect all adjustments of a normal recurring nature considered necessary to fairly state the financial position of the Company as of August 4, 2023 and February 3, 2023, the results of its operations, corresponding comprehensive income, and changes in stockholders’ equity for the three and for the six months ended August 4, 2023 and July 29, 2022, and its cash flows for the six months ended August 4, 2023 and July 29, 2022.

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Condensed Consolidated Financial Statements and the accompanying Notes.

Actual results could differ materially from those estimates.

The results of its operations, corresponding comprehensive income, changes in stockholders’ equity, and cash flows for the three months ended May 5, 2023 and April 29, 2022 are not necessarily indicative of the results to be expected for the full fiscal year or for any other fiscal period.

The results of the Company’s operations, corresponding comprehensive income, and changes in stockholders’ equity for the three and six months ended August 4, 2023 and July 29, 2022, and its cash flows for the six months ended August 4, 2023 and July 29, 2022 are not necessarily indicative of the results to be expected for the full fiscal year or for any other fiscal period.

The Company’s fiscal year is the 52- or 53-week period ending on the Friday nearest January 31.

The fiscal year ended February 3, 2023 (“Fiscal 2023”) was a 53-week period while the fiscal year ending February 2, 2024 (“Fiscal 2024”) will be a 52-week period.

Principles of Consolidation — These Condensed Consolidated Financial Statements include the accounts of Dell Technologies Inc., its wholly-owned subsidiaries, and the accounts of SecureWorks Corp.

Principles of Consolidation — These Condensed Consolidated Financial Statements include the accounts of Dell Technologies Inc.

and its wholly-owned subsidiaries, and the accounts of SecureWorks Corp.

(“Secureworks”), which is majority-owned by Dell Technologies.

All intercompany transactions have been eliminated.

Secureworks — As of May 5, 2023 and February 3, 2023, the Company held approximately 81.4 % and 82.6 %, respectively, of the outstanding equity interest in Secureworks, both including and excluding restricted stock awards (“RSAs”).

The portion of the results of operations of Secureworks allocable to its other owners is shown as net income (loss) attributable to the non-controlling interests in the Condensed Consolidated Statements of Income, as an adjustment to net income attributable to Dell Technologies stockholders.

The non-controlling interests’ share of equity in Secureworks is reflected as a component of the non-controlling interests in the Condensed Consolidated Statements of Financial Position and was $ 99 million and $ 97 million as of May 5, 2023 and February 3, 2023, respectively.

Secureworks — As of August 4, 2023 and February 3, 2023, the Company held approximately 81.2 % and 82.6 % , respectively, of the outstanding equity interest in Secureworks.

The portion of the results of operations of Secureworks allocable to its other owners is shown as net loss attributable to the non-controlling interests in the Condensed Consolidated Statements of Income, as an adjustment to net income attributable to Dell Technologies stockholders.

The non-controlling interests’ share of equity in Secureworks is reflected as a component of the non-controlling interests in the Condensed Consolidated Statements of Financial Position and wa s $ 95 million and $ 97 million as of August 4, 2023 and February 3, 2023, respectively.

Variable Interest Entities — The Company consolidates Variable Interest Entities ("VIEs") where it has been determined that the Company is the primary beneficiary of the applicable entities’ operations.

5 unchanged sentences

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Other Events — On July 12, 2023, the Company entered into a definitive agreement with Comenity Capital Bank, a subsidiary of Bread Financial Holdings, Inc.

(“Bread”) to establish a new U.S.

Dell Preferred Account program under which transactions will be originated, owned, serviced, and collected by Bread.

Under the definitive agreement, the Company will also sell its U.S.

consumer revolving customer receivables portfolio.

Upon the completion of the sale, such receivables will be serviced by Bread and the Company will have no continuing involvement.

The transaction is expected to close in the third quarter of Fiscal 2024, subject to customary closing conditions.

In accordance with applicable accounting guidance, the Company concluded that the U.S.

consumer revolving customer financing receivables have met the criteria to be classified as held for sale as of August 4, 2023.

Accordingly, the Company reclassified $ 389 million, net of allowance, to current assets held for sale on the Condensed Consolidated Statements of Financial Position as of August 4, 2023.

See Note 4 of the Notes to the Condensed Consolidated Financial Statements for more information.

DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 2 — FAIR VALUE MEASUREMENTS

The following table presents the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of the dates indicated:

May 5, 2023 February 3, 2023

August 4, 2023 February 3, 2023

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

10 unchanged sentences

The valuations of these securities are based on quoted prices in active markets for identical assets, when available, or pricing models whereby all significant inputs are observable or can be derived from or corroborated by observable market data.

The Company reviews security pricing and assesses liquidity on a quarterly basis.

As of May 5, 2023, the Company’s portfolio had no material exposure to money market funds with a fluctuating net asset value.

The Company reviews security pricing and assesses money market fund liquidity on a quarterly basis.

As of August 4, 2023, the Company’s portfolio had no material exposure to money market funds with a fluctuating net asset value.

Marketable Equity and Other Securities — The Company’s investments in equity and other securities that are measured at fair value on a recurring basis consist of strategic investments in publicly-traded companies.

5 unchanged sentences

Deferred Compensation Plans — The Company offers deferred compensation plans for eligible employees, which allow participants to defer a portion of their compensation.

Assets were the same as liabilities associated with the plans at approximately $ 190 million and $ 179 million as of May 5, 2023 and February 3, 2023, respectively, and are included in other assets and other liabilities on the Condensed Consolidated Statements of Financial Position.

Assets were the same as liabilities associated with the plans at approximately $ 197 million and $ 179 million as of August 4, 2023 and February 3, 2023, respectively, and are included in other assets and other liabilities on the Condensed Consolidated Statements of Financial Position.

The net impact to the Condensed Consolidated Statements of Income is not material since changes in the fair value of the assets substantially offset changes in the fair value of the liabilities.

5 unchanged sentences

See Note 8 of the Notes to the Condensed Consolidated Financial Statements for additional information about goodwill and intangible assets.

As of both May 5, 2023 and February 3, 2023, the Company held strategic investments in non-marketable equity and other securities of $ 1.3 billion.

As of August 4, 2023 and February 3, 2023, the Company held strategic investments in non-marketable equity and other securities of $ 1.2 billion and $ 1.3 billion, respectively.

As these investments represent early-stage companies without readily determinable fair values, they are not included in the recurring fair value table above.

1 unchanged sentence

Carrying Value and Estimated Fair Value of Outstanding Debt — The following table presents the carrying value and estimated fair value of the Company’s outstanding debt as described in Note 6 of the Notes to the Condensed Consolidated Financial Statements, including the current portion, as of the dates indicated:

May 5, 2023 February 3, 2023

August 4, 2023 February 3, 2023

Carrying Value Fair Value Carrying Value Fair Value

10 unchanged sentences

Short-term fixed income debt securities are recorded as other current assets in the Condensed Consolidated Statements of Financial Position.

As of both May 5, 2023 and February 3, 2023, total investments were $ 1.6 billion.

As of both August 4, 2023 and February 3, 2023, total investments were $ 1.6 billion.

Equity and Other Securities

7 unchanged sentences

The following table presents the cost, cumulative unrealized gains, cumulative unrealized losses, and carrying value of the Company's strategic investments in marketable and non-marketable equity securities as of the dates indicated:

May 5, 2023 February 3, 2023

August 4, 2023 February 3, 2023

Cost Unrealized Gain Unrealized Loss Carrying Value Cost Unrealized Gain Unrealized Loss Carrying Value

7 unchanged sentences

The following table presents unrealized gains and losses on marketable and non-marketable equity and other securities for the periods indicated:

Three Months Ended

May 5, 2023 April 29, 2022

Three Months Ended Six Months Ended

August 4, 2023 July 29, 2022 August 4, 2023 July 29, 2022

(in millions)

Marketable securities:

Unrealized gain $ 1 $ 7 $ 1 $ 7

Unrealized loss — ( 1 ) ( 23 ) ( 19 )

3 unchanged sentences

Unrealized loss ( 41 ) ( 320 ) ( 46 ) ( 320 )

Net unrealized gain (a) 4 21

Net unrealized gain (loss) on equity and other securities $ ( 19 ) $ 3

Net unrealized loss (a) ( 41 ) ( 269 ) ( 37 ) ( 248 )

Net unrealized loss on equity and other securities $ ( 40 ) $ ( 263 ) $ ( 59 ) $ ( 260 )

____________________

(a) For all periods presented, net unrealized gains on non-marketable securities were primarily due to upward adjustments for observable price changes.

(a) For all periods presented, net unrealized losses on non-marketable securities were primarily attributable to impairments.

During the three and six months ended July 29, 2022, the Company recognized $ 310 million of impairments on equity and other securities, which was generally in line with extended public equity market declines.

Fixed Income Debt Securities

1 unchanged sentence

The Company intends to hold the investments to maturity.

As of May 5, 2023, the Company held $ 200 million in fixed income debt securities which will mature within one year and $ 123 million in fixed income debt securities which will mature within two to five years.

As of August 4, 2023, the Company held $ 226 million in fixed income debt securities which will mature within one year and $ 83 million in fixed income debt securities which will mature within two to five years.

The following table summarizes the Company’s debt securities as of the dates indicated:

May 5, 2023 February 3, 2023

August 4, 2023 February 3, 2023

Cost Unrealized Gain Unrealized Loss Carrying Value Cost Unrealized Gain Unrealized Loss Carrying Value

10 unchanged sentences

In some cases, DFS also offers financing for the purchase of third-party technology products that complement the Dell Technologies portfolio of products and services.

New financing originations were $ 1.8 billion and $ 2.1 billion for the three months ended May 5, 2023 and April 29, 2022, respectively.

New financing originations were $ 2.4 billion and $ 2.3 billion for the three months ended August 4, 2023 and July 29, 2022, respectively, and $ 4.2 billion and $ 4.4 billion for the six months ended August 4, 2023 and July 29, 2022, respectively.

The Company’s lease and loan arrangements with customers are aggregated primarily into the following categories:

5 unchanged sentences

Due to the short-term nature of the revolving loan portfolio, the carrying value of the portfolio approximates fair value.

As described in Note 1 to the Notes to the Condensed Consolidated Financial Statements, on July 12, 2023, the Company entered into a definitive agreement with Comenity Capital Bank, a subsidiary of Bread Financial Holdings, Inc., to establish a new U.S.

DPA program under which transactions will be originated, owned, serviced, and collected by Bread.

Under the definitive agreement, the Company will also sell its U.S.

consumer revolving customer receivables portfolio.

Upon the completion of the sale, such receivables will be serviced by Bread and the Company will have no continuing involvement.

The transaction is expected to close in the third quarter of Fiscal 2024, subject to customary closing conditions.

In accordance with applicable accounting guidance, the Company concluded that the U.S.

consumer revolving customer financing receivables have met the criteria to be classified as held for sale as of August 4, 2023.

Accordingly, the Company reclassified $ 389 million, net of allowance, to current assets held for sale on the Condensed Consolidated Statements of Financial Position as of August 4, 2023.

Fixed-term leases and loans — The Company enters into financing arrangements with customers who seek lease financing for equipment.

11 unchanged sentences

The following table presents the components of the Company’s financing receivables segregated by portfolio segment as of the dates indicated:

May 5, 2023 February 3, 2023

August 4, 2023 February 3, 2023

Revolving Fixed-term Total Revolving Fixed-term Total

1 unchanged sentence

Financing receivables, net:

Customer receivables, gross (a) $ 658 $ 9,951 $ 10,609 $ 685 $ 10,293 $ 10,978

Customer receivables, gross (a) (b) $ 180 $ 10,439 $ 10,619 $ 685 $ 10,293 $ 10,978

Allowances for losses ( 9 ) ( 140 ) ( 149 ) ( 88 ) ( 113 ) ( 201 )

6 unchanged sentences

(a) Customer receivables, gross include amounts due from customers under revolving loans, fixed-term loans, fixed-term leases, and accrued interest.

(b) The decrease in revolving customer financing receivables is attributable to the reclassification of the U.S.

consumer revolving portfolio to current assets held for sale, as described above.

The following table presents the changes in allowance for financing receivable losses for the periods indicated:

Three Months Ended

May 5, 2023 April 29, 2022

August 4, 2023 July 29, 2022

Revolving Fixed-term Total Revolving Fixed-term Total

4 unchanged sentences

Provision charged to income statement 15 6 21 9 7 16

Held for sale adjustment ( 74 ) — ( 74 ) — — —

Balances at end of period $ 9 $ 140 $ 149 $ 91 $ 92 $ 183

Six Months Ended

August 4, 2023 July 29, 2022

Revolving Fixed-term Total Revolving Fixed-term Total

(in millions)

Allowance for financing receivable losses:

Balances at beginning of period $ 88 $ 113 $ 201 $ 102 $ 87 $ 189

Charge-offs, net of recoveries ( 33 ) ( 2 ) ( 35 ) ( 25 ) ( 4 ) ( 29 )

Provision charged to income statement 28 29 57 14 9 23

Held for sale adjustment ( 74 ) — ( 74 ) — — —

Balances at end of period $ 9 $ 140 $ 149 $ 91 $ 92 $ 183

DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The Company recognizes an allowance for financing receivable losses, including both the lease receivable and unguaranteed residual, in an amount equal to the expected losses net of recoveries.

1 unchanged sentence

The Company continues to monitor broader economic indicators and their potential impact on future credit loss performance.

DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table presents the aging of the Company’s customer financing receivables, gross, including accrued interest, segregated by class, as of the dates indicated:

May 5, 2023 February 3, 2023

August 4, 2023 February 3, 2023

Current Past Due

16 unchanged sentences

The following tables present customer receivables, gross, including accrued interest, by credit quality indicator, segregated by class, as of the dates indicated:

August 4, 2023

Fixed-term — Consumer and Commercial

17 unchanged sentences

The credit quality indicators for DPA revolving accounts are measured primarily as of each quarter-end date, while all other indicators are generally updated on a periodic basis.

For DPA revolving receivables shown in the table above, the Company makes credit decisions based on proprietary scorecards, which include the customer’s credit history, payment history, credit usage, and other credit agency-related elements.

For DPA revolving receivables, the Company makes credit decisions based on proprietary scorecards, which include the customer’s credit history, payment history, credit usage, and other credit agency-related elements.

The higher quality category includes prime accounts generally comparable to U.S.

9 unchanged sentences

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table presents the net revenue, cost of net revenue, and gross margin recognized at the commencement date of sales-type leases for the periods indicated:

Three Months Ended

May 5, 2023 April 29, 2022

The following table presents net revenue, cost of net revenue, and gross margin recognized at the commencement date of sales-type leases for the periods indicated:

Three Months Ended Six Months Ended

August 4, 2023 July 29, 2022 August 4, 2023 July 29, 2022

(in millions)

Net revenue — products

$ 292 $ 219 $ 539 $ 439

Cost of net revenue — products

192 164 388 368

Gross margin — products

$ 100 $ 55 $ 151 $ 71

The following table presents the future maturity of the Company’s fixed-term customer leases and associated financing payments, and reconciles the undiscounted cash flows to the customer receivables, gross recognized on the Condensed Consolidated Statement of Financial Position as of the date indicated:

August 4, 2023

(in millions)

Fiscal 2024 (remaining nine months) $ 1,997

Fiscal 2024 (remaining six months) $ 1,445

Fiscal 2025 2,063

10 unchanged sentences

The following table presents the components of the Company’s operating lease portfolio included in property, plant, and equipment, net as of the dates indicated:

May 5, 2023 February 3, 2023

August 4, 2023 February 3, 2023

(in millions)

5 unchanged sentences

The following table presents operating lease income related to lease payments and depreciation expense for the Company’s operating lease portfolio for the periods indicated:

Three Months Ended

May 5, 2023 April 29, 2022

Three Months Ended Six Months Ended

August 4, 2023 July 29, 2022 August 4, 2023 July 29, 2022

(in millions)

2 unchanged sentences

The following table presents the future payments to be received by the Company as lessor in operating lease contracts as of the date indicated:

August 4, 2023

(in millions)

Fiscal 2024 (remaining nine months) $ 862

Fiscal 2024 (remaining six months) $ 623

Fiscal 2025 918

6 unchanged sentences

The following table presents DFS debt as of the dates indicated and excludes the allocated portion of the Company’s other borrowings, which represents the additional amount considered to fund the DFS business:

May 5, 2023 February 3, 2023

August 4, 2023 February 3, 2023

DFS debt (in millions)

18 unchanged sentences

The debt has a variable interest rate and the duration of the debt is based on the terms of the underlying loan and lease payment streams.

As of May 5, 2023, the total debt capacity related to the U.S.

As of August 4, 2023, the total debt capacity related to the U.S.

asset-based financing and securitization facilities was $ 5.6 billion.

1 unchanged sentence

See Note 7 of the Notes to the Condensed Consolidated Financial Statements for additional information about interest rate swaps.

The Company’s U.S.

securitization facility for revolving loans is effective through June 25, 2025.

The Company’s two U.S.

asset-based financing facilities for fixed-term leases and loans are effective through July 7, 2025 and June 21, 2024, respectively.

The Company intends to extend the facility currently effective through July 10, 2023 during the second quarter of Fiscal 2024.

The Company’s U.S.

securitization facility for revolving loans is effective through June 25, 2025.

The Company intends to pay down the U.S.

securitization facility for revolving loans prior to the close of the U.S.

consumer revolving customer receivables portfolio sale described above.

The asset-based financing and securitization facilities contain standard structural features related to the performance of the funded receivables, which include defined credit losses, delinquencies, average credit scores, and minimum collection requirements.

In the event one or more of these criteria are not met and the Company is unable to restructure the facility, no further funding of receivables will be permitted and the timing of the Company’s expected cash flows from over-collateralization will be delayed.

As of May 5, 2023, these criteria were met.

As of August 4, 2023, these criteria were met.

Fixed-Term Securitization Offerings — The Company periodically issues asset-backed debt securities under fixed-term securitization programs to private investors.

1 unchanged sentence

fixed-term lease and loan payments and associated equipment, which are held by Special Purpose Entities (“SPEs”), as discussed below.

The interest rate on these securities is fixed and ranges from 0.33 % to 6.80 % per annum, and the duration of these securities is based on the terms of the underlying lease and loan payment streams.

The interest rate on these securities is fixed and ranges from 0.43 % to 6.80 % per annum as of August 4, 2023, and the duration of these securities is based on the terms of the underlying lease and loan payment streams.

DFS International Debt

1 unchanged sentence

The debt under this facility has a variable interest rate, and the duration of the debt is based on the terms of the underlying loan and lease payment streams.

This facility is effective through December 23, 2024 and had a total debt capacity of $ 881 million as of May 5, 2023.

This facility is effective through December 23, 2024 and had a total debt capacity of $ 876 million as of August 4, 2023.

The securitization facility contains standard structural features related to the performance of the securitized receivables, which include defined credit losses, delinquencies, average credit scores, and minimum collection requirements.

In the event one or more of these criteria are not met and the Company is unable to restructure the program, no further funding of receivables will be permitted and the timing of the Company’s expected cash flows from over-collateralization will be delayed.

As of May 5, 2023, these criteria were met.

Other Borrowings — In connection with the Company’s international financing operations, the Company has entered into revolving structured financing debt programs related to its fixed-term lease and loan products sold in Canada, Europe, Australia, and New Zealand.

As of August 4, 2023, these criteria were met.

The debt under these programs has a variable interest rate, and the duration of the debt is based on the terms of the underlying loan and lease payment streams.

The Canadian facility, which is collateralized solely by Canadian loan and lease payments and associated equipment, had a total debt capacity of $ 332 million as of May 5, 2023 and is effective through January 16, 2025.

The European facility, which is collateralized solely by European loan and lease payments and associated equipment, had a total debt capacity of $ 661 million as of May 5, 2023 and is effective through June 14, 2025.

The Australia and New Zealand facility, which is collateralized solely by Australia and New Zealand loan and lease payments and associated equipment, had a total debt capacity of $ 301 million as of May 5, 2023 and is effective through April 20, 2025.

The Middle East facility, which is collateralized solely by Middle East loan and lease payments and associated equipment, had a total debt capacity of $ 150 million as of May 5, 2023 and is effective through March 24, 2025.

The Canadian facility, which is collateralized solely by Canadian loan and lease payments and associated equipment, had a total debt capacity of $ 337 million as of August 4, 2023 and is effective through January 16, 2025.

The European facility, which is collateralized solely by European loan and lease payments and associated equipment, had a total debt capacity of $ 657 million as of August 4, 2023 and is effective through June 14, 2025.

The Australia and New Zealand facility, which is collateralized solely by Australia and New Zealand loan and lease payments and associated equipment, had a total debt capacity of $ 295 million as of August 4, 2023 and is effective through April 20, 2025.

The Middle East facility, which is collateralized solely by Middle East loan and lease payments and associated equipment, had a total debt capacity of $ 150 million as of August 4, 2023 and is effective through March 24, 2025.

DELL TECHNOLOGIES INC.

1 unchanged sentence

Note Payable — On May 25, 2022, the Company entered into an unsecured credit agreement to fund receivables in Mexico.

As of May 5, 2023, the aggregate principal amount of the note payable was $ 250 million.

As of August 4, 2023, the aggregate principal amount of the note payable was $ 250 million.

The note bears interest at an annual rate of 4.24 % and will mature on May 31, 2024.

13 unchanged sentences

The following table presents the assets and liabilities held by the consolidated VIEs as of the dates indicated, which are included in the Condensed Consolidated Statements of Financial Position:

May 5, 2023 February 3, 2023

August 4, 2023 February 3, 2023

(in millions)

1 unchanged sentence

Other current assets $ 282 $ 274

Current assets held for sale $ 366 $ —

Financing receivables, net of allowance

6 unchanged sentences

Long-term $ 2,760 $ 2,685

Lease and loan payments and associated equipment transferred via securitization through SPEs were $ 1.5 billion and $ 1.7 billion for the three months ended May 5, 2023 and April 29, 2022, respectively.

Lease and loan payments and associated equipment transferred via securitization through SPEs were $ 1.1 billion and $ 1.2 billion for the three months ended August 4, 2023 and July 29, 2022, respectively, and $ 2.6 billion and $ 2.9 billion for the six months ended August 4, 2023 and July 29, 2022, respectively.

DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Customer Receivable Sales

To manage certain concentrations of customer credit exposure, the Company may sell selected fixed-term customer receivables to unrelated third parties on a periodic basis, without recourse.

The amount of customer receivables sold for this purpose was $ 169 million and $ 148 million for the three months ended May 5, 2023 and April 29, 2022, respectively.

The amount of customer receivables sold for this purpose was $ 187 million and $ 425 million for the six months ended August 4, 2023 and July 29, 2022, respectively.

The Company’s continuing involvement in these customer receivables is primarily limited to servicing arrangements.

6 unchanged sentences

The Company also leases certain global logistics warehouses, employee vehicles, and equipment.

As of May 5, 2023, the remaining terms of the Company’s leases range from one month to approximately ten years .

As of May 5, 2023 and February 3, 2023, there were no material finance leases for which the Company was a lessee.

As of August 4, 2023, the remaining terms of the Company’s leases range from one month to approximately ten years .

As of August 4, 2023 and February 3, 2023, there were no material finance leases in which the Company was a lessee.

The Company also enters into leasing transactions in which the Company is the lessor, primarily through customer financing arrangements offered through DFS.

DFS originates leases that are primarily classified as either sales-type leases or operating leases.

See Note 4 of the Notes to the Condensed Consolidated Financial Statements for more information on the Company’s lessor arrangements.

See Note 4 of the Notes to the Condensed Consolidated Financial Statements for more information about the Company’s lessor arrangements.

The following table presents components of lease costs included in the Condensed Consolidated Statements of Income for the periods indicated:

Three Months Ended

May 5, 2023 April 29, 2022

Three Months Ended Six Months Ended

August 4, 2023 July 29, 2022 August 4, 2023 July 29, 2022

(in millions)

2 unchanged sentences

Total lease costs $ 82 $ 91 $ 185 $ 188

During the three months ended May 5, 2023 and April 29, 2022, sublease income, finance lease costs, and short-term lease costs were immaterial.

For both the six months ended August 4, 2023 and July 29, 2022, sublease income, finance lease costs, and short-term lease costs were immaterial.

The following table presents supplemental information related to operating leases included in the Condensed Consolidated Statements of Financial Position as of the dates indicated:

Classification May 5, 2023 February 3, 2023

Classification August 4, 2023 February 3, 2023

(in millions, except for term and discount rate)

8 unchanged sentences

The following table presents supplemental cash flow information related to leases for the periods indicated:

Three Months Ended

May 5, 2023 April 29, 2022

Six Months Ended

August 4, 2023 July 29, 2022

(in millions)

3 unchanged sentences

The following table presents the future maturity of the Company’s operating lease liabilities under non-cancelable leases and reconciles the undiscounted cash flows for these leases to the lease liability recognized on the Condensed Consolidated Statements of Financial Position as of the date indicated:

August 4, 2023

(in millions)

Fiscal 2024 (remaining nine months) $ 205

Fiscal 2024 (remaining six months) $ 131

Fiscal 2025 232

7 unchanged sentences

Non-current operating lease liabilities $ 600

As of May 5, 2023, the Company’s undiscounted operating leases that had not yet commenced were immaterial.

As of August 4, 2023, the Company’s undiscounted operating leases that had not yet commenced were immaterial.

DELL TECHNOLOGIES INC.

2 unchanged sentences

The following table summarizes the Company’s outstanding debt as of the dates indicated:

May 5, 2023 February 3, 2023

August 4, 2023 February 3, 2023

(in millions)

27 unchanged sentences

Total long-term debt, carrying value $ 20,177 $ 23,015

During the three months ended May 5, 2023, the net decrease in the Company’s debt balance primarily reflected the repayment of $ 1 billion principal amount of the 5.45 % Senior Notes due June 2023.

During the six months ended August 4, 2023, the net decrease in the Company’s debt balance was principally attributable to:

• the repayment of $ 1 billion principal amount of the 5.45 % Senior Notes due June 2023;

• the repayment of $ 1 billion principal amount of the 6.02 % Senior Notes due June 2026 in a tender offer, in connection with which the Company recognized an immaterial amount of debt extinguishment costs in interest and other, net in the Condensed Consolidated Statement of Income.

Outstanding Debt

1 unchanged sentence

Interest on these borrowings is payable semiannually.

DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Legacy Notes and Debentures — The Company has outstanding unsecured notes and debentures (collectively, the “Legacy Notes and Debentures”) that were issued by Dell Inc.

2 unchanged sentences

Interest on these borrowings is payable semiannually.

DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

DFS Debt — See Note 4 and Note 7 of the Notes to the Condensed Consolidated Financial Statements, respectively, for discussion of DFS debt and the interest rate swap agreements that hedge a portion of that debt.

6 unchanged sentences

The borrowers may voluntarily repay outstanding loans under the 2021 Revolving Credit Facility at any time without premium or penalty, other than customary breakage costs.

As of May 5, 2023, the Company had no oustanding borrowings under the 2021 Revolving Credit Facility.

As of August 4, 2023, the Company had no outstanding borrowings under the 2021 Revolving Credit Facility.

Commercial Paper Program — During Fiscal 2023, the Company established a commercial paper program under which the Company may issue unsecured notes in a maximum aggregate face amount of $ 5.0 billion outstanding at any time, with maturities up to 397 days from the date of issuance.

2 unchanged sentences

The proceeds of the notes are used for general corporate purposes.

As of May 5, 2023, the Company had no outstanding borrowings under the commercial paper program.

Commercial paper issuances and repayments with maturities of 90 days or less are presented on a net basis within cash flows from financing activities on the Condensed Consolidated Statements of Cash Flows.

As of August 4, 2023, the Company had no outstanding borrowings under the commercial paper program.

The Company may purchase, redeem, prepay, refinance, or otherwise retire any amount of outstanding indebtedness under the terms of such indebtedness at any time and from time to time, in open market or negotiated transactions with the holders of such indebtedness or otherwise, as considered appropriate in light of market conditions and other relevant factors.

2 unchanged sentences

The 2021 Revolving Credit Facility is also subject to an interest coverage ratio covenant that is tested at the end of each fiscal quarter with respect to the Company’s preceding four fiscal quarters.

The Company was in compliance with this financial covenant as of May 5, 2023.

The Company was in compliance with this financial covenant as of August 4, 2023.

DELL TECHNOLOGIES INC.

1 unchanged sentence

Aggregate Future Maturities

The following table presents the aggregate future maturities of the Company’s debt as of May 5, 2023 for the periods indicated:

The following table presents the aggregate future maturities of the Company’s debt as of August 4, 2023 for the periods indicated:

Maturities by Fiscal Year

2024 (remaining nine months) 2025 2026 2027 2028 Thereafter Total

2024 (remaining six months) 2025 2026 2027 2028 Thereafter Total

(in millions)

20 unchanged sentences

The majority of these contracts typically expire in twelve months or less.

During the three months ended May 5, 2023 and April 29, 2022, the Company did not discontinue any cash flow hedges related to foreign exchange contracts that had a material impact on the Company’s results of operations due to the probability that the forecasted cash flows would not occur.

During the three and six months ended August 4, 2023 and July 29, 2022, the Company did not discontinue any cash flow hedges related to foreign exchange contracts that had a material impact on the Company’s results of operations due to the probability that the forecasted cash flows would not occur.

The Company uses forward contracts to hedge monetary assets and liabilities denominated in a foreign currency.

11 unchanged sentences

The interest rate swaps economically convert the fixed rate on its bonds to a floating rate to match the underlying lease repayments profile.

None of these contracts are designated for hedge accounting and most expire within five years or less.

These contracts are not designated for hedge accounting and most expire within five years or less.

The Company utilizes cross-currency amortizing swaps to hedge the currency and interest rate risk exposure associated with the European securitization program.

8 unchanged sentences

During Fiscal 2023, the Company entered into interest rate swaps designated as fair value hedges intended to hedge a portion of its interest rate exposure by converting the fixed interest rate of a certain tranche of debt to a floating interest rate based on the benchmark SOFR Overnight Index Swap rate.

As of May 5, 2023, the carrying amount of the hedged debt was $ 1 billion.

The gains and losses related to changes in the fair value of the interest rate swaps perfectly offset changes in the fair value of the hedged portion of the underlying debt that are attributable to the changes in the underlying benchmark interest rate.

During the three months ended May 5, 2023, the cumulative amount of fair value hedge accounting adjustments was immaterial.

These contracts expire within four years .

During the three months ended August 4, 2023, the Company repaid the hedged debt and terminated the associated interest rate swaps.

Derivative Instruments

The following table presents the notional amounts of outstanding derivative instruments as of the dates indicated:

May 5, 2023 February 3, 2023

August 4, 2023 February 3, 2023

(in millions)

7 unchanged sentences

Total $ 6,395 $ 8,214

The following table presents the effect of derivative instruments designated as cash flow hedging instruments on the Condensed Consolidated Statements of Financial Position and the Condensed Consolidated Statements of Income for the periods indicated:

Derivatives in Cash Flow Hedging Relationships Gain (Loss) Recognized in Accumulated OCI, Net of Tax, on Derivatives Location of Gain (Loss) Reclassified from Accumulated OCI into Income Gain (Loss) Reclassified from Accumulated OCI into Income

(in millions) (in millions)

For the three months ended August 4, 2023:

Total net revenue $ ( 63 )

Foreign exchange contracts $ 49 Total cost of net revenue ( 5 )

Interest rate contracts — Interest and other, net —

Total $ 49 Total $ ( 68 )

For the three months ended July 29, 2022:

Total net revenue $ 307

Foreign exchange contracts $ 166 Total cost of net revenue ( 1 )

Interest rate contracts — Interest and other, net —

Total $ 166 Total $ 306

DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(in millions) (in millions)

For the three months ended May 5, 2023:

For the six months ended August 4, 2023:

Total net revenue $ ( 151 )

2 unchanged sentences

Total $ 59 Total $ ( 159 )

For the three months ended April 29, 2022:

For the six months ended July 29, 2022:

Total net revenue $ 430

3 unchanged sentences

The following table presents the effect of derivative instruments not designated as hedging instruments on the Condensed Consolidated Statements of Income for the periods indicated:

Three Months Ended

May 5, 2023 April 29, 2022 Location of Gain (Loss) Recognized

Three Months Ended Six Months Ended

August 4, 2023 July 29, 2022 August 4, 2023 July 29, 2022 Location of Gain (Loss) Recognized

(in millions)

6 unchanged sentences

The following tables present the fair value of those derivative instruments presented on a gross basis as of the dates indicated:

August 4, 2023

Other Current

36 unchanged sentences

The following tables present the gross amounts of the Company’s derivative instruments, amounts offset due to master netting agreements with the Company’s counterparties, and the net amounts recognized in the Condensed Consolidated Statements of Financial Position as of the dates indicated:

August 4, 2023

Gross Amounts of Recognized Assets/ (Liabilities) Gross Amounts Offset in the Statement of Financial Position Net Amounts of Assets/(Liabilities) Presented in the Statement of Financial Position Gross Amounts not Offset in the Statement of Financial Position Net Amount of Assets/ (Liabilities) Recognized in the Statement of Financial Position

23 unchanged sentences

Impact of foreign currency translation and other ( 36 ) — — ( 36 )

Balances as of May 5, 2023 $ 15,002 $ 4,232 $ 427 $ 19,661

Balances as of August 4, 2023 $ 14,981 $ 4,232 $ 427 $ 19,640

Intangible Assets

The following table presents the Company’s intangible assets as of the dates indicated:

May 5, 2023 February 3, 2023

August 4, 2023 February 3, 2023

Gross Accumulated

8 unchanged sentences

Total intangible assets $ 30,382 $ ( 24,322 ) $ 6,060 $ 30,382 $ ( 23,914 ) $ 6,468

Amortization expense related to definite-lived intangible assets was $ 199 million and $ 243 million for the three months ended May 5, 2023 and April 29, 2022, respectively.

There were no material impairment charges related to intangible assets during the three months ended May 5, 2023 and April 29, 2022.

Amortization expense related to definite-lived intangible assets was $ 209 million and $ 244 million for the three months ended August 4, 2023 and July 29, 2022, respectively, and $ 408 million and $ 487 million for the six months ended August 4, 2023 and July 29, 2022, respectively.

There were no material impairment charges related to intangible assets during the three or six months ended August 4, 2023 and July 29, 2022.

DELL TECHNOLOGIES INC.

1 unchanged sentence

The following table presents the estimated future annual pre-tax amortization expense of definite-lived intangible assets as of the date indicated:

August 4, 2023

(in millions)

Fiscal 2024 (remaining nine months) $ 591

Fiscal 2024 (remaining six months) $ 408

Fiscal 2025 644

16 unchanged sentences

Based on the results of the annual impairment test performed during Fiscal 2023, the fair values of each of the reporting units and indefinite-lived intangibles exceeded their carrying values.

No goodwill or indefinite-lived assets impairment test was performed during the three months ended May 5, 2023.

No goodwill or indefinite-lived assets impairment test was performed during the six months ended August 4, 2023.

DELL TECHNOLOGIES INC.

1 unchanged sentence

NOTE 9 — DEFERRED REVENUE

Deferred Revenue — Deferred revenue consists of support and deployment services, software maintenance, training, Software-as-a-Service, and undelivered hardware and professional services, consisting of installations and consulting engagements.

Deferred revenue consists of support and deployment services, software maintenance, training, Software-as-a-Service, and undelivered hardware and professional services, consisting of installations and consulting engagements.

Deferred revenue is recorded when the Company has invoiced or payments have been received for undelivered products or services where transfer of control has not occurred.

1 unchanged sentence

The following table presents the changes in the Company’s deferred revenue for the periods indicated:

Three Months Ended

May 5, 2023 April 29, 2022

Three Months Ended Six Months Ended

August 4, 2023 July 29, 2022 August 4, 2023 July 29, 2022

(in millions)

8 unchanged sentences

____________________

(a) Other represents the reclassification of deferred revenue to accrued and other liabilities.

(a) For the six months ended July 29, 2022, Other represents the reclassification of deferred revenue to accrued and other liabilities.

Remaining Performance Obligations — Remaining performance obligations represent the aggregate amount of the transaction price allocated to performance obligations not delivered, or partially undelivered, as of the end of the reporting period.

Remaining performance obligations include deferred revenue plus unbilled amounts not yet recorded in deferred revenue.

The value of the transaction price allocated to remaining performance obligations as of May 5, 2023 was approximately $ 39 billion.

The value of the transaction price allocated to remaining performance obligations as of August 4, 2023 was approximately $ 39 billion.

The Company expects to recognize approximately 58 % of remaining performance obligations as revenue in the next twelve months , and the remainder thereafter.

23 unchanged sentences

The Company is subject to indemnification obligations, upon the satisfaction of specified conditions, to the director and stockholder defendants and their affiliates pursuant to provisions of the Delaware General Corporation Law, the Company’s certificate of incorporation and bylaws, and agreements with the defendants.

A special committee of the Board consisting of directors who were not defendants in the action, advised by independent counsel, informed the Board of its determination that the defendants are entitled to indemnification under the foregoing obligations.

A special committee of the Board of Directors consisting of directors who were not defendants in the action, advised by independent counsel, informed the Board of Directors of its determination that the defendants are entitled to indemnification under the foregoing obligations.

During Fiscal 2023, the Company established a $ 1.0 billion liability on the Consolidated Statements of Financial Position and recognized $ 0.9 billion expense, net of $ 106 million in insurance proceeds, within interest and other, net within the Consolidated Statements of Income related to the settlement agreement.

The Company accounted for the expected insurance proceeds as a loss recovery and recognized a benefit within interest and other, net within the Condensed Consolidated Statements of Income and corresponding receivable on the Condensed Consolidated Statements of Financial Position.

On May 16, 2023, subsequent to the close of the three months ended May 5, 2023, the Company paid the settlement amount following approval of the settlement by the Delaware Court of Chancery.

On May 16, 2023, the Company paid the settlement amount following approval of the settlement by the Delaware Court of Chancery.

The payment is reflected within cash flows from operating activities within the Condensed Consolidated Statements of Cash Flows.

The Company does not expect to incur additional expenses with respect to the settlement.

Other Litigation — Dell does not currently anticipate that any of the other various legal proceedings it is involved in will have a material adverse effect on its business, financial condition, results of operations, or cash flows.

DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

In accordance with the relevant accounting guidance, the Company provides disclosures of matters where it is at least reasonably possible that the Company could experience a material loss exceeding the amounts already accrued for these or other proceedings or matters.

In addition, the Company also discloses matters based on its consideration of other matters and qualitative factors, including the experience of other companies in the industry, and investor, customer, and employee relations considerations.

As of May 5, 2023, the Company does not believe there is a reasonable possibility that a material loss exceeding the amounts already accrued for these or other proceedings or matters has been incurred.

As of August 4, 2023, the Company does not believe there is a reasonable possibility that a material loss exceeding the amounts already accrued for these or other proceedings or matters has been incurred.

However, since the ultimate resolution of any such proceedings and matters is inherently unpredictable, the Company’s business, financial condition, results of operations, or cash flows could be materially affected in any particular period by unfavorable outcomes in one or more of these proceedings or matters.

6 unchanged sentences

upon the completion of the spin-off of VMware, Inc.

by means of a special stock dividend (the “VMware Spin-off”), Dell Technologies has agreed to indemnify VMware, Inc., each of its subsidiaries and each of their respective directors, officers, and employees from and against all liabilities relating to, arising out of or resulting from, among other matters, the liabilities allocated to Dell Technologies as part of the separation of Dell Technologies and VMware, Inc.

by means of a special stock dividend (the “VMware Spin-off”) on November 1, 2021, Dell Technologies has agreed to indemnify VMware, Inc., each of its subsidiaries and each of their respective directors, officers, and employees from and against all liabilities relating to, arising out of or resulting from, among other matters, the liabilities allocated to Dell Technologies as part of the separation of Dell Technologies and VMware, Inc.

(individually and together with its subsidiaries, “VMware”) and their respective businesses (the “Separation”).

5 unchanged sentences

NOTE 11 — INCOME AND OTHER TAXES

For the three months ended May 5, 2023, the Company’s effective income tax rate was 18.0 % on pre-tax income of $ 0.7 billion compared to 11.9 % on pre-tax income of $ 1.2 billion for the three months ended April 29, 2022.

The change in the Company’s effective income tax rate was attributable to a change in the Company’s jurisdictional mix of income as well as higher U.S.

tax on foreign operations.

For the three months ended August 4, 2023, the Company’s effective income tax rate was 36.3 % on pre-tax income of $ 0.7 billion compared to 20.3 % on pre-tax income of $ 0.6 billion for the three months ended July 29, 2022.

For the six months ended August 4, 2023, the Company’s effective income tax rate was 27.2 % on pre-tax income of $ 1.4 billion compared to 14.8 % on pre-tax income of $ 1.8 billion for the six months ended July 29, 2022.

The changes in the Company’s effective income tax rate were attributable to changes in the Company’s jurisdictional mix of income, higher U.S.

tax on foreign operations, and the impact of discrete tax items.

The differences between the estimated effective income tax rates and the U.S.

1 unchanged sentence

In certain jurisdictions, the Company’s tax rate is significantly less than the applicable statutory rate as a result of tax holidays.

The majority of the Company’s foreign income that is subject to these tax holidays and lower tax rates is attributable to Singapore and China.

The majority of the Company’s foreign income subject to these tax holidays and lower tax rates is attributable to Singapore and China.

A significant portion of these income tax benefits relates to a tax holiday that will be effective until January 31, 2029.

1 unchanged sentence

Many of these tax holidays and reduced tax rates may be extended when certain conditions are met or may be terminated early if certain conditions are not met or as a result of changes in tax legislation.

As of May 5, 2023, the Company was not aware of any matters of noncompliance related to these tax holidays or enacted tax legislative changes affecting these tax holidays.

The Internal Revenue Service is currently conducting tax examinations of the Company for fiscal years 2015 through 2019.

As of August 4, 2023, the Company was not aware of any matters of noncompliance related to these tax holidays or enacted tax legislative changes affecting these tax holidays.

In June 2023, the Company received Revenue Agent’s Reports for the examination by the Internal Revenue Service (“IRS”) of fiscal years 2015 through 2017 and fiscal years 2018 through 2019.

The Company agreed with the IRS assessments relating to fiscal years 2015 through 2017 and settled those positions on August 24, 2023.

The impact to the financial statements for that settlement is not material.

For fiscal years 2018 through 2019, the IRS proposed adjustments primarily relating to certain transactions the Company completed as part of its business integration efforts, with which the Company disagrees and which it will contest through the IRS administrative appeals procedures.

In August 2023, subsequent to the close of the Company’s second quarter of fiscal year 2024, the Company submitted a written protest to the IRS relating to certain assessments.

The Company anticipates the appeals process for the resolution of these matters will extend beyond the next twelve months.

The Company is also currently under income tax audits in various U.S.

1 unchanged sentence

The Company is undergoing negotiations, and in some cases contested proceedings, relating to tax matters with the taxing authorities in these jurisdictions.

The Company believes that it has provided adequate reserves related to all matters contained in tax periods open to examination.

Although the Company believes it has made adequate provisions for the uncertainties surrounding these audits, should the Company experience unfavorable outcomes, such outcomes could have a material impact on its results of operations, financial position, and cash flows.

With respect to major U.S.

state and foreign taxing jurisdictions, the Company is generally not subject to tax examinations for years prior to the fiscal year ended January 29, 2010.

The Company believes that it has provided adequate reserves related to all matters contained in tax periods open to examination, including the IRS audits described above.

Judgment is required in evaluating the Company’s uncertain tax positions and determining the Company’s provision for income taxes.

The unrecognized tax benefits were $ 1.3 billion as of both May 5, 2023 and February 3, 2023 and are included in accrued and other and other non-current liabilities in the Condensed Consolidated Statements of Financial Position.

The Company does not expect a significant change to the total amount of unrecognized tax benefits within the next twelve months.

Unrecognized tax benefits were $ 1.3 billion as of both August 4, 2023 and February 3, 2023 and are included in other non-current liabilities in the Condensed Consolidated Statements of Financial Position.

Although timing of resolution or closure of uncertain tax positions is not certain, the Company believes it is reasonably possible that certain tax matters in various jurisdictions could be concluded within the next twelve months.

The resolution of these matters could reduce the Company’s unrecognized tax benefits up to $ 0.4 billion including interest and penalties.

Such a reduction would have a material impact on the Company’s effective tax rate.

DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The Company takes certain non-income tax positions in the jurisdictions in which it operates and has received certain non-income tax assessments from various jurisdictions.

15 unchanged sentences

Total change for the period 25 218 1 244

Balances as of May 5, 2023 $ ( 716 ) $ ( 121 ) $ ( 31 ) $ ( 868 )

Balances as of August 4, 2023 $ ( 722 ) $ ( 4 ) $ ( 31 ) $ ( 757 )

Amounts related to the Company’s cash flow hedges are reclassified to net income during the same period in which the items being hedged are recognized in earnings.

1 unchanged sentence

The following table presents reclassifications out of accumulated other comprehensive income (loss), net of tax, to net income for the periods indicated:

Three Months Ended

May 5, 2023 April 29, 2022

Cash Flow Hedges Cash Flow Hedges

Three Months Ended Six Months Ended

August 4, 2023 July 29, 2022 August 4, 2023 July 29, 2022

Cash Flow Hedges

(in millions)

2 unchanged sentences

Cost of net revenue ( 5 ) ( 1 ) ( 8 ) ( 28 )

Operating expenses — —

Total reclassifications, net of tax $ ( 68 ) $ 306 $ ( 159 ) $ 402

5 unchanged sentences

(in millions)

Common stock as of May 5, 2023

Common stock as of August 4, 2023

Class A 600 379 379

11 unchanged sentences

The Company is authorized to issue one million shares of preferred stock, par value $ 0.01 per share.

As of May 5, 2023 and February 3, 2023, no shares of preferred stock were issued or outstanding.

As of August 4, 2023 and February 3, 2023, no shares of preferred stock were issued or outstanding.

Dell Technologies Common Stock — The Class A Common Stock, the Class B Common Stock, the Class C Common Stock, and the Class D Common Stock are collectively referred to as Dell Technologies Common Stock.

6 unchanged sentences

Conversion Rights — Under the Company’s certificate of incorporation, at any time and from time to time, any holder of Class A Common Stock or Class B Common Stock has the right to convert all or any of the shares of Class A Common Stock or Class B Common Stock, as applicable, held by such holder into shares of Class C Common Stock on a one -to-one basis.

During the three months ended May 5, 2023, there were no conversions of shares of Class A Common Stock or Class B Common Stock into shares of Class C Common Stock.

During the three months ended August 4, 2023, the Company issued 4,716,548 shares of Class C Common Stock to stockholders upon the conversion of the same number of shares of Class B Common Stock into Class C Common Stock in accordance with the Company’s certificate of incorporation.

DELL TECHNOLOGIES INC.

6 unchanged sentences

May 5, 2023 March 2, 2023 April 25, 2023 May 5, 2023 $ 0.37 $ 270

August 4, 2023 June 16, 2023 July 25, 2023 August 4, 2023 $ 0.37 $ 268

April 29, 2022 February 24, 2022 April 20, 2022 April 29, 2022 $ 0.33 $ 248

During the three months ended May 5, 2023, the Company also paid an immaterial amount of dividend equivalents on eligible vested equity awards which are not reflected above.

July 29, 2022 June 7, 2022 July 20, 2022 July 29, 2022 $ 0.33 $ 242

During the three and six months ended August 4, 2023, the Company also paid an immaterial amount of dividend equivalents on eligible vested equity awards which are not reflected above.

Repurchases of Common Stock

Effective as of September 23, 2021, the Company’s Board of Directors approved a stock repurchase program under which the Company is authorized to repurchase up to $ 5.0 billion of shares of Class C Common Stock with no fixed expiration date.

During the three months ended May 5, 2023, the Company repurchased approximately 6.1 million shares of Class C Common Stock for a total purchase price of approximately $ 0.25 billion.

During the three months ended April 29, 2022, the Company repurchased approximately 28.8 million shares of Class C Common Stock for a total purchase price of approximately $ 1.5 billion.

During the six months ended August 4, 2023, the Company repurchased approximately 11 million shares of Class C Common Stock for a total purchase price of approximately $ 0.5 billion.

During the six months ended July 29, 2022, the Company repurchased approximately 42 million shares of Class C Common Stock for a total purchase price of approximately $ 2.1 billion.

The above repurchases of Class C Common Stock exclude shares withheld from stock awards to settle employee tax withholding obligations related to the vesting of such awards.

6 unchanged sentences

The following table presents basic and diluted earnings per share for the periods indicated:

Three Months Ended

May 5, 2023 April 29, 2022

Three Months Ended Six Months Ended

August 4, 2023 July 29, 2022 August 4, 2023 July 29, 2022

Earnings per share attributable to Dell Technologies Inc.

2 unchanged sentences

The following table presents the computation of basic and diluted earnings per share for the periods indicated:

Three Months Ended

May 5, 2023 April 29, 2022

Three Months Ended Six Months Ended

August 4, 2023 July 29, 2022 August 4, 2023 July 29, 2022

(in millions)

4 unchanged sentences

Weighted-average shares outstanding — basic

726 739 725 746

Dilutive effect of options, restricted stock units, restricted stock, and other 12 16 12 22

Weighted-average shares outstanding — diluted

738 755 737 768

Weighted-average shares outstanding — antidilutive

12 unchanged sentences

• Dell Technologies procures products and services from VMware for its internal use.

For the three months ended May 5, 2023 and April 29, 2022, costs incurred associated with products and services purchased from VMware for internal use were immaterial.

For the three and six months ended August 4, 2023 and July 29, 2022, costs incurred associated with products and services purchased from VMware for internal use were immaterial.

• Dell Technologies sells and leases products and sells services to VMware.

For the three months ended May 5, 2023 and April 29, 2022, revenue recognized from sales of services to VMware was immaterial.

For the three and six months ended August 4, 2023 and July 29, 2022, revenue recognized from sales of services to VMware was immaterial.

• DFS provides financing to certain VMware end-users.

2 unchanged sentences

• Dell Technologies and VMware also enter into joint marketing, sales, and branding arrangements, for which both parties may incur costs.

For the three months ended May 5, 2023 and April 29, 2022, consideration received from VMware for joint marketing, sales, and branding arrangements was immaterial.

For the three and six months ended August 4, 2023 and July 29, 2022, consideration received from VMware for joint marketing, sales, and branding arrangements was immaterial.

• Dell Technologies and VMware entered into a transition services agreement in connection with the VMware Spin-off to provide various support services, including investment advisory services, certain support services from Dell Technologies personnel, and other transitional services.

Costs associated with this agreement were immaterial for the three months ended April 29, 2022.

Costs associated with this agreement were immaterial for the three and six months ended July 29, 2022.

Activities under the agreement concluded during Fiscal 2023.

2 unchanged sentences

The following table presents information about the impact of Dell Technologies’ related party transactions with VMware on the Condensed Consolidated Statements of Income for the periods indicated:

Three Months Ended

Classification May 5, 2023 April 29, 2022

Three Months Ended Six Months Ended

Classification August 4, 2023 July 29, 2022 August 4, 2023 July 29, 2022

(in millions)

3 unchanged sentences

The following table presents information about the impact of Dell Technologies’ related party transactions with VMware on the Condensed Consolidated Statements of Financial Position as of the dates indicated:

Classification May 5, 2023 February 3, 2023

Classification August 4, 2023 February 3, 2023

(in millions)

3 unchanged sentences

The following table presents amounts due to and from VMware as of the dates indicated:

May 5, 2023 February 3, 2023

August 4, 2023 February 3, 2023

(in millions)

12 unchanged sentences

VMware’s portion of the mandatory one-time transition tax on accumulated earnings of foreign subsidiaries (the “Transition Tax”) is governed by a letter agreement between VMware and Dell Technologies entered into on April 1, 2019.

Pursuant to the Tax Agreements, net receipts from VMware during the three months ended May 5, 2023 and net payments to VMware during the three months ended April 29, 2022 were immaterial.

DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

As a result of the activity under the Tax Agreements with VMware, amounts due from VMware were $ 596 million and $ 599 million as of May 5, 2023 and February 3, 2023, respectively, primarily related to VMware’s estimated tax obligation resulting from the Transition Tax.

Pursuant to the Tax Agreements, net receipts from VMware during the six months ended August 4, 2023 and net payments to VMware during the six months ended July 29, 2022 were immaterial.

As a result of the activity under the Tax Agreements with VMware, amounts due from VMware were $ 484 million and $ 599 million as of August 4, 2023 and February 3, 2023, respectively, primarily related to VMware’s estimated tax obligation resulting from the Transition Tax.

The 2017 Tax Cuts and Jobs Act included a deferral election for an eight-year installment payment method on the Transition Tax.

Dell Technologies expects VMware to pay the remainder of its Transition Tax over a period of three years .

Dell Technologies expects VMware to pay the remainder of its Transition Tax over a period of two years .

Indemnification — Upon consummation of the VMware Spin-off, Dell Technologies recorded net income tax indemnification receivables from VMware related to certain income tax liabilities for which Dell Technologies is jointly and severally liable, but for which it is indemnified by VMware under the Tax Matters Agreement.

The amounts that VMware may be obligated to pay Dell Technologies could vary depending on the outcome of certain unresolved tax matters, which may not be resolved for several years.

The net receivable as of May 5, 2023 and February 3, 2023 was $ 150 million and $ 146 million, respectively.

The net receivable as of August 4, 2023 and February 3, 2023 was $ 93 million and $ 146 million, respectively.

DELL TECHNOLOGIES INC.

3 unchanged sentences

Infrastructure Solutions Group (“ISG”) and Client Solutions Group (“CSG”).

ISG enables the Company’s customers’ digital transformation with solutions that address the fundamental shift to multicloud environments, machine learning, artificial intelligence, and data analytics.

The Company’s comprehensive storage portfolio includes traditional as well as next-generation storage solutions, including all-flash arrays, scale-out file, object platforms, hyperconverged infrastructure, and software-defined storage.

The Company’s server portfolio includes high-performance rack, blade, and tower servers.

The Company’s servers are designed with the capability to run high value workloads across customers’ IT environments, including the training, fine-tuning, and operationalization of AI models.

The ISG networking portfolio helps the Company’s business customers transform and modernize their infrastructure, mobilize and enrich end-user experiences, and accelerate business applications and processes.

5 unchanged sentences

The Company does not allocate assets to the above reportable segments for internal reporting purposes.

Pursuant to the Commercial Framework Agreement (the “CFA”) established between Dell Technologies and VMware in association with the VMware Spin-off, Dell Technologies continues to act as a distributor of VMware’s standalone products and services and purchase such products and services for resale to end-user customers (“VMware Resale”).

Pursuant to the Commercial Framework Agreement (the “CFA”) established between Dell Technologies and VMware in connection with the VMware Spin-off, Dell Technologies continues to act as a distributor of VMware’s standalone products and services and purchase such products and services for resale to end-user customers (“VMware Resale”).

Dell Technologies also continues to integrate VMware’s products and services with Dell Technologies’ offerings and sell them to end users.

4 unchanged sentences

The following table presents a reconciliation of net revenue by the Company’s reportable segments to the Company’s consolidated net revenue as well as a reconciliation of segment operating income to the Company’s consolidated operating income for the periods indicated:

Three Months Ended

May 5, 2023 April 29, 2022

Three Months Ended Six Months Ended

August 4, 2023 July 29, 2022 August 4, 2023 July 29, 2022

(in millions)

24 unchanged sentences

(e) Stock-based compensation expense consists of equity awards granted based on the estimated fair value of those awards at grant date.

(f) Other corporate expenses includes impairment charges, incentive charges related to equity investments, severance, facility action, payroll taxes associated with stock-based compensation, and other costs.

(f) Other corporate expenses includes severance, impairment charges, facility action, payroll taxes associated with stock-based compensation, and other costs.

DELL TECHNOLOGIES INC.

1 unchanged sentence

The following table presents the disaggregation of net revenue by reportable segment, and by major product categories within the segments for the periods indicated:

Three Months Ended

May 5, 2023 April 29, 2022

Three Months Ended Six Months Ended

August 4, 2023 July 29, 2022 August 4, 2023 July 29, 2022

(in millions)

11 unchanged sentences

The following table presents additional information on selected assets included in the Condensed Consolidated Statements of Financial Position as of the dates indicated:

May 5, 2023 February 3, 2023

August 4, 2023 February 3, 2023

(in millions)

4 unchanged sentences

Total cash, cash equivalents, and restricted cash $ 8,650 $ 8,894

Inventories, net:

Production materials $ 2,197 $ 3,225

1 unchanged sentence

Finished goods 783 843

Total inventories, net $ 4,016 $ 4,776

Total inventories $ 3,584 $ 4,776

Deferred Costs:

11 unchanged sentences

Amounts classified as long-term deferred costs are included in other non-current assets and are not disclosed above.

Supply Chain Finance Program

The Company maintains a Supply Chain Finance Program (the “SCF Program”), which enables eligible suppliers of the Company, at the supplier's sole discretion, to sell receivables due from the Company to a third-party financial institution.

The Company has no involvement in establishing the terms or conditions of the arrangement between its suppliers and the financial institution and no economic interest in a supplier's decision to sell a receivable.

Suppliers may elect to sell varying amounts of their outstanding receivables as part of the SCF Program.

The Company does not provide secured legal assets or other forms of guarantees under the arrangement.

The SCF Program does not impact the Company's liquidity as payments for participating supplier invoices are remitted by the Company to the financial institution on the original invoice due date.

Further, the Company negotiates payment terms with suppliers regardless of their decision to participate in the SCF Program.

Payment terms with such suppliers vary and do not exceed 120 days.

Any amounts due to the financial institution for suppliers participating in the SCF Program are recorded within Accounts Payable on the Company's Condensed Consolidated Statements of Financial Position and associated payments are included in cash flows from operating activities on the Condensed Consolidated Statements of Cash Flows.

As of both May 5, 2023 and February 3, 2023, the Company had $ 1 billion included within Accounts Payable representing invoices due to suppliers confirmed as valid under the SCF Program.

DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Warranty Liability

The following table presents changes in the Company’s liability for standard limited warranties for the periods indicated:

Three Months Ended

May 5, 2023 April 29, 2022

Three Months Ended Six Months Ended

August 4, 2023 July 29, 2022 August 4, 2023 July 29, 2022

(in millions)

7 unchanged sentences

The Company’s warranty liability process does not differentiate between estimates made for pre-existing warranties and those made for new warranty obligations.

DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Severance Charges

1 unchanged sentence

The liability related to these actions is included in accrued and other current liabilities in the Condensed Consolidated Statements of Financial Position.

During the three months ended May 5, 2023, the Company announced to its employees reorganizations and actions to align its investments more closely with its previously discussed strategic and customer priorities as it continues to take prudent steps in light of a challenging global economic environment.

These actions impacted approximately 5 % of the Company’s workforce.

The Company recognized $ 367 million of expense associated with these actions in the fourth quarter of Fiscal 2023 and $ 48 million in the first quarter of Fiscal 2024.

The following table presents the activity related to the Company’s severance liability for the periods indicated:

Three Months Ended

May 5, 2023 April 29, 2022

Three Months Ended Six Months Ended

August 4, 2023 July 29, 2022 August 4, 2023 July 29, 2022

(in millions)

4 unchanged sentences

Severance liability at end of period $ 457 $ 88 $ 457 $ 88

The following table presents severance charges as included in the Condensed Consolidated Statements of Income for the periods indicated:

Three Months Ended Six Months Ended

August 4, 2023 July 29, 2022 August 4, 2023 July 29, 2022

(in millions)

Severance charges:

Cost of net revenue $ 27 $ ( 2 ) $ 48 $ 1

Selling, general, and administrative 324 46 350 57

Research and development 13 2 14 5

Total severance charges $ 364 $ 46 $ 412 $ 63

Supply Chain Finance Program

Suppliers may elect to sell varying amounts of their outstanding receivables as part of the SCF Program.

The Company does not provide secured legal assets or other forms of guarantees under the arrangement.

The SCF Program does not impact the Company's liquidity as payments for participating supplier invoices are remitted by the Company to the financial institution on the original invoice due date.

Further, the Company negotiates payment terms with suppliers regardless of their decision to participate in the SCF Program.

Payment terms with such suppliers vary and do not exceed 120 days.

As of August 4, 2023 and February 3, 2023, the Company had $ 1.1 billion and $ 1.0 billion, respectively, included within Accounts Payable representing invoices due to suppliers confirmed as valid under the SCF Program.

DELL TECHNOLOGIES INC.

2 unchanged sentences

The following table presents information regarding interest and other, net for the periods indicated:

Three Months Ended

May 5, 2023 April 29, 2022

Three Months Ended Six Months Ended

August 4, 2023 July 29, 2022 August 4, 2023 July 29, 2022

(in millions)

1 unchanged sentence

Investment income, primarily interest $ 66 $ 16 $ 125 $ 31

Gain (loss) on investments, net ( 15 ) 14

Loss on investments, net ( 29 ) ( 255 ) ( 44 ) ( 241 )

Interest expense ( 352 ) ( 298 ) ( 757 ) ( 563 )

5 unchanged sentences

NOTE 18 — SUBSEQUENT EVENTS

There were no known events occurring after May 5, 2023 and up until the date of issuance of this report that would materially affect the information presented herein.

There were no known events occurring after August 4, 2023 and up until the date of issuance of this report that would materially affect the information presented herein.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements