Dell Technologies Inc. 10-Q

ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This management’s discussion and analysis should be read in conjunction with the audited Consolidated Financial Statements and accompanying Notes included in the Company’s annual report on Form 10-K for the fiscal year ended February 3, 2023 and the unaudited Condensed Consolidated Financial Statements included in this report. In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs, and that are subject to numerous risks and uncertainties. Our actual results may differ materially from those expressed or implied in any forward-looking statements. Unless otherwise indicated, all results presented are prepared in a manner that complies, in all material respects, with generally accepted accounting principles in the United States of America (“GAAP”). Unless otherwise indicated, all changes identified for the current-period results represent comparisons to results for the prior corresponding fiscal period. Unless the context indicates otherwise, references in this report to “we,” “us,” “our,” the “Company,” and “Dell Technologies” mean Dell Technologies Inc. and its consolidated subsidiaries, references to “Dell” mean Dell Inc. and Dell Inc.’s consolidated subsidiaries, and references to “EMC” mean EMC Corporation and EMC Corporation’s consolidated subsidiaries. Our fiscal year is the 52- or 53-week period ending on the Friday nearest January 31. We refer to our fiscal year ending February 2, 2024 as “Fiscal 2024” and our fiscal year ended February 3, 2023 as “Fiscal 2023.” Fiscal 2024 will include 52 weeks and Fiscal 2023 included 53 weeks. INTRODUCTION Company Overview Dell Technologies helps organizations build their digital futures and individuals transform how they work, live, and play. We provide customers with one of the industry’s broadest and most innovative solutions portfolio for the data era, including traditional infrastructure and extending to multicloud environments. Our differentiated and holistic IT solutions enable us to capture growth as customer spending priorities evolve. Dell Technologies’ integrated solutions help customers modernize their IT infrastructure, manage and operate in a multicloud world, address workforce transformation, and provide critical solutions that keep people and organizations connected. We are helping customers accelerate their digital transformations to improve and strengthen business and workforce productivity. With our extensive portfolio and our commitment to innovation, we offer secure, integrated solutions that extend from the edge to the core to the cloud, and we are at the forefront of software-defined and cloud native infrastructure solutions. Dell Technologies operates globally in approximately 180 countries, supported by a world-class organization across key functional areas, including technology and product development, marketing, sales, financial services, and services. We have a number of operational advantages that provide a critical foundation for our success. Our go-to-market model includes a 27,000-person direct sales force and a global network of approximately 240,000 channel partners. We employ approximately 33,000 service and support professionals and maintain approximately 2,200 vendor-managed service centers. We also manage a world-class supply chain at significant scale with approximately $77 billion in annual procurement expenditures and over 725 parts distribution centers. We further strengthen customer relationships through our financing offerings provided by Dell Financial Services and its affiliates (“DFS”) and our flexible consumption models, including utility, subscription, and as-a-Service models, which we continue to expand under Dell APEX. These offerings enable our customers to pay over time and provide them with financial flexibility to meet their changing technological requirements. 57 Table of Contents Our Vision and Strategy Our vision is to become the most essential technology company for the data era. We help customers address their evolving IT needs and their broader digital transformation objectives as they embrace today’s multicloud world. We intend to execute our vision by focusing on our strategy to leverage our strengths to extend our leadership positions and capture new growth across our core offerings, including opportunities such as artificial intelligence (“AI”), multicloud, edge, telecom, data management, and as-a-Service consumption models. We believe we are uniquely positioned in the data and multicloud era and that our results will continue to benefit from our operational advantages. We intend to continue to execute our business model and position our Company for long-term success while balancing liquidity, profitability, and growth and keeping our purpose at the forefront of our decision-making: to create technologies that drive human progress. The IT industry is rapidly evolving with demand for simple, agile solutions as companies leverage multiple clouds across their increasingly complex IT environments. To meet our customer needs, we continue to invest in research and development, sales, and other key areas of our business to deliver superior products and solutions capabilities and to drive long-term sustainable growth. Products and Services We design, develop, manufacture, market, sell, and support a wide range of comprehensive and integrated solutions, products, and services. We are organized into two business units, referred to as Infrastructure Solutions Group and Client Solutions Group, which are our reportable segments. • Infrastructure Solutions Group (“ISG”) — ISG enables our customers’ digital transformations with solutions that address the fundamental shift to multicloud environments, machine learning, AI, and data analytics. ISG helps customers simplify, streamline, and automate cloud operations. ISG solutions are built for multicloud environments and are optimized to run cloud native workloads in both public and private clouds, as well as traditional on-premises workloads. Our comprehensive storage portfolio includes traditional as well as next-generation storage solutions, including all-flash arrays, scale-out file, object platforms, hyper-converged infrastructure, and software-defined storage. We have simplified our storage portfolio and continue to make enhancements to our storage offerings that we expect will drive long-term improvements in the business. Our server portfolio includes high-performance rack, blade, and tower servers. Our servers are designed with the capability to run high value workloads across customers’ IT on premises, multicloud, and edge environments, including the training, fine-tuning, and operationalization of AI models. Our networking portfolio helps our business customers transform and modernize their infrastructure, mobilize and enrich end-user experiences, and accelerate business applications and processes. Our strengths in server, storage, and virtualization software solutions allow us to offer leading converged and hyper-converged solutions, enabling our customers to accelerate their IT transformation with scalable integrated solutions instead of building and assembling their own IT platforms. ISG also offers software, peripherals, and services, including configuration, and support and deployment. Approximately half of ISG revenue is generated by sales to customers in the Americas, with the remaining portion derived from sales to customers in the Europe, Middle East, and Africa region (“EMEA”) and the Asia-Pacific and Japan region (“APJ”). 58 Table of Contents • Client Solutions Group (“CSG”) — CSG includes branded PCs including notebooks, desktops, and workstations and branded peripherals including displays and docking stations, as well as third-party software and peripherals. CSG also includes services offerings, such as support and deployment, configuration, and extended warranties. Our CSG offerings are designed with our customers’ needs in mind and we seek to optimize performance, reliability, manageability, design, and security. Our commercial portfolio provides our customers with solutions centered around flexibility to address their complex needs such as IT modernization, hybrid work transformation, and other critical needs. Within our high-end consumer and gaming offerings, we provide our customers with powerful performance, processing, and end-user experiences. Approximately 60% of CSG revenue is generated by sales to customers in the Americas, with the remaining portion derived from sales to customers in EMEA and APJ. Our “other businesses,” described below, primarily consist of our resale of standalone offerings of VMware, Inc. (individually and together with its subsidiaries, “VMware”), referred to as “VMware Resale,” and offerings of SecureWorks Corp. (“Secureworks”). These businesses are not classified as reportable segments, either individually or collectively. • VMware Resale consists of our sale of standalone VMware offerings. Under our Commercial Framework Agreement (the “CFA”) with VMware discussed in this report, Dell Technologies continues to act as a key channel partner for VMware, reselling VMware’s offerings to our customers. On November 22, 2023, subsequent to the close our third quarter of Fiscal 2024, VMware was acquired by Broadcom Inc. (“Broadcom”). See Note 18 of the Notes to the Condensed Consolidated Financial Statements included in this report for more information about the impact of the transaction on our relationship with VMware. • Secureworks (NASDAQ: SCWX) is a leading global cybersecurity provider of technology-driven security solutions singularly focused on protecting its customers by outpacing and outmaneuvering the adversary. The solutions offered by Secureworks enable organizations of varying size and complexity to prevent security breaches, detect malicious activity, respond rapidly when a security breach occurs, and identify emerging threats. Our offerings are continually evolving in response to customer needs. As a result, reclassifications of certain products and services solutions in major product categories may be required. For further discussion regarding our current reportable segments, see “Results of Operations — Business Unit Results” and Note 16 of the Notes to the Condensed Consolidated Financial Statements included in this report. Dell Financial Services DFS supports our businesses by offering and arranging various financing options and services for our customers globally. DFS originates, collects, and services customer receivables primarily related to the purchase or use of our product, software, and services offerings. We also arrange financing for some of our customers in various countries where DFS does not currently operate as a captive enterprise. We further strengthen customer relationships through flexible consumption models, including utility, subscription, and as-a-Service models, which also enable us to offer our customers the option to pay over time to provide them with financial flexibility to meet their changing technological requirements. The results of these operations are allocated to our segments based on the underlying product or service financed and may be impacted by, among other factors, changes in the interest rate environment and the translation of those changes to pricing. For additional information about our financing arrangements, see Note 4 of the Notes to the Condensed Consolidated Financial Statements included in this report. 59 Table of Contents Relationship with VMware On November 1, 2021, we completed our spin-off of VMware by means of a special stock dividend (the “VMware Spin-off”). In connection with and upon completion of the VMware Spin-off, we entered into a Commercial Framework Agreement (the “CFA”) with VMware, which provides the framework under which we and VMware continue our commercial relationship. Pursuant to the CFA, we act as a distributor of VMware’s standalone products and services and purchase such products and services for resale to customers. For the periods presented within this report, VMware was considered to be a related party of the Company as a result of Michael Dell’s ownership interests in both Dell Technologies and VMware and Mr. Dell’s service as Chairman and Chief Executive Officer of Dell Technologies and as Chairman of the Board of VMware. Upon the completion of Broadcom’s acquisition of VMware described in “Products and Services” above, the Company determined that the acquisition terminated the preexisting related party relationship with VMware and that no related party relationship exists with either Broadcom or VMware as of the date of issuance of this report. For more information regarding related party transactions with VMware, see Note 15 of the Notes to the Condensed Consolidated Financial Statements included in this report. Strategic Investments and Acquisitions As part of our strategy, we will continue to evaluate opportunities for strategic investments through our venture capital investment arm, Dell Technologies Capital, with a focus on emerging technology areas that are relevant to our business and that will complement our existing portfolio of solutions. Our investment areas include storage, software-defined networking, management and orchestration, security, machine learning and AI, Big Data and analytics, cloud, edge computing, and software development operations. The technologies or products these companies have under development are typically in the early stages and may never have commercial value, which could result in a loss of a substantial part of our investment in the companies. As of November 3, 2023 and February 3, 2023, we held strategic investments in non-marketable securities of $1.2 billion and $1.3 billion, respectively. See Note 3 of the Notes to the Condensed Consolidated Financial Statements included in this report for additional information. In addition to these investments, we also may make disciplined acquisitions targeting businesses that advance our strategic objectives and accelerate our innovation agenda. Product Backlog Product backlog represents the value of unfulfilled manufacturing orders and is included as a component of remaining performance obligations to the extent we determine that the manufacturing orders are non-cancelable. Our business model generally gives us the ability to optimize product backlog at any point in time, such as by expediting shipping or prioritizing customer orders for products that have shorter lead times. During Fiscal 2023, we reduced our backlog across both CSG and ISG from previously elevated levels as constraints in limited-source components began to diminish as a result of improving supply positions and overall declines in the demand environment. During Fiscal 2024, while our supply chain has operated efficiently at standard lead times, demand for AI-optimized servers has outpaced supply of graphics processing units (“GPUs”) and, as such, backlog for such offerings has increased. 60 Table of Contents Business Trends and Challenges During the first nine months of Fiscal 2024, the effects of the evolving macroeconomic environment on demand persisted and, as a result, continued to impact our net revenue performance when compared to the first nine months of Fiscal 2023. Our CSG net revenue performance was impacted by industry-wide declines in demand that began in the second quarter of Fiscal 2023. Within ISG, our net revenue performance was impacted as certain customers, most notably enterprise and large corporate customers, remained cautious and measured in their IT spending. We anticipate that the continued impact of these dynamics, coupled with increasing competitive pricing pressure, will result in a decline in net revenue for both CSG and ISG for the remainder of Fiscal 2024 compared to the fourth quarter of Fiscal 2023. Further, we anticipate that the impact of Broadcom’s acquisition of VMware will result in a decrease in our other businesses net revenue beginning in the fourth quarter of Fiscal 2024. We will continue to execute disciplined cost management measures as we make prudent decisions to navigate this environment. Despite continued near-term challenges, we are observing early signs of macroeconomic stabilization which we expect to continue and result in net revenue growth in Fiscal 2025. We believe our unique operational advantages continue to position us for long-term success. Supply Chain — Dell Technologies maintains single-source and limited-source supplier relationships for certain components because the relationships are advantageous in the areas of performance, quality, support, delivery, capacity, and price considerations. During the third quarter and first nine months of Fiscal 2024, our supply chain operated efficiently at standard lead times for our customers and we experienced declines in both component and logistics costs, which we refer to as input costs. We expect component cost deflation to moderate during the remainder of Fiscal 2024 and to turn inflationary in Fiscal 2025. Component cost trends are dependent on the strength or weakness of actual end-user demand and supply dynamics, which will continue to evolve and ultimately impact the translation of the cost environment to pricing and operating results. Logistics costs, which we believe have now normalized, continued to decrease from previously elevated levels as a result of declines in both expedited shipments and overall rate costs in the freight network. Foreign Currency Exposure — We manage our business on a U.S. dollar basis. However, we have a large global presence, generating approximately half of our net revenue from sales to customers outside of the United States during the third quarter and first nine months of Fiscal 2024 and Fiscal 2023. As a result, our operating results can be, and particularly in recent periods have been, impacted by fluctuations in foreign currency exchange rates. We utilize a comprehensive hedging strategy intended to mitigate the impact of foreign currency volatility over time, and we adjust pricing when possible to further minimize foreign currency impacts. ISG — We expect that ISG will continue to be impacted by the changing nature of the IT infrastructure market and competitive environment. With our scale and strong solutions portfolio, we believe we are well-positioned to respond to ongoing competitive dynamics and trends in workloads and usage patterns. Through our collaborative, customer-focused approach to innovation, we strive to deliver new and relevant solutions and software to our customers quickly and efficiently. We continue to focus on customer base expansion and lifetime value of customer relationships. Our customer base includes service providers, such as cloud service providers, Software-as-a-Service companies, consumer webtech providers, and telecommunications companies. These service providers turn to Dell Technologies for our advanced solutions that enable efficient infrastructure and service delivery at cloud scale. While we anticipate challenges in the demand environment as customers re-prioritize and continue to exercise caution in response to macroeconomic conditions, we expect that data growth will continue to generate long-term demand for our storage solutions and services. Cloud native applications are expected to continue to be a key trend in the infrastructure market. We benefit from offering solutions that address the emerging trends of enterprises deploying software-defined storage, hyper-converged infrastructure, and modular solutions based on server-centric architectures. These trends are changing the way customers are consuming our storage offerings. We continue to expand our offerings in external storage arrays, which incorporate flexible, cloud-based functionality. Our storage business is subject to seasonal trends, which we expect to continue. 61 Table of Contents We anticipate that ISG will benefit from the continued expansion of, and advances in, AI. Through our server and storage offerings, including our AI optimized solutions, we are well positioned to capture growth and support our customers needs. As demonstrated by our PowerEdge XE servers, we continue to optimize and enhance our offerings to run high value and transformational workloads, such as AI. CSG — Our CSG offerings are an important element of our strategy, generating strong cash flow and opportunities for cross-selling of complementary solutions. Within CSG, while we participate in all segments of the PC market, we are focused on commercial and high-end consumer computing devices, as we believe they are the most stable and profitable markets. Competitive dynamics continue to be a factor in our CSG business and continue to impact pricing and operating results. We remain committed to our long-term CSG strategy and will continue to make investments to innovate across the portfolio. We expect that the CSG demand environment will continue to be subject to seasonal trends. Recurring Revenue and Consumption Models — Our customers are seeking new and innovative models that address how they consume our solutions. In part, customers are looking for predictable cost models and to reduce complexity, align solutions offerings with their business needs, and provide consistent operations throughout their IT enterprise. We offer options including leases, loans, immediate pay, as-a-Service, subscription, and utility models designed to match customers' consumption and financing preferences. We believe these options are particularly advantageous for our customers during times of economic uncertainty as they provide customers with financial flexibility to further enable them to procure our solutions. These offerings typically result in multiyear agreements which generate recurring revenue streams over the term of the arrangement. We expect that these offerings will further strengthen our customer relationships and provide a foundation for growth in recurring revenue. We define recurring revenue as revenue recognized that is primarily related to hardware and software maintenance as well as operating leases, subscription, as-a-Service, and usage-based offerings. Other Macroeconomic Risks and Uncertainties — The impacts of trade protection measures, including increases in tariffs and trade barriers, changes in government policies and international trade arrangements, geopolitical volatility (including ongoing military conflicts in Ukraine and the Middle East), and global macroeconomic challenges (including those in China), may affect our ability to conduct business in some non-U.S. markets. We monitor and seek to mitigate these risks with adjustments to our manufacturing, supply chain, and distribution networks. Key Performance Metrics Our key performance metrics include net revenue, operating income, and cash flows from operations, which are discussed elsewhere in this management’s discussion and analysis. 62 Table of Contents NON-GAAP FINANCIAL MEASURES In this management’s discussion and analysis, we use supplemental measures of our performance which are derived from our consolidated financial information but which are not presented in our consolidated financial statements prepared in accordance with GAAP. These non-GAAP financial measures include non-GAAP product gross margin; non-GAAP services gross margin; non-GAAP gross margin; non-GAAP operating expenses; non-GAAP operating income; non-GAAP net income; earnings before interest and other, net, taxes, depreciation, and amortization (“EBITDA”); and adjusted EBITDA. These non-GAAP financial measures are not meant to be considered as indicators of performance in isolation from or as a substitute for gross margin, operating expenses, operating income, or net income prepared in accordance with GAAP, and should be read only in conjunction with financial information presented on a GAAP basis. We use non-GAAP financial measures to supplement financial information presented on a GAAP basis. Management considers these non-GAAP measures in evaluating our operating trends and performance. Moreover, we believe these non-GAAP financial measures provide our stakeholders with useful and transparent information to help them evaluate our operating results by facilitating an enhanced understanding of our operating performance and enabling them to make more meaningful period to period comparisons. There are limitations to the use of the non-GAAP financial measures presented in this report. Our non-GAAP financial measures may not be comparable to similarly titled measures of other companies. Other companies, including companies in our industry, may calculate non-GAAP financial measures differently than we do, limiting the usefulness of those measures for comparative purposes. Non-GAAP product gross margin, non-GAAP services gross margin, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, and non-GAAP net income, as defined by us, exclude amortization of intangible assets, the impact of purchase accounting, transaction-related expenses, stock-based compensation expense, other corporate expenses and, for non-GAAP net income, fair value adjustments on equity investments and an aggregate adjustment for income taxes. As the excluded items may have a material impact on our financial results, our management compensates for this limitation by relying primarily on our GAAP results and using non-GAAP financial measures supplementally or for projections when comparable GAAP financial measures are not available. Reconciliations of each non-GAAP financial measure to its most directly comparable GAAP financial measure are presented below. We encourage you to review the reconciliations in conjunction with the presentation of the non-GAAP financial measures for each of the periods presented. The discussion below includes information on each of the excluded items as well as our reasons for excluding them from our non-GAAP results. In future fiscal periods, we may exclude such items and may incur income and expenses similar to these excluded items. Accordingly, the exclusion of these items and other similar items in our non-GAAP presentation should not be interpreted as implying that these items are non-recurring, infrequent, or unusual. The following is a summary of the items excluded from the most comparable GAAP financial measures to calculate our non-GAAP financial measures: • Amortization of Intangible Assets — Amortization of intangible assets primarily consists of amortization of customer relationships, developed technology, and trade names. In connection with our acquisition by merger of EMC, referred to as the “EMC merger transaction,” and the acquisition of Dell Inc. by Dell Technologies Inc., referred to as the “going-private transaction,” all of the tangible and intangible assets and liabilities of EMC and Dell Inc. and their consolidated subsidiaries, respectively, were accounted for and recognized at fair value on the transaction dates. Accordingly, for the periods presented, amortization of intangible assets primarily represents amortization associated with intangible assets recognized in connection with the EMC merger transaction and the going-private transaction. Amortization charges for purchased intangible assets are significantly impacted by the timing and magnitude of our acquisitions, and these charges may vary in amount from period to period. We exclude these charges for purposes of calculating the non-GAAP financial measures presented below to facilitate an enhanced understanding of our current operating performance and provide more meaningful period to period comparisons. 63 Table of Contents • Impact of Purchase Accounting — The impact of purchase accounting includes purchase accounting adjustments primarily related to the EMC merger transaction recorded under the acquisition method of accounting in accordance with the accounting guidance for business combinations. In accordance with such guidance, all of the assets and liabilities acquired were accounted for and recognized at fair value as of the transaction date, and the fair value adjustments continue to amortize over the estimated useful lives in the periods following the transactions. The fair value adjustments that are still amortizing primarily relate to property, plant, and equipment. We believe that excluding the impact of purchase accounting for purposes of calculating the non-GAAP financial measures presented below facilitates an enhanced understanding of our current operating performance and provides more meaningful period to period comparisons. • Transaction-Related (Income) Expenses — Transaction-related expenses typically consist of acquisition, integration, and divestiture related costs and are expensed as incurred. These expenses primarily represent costs for legal, banking, consulting, and advisory services. From time to time, this category also may include transaction-related income related to divestitures of businesses or asset sales. We exclude these items for purposes of calculating the non-GAAP financial measures presented below to facilitate an enhanced understanding of our current operating performance and provide more meaningful period to period comparisons. • Stock-based Compensation Expense — Stock-based compensation expense consists of equity awards granted based on the estimated fair value of those awards at grant date. To estimate the fair value of performance-based awards containing a market condition, we use the Monte Carlo valuation model. For other share-based awards, the fair value is generally based on the closing price of the Class C Common Stock as reported on the NYSE on the date of grant. Although stock-based compensation is an important aspect of the compensation of our employees and executives, the fair value of the stock-based awards may bear little resemblance to the actual value realized upon the vesting or future exercise of the related stock-based awards. We believe that excluding stock-based compensation expense for purposes of calculating the non-GAAP financial measures presented below facilitates an enhanced understanding of our current operating performance and provides more meaningful period to period comparisons. • Other Corporate Expenses — Other corporate expenses consist of impairment charges, incentive charges related to equity investments, severance, facility action, payroll taxes associated with stock-based compensation, and other costs. During the first nine months of Fiscal 2024, we recognized $0.4 billion of severance expense related to workforce reduction activities. Severance costs are primarily related to severance and benefits for employees terminated pursuant to cost savings initiatives. During the third quarter of Fiscal 2023, other corporate expenses includes $1.0 billion of expense recognized within interest and other, net, in connection with an agreement to settle the Class V transaction litigation. See Note 10 of the Notes to the Condensed Consolidated Financial Statements included in this report for information about this matter. During the first nine months of Fiscal 2023, we recognized $0.2 billion in costs associated with exiting our business in Russia, primarily related to asset impairments and other exit related costs. Other corporate expenses vary from period to period and are significantly impacted by the timing and nature of these events. Therefore, although we may incur these types of expenses in the future, we believe that eliminating these charges for purposes of calculating the non-GAAP financial measures presented below facilitates an enhanced understanding of our current operating performance and provides more meaningful period to period comparisons. • Fair Value Adjustments on Equity Investments — Fair value adjustments on equity investments primarily consist of the gain (loss) on strategic investments, which includes recurring fair value adjustments of investments in publicly-traded companies, as well as those in privately-held companies, which are adjusted for observable price changes and any potential impairments. See Note 3 of the Notes to the Condensed Consolidated Financial Statements included in this report for additional information on our strategic investment activity. Given the volatility in the ongoing adjustments to the valuation of these strategic investments, we believe that excluding these gains and losses for purposes of calculating non-GAAP net income presented below facilitates an enhanced understanding of our current operating performance and provides more meaningful period to period comparisons. • Aggregate Adjustment for Income Taxes — The aggregate adjustment for income taxes is the estimated combined income tax effect for the adjustments described above, as well as an adjustment for discrete tax items. Due to the variability in recognition of discrete tax items from period to period, we believe that excluding these benefits or charges for purposes of calculating non-GAAP net income facilitates an enhanced understanding of our current operating performance and provides more meaningful period to period comparisons. The tax effects are determined based on the tax jurisdictions where the above items were incurred. See Note 11 of the Notes to the Condensed Consolidated Financial Statements included in this report for additional information on our income taxes. 64 Table of Contents The following table presents a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP measure for the periods indicated: Three Months Ended Nine Months Ended November 3, 2023 % Change October 28, 2022 November 3, 2023 % Change October 28, 2022 (in millions, except percentages) Product gross margin $ 2,687 (19) % $ 3,337 $ 8,281 (17) % $ 9,931 Non-GAAP adjustments: Amortization of intangibles 84 106 247 315 Impact of purchase accounting — — — 2 Stock-based compensation expense 12 12 38 38 Other corporate expenses — (2) 15 14 Non-GAAP product gross margin $ 2,783 (19) % $ 3,453 $ 8,581 (17) % $ 10,300 Services gross margin $ 2,461 4 % $ 2,370 $ 7,272 4 % $ 6,999 Non-GAAP adjustments: Stock-based compensation expense 25 25 74 74 Other corporate expenses 7 17 49 83 Non-GAAP services gross margin $ 2,493 3 % $ 2,412 $ 7,395 3 % $ 7,156 Gross margin $ 5,148 (10) % $ 5,707 $ 15,553 (8) % $ 16,930 Non-GAAP adjustments: Amortization of intangibles 84 106 247 315 Impact of purchase accounting — — — 2 Stock-based compensation expense 37 37 112 112 Other corporate expenses 7 15 64 97 Non-GAAP gross margin $ 5,276 (10) % $ 5,865 $ 15,976 (8) % $ 17,456 Operating expenses $ 3,662 (7) % $ 3,945 $ 11,833 (4) % $ 12,348 Non-GAAP adjustments: Amortization of intangibles (121) (139) (366) (417) Impact of purchase accounting (2) (21) (10) (31) Transaction-related expenses (3) (8) (9) (16) Stock-based compensation expense (190) (198) (563) (591) Other corporate expenses (34) (94) (448) (304) Non-GAAP operating expenses $ 3,312 (5) % $ 3,485 $ 10,437 (5) % $ 10,989 65 Table of Contents Three Months Ended Nine Months Ended November 3, 2023 % Change October 28, 2022 November 3, 2023 % Change October 28, 2022 (in millions, except percentages) Operating income $ 1,486 (16) % $ 1,762 $ 3,720 (19) % $ 4,582 Non-GAAP adjustments: Amortization of intangibles 205 245 613 732 Impact of purchase accounting 2 21 10 33 Transaction-related expenses 3 8 9 16 Stock-based compensation expense 227 235 675 703 Other corporate expenses 41 109 512 401 Non-GAAP operating income $ 1,964 (17) % $ 2,380 $ 5,539 (14) % $ 6,467 Net income $ 1,004 317 % $ 241 $ 2,037 12 % $ 1,816 Non-GAAP adjustments: Amortization of intangibles 205 245 613 732 Impact of purchase accounting 2 21 10 33 Transaction-related (income) expenses (5) 4 54 (2) Stock-based compensation expense 227 235 675 703 Other corporate expenses 41 1,112 512 1,420 Fair value adjustments on equity investments (8) (44) 36 197 Aggregate adjustment for income taxes (77) (109) (302) (494) Non-GAAP net income $ 1,389 (19) % $ 1,705 $ 3,635 (17) % $ 4,405 66 Table of Contents In addition to the above measures, we also use EBITDA and adjusted EBITDA to provide additional information for evaluation of our operating performance. Adjusted EBITDA excludes stock-based compensation expense, transaction-related expenses, and other corporate expenses, as defined above. As is the case with the non-GAAP measures presented above, users should consider the limitations of using EBITDA and adjusted EBITDA, including the fact that those measures do not provide a complete measure of our operating performance. EBITDA and adjusted EBITDA do not purport to be alternatives to net income as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. In particular, EBITDA and adjusted EBITDA are not intended to be a measure of cash flow available for management’s discretionary use, as these measures do not consider certain cash requirements, such as working capital needs, capital expenditures, contractual commitments, interest payments, tax payments, and other debt service requirements. The following table presents a reconciliation of EBITDA and adjusted EBITDA to net income for the periods indicated: Three Months Ended Nine Months Ended November 3, 2023 % Change October 28, 2022 November 3, 2023 % Change October 28, 2022 (in millions, except percentages) Net income $ 1,004 317 % $ 241 $ 2,037 12 % $ 1,816 Adjustments: Interest and other, net (a) 306 1,308 1,121 2,280 Income tax expense (benefit) 176 213 562 486 Depreciation and amortization 822 832 2,462 2,302 EBITDA $ 2,308 (11) % $ 2,594 $ 6,182 (10) % $ 6,884 EBITDA $ 2,308 (11) % $ 2,594 $ 6,182 (10) % $ 6,884 Adjustments: Stock-based compensation expense 227 235 675 703 Transaction-related expenses 3 8 9 16 Other corporate expenses 41 109 512 401 Adjusted EBITDA $ 2,579 (12) % $ 2,946 $ 7,378 (8) % $ 8,004 ____________________ (a) See “Results of Operations — Interest and Other, Net” for more information on the components of interest and other, net. 67 Table of Contents RESULTS OF OPERATIONS Consolidated Results The following table summarizes our consolidated results for the periods indicated. Unless otherwise indicated, all changes identified for the current-period results represent comparisons to results for the prior corresponding fiscal period. Three Months Ended Nine Months Ended November 3, 2023 October 28, 2022 November 3, 2023 October 28, 2022 Dollars % of Net Revenue % Change Dollars % of Net Revenue Dollars % of Net Revenue % Change Dollars % of Net Revenue (in millions, except percentages) Net revenue: Products $ 16,233 73.0 % (14) % $ 18,938 76.6 % $ 48,204 72.9 % (20) % $ 60,212 77.9 % Services 6,018 27.0 % 4 % 5,783 23.4 % 17,903 27.1 % 5 % 17,050 22.1 % Total net revenue $ 22,251 100.0 % (10) % $ 24,721 100.0 % $ 66,107 100.0 % (14) % $ 77,262 100.0 % Gross margin: Products (a) $ 2,687 16.6 % (19) % $ 3,337 17.6 % $ 8,281 17.2 % (17) % $ 9,931 16.5 % Services (b) 2,461 40.9 % 4 % 2,370 41.0 % 7,272 40.6 % 4 % 6,999 41.0 % Total gross margin $ 5,148 23.1 % (10) % $ 5,707 23.1 % $ 15,553 23.5 % (8) % $ 16,930 21.9 % Operating expenses $ 3,662 16.4 % (7) % $ 3,945 16.0 % $ 11,833 17.9 % (4) % $ 12,348 16.0 % Operating income $ 1,486 6.7 % (16) % $ 1,762 7.1 % $ 3,720 5.6 % (19) % $ 4,582 5.9 % Net income $ 1,004 4.5 % 317 % $ 241 1.0 % $ 2,037 3.1 % 12 % $ 1,816 2.4 % Non-GAAP Financial Information Three Months Ended Nine Months Ended November 3, 2023 October 28, 2022 November 3, 2023 October 28, 2022 Dollars % of Net Revenue % Change Dollars % of Net Revenue Dollars % of Net Revenue % Change Dollars % of Net Revenue (in millions, except percentages) Non-GAAP gross margin: Products (a) $ 2,783 17.1 % (19) % $ 3,453 18.2 % $ 8,581 17.8 % (17) % $ 10,300 17.1 % Services (b) 2,493 41.4 % 3 % 2,412 41.7 % 7,395 41.3 % 3 % 7,156 42.0 % Total non-GAAP gross margin $ 5,276 23.7 % (10) % $ 5,865 23.7 % $ 15,976 24.2 % (8) % $ 17,456 22.6 % Non-GAAP operating expenses $ 3,312 14.9 % (5) % $ 3,485 14.1 % $ 10,437 15.8 % (5) % $ 10,989 14.2 % Non-GAAP operating income $ 1,964 8.8 % (17) % $ 2,380 9.6 % $ 5,539 8.4 % (14) % $ 6,467 8.4 % Non-GAAP net income $ 1,389 6.2 % (19) % $ 1,705 6.9 % $ 3,635 5.5 % (17) % $ 4,405 5.7 % EBITDA $ 2,308 10.4 % (11) % $ 2,594 10.5 % $ 6,182 9.4 % (10) % $ 6,884 8.9 % Adjusted EBITDA $ 2,579 11.6 % (12) % $ 2,946 11.9 % $ 7,378 11.2 % (8) % $ 8,004 10.4 % ____________________ (a) Product gross margin and non-GAAP product gross margin percentages are calculated as a percentage of product net revenue. (b) Services gross margin and non-GAAP services gross margin percentages are calculated as a percentage of services net revenue. 68 Table of Contents Non-GAAP product gross margin, non-GAAP services gross margin, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income, EBITDA, and adjusted EBITDA are not measurements of financial performance prepared in accordance with GAAP. See “Non‑GAAP Financial Measures” for additional information about these non-GAAP financial measures, including our reasons for including these measures, material limitations with respect to the usefulness of the measures, and a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure. Overview During the third quarter and first nine months of Fiscal 2024, net revenue decreased by 10% and 14%, respectively, driven by declines in CSG net revenue and, to a lesser extent, ISG net revenue, which reflected the continued impact of global macroeconomic conditions on demand. The decline in CSG net revenue was primarily attributable to a decrease in units sold within both commercial and consumer offerings which, during the first nine months of Fiscal 2024, was partially offset by an increase in average selling prices of our commercial offerings. ISG net revenue decreased as a result of a reduction in net revenue attributable to both servers and networking and storage. During the first nine months of Fiscal 2024, the decline in ISG net revenue was most notable in servers and networking. During the third quarter and first nine months of Fiscal 2024, operating income decreased by 16% to $1.5 billion and 19% to $3.7 billion, respectively. Non-GAAP operating income decreased 17% to $2.0 billion and 14% to $5.5 billion, during the third quarter and first nine months of Fiscal 2024, respectively. The decline in operating income and non-GAAP operating income during both periods was driven by decreases in ISG operating income and, to a lesser extent, CSG operating income which both declined primarily as a result of a decrease in net revenue that outpaced the favorable impacts of a decline in input costs and cost management measures. The decline in ISG operating income was primarily attributable to servers and networking and, to a lesser extent, storage. The decline in CSG operating income was driven by decreases in both commercial and consumer offerings. During the third quarter of Fiscal 2024, operating income and non-GAAP operating income as a percentage of net revenue decreased 40 basis points to 6.7% and 80 basis points to 8.8%, respectively. During the first nine months of Fiscal 2024, operating income and non-GAAP operating income as a percentage of net revenue decreased 30 basis points to 5.6% and remained flat at 8.4%, respectively. During both periods, operating income and non-GAAP operating income as a percentage of net revenue was impacted by an increase in operating expense as a percentage of net revenue, principally within ISG, that was attributable to a decrease in net revenue which outpaced the impact of continued cost management measures and, to a lesser extent, continued investment in research and development. For the first nine months of Fiscal 2024, non-GAAP operating income as a percentage of net revenue remained flat as the impact of an increase in non-GAAP operating expense as a percentage of net revenue was fully offset by an increase in non-GAAP gross margin as a percentage of net revenue. Cash provided by operating activities was $7.1 billion during the first nine months of Fiscal 2024, and was primarily driven by profitability and working capital management as we reduced inventory, demonstrated strong cash collections performance, and benefited from the timing of purchases and payments to vendors. During the first nine months of Fiscal 2023, cash provided by operating activities was $0.9 billion, which primarily reflected profitability that was partially offset by the impact of working capital dynamics. See “Liquidity, Cash Requirements, and Market Conditions” for additional information about our cash flow metrics. Despite the near-term challenges driven by uncertainty in the macroeconomic environment, we continue to see opportunities to create value and grow as we respond to long-term demand for our IT solutions driven by a technology- and data-enabled world. We have demonstrated our ability to adjust to changing market conditions with complementary solutions and innovation across both segments of our business, an agile workforce, and the strength of our global supply chain. As we continue to innovate and modernize our offerings, we believe that Dell Technologies is well-positioned for long-term profitable growth. 69 Table of Contents Net Revenue During the third quarter and first nine months of Fiscal 2024, net revenue decreased 10% and 14%, respectively, primarily driven by declines in CSG net revenue and, to a lesser extent, ISG net revenue. See “Business Unit Results” for further information. • Product Net Revenue — Product net revenue includes revenue from the sale of hardware products and software licenses. During the third quarter and first nine months of Fiscal 2024, product net revenue decreased 14% and 20%, respectively, due to declines in CSG product net revenue and, to a lesser extent, ISG product net revenue. During both periods, CSG product net revenue decreased primarily as a result of a decline in units sold, which impacted both our commercial and consumer offerings. During the first nine months of Fiscal 2024, the impact of a decline in CSG units sold was partially offset by an increase in average selling prices of our commercial offerings. During the third quarter of Fiscal 2024, the decline in ISG product net revenue was attributable to a decrease in product net revenue for both servers and networking and storage. For the first nine months of Fiscal 2024, the decline in ISG product net revenue was primarily attributable to a decrease in product net revenue attributable to servers and networking, and, to a lesser extent, a decline in our product net revenue attributable to storage offerings. The decline in product net revenue attributable to servers and networking for both periods was driven by a decrease in units sold. • Services Net Revenue — Services net revenue includes revenue from our services offerings and support services related to hardware products and software licenses. During the third quarter and first nine months of Fiscal 2024, services net revenue increased 4% and 5%, respectively, driven primarily by growth within services net revenue attributable to CSG and other businesses. The increases in services net revenue attributable to CSG were driven primarily by third-party software support and maintenance and hardware support and maintenance. The increases in services net revenue attributable to other businesses were driven primarily by VMware Resale. A substantial portion of services net revenue is derived from offerings that have been deferred over a period of time, and, as a result, reported growth rates for services net revenue will be different than reported growth rates for product net revenue. From a geographical perspective, net revenue decreased in the Americas, EMEA, and APJ during both the third quarter and first nine months of Fiscal 2024, with the greatest decrease occurring in APJ. Gross Margin During the third quarter of Fiscal 2024, gross margin and non-GAAP gross margin both decreased 10% to $5.1 billion and $5.3 billion, respectively. During the first nine months of Fiscal 2024, gross margin and non-GAAP gross margin both decreased 8% to $15.6 billion and $16.0 billion, respectively. The declines were driven by decreases in both CSG and ISG gross margin that were primarily attributable to a decrease in net revenue, the effect of which was partially offset by lower input costs. During the third quarter of Fiscal 2024, gross margin and non-GAAP gross margin percentage remained flat at 23.1% and 23.7%, respectively. Both gross margin and non-GAAP gross margin percentage benefited from an increase in ISG gross margin as a percentage of net revenue, which increased primarily as a result of an overall decline in input costs coupled with disciplined pricing. The impact of an increase in ISG gross margin as a percentage of net revenue was offset by a shift in the mix of net revenue towards lower margin offerings. During the first nine months of Fiscal 2024, both gross margin and non-GAAP gross margin percentage increased 160 basis points to 23.5% and 24.2%, respectively. The increases were primarily attributable to the impacts of an overall decline in input costs coupled with an increase in average selling price across many of our offerings as we maintained strong pricing discipline. • Product Gross Margin — During the third quarter of Fiscal 2024, product gross margin and non-GAAP product gross margin both decreased 19% to $2.7 billion and $2.8 billion, respectively. During the first nine months of Fiscal 2024, product gross margin and non-GAAP product gross margin both decreased 17% to $8.3 billion and $8.6 billion, respectively. The decreases were primarily driven by declines in both ISG and CSG product gross margin, which were largely attributable to declines in product net revenue. 70 Table of Contents During the third quarter of Fiscal 2024, product gross margin percentage and non-GAAP product gross margin percentage decreased 100 basis points to 16.6% and 110 basis points to 17.1%, respectively. The declines were driven primarily by a decrease in ISG product gross margin percentage and, to a lesser extent, CSG product gross margin percentage. ISG product gross margin percentage declined primarily as a result of a shift in the mix of ISG product net revenue recognized towards offerings with lower product gross margin percentages. CSG product gross margin percentage declined primarily as a result of increasing competitive pricing pressure. During the first nine months of Fiscal 2024, both product gross margin percentage and non-GAAP product gross margin percentage increased 70 basis points to 17.2% and 17.8%, respectively. The increases were driven primarily by the impacts of an overall decline in input costs coupled with an increase in average selling price across many of our offerings as we maintained strong pricing discipline. • Services Gross Margin — During the third quarter of Fiscal 2024, services gross margin and non-GAAP services gross margin increased 4% to $2.5 billion and 3% to $2.5 billion, respectively. During the first nine months of Fiscal 2024, services gross margin and non-GAAP services gross margin increased 4% to $7.3 billion and 3% to $7.4 billion, respectively. The increases were primarily attributable to growth within ISG services gross margin and, to a lesser extent CSG services gross margin, that was driven by support and maintenance associated with products sold in prior periods. During the third quarter of Fiscal 2024, services gross margin percentage and non-GAAP services gross margin percentage decreased 10 basis points to 40.9% and 30 basis points to 41.4%, respectively. During the first nine months of Fiscal 2024, services gross margin percentage decreased 40 basis points to 40.6% and non-GAAP services gross margin percentage decreased 70 basis points to 41.3%, respectively. The decreases were driven primarily by a shift in mix of services delivered, partially offset by an increase in ISG services gross margin percentage. Vendor Programs Our gross margin is affected by our ability to achieve competitive pricing with our vendors and contract manufacturers, including through our negotiation of a variety of vendor rebate programs to achieve lower net costs for the various components we include in our products. Under these programs, vendors provide us with rebates or other discounts from the list prices for the components, which are generally elements of their pricing strategy. We account for vendor rebates and other discounts as a reduction in cost of net revenue. We manage our costs on a total net cost basis, which includes supplier list prices reduced by vendor rebates and other discounts. The terms and conditions of our vendor rebate programs are largely based on product volumes and are generally negotiated either at the beginning of the annual or quarterly period, depending on the program. The timing and amount of vendor rebates and other discounts we receive under the programs may vary from period to period, reflecting changes in the competitive environment. We monitor our component costs and seek to address the effects of any changes to terms that might arise under our vendor rebate programs. Our gross margins for the third quarter and first nine months of Fiscal 2024 were not materially affected by any changes to the terms of our vendor rebate programs, as the amounts we received under these programs were generally stable relative to our total net cost. We are not aware of any significant changes to our vendor rebate programs that will materially impact our results in the near term. 71 Table of Contents Operating Expenses The following table presents information regarding our operating expenses for the periods indicated: Three Months Ended Nine Months Ended November 3, 2023 October 28, 2022 November 3, 2023 October 28, 2022 Dollars % of Net Revenue % Change Dollars % of Net Revenue Dollars % of Net Revenue % Change Dollars % of Net Revenue (in millions, except percentages) Operating expenses: Selling, general, and administrative $ 2,970 13.3 % (9) % $ 3,268 13.3 % $ 9,748 14.7 % (6) % $ 10,364 13.4 % Research and development 692 3.1 % 2 % 677 2.7 % 2,085 3.2 % 5 % 1,984 2.6 % Total operating expenses $ 3,662 16.4 % (7) % $ 3,945 16.0 % $ 11,833 17.9 % (4) % $ 12,348 16.0 % Three Months Ended Nine Months Ended November 3, 2023 October 28, 2022 November 3, 2023 October 28, 2022 Dollars % of Net Revenue % Change Dollars % of Net Revenue Dollars % of Net Revenue % Change Dollars % of Net Revenue (in millions, except percentages) Non-GAAP operating expenses $ 3,312 14.9 % (5) % $ 3,485 14.1 % $ 10,437 15.8 % (5) % $ 10,989 14.2 % During the third quarter and first nine months of Fiscal 2024, total operating expenses decreased 7% and 4%, respectively, due to a decline in selling, general, and administrative expenses, which was partially offset by an increase in research and development expenses. • Selling, General, and Administrative — During the third quarter and first nine months of Fiscal 2024, selling, general, and administrative (“SG&A”) expenses decreased 9% and 6%, respectively, principally due to continued disciplined cost management. During the third quarter of Fiscal 2024, the decline in SG&A expenses was driven primarily by a decrease in employee compensation and benefits expense principally as a result of a reduction in overall headcount. During the first nine months of Fiscal 2024, the decline in SG&A expenses was driven primarily by decreases in advertising and outside services expense, partially offset by the impact of costs incurred in connection with workforce reductions. • Research and Development — Research and development (“R&D”) expenses are primarily composed of personnel-related expenses incurred in connection with product development. R&D expenses increased 2% and 5%, respectively, during the third quarter and first nine months of Fiscal 2024 principally due to an increase in employee compensation and benefits expense. As a percentage of net revenue, R&D expenses for the third quarter of Fiscal 2024 and Fiscal 2023 were 3.1% and 2.7%, respectively, and for the first nine months of Fiscal 2024 and Fiscal 2023 were 3.2% and 2.6%, respectively. The increases in R&D expenses as a percentage of net revenue were attributable to continued R&D investments as we support R&D initiatives to innovate and introduce new and enhanced solutions into the market. During both the third quarter and first nine months of Fiscal 2024, non-GAAP operating expenses decreased 5%, principally due to continued disciplined cost management which resulted in a decline in outside services, employee compensation and benefits, and advertising expenses, among other items. We continue to make selective investments designed to enable growth, marketing, and R&D, while balancing our efforts to drive cost efficiencies in the business. We also expect to continue making investments in support of our own digital transformation to modernize our IT operations. 72 Table of Contents Operating Income During the third quarter and first nine months of Fiscal 2024, operating income decreased by 16% to $1.5 billion and 19% to $3.7 billion, respectively. Non-GAAP operating income decreased 17% to $2.0 billion and 14% to $5.5 billion, during the third quarter and first nine months of Fiscal 2024, respectively. The decline in operating income and non-GAAP operating income during both periods was driven by decreases in ISG operating income and, to a lesser extent, CSG operating income which both declined primarily as a result of a decrease in net revenue that outpaced the favorable impacts of a decline in input costs and continued cost management measures. The decline in ISG operating income was primarily attributable to servers and networking and, to a lesser extent, storage. The decline in CSG operating income was driven by decreases in both commercial and consumer. During the third quarter of Fiscal 2024, operating income and non-GAAP operating income as a percentage of net revenue decreased 40 basis points to 6.7% and 80 basis points to 8.8%, respectively. During the first nine months of Fiscal 2024, operating income and non-GAAP operating income as a percentage of net revenue decreased 30 basis points to 5.6% and remained flat at 8.4%, respectively. During both periods, operating income and non-GAAP operating income as a percentage of net revenue was impacted by an increase in operating expense as a percentage of net revenue, principally within ISG, that was attributable to a decrease in net revenue which outpaced the impact of continued cost management measures and, to a lesser extent, continued investment in research and development. For the first nine months of Fiscal 2024, non-GAAP operating income as a percentage of net revenue remained flat as the impact of an increase in non-GAAP operating expense as a percentage of net revenue was fully offset by an increase in non-GAAP gross margin as a percentage of net revenue. Interest and Other, Net The following table presents information regarding interest and other, net for the periods indicated: Three Months Ended Nine Months Ended November 3, 2023 October 28, 2022 November 3, 2023 October 28, 2022 (in millions) Interest and other, net: Investment income, primarily interest $ 88 $ 21 $ 213 $ 52 Gain (loss) on investments, net 8 44 (36) (197) Interest expense (371) (272) (1,128) (835) Foreign exchange (30) (72) (127) (227) Legal settlement, net — (1,000) — (1,000) Other (1) (29) (43) (73) Total interest and other, net $ (306) $ (1,308) $ (1,121) $ (2,280) During both the third quarter and first nine months of Fiscal 2024, the change in interest and other, net was favorable, primarily as a result of $1.0 billion of expense recognized in the third quarter of Fiscal 2023 in connection with an agreement to settle the Class V transaction litigation, described in Note 10 to the Notes to the Condensed Consolidated Financial Statements included in this report, coupled with an increase in interest income on investments during the Fiscal 2024 periods. During both periods, these benefits were partially offset by an increase in interest expense primarily associated with DFS securitization and structured financing programs. 73 Table of Contents Income and Other Taxes The following table presents information regarding our income and other taxes for the periods indicated: Three Months Ended Nine Months Ended November 3, 2023 October 28, 2022 November 3, 2023 October 28, 2022 (in millions, except percentages) Income before income taxes $ 1,180 $ 454 $ 2,599 $ 2,302 Income tax expense $ 176 $ 213 $ 562 $ 486 Effective income tax rate 14.9 % 46.9 % 21.6 % 21.1 % For the third quarter of Fiscal 2024 and Fiscal 2023, our effective income tax rate was 14.9% and 46.9%, respectively. The decline in our effective tax rate was primarily attributable to the impact of expenses recognized in the three months ended October 28, 2022 in connection with an agreement to settle the Class V transaction litigation, as described in Note 10 to the Notes to the Condensed Consolidated Financial Statements included in this report. Other changes in our effective income tax rate were attributable to higher U.S. tax on our foreign operations, changes in our jurisdictional mix of income, and the impact of discrete tax items. For the first nine months of Fiscal 2024 and Fiscal 2023, our effective income tax rate was 21.6% and 21.1%, respectively. The increase in our effective tax rate was attributable to higher U.S. tax on our foreign operations, changes in our jurisdictional mix of income, and the impact of discrete tax items, largely offset by the impact of the litigation expenses discussed above. Our effective income tax rate can fluctuate depending on the geographic distribution of our worldwide earnings, as our foreign earnings are generally taxed at lower rates than in the United States. The differences between our effective income tax rates and the U.S. federal statutory rate of 21% principally result from the geographical distribution of income, differences between the book and tax treatment of certain items, and discrete tax items. In certain jurisdictions, our tax rate is significantly less than the applicable statutory rate as a result of tax holidays. The majority of our foreign income subject to these tax holidays 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. Most of our other tax holidays will expire in whole or in part during Fiscal 2030 through Fiscal 2031. 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 November 3, 2023, we were not aware of any matters of noncompliance or enacted tax legislative changes affecting these tax holidays. For further discussion regarding tax matters, including the status of income tax audits, see Note 11 of the Notes to the Condensed Consolidated Financial Statements included in this report. Net Income During the third quarter and first nine months of Fiscal 2024, net income increased 317% to $1.0 billion and 12% to $2.0 billion, respectively, driven primarily by a favorable change in interest and other, net, partially offset by a decline in operating income. During the third quarter and first nine months of Fiscal 2024, non-GAAP net income decreased 19% to $1.4 billion and 17% to $3.6 billion, respectively, driven by a decline in operating income. 74 Table of Contents Business Unit Results Our reportable segments are based on the ISG and CSG business units. A description of our business units is provided under “Introduction.” See Note 16 of the Notes to the Condensed Consolidated Financial Statements included in this report for a reconciliation of net revenue and operating income by reportable segment to consolidated net revenue and consolidated operating income, respectively. Infrastructure Solutions Group The following table presents net revenue and operating income attributable to ISG for the periods indicated: Three Months Ended Nine Months Ended November 3, 2023 % Change October 28, 2022 November 3, 2023 % Change October 28, 2022 (in millions, except percentages) Net revenue: Servers and networking $ 4,656 (10) % $ 5,201 $ 12,767 (17) % $ 15,458 Storage 3,843 (13) % 4,429 11,786 (9) % 12,993 Total ISG net revenue $ 8,499 (12) % $ 9,630 $ 24,553 (14) % $ 28,451 Operating income: ISG operating income $ 1,069 (22) % $ 1,374 $ 2,858 (18) % $ 3,502 % of segment net revenue 12.6 % 14.3 % 11.6 % 12.3 % Net Revenue — During the third quarter and first nine months of Fiscal 2024, ISG net revenue decreased 12% and 14%, respectively. During the third quarter of Fiscal 2024, the decline in ISG net revenue was driven by a decline in both servers and networking net revenue and storage net revenue. During the first nine months of Fiscal 2024, the decline in ISG net revenue was driven primarily by servers and networking net revenue and, to a lesser extent, storage net revenue. Revenue from sales of servers and networking decreased 10% and 17% during the third quarter and first nine months of Fiscal 2024, respectively, driven by a decrease in units sold, the effect of which was partially offset by an increase in average selling price of our server offerings. The average selling price for our server offerings increased as a result of the impact of attached offerings and richer configurations. During the third quarter and first nine months of Fiscal 2024, storage net revenue decreased 13% and 9%, respectively, primarily driven by a decline in net revenue across the majority of our storage offerings. From a geographical perspective, net revenue attributable to ISG decreased in the Americas, EMEA, and APJ during the third quarter and first nine months of Fiscal 2024. Operating Income — During the third quarter and first nine months of Fiscal 2024, ISG operating income as a percentage of net revenue decreased 170 basis points to 12.6% and 70 basis points to 11.6%, respectively, principally due to an increase in operating expenses as a percentage of net revenue. Operating expense as a percentage of net revenue increased as a result of a decline in revenue that outpaced the impact of continued cost management measures coupled with continued investment in research and development. The impact of an increase in operating expense as a percentage of net revenue was partially offset by an overall decline in input costs coupled with an increase in average selling price. 75 Table of Contents Client Solutions Group The following table presents net revenue and operating income attributable to CSG for the periods indicated: Three Months Ended Nine Months Ended November 3, 2023 % Change October 28, 2022 November 3, 2023 % Change October 28, 2022 (in millions, except percentages) Net revenue: Commercial $ 9,835 (8) % $ 10,747 $ 30,251 (13) % $ 34,859 Consumer 2,441 (19) % 3,028 6,950 (30) % 9,993 Total CSG net revenue $ 12,276 (11) % $ 13,775 $ 37,201 (17) % $ 44,852 Operating income: CSG operating income $ 925 (13) % $ 1,060 $ 2,786 (12) % $ 3,153 % of segment net revenue 7.5 % 7.7 % 7.5 % 7.0 % Net Revenue — During the third quarter and first nine months of Fiscal 2024, CSG net revenue decreased 11% and 17%, respectively, driven by a decline in units sold as global macroeconomic conditions continued to impact demand. Commercial net revenue decreased 8% and 13%, respectively, during the third quarter and first nine months of Fiscal 2024. The decreases were primarily due to a decrease in units sold which was partially offset by the effect of an increase in the average selling price of our commercial offerings. Average selling prices for our commercial offerings increased primarily as a result of richer configurations and the mix of offerings sold. Consumer net revenue decreased 19% and 30%, respectively, during the third quarter and first nine months of Fiscal 2024, principally due to a decrease in units sold. From a geographical perspective, net revenue attributable to CSG decreased primarily in APJ and, to a lesser extent, in the Americas and EMEA during both the third quarter and first nine months of Fiscal 2024. Operating Income — During the third quarter of Fiscal 2024, CSG operating income as a percentage of net revenue decreased 20 basis points to 7.5%. The decline in CSG operating income as a percentage of net revenue was driven primarily by our consumer business, largely attributable to a decrease in average selling prices, partially offset by the results of our commercial business. During the first nine months of Fiscal 2024, CSG operating income as a percentage of net revenue increased 50 basis points to 7.5%, primarily due to the impact of an overall decrease in input costs coupled with an increase in average selling prices for our commercial offerings, as described above. The impact of these factors was partially offset by an increase in operating expenses as a percentage of net revenue, which increased as a result of a decline in CSG net revenue that outpaced the impact of continued cost management measures. 76 Table of Contents OTHER BALANCE SHEET ITEMS Accounts Receivable We sell products and services directly to customers and through a variety of sales channels, including retail distribution. Our accounts receivable, net, was $9.7 billion and $12.5 billion as of November 3, 2023 and February 3, 2023, respectively. The reduction in accounts receivable, net primarily reflects strong collections coupled with a decline in net revenue. We maintain an allowance for expected credit losses to cover receivables that may be deemed uncollectible. The allowance for expected credit losses is an estimate based on an analysis of historical loss experience, current receivables aging, and management’s assessment of current conditions and its reasonable and supportable expectation of future conditions, as well as specific identifiable customer accounts that are deemed at risk. As of November 3, 2023 and February 3, 2023, the allowance for expected credit losses was $74 million and $78 million, respectively. Based on our assessment, we believe that we are adequately reserved for expected credit losses. We are monitoring the impact of current economic conditions and the aging of our accounts receivable on our expected losses and have not experienced deterioration in delinquency or loss rates. We will continue to take actions, where necessary, to reduce our exposure to credit losses. Dell Financial Services and Financing Receivables We offer or arrange various financing options and services for our customers globally, including through captive financing operations. DFS originates, collects, and services customer receivables primarily related to the purchase of our product, software, and service solutions. We further strengthen customer relationships through flexible consumption models, including utility, subscription, and as-a-Service models, which enable us to offer our customers the option to pay over time to provide them with financial flexibility to meet their changing technological requirements. New financing originations were $1.8 billion and $2.3 billion for the third quarter of Fiscal 2024 and Fiscal 2023, respectively, and $6.0 billion and $6.7 billion for the first nine months of Fiscal 2024 and Fiscal 2023, respectively. Our leases are generally classified as sales-type leases or operating leases. On commencement of sales-type leases, we recognize profit up-front, and recognize amounts due from the customer under the lease contract as financing receivables. Interest income is recognized as net product revenue over the term of the lease. Upon origination of operating leases, we record equipment under operating leases, classified as property, plant, and equipment. We recognize product revenue and depreciation expense, classified as cost of net revenue, over the contract term. As of November 3, 2023 and February 3, 2023, our financing receivables, net were $10.3 billion and $10.9 billion, respectively . The decline in financing receivables was driven by the sale of our U.S. consumer revolving customer financing receivables portfolio. See Note 4 of the Notes to the Condensed Consolidated Financial Statements included in this report for additional information about the reclassification. We maintain an allowance to cover expected financing receivable credit losses and evaluate credit loss expectations based on our total portfolio. For the third quarter and first nine months of Fiscal 2024 and Fiscal 2023, the principal charge-off rate for our financing receivables portfolio was 0.6% and 0.5%, respectively. The credit quality of our financing receivables has improved in recent years as the mix of high-quality commercial accounts in our portfolio has continued to increase. We continue to monitor broader economic indicators and their potential impact on future credit loss performance. We have an extensive process to manage our exposure to customer credit risk, including active management of credit lines and our collection activities. We also sell selected fixed-term financing receivables without recourse to unrelated third parties on a periodic basis, primarily to manage certain concentrations of customer credit exposure. Based on our assessment of the customer financing receivables, we believe that we are adequately reserved. We retain a residual interest in equipment leased under our lease programs. As of November 3, 2023 and February 3, 2023, the residual interest recorded as part of financing receivables was $150 million and $142 million, respectively. The amount of the residual interest is established at the inception of the lease based upon estimates of the value of the equipment at the end of the lease term using historical studies, industry data, and future value-at-risk demand valuation methods. On a quarterly basis, we assess the carrying amount of our recorded residual values for expected losses. Generally, expected losses as a result of residual value risk on equipment under lease are not considered to be significant primarily because of the existence of a secondary market with respect to the equipment. Further, the lease agreement defines applicable return conditions and remedies for non-compliance to ensure that the leased equipment will be in good operating condition upon return. No expected losses were recorded related to residual assets during the third quarter and first nine months of Fiscal 2024 and Fiscal 2023. 77 Table of Contents As of November 3, 2023 and February 3, 2023, equipment under operating leases, net was $2.1 billion and $2.2 billion, respectively. We assess the carrying amount of the equipment under operating leases for impairment whenever events or circumstances may indicate that an impairment has occurred. No material impairment losses were recorded related to such equipment during the third quarter and first nine months of Fiscal 2024 and Fiscal 2023. DFS offerings are initially funded through cash on hand at the time of origination, most of which is subsequently replaced with asset-backed financing. For DFS offerings which qualify as sales-type leases, the initial funding of financing receivables is reflected as an impact to cash flows from operations and is largely subsequently offset by cash proceeds from financing. For DFS operating leases, the initial funding is classified as a capital expenditure and reflected as an impact to cash flows used in investing activities. See Note 4 of the Notes to the Condensed Consolidated Financial Statements included in this report for additional information about our financing receivables and the associated allowances, and equipment under operating leases. 78 Table of Contents LIQUIDITY, CASH REQUIREMENTS, AND MARKET CONDITIONS Liquidity and Capital Resources We rely on operating cash flows, which are impacted by trends in the demand environment, as our primary source of liquidity for our ongoing business operations. We monitor the efficiency of our balance sheet to ensure that we have adequate liquidity to support our business and strategic initiatives. In addition to internally generated cash, we have access to other capital sources to finance our strategic initiatives and fund growth in our financing operations. Our strategy is to deploy capital from any potential source, whether internally generated cash or debt, depending on the adequacy and availability of that source of capital and whether it can be accessed in a cost-effective manner. We believe that our current cash and cash equivalents, together with cash that will be provided by future operations and borrowings expected to be available under our revolving credit facility and commercial paper program, will be sufficient over at least the next twelve months and for the foreseeable future thereafter to meet our material cash requirements, including funding of our operations, debt-related payments, capital expenditures, and other corporate needs. As part of our overall capital allocation strategy, we intend to return capital to our stockholders through both share repurchase programs and dividend payments, drive growth, and maintain our investment grade credit rating. The following table presents our cash and cash equivalents as well as our available borrowings as of the dates indicated: November 3, 2023 February 3, 2023 (in millions) Cash and cash equivalents, and available borrowings: Cash and cash equivalents $ 8,298 $ 8,607 Remaining available borrowings under 2021 Revolving Credit Facility 5,999 5,999 Total cash and cash equivalents, and available borrowings $ 14,297 $ 14,606 During the first nine months of Fiscal 2024, cash and cash equivalents decreased by $0.3 billion primarily driven by capital expenditures, the return of capital to our stockholders, and the repayment of Senior Notes, the effect of which was partially offset by cash flows from operations. As of November 3, 2023, our 2021 Revolving Credit Facility had a maximum capacity of $6.0 billion. Available borrowings under this facility are reduced by draws on the facility and outstanding letters of credit. As of November 3, 2023, there were no borrowings outstanding under the facility and remaining available borrowings totaled approximately $6.0 billion. The 2021 Revolving Credit Facility also acts as a backstop to provide liquidity support for our commercial paper program. We maintain a commercial paper program under which we 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 issue. As of November 3, 2023, we had no outstanding borrowings under the program. We may regularly use our available borrowings from the 2021 Revolving Credit Facility and issuances under the commercial paper program on a short-term basis for general corporate purposes. See the following discussion for additional information about our debt. 79 Table of Contents Debt The following table presents our outstanding debt as of the dates indicated: November 3, 2023 Change February 3, 2023 (in millions) Core debt Senior Notes $ 16,107 $ (2,193) $ 18,300 Legacy Notes and Debentures 952 — 952 DFS allocated debt (1,271) (75) (1,196) Total core debt 15,788 (2,268) 18,056 DFS related debt DFS debt 9,620 (670) 10,290 DFS allocated debt 1,271 75 1,196 Total DFS related debt 10,891 (595) 11,486 Other 181 (144) 325 Total debt, principal amount 26,860 (3,007) 29,867 Carrying value adjustments (243) 36 (279) Total debt, carrying value $ 26,617 $ (2,971) $ 29,588 The outstanding principal amount of our debt decreased $3.0 billion to $26.9 billion as of November 3, 2023, driven primarily by the prepayment of $2.0 billion principal amount of Senior Notes and a reduction in DFS debt which was principally attributable to the prepayment and termination of our U.S. securitization facility for revolving loans. We define core debt as the total principal amount of our debt, less DFS related debt and other debt. Our core debt was $15.8 billion and $18.1 billion as of November 3, 2023 and February 3, 2023, respectively. See Note 6 of the Notes to the Condensed Consolidated Financial Statements included in this report for additional information about our debt. DFS related debt primarily represents debt from our securitization and structured financing programs. Our risk of loss under these programs is limited to transferred lease and loan payments and associated equipment, as the credit holders have no recourse to Dell Technologies. To fund expansion of the DFS business, we balance the use of the securitization and structured financing programs with other sources of liquidity. We approximate the amount of our core debt used to fund the DFS business by applying a 7:1 debt-to-equity ratio to the sum of our financing receivables balance and equipment under our DFS operating leases, net. The debt-to-equity ratio is based on the underlying credit quality of the assets. See Note 4 of the Notes to the Condensed Consolidated Financial Statements included in this report for additional information about our DFS debt. We believe we will continue to be able to make our debt principal and interest payments, including short-term maturities, from existing and expected sources of cash, primarily from operating cash flows. Cash used for debt principal and interest payments may include short-term borrowings under our commercial paper program, our revolving credit facility, or other borrowings. Under our variable-rate debt, we could experience variations in our future interest expense from potential fluctuations in applicable reference rates, or from possible fluctuations in the level of DFS debt required to meet future demand for customer financing. At our sole discretion, we may purchase, redeem, prepay, refinance, or otherwise retire any amount of our 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 we consider appropriate in light of market conditions and other relevant factors. 80 Table of Contents Cash Flows The following table presents a summary of our Condensed Consolidated Statements of Cash Flows for the periods indicated: Nine Months Ended November 3, 2023 October 28, 2022 (in millions) Net change in cash from: Operating activities $ 7,143 $ 851 Investing activities (2,114) (2,228) Financing activities (5,275) (3,138) Effect of exchange rate changes on cash, cash equivalents, and restricted cash (200) (343) Change in cash, cash equivalents, and restricted cash $ (446) $ (4,858) Operating Activities — Cash provided by operating activities was $7.1 billion during the first nine months of Fiscal 2024, and was primarily driven by profitability and working capital management as we reduced inventory, demonstrated strong cash collections performance, and benefited from the timing of purchases and payments to vendors. Cash provided by operating activities also reflected the impact of the $0.9 billion net payment to settle the Class V transaction litigation and $0.4 billion in proceeds from the sale of our U.S. consumer revolving customer receivables portfolio. During the first nine months of Fiscal 2023, cash provided by operating activities was $0.9 billion, which primarily reflected profitability that was partially offset by the impact of working capital dynamics. Investing Activities — Investing activities primarily consist of cash used to fund capital expenditures for property, plant, and equipment inclusive of equipment under DFS operating leases and equipment used to support our as-a-Service offerings, which we refer to collectively as revenue-generating assets. Additional activities include capitalized software development costs, acquisitions and divestitures, and the maturities, sales, and purchases of investments. Cash used in investing activities was $2.1 billion and $2.2 billion during the first nine months of Fiscal 2024 and Fiscal 2023, respectively, and was primarily applied to capital expenditures. Financing Activities — Financing activities primarily consist of the proceeds and repayments of debt and return of capital to our stockholders. Cash used in financing activities was $5.3 billion during the first nine months of Fiscal 2024 and primarily consisted of principal repayments of our Senior Notes, repurchases of common stock, inclusive of payments to settle employee tax withholdings on stock-based compensation, and the payment of quarterly dividends. During the first nine months of Fiscal 2023, cash used in financing activities was $3.1 billion and primarily consisted of repurchases of common stock, inclusive of payments to settle employee tax withholdings on stock-based compensation, and the payment of quarterly dividends. DFS Cash Flow Impacts — DFS offerings are initially funded through cash on hand at the time of origination, most of which is subsequently replaced with asset-backed financing. For DFS offerings that qualify as sales-type leases, the initial funding of financing receivables is reflected as an impact to cash flows from operations and is largely subsequently offset by cash proceeds from financing. For operating leases, the initial funding is classified as a capital expenditure and reflected as cash flows used in investing activities. DFS new financing originations were $6.0 billion and $6.7 billion during the first nine months of Fiscal 2024 and Fiscal 2023, respectively. As of November 3, 2023, the Company had $10.3 billion of total net financing receivables and $2.1 billion of equipment under operating leases, net. Supply Chain Finance Program — We maintain a Supply Chain Finance Program (the "SCF Program”) which enables eligible suppliers to sell receivables due from us to a third-party financial institution at the suppliers’ sole discretion. The SCF Program does not impact our liquidity. Payments by us to participating suppliers are remitted to the financial institution on the original invoice due date. Further, we negotiate payment terms with our suppliers regardless of their decision to participate in the SCF Program. Payments made under the SCF Program are included in cash flows from operating activities on the Condensed Consolidated Statements of Cash Flows. See Note 17 of the Notes to the Condensed Consolidated Financial Statements included in this report for more information regarding the SCF Program. 81 Table of Contents Capital Commitments and Other Cash Requirements Capital Expenditures — We spent $2.0 billion and $2.2 billion, respectively, during the first nine months of Fiscal 2024 and Fiscal 2023 on property, plant, and equipment and capitalized software development costs. Of total expenditures incurred, funding of revenue-generating assets totaled $0.9 billion and $1.1 billion during the first nine months of Fiscal 2024 and Fiscal 2023, respectively. Product demand, product mix, the use of contract manufacturers, and ongoing investments in operating and information technology infrastructure influence the level and prioritization of our capital expenditures. Aggregate capital expenditures for Fiscal 2024 are currently expected to total between $2.8 billion and $3.0 billion, of which approximately $1.4 billion are expected to relate to revenue-generating assets. Repurchases of Common Stock — Effective as of September 23, 2021, our Board of Directors approved a stock repurchase program with no fixed expiration date under which we are authorized to repurchase up to $5.0 billion of shares of our Class C Common Stock. Effective as of October 5, 2023, the Company’s Board of Directors approved the repurchase of an additional $5.0 billion of shares of the Class C Common Stock with no fixed expiration date. Following the approval, the Company had approximately $5.7 billion in cumulative authorized amount remaining under the stock repurchase program. During the first nine months of Fiscal 2024, the Company repurchased approximately 22 million shares of Class C Common Stock for a total purchase price of approximately $1.3 billion. During the first nine months of Fiscal 2023, the Company repurchased approximately 59 million shares of Class C Common Stock for a total purchase price of approximately $2.7 billion. Dividend Payments — On February 24, 2022, we announced that our Board of Directors adopted a dividend policy providing for our payment of quarterly cash dividends on our common stock at a rate of $0.33 per share per fiscal quarter beginning in the first quarter of Fiscal 2023. On March 2, 2023, the Company announced that the Board of Directors approved a 12% increase in the quarterly dividend rate from $0.33 per share per fiscal quarter to a rate of $0.37 per share per fiscal quarter beginning in the first quarter of Fiscal 2024. During the first nine months of Fiscal 2024 and Fiscal 2023, the Company paid $811 million and $728 million, respectively, in dividends and dividend equivalents. Purchase Obligations — Purchase obligations are defined as contractual obligations to purchase goods or services that are enforceable and legally binding on us. These obligations specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transaction. Purchase obligations do not include contracts that may be canceled without penalty. We utilize several suppliers to manufacture sub-assemblies for our products. Our efficient supply chain management allows us to enter into flexible and mutually beneficial purchase arrangements with our suppliers in order to minimize inventory risk. Consistent with industry practice, we acquire raw materials or other goods and services, including product components, by issuing to suppliers authorizations to purchase based on our projected demand and manufacturing needs. These purchase orders are typically fulfilled within 30 days and are entered into during the ordinary course of business in order to establish best pricing and continuity of supply for our production. Purchase orders are not included in purchase obligations, as they typically represent our authorization to purchase rather than binding purchase obligations. 82 Table of Contents Market Conditions We regularly monitor economic conditions and associated impacts on the financial markets and our business. We consistently evaluate the financial health of our supplier base, carefully manage customer credit, diversify counterparty risk, and monitor the concentration risk of our cash and cash equivalents balances globally. We routinely monitor our financial exposure to borrowers and counterparties. We monitor credit risk associated with our financial counterparties using various market credit risk indicators such as credit ratings issued by nationally recognized credit rating agencies and changes in market credit default swap levels. We perform periodic evaluations of our positions with these counterparties and may limit exposure to any one counterparty in accordance with our policies. We monitor and manage these activities depending on current and expected market developments. We use derivative instruments to hedge certain foreign currency exposures. We use forward contracts and purchased options designated as cash flow hedges to protect against the foreign currency exchange rate risks inherent in our forecasted transactions denominated in currencies other than the U.S. dollar. In addition, we primarily use forward contracts and may use purchased options to hedge monetary assets and liabilities denominated in a foreign currency. See Note 7 of the Notes to the Condensed Consolidated Financial Statements included in this report for additional information about our use of derivative instruments. We are exposed to interest rate risk related to our variable-rate debt portfolio. In the normal course of business we follow established policies and procedures to manage this risk, including monitoring of our asset and liability mix and the use of derivative instruments. As a result, we do not anticipate any material losses from interest rate risk. 83 Table of Contents Summarized Guarantor Financial Information Dell International L.L.C. and EMC Corporation (the “Issuers”), both of which are wholly-owned subsidiaries of Dell Technologies Inc., completed private offerings of multiple series of senior secured notes issued on June 1, 2016, March 20, 2019, and April 9, 2020 (the “Senior Secured Notes”). The Senior Secured Notes became unsecured obligations following the release of the collateral securing such Senior Secured Notes during Fiscal 2022. On December 13, 2021, the Issuers completed a private offering of senior unsecured notes (together with the Senior Secured Notes, the “Senior Notes”). In June 2021 and September 2023, the Issuers completed exchange offers in which they issued $18.4 billion and $2.1 billion, respectively, in aggregate principal amount of registered senior notes under the Securities Act of 1933 (the “Exchange Notes”) in exchange for the same principal amount and substantially identical terms of the Senior Notes. On January 24, 2023, the Issuers completed a public offering of unsecured senior notes (together with the Exchange Notes, the “Registered Senior Notes”) in the aggregate principal amount of $2.0 billion. The unsecured senior notes were sold pursuant to a shelf registration statement. Guarantees — The Registered Senior Notes are guaranteed on a joint and several unsecured basis by Dell Technologies Inc. and its wholly-owned subsidiaries, Denali Intermediate, Inc. and Dell Inc. (collectively, the “Guarantors”). Basis of Preparation of the Summarized Financial Information — The tables below are summarized financial information provided in conformity with Rule 13-01 of the SEC’s Regulation S-X. The summarized financial information of the Issuers and Guarantors (collectively, the “Obligor Group”) is presented on a combined basis, excluding intercompany balances and transactions between entities in the Obligor Group. The Obligor Group’s amounts due from, amounts due to, and transactions with Non-Obligor Subsidiaries and VMware, Inc. and its consolidated subsidiaries (the “Related Party”) have been presented separately. The Obligor Group’s investment balances in Non-Obligor Subsidiaries have been excluded. The following table presents summarized results of operations information for the Obligor Group for the period indicated: Nine Months Ended November 3, 2023 (in millions) Net revenue (a) $ 6,807 Gross margin (b) 2,882 Operating income 599 Interest and other, net (c) (2,886) Loss before income taxes $ (2,287) Net loss attributable to Obligor Group $ (1,729) ____________________ (a) Includes net revenue from services provided and product sales to Non-Obligor Subsidiaries of $645 million and $89 million, respectively. (b) Includes cost of net revenue from the resale of solutions purchased from Non-Obligor Subsidiaries and the Related Party of $695 million and $284 million, respectively. Includes cost of net revenue from shared services provided by Non-Obligor Subsidiaries of $451 million. (c) Includes interest expense on inter-company loan payables of $2,002 million and other expenses from services provided by Non-Obligor Subsidiaries of $44 million. 84 Table of Contents The following table presents summarized balance sheet information for the Obligor Group as of the dates indicated: November 3, 2023 February 3, 2023 (in millions) ASSETS Current assets $ 2,028 $ 2,972 Intercompany receivables — 595 Due from related party, net 344 312 Short-term intercompany loan receivables — 227 Total current assets 2,372 4,106 Due from related party, net 239 440 Goodwill and intangible assets 14,605 14,818 Other non-current assets 3,173 3,009 Total assets $ 20,389 $ 22,373 LIABILITIES Current liabilities $ 5,164 $ 6,611 Intercompany payable 1,623 — Due to related party 67 110 Total current liabilities 6,854 6,721 Long-term debt 15,840 17,996 Intercompany loan payables 38,838 38,896 Other non-current liabilities 3,410 3,891 Total liabilities $ 64,942 $ 67,504 85 Table of Contents