DELL 10-K & 10-Q changes, risk factors and insider trading

As a global company with customers operating in a broad range of businesses and industries, our performance is affected by global and regional economic conditions and the demand for technology products and services in international markets. Adverse economic conditions may negatively affect customer demand, and could result in postponed or decreased spending amid customer concerns over elevated inflation and interest rates or slowing demand for theirour products, reduced asset values, volatile energy costs, the availability and cost of credit, and the stability of financial institutions, financial markets, businesses, local and state governments, and sovereign nations. In Fiscal 2025, global economic uncertainty adversely affected the demand for our products and services as some of our larger customers exhibited caution in their IT spending.

Factors contributing to weak or unstable global or regional economic conditions, including those attributable to geopolitical volatility (suchassociated aswith ongoingterrorism, military conflicts (including the Iran conflict), and terrorism),other events, extreme weather events (such as wildfires or flooding), international trade protection measures and disputes, or public health issuesissues, also could harm our business by contributing to product shortages or delays, supply chain disruptions, insolvency of key suppliers, customers and counterparties, increased product costs and associated price increases, reduced global sales, and other adverse effects on our operations. Any suchSuch effects in the past have had, and in future periods could havehave, a negative impact on our net revenue and profitability.

We operate in an industry in which there are rapid technological advances in hardware, software, and services offerings, including AI, cloud, and security-related offerings. Our ability to respond to such advances and to develop new or improved offerings is critical to our continued success. We face aggressive competition from a variety of competitors in all areas of our business, including companies that specialize in one or more of our product or service lines. Our competitors may provide offerings that are less costly, perform better, or include additional features. Further, our offering portfolios may quickly become outdated or our market share may quicklyrapidly erode. Our efforts to balance the mix of products and services to optimize profitability, liquidity, and growth may put pressure on our industry position. If we do not successfully adapt to industry developments and changing demand, and evolve our business to keep pace with the demands of current and prospective customers, we may be unable to develop and maintain a competitive advantage, which would adversely affect our unit share position, revenue, and profitability.

We obtain many products and all of our components from third-party vendors, many of which are located outside of the United States. In addition, significant portions of our products are assembled by contract manufacturers, primarily in various locations in Asia. A significant concentration of such outsourced manufacturing is performed by only a few contract manufacturers, often in single locations. We sell components to these contract manufacturers and generate large non-trade accounts receivables, an arrangement that would present a risk of uncollectibility if the financial condition of a contract manufacturer should deteriorate.

We may experience additional supply shortages and price increases caused by changes to raw material availability, increased demand, manufacturing capacity, labor shortages, public health issues, tariffs, trade disputes and protectionist measures, extreme weather events or effects of climate change, and significant changes in the financial condition of our suppliers. Because we generally maintain minimal levels of component and product inventories, a disruption in component or product availability could harm our ability to fill customer orders on a timely basis and at an acceptable price. The impact of supply constraints on our operations may be more acute during periods of rapid growth in demand for new products and services, such as the current demand for AI-optimized solutions. We aremay also subject to risks associated with our receipt from vendors ofreceive defective parts and products,products from vendors, which could require the replacement of such parts and products and expose us to reputational harm.

Our profitability is affected by our ability to achieve favorable pricing from vendors and contract manufacturers, including through negotiations for vendor rebates, marketing funds, and other vendor funding received in the normal course of business. Because these supplier negotiations are continual and reflect the evolving competitive environment, the variability in timing and amount of incremental vendor discounts and rebates can affectaffects our profitability. The vendor programs may change periodically, and changes in our business may result in increased reliance ofon vendors with less favorable pricing terms, potentially resulting in adverse profitability trends if we cannot adjust pricing or variable costs. An inability to establish a cost and product advantage, or determine alternative means to deliver value to customers, may adversely affect our revenue and profitability.

While we expect the buyer base for our AI solutions to continue to expand, to date our AI solutions have been purchased primarily by a small number of larger customers and cloud service providers. If we are not successful in continuing to expand sales to a broader base of customers, our ability to maintain growth in this area may be limited. Sales of AI to large customers may also cause fluctuations in our results of operations, as such large orders may occur in some periods and not others and are generally subject to intense competition and pricing pressure, which can have an impact on our margingross margins and results of operations. Larger orders may also require greater commitments of working capital, such as for purchases of key components, which could adversely affect our cash flow and expose us to the risk of holding excess and obsolete inventory due to delays or cancellations. These transactions may also involve larger amounts of credit or longer payment terms than have been typical for our business, increasing our risks in the event customers do not pay or make timely payment, particularly where our payment terms with major suppliers of underlying components differ from the payment terms of our customers. In addition, the accelerated rate of innovation of components from our suppliers may result in higher defects or failure of our offerings to perform, which could cause us to incur increased warranty costs, inventory provisions or impairments and could impact future sales.

The use of AI in our productsproducts, services, and servicesinternal processes presents ethical and legal risks to our business, financial condition, and results of operations. If our use of AI becomes controversial, we may experience loss of user trust, as well as brand or reputational harm, competitive injury, or legal liability. The use of AI technologies also could expose us to an increased risk of cybersecurity threats and incidents and claims or other adverse effects from infringements or violations of intellectual property,property rights, including claims related to AI technologies considered to have similarities to other AI technologies. Our use of such technologies could increase the risk of exposure of our or other parties’ proprietary confidential information, or other confidential or sensitive information, to unauthorized recipients, including inadvertent disclosure of confidential or sensitive information into publicly available third-party training sets,data, and may affect our ability to realize the benefit of, or adequately maintain, protect and enforce, our intellectual property or confidential information. Such risks related to the use of AI could, whether directly or indirectly, harm our results of operations, competitive position, and business.

AI is the subject of evolving review by various domestic and international governmental and regulatory agencies, including the SEC and the U.S. Federal Trade Commission, and laws, rules, directives and regulations governing the use of AI, such as the EU Artificial Intelligence Act,AI are changingrapidly proliferating and evolving rapidly.evolving. We may not always be able to anticipate how to respond to these legal frameworks for AI use and we may have to expend resources to adjust or audit our productsproducts, services, and servicesinternal use in certain jurisdictions, especially if the legal frameworks are not consistent across jurisdictions. In particular, use of personal data in foundational models and intellectual property ownership and license rights, including copyright, of generative and other AI output, have not been fully interpreted by courts or regulations. Any failure or perceived failure by us to comply with laws, rules, directives, and regulations governing the use of AI could have an adverse impact on our business, andincluding weby mayimpairing notour be ableability to claim intellectual property ownership and license rights on content or source code that we create using AI.

We must identify and address quality issues associated with our products, software, and services, many of which include third-party components. Although quality testing is performed regularly to detect quality problems and implement required solutions, failure to identify and correct significant product quality issues before the sale or shipment of such products to customers could result in lower sales, increased warranty or replacement expenses, and reduced customer confidence, which could harm our operating results.

We continue to make significant changes to modernize the way we work and make decisions, improve business outcomes and the customer experience, and reduce costs by leveraging new technology and optimizing business processes. We are pursuing disciplined cost management in coordination with our ongoing business modernization initiatives and will continue to take certain measures to reduce costs, including employee reorganizations, limitation of external hiring, employee reorganizations, and other actions to align our investments with our strategic priorities and customer needs. As a result of these actions, we may experience a loss of continuity, loss of accumulated knowledge, diminished employee productivity, disruptions to our operations, and operational inefficiencies during transitional periods. These actions could also negatively impact employee retention. We may experience delays or unanticipated costs in implementing our cost efficiency plans, which could prevent the timely or full achievement of expected cost efficiencies and adversely affect our competitive position and results of operations.

We routinely receive, collect, manage, store, transmit, and process large amounts of proprietary information and confidential data, including personally identifiable and other sensitive information, relating to our operations, products, partners, vendors, and customers. We face numerous sophisticated and evolving cyber threats of significant scale, volume, severity, and complexity, including threats specifically designed for or directly targeted at us, making it increasingly difficult to defend against security incidents successfully or to implement adequate preventative measures.

Our cybersecurity program may not always successfully manage or mitigate the effects of these risks. Future cyber-attacks or incidents, such as some of those we have experienced in the past, could persist undetected in our environments for a period of time. Despite our cybersecurity governance and investment in controls and security measures, threat actors, including nation states and state-sponsored organizations, pose a significant risk of penetrating or bypassing our security defenses, including by utilizing insider threat tacticstactics, or utilizingdeploying AI tools against our defenses, breaching our information technology systems, and misappropriating or compromising confidential and proprietary information of our company, our partners, vendors, or our customers, causing system disruptions and shutdowns, introducing ransomware, malware, or vulnerabilities into our products, systems, and networks or those of our customerscustomers, andpartners partners,or vendors, or accessing systems and networks of our customerscustomers, partners or partnersvendors through connectivity to or credentials taken from our network. In some casescases, these incidents, which are common in our industry for companies of our size, have resulted in successful attacks on our IT environments.

We are targeted by criminal and other threat actors that conduct cyber-attacks of our systems and networks on an ongoing basis. We have experienced cyber-attacks that leveraged compromised credentials of our partners, vendors, employees, and customers to gain unauthorized access to Dell Technologies, partner, and vendor systems and confidential information, including information about our customers, employees, and partners. These incidents have caused, and may in the future cause, disruption to parts of our business operations, and to the environments and operations of our partners, vendors, and customers, and such incidents could result in regulatory, investigative, recovery, remediation, contractual, and litigation expenses. We anticipate that our systemssystems, networks, and networksemployees will continue to be targeted by criminal and other threat actors with increasing frequency and potential harm. In particular, weWe expect that attacks by nation state actors and their agents mayto intensify during periods of geopolitical conflict. We also expect threat tactics leveraging AI to increase as AI technology availability and capability expand.

The costs to address cybersecurity risks, both before and after a security incident, could be significant, regardless of whether incidents result from an attack on us directly, on customers we service, or on partners or third-party vendors upon which we rely. The costs associated with cybersecurity tools and infrastructure and competition for scarce cybersecurity and IT resources have at times limited, and may in the future may limit, our ability to identify, eliminate, or remediate cybersecurity or other security vulnerabilities or problems or enact changes to minimize the attack surface of our network.

OurIn addition, our customers, partners, and third-party vendors continue to experience security incidents of varying severity and differing attack methods. These parties may possess or transmit our proprietary information and confidential data, including personal data, personallycredentials, identifiabletokens, information,access keys, and other sensitive information, which may be exfiltrated if they are affected by a security incident. Targeted cyber-attacks or those that result from a security incident directed at a partner or third-party vendor create a risk of compromise to our internal systems, products, services, and offerings, as well as the systems of our customers, which could result in interruptions, delays, or cessation of service that could disrupt business operations for usus, our partners and vendors, and our customers. Our proactive measures and remediation efforts may not always be successful or timely. In addition, compromises of our security measures, including through the use and the unapproved dissemination of proprietary information or sensitive or confidential data about us, our customers, partners or other third parties, could impair our intellectual property rights and expose us, our customers, partners, or such other third parties to a risk of loss or misuse of such information or data. Any such incidents could subject us to government investigations and regulatory enforcement actions, litigation, potential liability, and damage to our brand and reputation, or otherwise harm our business and operations.

Hardware, software, and applications that we produce or procure from third parties may contain defects in design or manufacture or other deficiencies, including security vulnerabilities that could interfere with the operation or security of our products, services, and offerings. In the event of a security vulnerability or other flaws in third-party components or software code, we may have to rely on multiple third parties to mitigate vulnerabilities. The mitigation techniques they deploy may be ineffective or result in adverse performance, system instability, or data loss, and may not always be available, or available on a timely basis. Further, our use of AI technologies, including generative and agentic AI, may make us susceptible to unanticipated security threats from adversaries as we incorporate such technologies into our internal systems, customer-facing services and products, while our understanding of AI-related security risks and protection methods continuescontinue to develop.

Any actual or perceived security vulnerabilities in our products or services, or those of third-party products we sell or in the open-source software or AI models we utilize, could lead to loss of existing or potential customers, and may impede our sales, manufacturing, distribution, outsourcing services, information technology solutions, and other critical functions and offerings. Failure to comply with internal security policies and standards, including secure development lifecycle practices, or to prevent or promptly mitigate security vulnerabilities in our products and offerings may adversely affect our brand and reputation, impact our ability to sell products in certain jurisdictions, and subject us to government investigations, regulatory enforcement actions, litigation, and potential liability resulting from our inability to fulfill our contractual obligations to our customers and partners.

Sales outside the United States accounted for approximately half45% of our consolidated net revenue for Fiscal 2025.2026. Our future growth rates and success are substantially dependent on the continued growth of our business outside of the United States. Our international operations face many risks and uncertainties, including varied local economic and labor conditions; political instability; public health issues; changes in the U.S. and international regulatory environments; the impacts of trade protection measures, including increases in tariffs and trade barriers, and other changes in international trade arrangements that could adversely affect our ability to conduct business in non-U.S. markets; changes in tax laws; potential theft or other compromise, and limited or unfavorable protection, of our technology, data, or intellectual property; copyright levies; and volatility in foreign currency exchange rates. We could incur additional operating costs, or sustain supply chain disruptions, due to any such changes. Any of these factors could negatively affect our international business results and growth prospects.

We have numerous arrangements with financial institutions that include cash and investment deposits, interest rate swap contracts, foreign currency option contracts, and forward contracts. As a result, we are subject to the risk that the counterparty to one or more of these arrangements will default, either voluntarily or involuntarily, on its performance under the terms of the arrangement. In times of market distress, a counterparty may default rapidly and without notice, and we may be unable to take action to cover itsour exposure, either because of lack of contractual ability to do so or because market conditions make it difficult to take effective action. If one of our counterparties becomes insolvent or files for bankruptcy, our ability to eventually to recover any losses suffered as a result of that counterparty’s default may be limited by the impaired liquidity of the counterparty or the applicable legal regime governing the bankruptcy proceeding. In the event of such a default, we could incur significant losses, which could harm our business and adversely affect our results of operations and financial condition.

We offer our ISG customers a range of consumption models for our services and solutions, including utility, subscription, as-a-Service, utility,leases, lease,loans, orand immediate pay models, designed to match customers’ consumption preferences. These solutions generally are multiyear agreements that typically result in recurring revenue streams over the term of the arrangement. Our financial results and growth depend, in part, on customers continuing to purchase our services and solutions over the contract life on the agreed terms. The contracts allow customers to take actions that may adversely affect our recurring revenue and profitability. These actions may include terminating a contract if our performance does not meet specified services levels, requesting rate reductions, reducing the use of our services and solutions or terminating a contract early upon payment of agreed fees. In addition, we estimate the costs of delivering the services and solutions at the outset of the contract. If we fail to estimate such costs accurately and actual costs significantly exceed estimates, we may incur losses on the contracts. We also are subject to the risk of loss under the contracts as a result of a default, voluntarily or involuntarily, in payment by the customer, whether because of financial weakness or other reasons.

Our contracts with U.S. federal, state, and local governments and with foreign governments represent a significant source of business and are subject to future funding that may affect the extension or termination of programs and to the right of such governments to terminate contracts for convenience or non-appropriation. In addition, there is pressure on governments to reduce spending on governments,spending, both domestically and internationally, notably in recent periods onby U.S. federal government agencies. Funding reductions, uncertainties or delays could adversely affect public sector demand for our products and services. In addition, if we violate legal or regulatory requirements, the applicable government could suspend or disbar us as a contractor, which would unfavorably affect our net revenue and profitability.

Failure to effectively hedge effectively our exposure to fluctuations in foreign currency exchange rates and interest rates could adversely affect our financial condition and results of operations.

We are continually under audit in various tax jurisdictions, including the United States. We may not be successful in resolving potential tax claims that arise from these audits. A final determination of tax audits or disputes may differ from what is reflected in our historical income tax provisions or benefits and accruals. An unfavorable outcome in certainsome of these matters could result inhave a substantialmaterial increaseimpact inon our taxresults expense.of operations, financial position, and cash flows. Further, our provision for income taxes could be adversely affected by changes in the valuation of deferred tax assets.

We invest a portion of our available funds in a portfolio consisting of both equity and debt securities of various types and maturities pending the deployment of these funds in our business. Our earnings performance could suffer from declines in fair value or impairment of our investments. Our equity investments consist of strategic investments in both marketable and non-marketable securities. Investments in marketable securities are measured at fair value on a recurring basis. We have elected to apply the measurement alternative for non-marketable securities. Under the alternative, we measure investments without readily determinable fair values at cost, less impairment, adjusted by observable price changes. Our debt securities generally are classified as held to maturity and are recorded in our financial statements at amortized cost. Our earnings performance could suffer from declines in fair value or impairment of our investments.

Evolving and varied stakeholder expectations and regulatory requirements with respect to sustainability and environmental, social, and governance (“ESG”) activities could harm our reputation, adversely affect our business, and expose us to regulatory proceedings and litigation.

Many stakeholders are increasingly focused on ESG considerations with evolving and varied expectations that could expose us to heightened scrutiny and various financial, legal, reputational, operational, compliance, and other risks. We make statements about sustainability and ESG goals and initiatives through our SEC filings, our annual ESG report, our other non-financial reports, information provided on our website, social media sites, press statements and other communications. Responding to these considerations and successfulSuccessful implementation of these goals and initiatives involves risks and uncertainties, is not guaranteed, and is subject to numerous conditions, as well as standards, processes, regulations, and methodologies that continue to evolve. Any failure, or perceived failure, by us to achievefurther our sustainability and ESG goals, further our initiatives, adhere to our public statements, comply with federal, state, or international ESG laws and regulations, or meet evolving and varied stakeholder expectations could harm our reputation, adversely affect our business, financial condition or results of operations, and expose us to liabilities under regulatory proceedings or litigation instituted in the United States or in other countries.

In recent periods, regulators in various jurisdictions have increasingly expressed or pursued opposingconflicting views, legislation, and expectations with respect to sustainability initiatives. Conflicting regulations and a lack of harmonization of ESG legal and regulatory environments across the jurisdictions in which we operate may create enhanced compliance risks and costs.

Global climateclimate-related change,risks, and legal, regulatory, or market measures related to climate change,climate, may negatively affect our business, operations, and financial results.

We are subject to climate-related risks associatedthat withcould the long-term effects of climate change onimpact the global economy and on the IT industry in particular. The physical risks associated with climate change include the adverse effects of carbon dioxide and other greenhouse gases on global temperatures, weather patterns, and the frequency and severity of natural disasters. Extreme weather and natural disasters within or outside the United States could make it more difficult and costly for us to manufacture and deliver our products to our customers, obtain production materials from our suppliers, or perform other critical corporate functions.

ConcernTransition over climate change could also result in transition risksrisks, such as shifting customer preferences or regulatory changes. Changing customer preferenceschanges, may also result in increased demands regarding our solutions, products, and services, including the use of packaging materials and other components in our products and their environmental impact on sustainability. These demands may cause us to incur additional costs or make other changes to other operations to respond to such demands, which could adversely affect our financial results.

ConcernIn addition, concern over climate change could result in new or more stringent legal requirements foraimed usat to reducereducing greenhouse gas emissions and other environmental impacts of our operations, improve ourimproving energy efficiency, or undertakeundertaking sustainability measures that exceed those we currently pursue. Any such regulatory requirements could cause disruptions in the manufacture of our products and result in increased procurement, production, and distribution costs.

We and our subsidiaries are subject to various anti-corruption laws that prohibit improper payments or offers of payments to foreign governments and their officials for the purpose of obtaining or retaining business, and are also subject to export controls, countrycountry- and product specificproduct-specific tariffs, customs, economic sanctions laws, and embargoes imposed by the U.S. government. Violations of the U.S. Foreign Corrupt Practices Act or other anti-corruption laws or export control, customs, trade, or economic sanctions laws may result in severe criminal or civil sanctions and penalties, and we and our subsidiaries may be subject to other liabilities that could have a material adverse effect on our business, results of operations, and financial condition.

We are subject to various human rights laws, including provisions of the EU Forced Labor Regulations, USU.S. Uniform Forced Labor Protection Act, and the Dodd-Frank Wall Street Reform and Consumer Protection Act intended to improve transparency and accountability concerning the supply of minerals originating from the conflict zones of the Democratic Republic of the Congo or adjoining countries. We incur costs to comply with the disclosure requirements of this last law and other costs relating to the sourcing and availability of minerals used in our products. Further, we may face reputational harm if our customers or other stakeholders conclude that we are unable to verify sufficiently verify the origins of the minerals used in our products.

We are highly dependent on the services of Michael S. Dell, our founder, Chief Executive Officer, and largest stockholder. Further, we rely on key personnel, including JeffJeffrey W. Clarke and other members of our executive leadership team, to support our business and increasingly complex product and services offerings. Our experienced executives are supported by employees in our U.S. and international operations who are highly skilled in product development, manufacturing, sales, and other functions critical to our future growth and profitability. If we lose the services of Mr. Dell or other key personnel, we may not be able to locate suitable or qualified replacements, and we may incur additional expenses to recruit replacements, which could severely disrupt our business and growth. We face intensive competition, both within and outside of our industry, in retaining and hiring individuals with the requisite expertise. As a result of this competition, we may be unable to continue to attract, retain, and motivate suitably qualified individuals at acceptable compensation levels who have the managerial, operational, and technical knowledge and experience to meet our needs. Failure by us to do so could adversely affect our competitive position and results of operations.

Sales of a substantial number of shares of the Class C Common Stock in the public market, or the perception that these sales may occur, could adversely affect the market price of the Class C Common Stock, which could make it more difficult for investors to sell their shares of Class C Common Stock at a time and price that they consider appropriate. These sales, or the possibility that these sales may occur, also could impair our ability to sell equity securities in the future at a time and at a price we deem appropriate, andas well as our ability to use Class C Common Stock as consideration for acquisitions of other businesses, investments, or other corporate purposes. As of March 17,9, 2025,2026, we had a total of approximately 359318 million shares of Class C Common Stock outstanding.

As of March 17,9, 2025,2026, the 277 million outstanding shares of Class A Common Stock held by the MD stockholders and the 6251 million outstanding shares of Class B Common Stock held by the SLP stockholders are convertible into shares of Class C Common Stock at any time on a one-to-one basis. Such shares, upon any conversion into shares of Class C Common Stock, will be eligible for resale in the public market pursuant to Rule 144 under the Securities Act of 1933 (the “Securities Act”),Act, subject to compliance with conditions of Rule 144. From January 31, 2026 to March 9, 2026, the SLP stockholders converted approximately 1 million shares of Class B Common Stock on a one-for-one basis into approximately 1 million shares of Class C Common Stock.

We haveare entereda intoparty to a registration rights agreement with holders of substantially all outstanding shares of Class A Common Stock (which are convertible into the same number of shares of Class C Common Stock), holders of all outstanding shares of Class B Common Stock (which are convertible into the same number of shares of Class C Common Stock), and, as of March 17,9, 2025,2026, holders of approximately 3820 million outstanding shares of Class C Common Stock, pursuant to which we have granted such holders and their permitted transferees shelf, demand and/or piggyback registration rights with respect to such shares (including the shares of Class C Common Stock into which the Class A Common Stock and the Class B Common Stock may be converted). Registration of those shares under the Securities Act would permit such holders to sell the shares into the public market.

As of January 31,30, 2025,2026, 2622 million shares of Class C Common Stock that were issuable upon the exercise, vesting, or settlement of outstanding stock options, restricted stock units, or deferred stock units under our stock incentive plan, all of whichplan would have been, upon issuance, eligible for sale in the public market, subject where applicable to compliance with Rule 144, and an additional 5445 million shares of Class C Common Stock were authorized and reserved for issuance pursuant to potential future awards under the stock incentive plan. We also may issue additional stock options in the future that may be exercised for additional shares of Class C Common Stock and additional restricted stock units or deferred stock units that maywill vest.provide for delivery of shares of Class C Common Stock upon vesting of such awards. We expect that all shares of Class C Common Stock issuable with respect to such awards will be registered under one or more registration statements on SEC Form S-8 under the Securities Act and available for sale in the open market.

We are controlled by the MD stockholders, who, separately and together with the SLP stockholders, collectively own common stock with a substantial majority of the voting power of all our outstanding series of common stock and are able to effectively control our actions, including approval of mergers and other significant corporate transactions.

Further, as of March 17,9, 2025,2026, the MD stockholders together with the SLP stockholders collectively beneficially owned 54.0%53.8% of our outstanding common stock. This concentration of ownershipownership, together with the disparate voting rights of our common stockstock, may delay or deter possible changes in control of Dell Technologies, which may reduce the value of an investment in the Class C Common Stock. So long as the MD stockholders and the SLP stockholders continue to own common stock representing a significant amount of the combined voting power of our outstanding common stock, even if such amount is, individually or in the aggregate, less than 50%, such stockholders will continue to be able to strongly influence our decisions.

We are a “controlled company” within the meaning of the rules of the New York Stock Exchange (the “NYSE”) because the MD stockholders hold common stock representing more than 50% of the voting power eligible to vote in the election of directors. As a result, holders of Class C Common Stock do not have the same protections afforded to stockholders of companies that are subject to all of the NYSE’s corporate governance requirements. Because we are a controlled company, we may elect not to comply with certain corporate governance requirements under NYSE rules, including the requirements that we have a board composed of a majority of “independent directors,” as defined under NYSE rules, and that we have a compensation committee and a nominating/corporate governance committee each composed entirely of independent directors. Although we currently maintain a board composed of a majority of independent directors and three standing committees of the board composed entirely of independent directors, we may decide in the future to change our board membership and committee composition so that the board is not composed of a majority of independent directors or one or more committeescommittees, other than the audit committee, are not composed entirely of independent directors.

Our payment of cash dividends, as well as the rate at which we pay dividends, is solely at the discretion of our Board of Directors. Further, dividend payments, if any, are subject to our financial results and the availability of statutory surplus to pay dividends. These or other factors could result in a change to our current dividend policy.

This management’s discussion and analysis should be read in conjunction with the audited Consolidated Financial Statements and accompanying Notes included in this Annual Report on Form 10-K. This section generally discusses Fiscal 2026 results compared to Fiscal 2025 results. Discussion of Fiscal 2025 results compared to Fiscal 2024 results, to the extent not included in this Form 10-K, are presented in “Part II — Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Company’s Annual Report on Form 10-K generally discusses Fiscal 2025 and Fiscal 2024 items. This section also discusses Fiscal 2024 and Fiscal 2023 results, asfor the Companyfiscal revisedyear itsended FiscalJanuary 2024 items to correct for a misstatement in its financial statements discovered during the fourth quarter of Fiscal31, 2025. The revisions ensure comparability across all periods reflected herein. For additional information, see Note 1 and Note 22 of the Notes to the Consolidated Financial Statements included in this report.

Unless the context indicates otherwise, references in this reportmanagement’s discussion and analysis 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 years ended January 30, 2026, January 31, 2025, and February 2, 2024, and February 3, 20232024 as “Fiscal 2026,” “Fiscal 2025,” and “Fiscal 2024,” and “Fiscal 2023,” respectively. BothAll Fiscalfiscal 2025years and Fiscal 2024presented included 52 weeks,weeks. whileWe refer to our fiscal year ending January 29, 2027 as “Fiscal 2023 included 53 weeks.2027.”

•Client Solutions Group (“CSG”) — CSG includes offerings designed for commercial and consumer customers. Our CSG portfolio includes branded PCs,personal computers (“PCs”), including notebooks, desktops, and workstations, branded peripherals, and third-party software and peripherals. CSG also includes services offerings, such as configuration, support and deployment, and extended warranties. Our major product categories within CSG include our commercial offerings and consumer offerings.

Our other businesses primarily consist of our historical resale of standalone offerings of VMware LLC (formerly VMware, Inc. and individually and together with its subsidiaries, “VMware”), referred to as “VMware Resale,” and offerings of SecureWorks Corp. (“Secureworks”). through the date of the sale of Secureworks as discussed below. These businesses are divested businesses or their offerings are no longer actively sold, and are not classified as reportable segments, either individually or collectively. Their operating results are reported within Corporate and other. On OctoberFebruary 21,3, 2024,2025, the sale of Secureworks announced that it had entered into a definitive agreement providing for its sale to Sophos Inc., an affiliate of Thoma Bravo, L.P., a private equity and growth capital firm. The transaction was completed on February 3, 2025, subsequent to the close of the Company’s fiscal year ended January 31, 2025, in an all-cash transaction for a purchase price of approximately $0.9 billion. We received total cash consideration for the equity interest held in Secureworks of approximately $0.6 billion, resulting in a gain on sale of $0.2 billion recognized in interest and other, net in the Consolidated Statements of Income during Fiscal 2026.

We offer customers choicechoices in how they acquire our solutions, including traditional purchasing and offerings under the Dell Payment Solutions portfolio. These offerings provide both payment and consumption solutions, including as-a-Service,utility, subscription, utility,as-a-Service, leases, and loans, which allow our customers to pay over time and provide them with operational and financial flexibility. Dell Financial Services and its affiliates (“DFS”) support financing solutions and services as part of the portfolio. For additional information about our financing arrangements, see Note 5 of the Notes to the Consolidated Financial Statements included in this report.

Fiscal 2025 Significant Developments — During Fiscal 2025,2026, we executed our strategy withand strongdelivered exceptional operating results, generating significant net revenue and operating income growth. The following trends and conditions affected the environment in which we operated:

•Demand for AI-optimized solutionsservers: Our ISG business continued to benefit from significant increased demand for our AI-optimized solutionsservers offerings as customers continue to adopt and further integrate AIAI, intoresulting their operations. Asin a resultsubstantial ofincrease the continued strong demand for our AI-optimized servers,in backlog levels for such offerings remained elevated as we exited the fiscalyear. year.Given the scale of the AI opportunities, the varying stages of customer readiness, and the frequency of component part updates or transitions, there is inherent non-linearity in the timing of demand and subsequent shipments for our AI-optimized servers offerings, which continues to drive variability in our revenue.

We remain focused on executing our key strategic priorities, buildingcreating long-term value creation for our stakeholders,shareholders, and addressing our customers’ needsneeds. whileWe continuinghave tothe makefollowing prudentexpectations decisionsregarding our performance in responseFiscal to the environment. We expect margin rate pressure resulting from a continuing shift in mix towards our AI-optimized servers and a competitive environment. We look to balance profitability and growth while maintaining disciplined pricing as we navigate through competitive pricing pressures.2027:

•Operating expenses: We continue to advance our own capabilities to change the way we work and make decisions, improve business outcomes and the customer experience, and reduce costs by leveraging new technology and optimizing business processes. We remain committed to disciplined cost management in coordination with our ongoing business modernization initiativesinitiatives, and expect continuedto reductionscontinue into scale operating expenses as we take certaintargeted measures to reduce costs, including employee reorganizations, limitation of external hiring, employee reorganizations, and other actions to align our investments with our strategic priorities and customer needs. We anticipate these actions will result in additional reductions in our overall headcount. We believe our unique operating advantages provide a foundation to foster growth, drive efficiencies, and continue to position us for long-term success.

Relationship with VMware — OnIn NovemberMarch 22,2024, 2023,following the acquisition of VMware was acquired by Broadcom, and subsequently announced changes to its go-to-market approach for VMware offerings that impacted our commercial relationship with VMware. On March 25, 2024, we terminated our Commercial Framework Agreement with VMware, which provided the framework under whichwhereby we andacted VMwareas continueda our commercial relationship following our spin-offdistributor of VMware onstandalone Novemberproducts 1,and 2021.services. We no longer act as a distributor of Broadcom’s VMware standalonethose products and services, although we will continue to support customers that have purchased resale offerings sold in prior periods. We continue to integrate and embed certain VMware products and services with selected Dell Technologies’ offerings to end-users, such as through our VxRail solution.solution for end-user customers. The results offor suchthis offeringsintegrated offering are reflected within CSG or ISG, depending upon the nature of the underlying offering sold.ISG.

VMware was a related party until the date of its acquisition by Broadcom.Broadcom on November 22, 2023. The acquisition terminated the preexisting related party relationship with VMware such that no related party relationship exists with either Broadcom or VMware effective as of November 22, 2023. For more information regarding the impact of the Broadcom acquisition of VMware and our prior related party transactions with VMware, see Note 19 of the Notes to the Consolidated Financial Statements included in this report.

ISG — We expect that ISG will continue to be impactedinfluenced by the evolvingdynamic nature of the IT infrastructure market and the competitive environment.landscape. With our extensive scale and market-leading solutions portfolio, we believe we are well-positioned to addressnavigate the ongoingthese competitive dynamics and trends inevolving technology andtrends to meet customer needs. ThroughBy leveraging our collaborative, customer-focused approach to innovation, we striveaim to deliver relevant new and relevantnext-generation solutions and software to our customers quicklyswiftly and efficiently. We continueremain to focusfocused on expanding our customer base expansionand andenhancing the lifetime value of our customer relationships.

We anticipate that ISG will continue to benefit from technology advancements and interest in AI as customers continue to adopt and integrate AI into their operations.AI. The timing of customer purchases reflects the varying stages of adoption of AI by different customer segments and drives variability in our revenue. To meet the growing demand and increasing complexity of our AI-optimized servers offerings, we have increased our purchases of certain components with suppliers, which has resulted in increased inventory levels, higher purchase obligations, and new working capital dynamics. Additionally, frequent component part updates or transitions create additional challenges in managing demand and supply levels. While we have seen lead times shorten, we anticipate the next-generationnext generation of these componentscomponents, for which demand remains high, will be subject to supply constraints as demand for these components remains high.constraints.

We expect that growth in data 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 continue to expand our offerings in external storage arrays, which incorporate flexible, cloud-based functionality. We benefit from offering solutions that addressprovide software-definedthe storage,foundation hyper-convergedfor infrastructure,AI, enabling organizations to store, protect, and modularmanage solutionsdata basedacross onenvironments server-centricfor architectures.both traditional and AI workloads. Our storage business is subject to seasonal trends, which may continue to impact ISG results.

CSG — Our CSG offerings are an important element of our strategy, generating strong cash flow and opportunities for cross-selling of complementary solutions. We participatemaintain ina broad presence across all segments of the PC marketmarket. withOur astrategic focus is on commercialdriving share gain while balancing profitability across all segments, enhancing our product portfolio to address evolving customer needs, and high-endexpanding consumerour computingpresence devices, which we believe representacross the mostbroader stablePC andecosystem profitablethrough markets.branded peripherals. We anticipate that CSG will benefit from advances in AI over the long-term as customers will require PCs with the ability to run their complex AI workloads.

Competitive dynamics remain an important factor in our CSG business and continue to impactinfluence pricing and operating results. We are 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 and to be influenced by the timing and scale of the anticipated PC refresh cycle.

Recurring Revenue and Consumption Models — We expect that our flexible consumption models 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.

Foreign Currency Exposure — We manage our business on a U.S. Dollar basis. However, we have a large global presence, generating approximately half45% and 50% of our net revenue from sales to customers outside of the United States during Fiscal 20252026 and Fiscal 2024.2025, respectively. 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.

Other Macroeconomic Risks and Uncertainties — During Fiscal 2026, a number of countries, including the United States, imposed or proposed tariffs on imports, and may continue to do so. The impacts of trade protection measures, including increaseschanges in tariffs and trade barriers, changes in government policies and international trade arrangements, geopolitical volatility,volatility associated with terrorism, military conflicts (including the Iran conflict), and other events, and global macroeconomic conditionsconditions, (includingor thoseuncertainty inregarding China)the impact of proposed or future trade protection measures, may affect our abilityresults toof conduct businessoperations in some non-U.S. markets. We monitorcontinue to leverage the agility and seekscale of our world-class supply chain to mitigate theseimpacts risksof withtrade adjustmentsprotection measures and will continue to ourrespond manufacturing,to supplychanging chain,market andconditions distributionas networks.needed.

•Amortization of Intangible Assets — Amortization of intangible assets primarily consists of the amortization of customer relationships, developed technology, and trade names. In connection with our acquisition by merger of EMC, referred to as the “EMC mergerCorporation transaction,”in and the acquisition of Dell by Dell Technologies Inc., referred to as the “going-private transaction,”2016, all of the tangible and intangible assets and liabilities of EMC and Dell, respectively, were accounted for and recognized at fair value on the transaction dates.date. We exclude amortization charges for the amortization of intangible assets as they do not reflect our current operating performance and charges are significantly impacted by the timing and magnitude of our acquisitions and, as a result, may vary in amount from period to period.

•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 New York Stock Exchange on the date of grant.grant or most recent preceding trading day if the grant date falls on a non-trading day. Although stock-based compensation is an important aspect of the compensation of our employees and executives, we exclude such expense because the fair value of the stock-based awards may fluctuate based on factors unrelated to the operating performance of the business and may bear little resemblance to the actual value realized upon the vesting or future exercise of the related stock-based awards.

•Other Corporate Expenses — Other corporate expenses consist primarily of severance expenses, transaction-related impacts of the sales of businesses, payroll taxes associated with stock-based compensation, incentive charges related to equity investments, transaction-related expenses, facility action costs, transaction-related expenses, and impairment charges. Severance costs are primarily related to severance and benefits for employees terminatedimpacted pursuant toby cost management initiatives. During Fiscal 2026, Fiscal 2025, and Fiscal 2024, and Fiscal 2023, we recognized $0.6 billion, $0.7 billion, $0.6 billion, and $0.5$0.6 billion, respectively, of severance expense related to workforce reduction activities. During Fiscal 2023,2026, otherwe corporaterecognized expensesa also included $0.9$0.2 billion ofgain net expense recognized within interest and other, net, in connection with an agreement to settle the Class V transaction litigation. See Note 11 of the Notesrelated to the Consolidated Financial Statements included in this report for information about this matter. Transaction-related expenses typically consistsale of acquisition, integration, and divestitures related costs, primarily representing costs for legal, banking, consulting, and advisory services, and are expensed as incurred.Secureworks. Although we may incur these types of expensesitems in the future, we exclude other corporate expenses as they can vary from period to period, are significantly impacted by the timing and nature of these events, and are not used by management in assessing operating performance of the business.

•Aggregate Adjustment for Income Taxes — The aggregate adjustment for income taxes is the estimated combined income tax effect for the adjustments described above and determined based on the tax jurisdictions where those adjustments were incurred, as well as an adjustment for discrete tax items. During Fiscal 2025, the aggregate adjustment for income taxes included discrete tax benefits of $0.4 billion related to changes in uncertain tax benefits resulting from the expiration of certain U.S. statutes of limitations and $0.2 billion related to stock-based compensation. We exclude these benefits or charges for purposes of calculating non-GAAP net income due to the variability in recognition of discrete tax items from period to period. The tax effects are determined based on the tax jurisdictions where the above items were incurred. See Note 12 of the Notes to the Consolidated Financial Statements included in this report for additional information about our income taxes. Beginning in Fiscal 2025, ourOur non-GAAP income tax was calculated using a fixed estimated annual tax rate that is determined based on historical trends and projections for the current fiscal year. We may adjust our estimated annual tax rate during the fiscal year to take into account events that would significantly impact our income tax expense, including significant changes resulting from tax legislation, material changes in geographic mix of net revenue and expenses, changes to our corporate structure, and other significant events.

In addition to the above measures, we use free cash flow and adjusted free cash flow as non-GAAP liquidity measures to evaluate our performance. As presented in the following table, we define free cash flow as cash flow from operations after excluding capital expenditures and capitalized software development costs, net. To measure adjusted free cash flow, we exclude the impact of financing receivables and equipment under operating leases from free cash flow, as the initial funding of these DFS offerings at the time of origination is largely subsequently replaced with cash inflows from our DFS debt,related the majority of which is asset-backed.debt.

During Fiscal 2025,2026, net revenue increased by 8%,19% driven by an increase in ISG net revenue and, to a lesser extent, CSG net revenue that was partially offset by a decrease in Corporate and other net revenue and, to a lesser extent, CSG net revenue. The increase in ISG net revenue was primarily driven by growth in our AI-optimized servers offerings and, to a lesser extent, our traditional servers and networking offerings. The increase in CSG net revenue was attributable to an increase in sales of our commercial offerings. Corporate and other net revenue declined primarily due to a decrease in VMware Resale revenuerevenue, as we no longer act as a distributor of standalone VMware offerings.offerings, The decline in CSG net revenue was attributableand, to a decreaselesser inextent, salesthe sale of our consumer offerings.Secureworks.

During Fiscal 2025,2026, operating income and non-GAAP operating income increased by 15%31% to $6.2$8.1 billion and 8%17% to $8.5$10.0 billion, respectively. During Fiscal 2025, theThe increases in operating income and non-GAAP operating income were primarily attributable to an increase in ISG operating income that was driven by our servers and networking offerings and, to a lesser extent,and our storage offerings, which was partially offset by a decrease in CSG operating income.offerings.

During Fiscal 2025, operating income and non-GAAP2026, operating income as a percentage of net revenue increased 4070 basis points to 6.5%7.2%. and remained flat at 8.9%, respectively. The operatingOperating income andas non-GAAPa operatingpercentage incomeof ratesnet duringrevenue thebenefited current year were affected byfrom the favorable impact of a decreasedecline in operating expense rate thatas wasa drivenresult byof strong ISG net revenue growth coupled with continued disciplined cost management.management and, to a lesser extent, lower other corporate expenses. The favorable impact of a decrease in operating expense rate was partially offset by a decline in gross margin rate as a percentageresult of net revenue due to a shift in mix towards our AI-optimized serverservers offerings and a competitive CSG pricing environment.offerings.

During Fiscal 2025,2026, net revenue increased 8%, primarily19%, driven by an increase in ISG net revenue and, to a lesser extent, CSG net revenue that was partially offset by a decrease in Corporate and other net revenue and, to a lesser extent, CSG 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 Fiscal 2025,2026, product net revenue increased 11%27%, due to an increase in ISG product net revenue and, to a lesser extent, CSG product net revenue. The increase in ISG product net revenue was primarily driven by growth in our AI-optimized servers offerings and, to a lesser extent, our traditional servers and networking offerings. The increase was partially offset by a decrease in CSG product net revenue asreflected a result of a decreasegrowth in the average selling prices of our CSGcommercial offeringsofferings, and,which towas apartially lesseroffset extent,by alower declinedemand in units sold withinfor our consumer offerings, as well as a decline in Corporate and other product net revenue as we no longer act as a distributor of standalone VMware offerings.

•Services Net Revenue — Services net revenue includes revenue from our services offerings and support services related to hardware products and software licenses. During Fiscal 2025,2026, services net revenue wasdecreased flat4% as the growth within CSG services net revenue and,due to a lesser extent, ISG services net revenue was offset by a decline in Corporate and other services net revenue. The increase in CSG services net revenuedecline was primarily due to CSGa third-party software support and maintenance as well as support and maintenance associated with products solddecrease in priorVMware periods.Resale The increase in ISG services net revenue was primarily due to support and maintenance associated with products sold in prior periods. Corporate and other services net revenue declinedrevenue, as we no longer act as a distributor of standalone VMware offerings.offerings and, to a lesser extent, the sale of Secureworks. The decline was partially offset by growth within services net revenue attributable to ISG and CSG, which was driven by support and maintenance associated with products sold in prior periods within both CSG and ISG and higher AI-optimized servers offerings within ISG.

A substantial portion of services net revenue is derived from offerings that have been deferred over a period of time,time. and, asAs 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 increased during Fiscal 20252026 increased in the AmericasAmericas, driven by our AI-optimized servers offerings, and, to a lesser extent, APJin EMEA and remained flat in EMEA.APJ.

During Fiscal 2025, both2026, gross margin and non-GAAP gross margin increased 1%,7% to $21.3$22.7 billion and $21.86% to $23.2 billion, respectively, drivenprimarily bydue to an increase in ISG gross margin that was largely offsetdriven by a decreasegrowth in CSGour grossservers margin.and networking offerings and, to a lesser extent, growth in our core storage offerings. The increase in ISG gross margin was primarilypartially attributableoffset toby growtha decline in ourCorporate AI-optimizedand server offerings and, to a lesser extent, our storage offerings. The decrease in CSGother gross margin wasdriven primarilyby attributablethe tosale aof competitive pricing environment.Secureworks.

During Fiscal 2025,2026, gross margin percentage and non-GAAP gross margin percentage decreased 160220 basis points to 22.2%20.0% and 170240 basis points to 22.8%,20.4%, respectively. The decreases in gross margin percentage and non-GAAP gross margin percentage were primarily driven by a shift in mix towards our AI-optimized serverservers offerings and a competitive CSG pricing environment.offerings.

During the second quarter and first quartersix months of Fiscal 2027, we executed our strategy and delivered exceptional operating results, generating significant net revenue and operating income growth. The following trends and conditions affected the environment in which we operated:

•Macroeconomic environment: We experiencedcontinued to experience substantial demand growth across our ISG offerings, resulting in ISG net revenue growth and a continued shift in the mix of the business towards our ISG offerings. Additionally, the demand environment was significant for our CSG offerings, resulting in CSG net revenue growth.

•Supply Chainchain: We experienced an increase in input costs, driven primarily by higher component costs. Strong and accelerating industry demand for AI‑optimized solutions, together with current limitations in capacity from memory manufacturers, has resulted in global supply constraints and substantial inflation in memory component costs.

•Revenue: Overall, whilewe customersexpect continueIT environments to reassessenable theirgrowth, spendingproductivity, prioritiesand throughoutcompetitive theadvantage yearfor inour lightcustomers. ofAs thea dynamic commodity supply environment,result, we expectanticipate significant ISG and strong CSG net revenue growth. We expect ISG net revenue growth will be driven largely by increased demand for our servers and networking offerings and, to a lesser extent, our storage offerings. We anticipate CSG net revenue growth to be driven in part by the continuation of the PC refresh cycle.

We anticipate that ISG will continue to benefit from technology advancements and interest in AI as customers continue to adopt and integrate AI. The timing of customer purchases reflects the varying stages of adoption of AI by different customer segments and drives variability in our revenue. To meet the growing demand and increasing complexity of our AI-optimized servers offerings, we have increased our purchases of certain components with suppliers, which has resulted in increased inventory levels, higher purchase obligations, and new working capital dynamics. Additionally, frequent component part updates or transitions may create additional challenges in managing demand and supply levels. While we have seen lead times shorten, we anticipate the next generation of these components, for which demand remains high, will be subject to supply constraints.

Foreign Currency Exposure — We manage our business on a U.S. Dollar basis. However, we have a large global presence, generating approximately 45% and 50%40% of our net revenue from sales to customers outside of the United States during both the second quarter and first quartersix months of Fiscal 2027 and 40% and 45% during the second quarter and first quartersix months of Fiscal 2026, respectively. As a result, our operating results can be 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.

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, and non-GAAP earnings per share - diluted, as defined by us, exclude amortization of intangible assets, stock-based compensation expense, other corporate (income) expenses and, for non-GAAP net income and non-GAAP earnings per share - diluted, 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.

•Other Corporate (Income) Expenses — Other corporate (income) expenses consist primarily of severance expenses, transaction-related impacts of the sales of businesses, payroll taxes associated with stock-based compensation, incentive charges related to equity investments, and transaction-related expenses. Severance costs are primarily related to severance and benefits for employees impacted by cost management initiatives. During the first quartersix months of Fiscal 2027,2027 and Fiscal 2026, we recognized $0.2$0.5 billion and $0.3 billion, respectively, of severance expense related to workforce reduction activities. During the first quartersix months of Fiscal 2026, we recognized a $0.2 billion gain related to the sale of our subsidiary SecureWorks Corp. (“Secureworks”). Although we may incur these types of items in the future, we exclude other corporate (income) expensesexpenses, as they can vary from period to period, are significantly impacted by the timing and nature of these events, and are not used by management in assessing operating performance of the business.

•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. During the first quartersix months of Fiscal 2027, we recognized a $0.6 billion gain from our strategic investment portfolio related to a single investee. See Note 3 of the Notes to the Condensed Consolidated Financial Statements included in this report for additional information on our strategic investment activity. We exclude fair value adjustments on equity investments given the volatility in ongoing adjustments to the valuation of these strategic investments and because such adjustments are unrelated to the operating performance of our business.

During the second quarter and first quartersix months of Fiscal 2027, net revenue increased by 88%,58% and 71%, respectively, driven by an increase in ISG net revenue and, to a lesser extent, CSG net revenue that was partially offset by a decrease in Corporate and other net revenue. The increase in ISG net revenue was primarily driven by growth in our AI-optimized servers offerings and, to a lesser extent, our traditional servers and networking offerings and our storage offerings. The increase in CSG net revenue was primarily attributable to an increase in sales of our commercial offerings. Corporate and other net revenue declined primarily due to a decrease in VMware Resale revenue, as we no longer act as a distributor of standalone VMware offerings.

During the firstsecond quarter of Fiscal 2027, operating income and non-GAAP operating income increased by 214%204% to $3.7$5.4 billion and 154%160% to $4.2$5.9 billion, respectively. During the first six months of Fiscal 2027, operating income and non-GAAP operating income increased by 208% to $9.0 billion and 157% to $10.2 billion, respectively. The increases were primarily attributable to an increase in ISG operating income and, to a lesser extent, CSG operating income. The increase in ISG operating income was driven by our servers and networking offerings and, to a lesser extent, our storage offerings. The increase in CSG operating income was driven primarily by our commercial offerings.

During the second quarter and first quartersix months of Fiscal 2027, operating income as a percentage of net revenue increased 550 basis points to 11.5% and 450 basis points to 10.0%, respectively. During the second quarter and first six months of Fiscal 2027, non-GAAP operating income as a percentage of net revenue increased 330490 basis points to 8.3%12.6% and 260380 basis points to 9.7%,11.2%, respectively. Operating income and non-GAAP operating income as a percentage of net revenue benefited from the favorable impact of a decline in operating expense rate as a result of substantial net revenue growth. TheDuring favorablethe impactsecond quarter of Fiscal 2027, operating expenseincome and non-GAAP operating income rate wasalso partiallybenefited offsetfrom byan a declineincrease in gross margin rate duedriven toby adisciplined shift in mix towards our AI-optimized servers offerings.pricing.

Cash provided by operating activities was $4.1$6.3 billion during the first quartersix months of Fiscal 2027 and was driven by net revenue growthgrowth, profitability, and profitability,working capital dynamics, partially offset by workinghigher capitalfinancing dynamics.receivables, Workingall capitalof waswhich factors were primarily affected by increased demand for our AI-optimized serversISG offerings. During the first quartersix months of Fiscal 2026, cash provided by operating activities was $2.8$5.3 billion and was driven by profitabilitynet revenue growth, profitability, and similar working capital dynamics as well as by other business impacts, including annual incentive-based personnel-related payments.dynamics. See “Liquidity, Cash Requirements, and Market Conditions” for additional information about our cash flow metrics.

During the second quarter and first quartersix months of Fiscal 2027, net revenue increased 88%,58% and 71%, respectively, driven by an increase in ISG net revenue and, to a lesser extent, CSG net revenue that was partially offset by a decrease in Corporate and other 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 second quarter and first quartersix months of Fiscal 2027, product net revenue increased 117%72% and 91%, respectively, due to an increase in ISG product net revenue and, to a lesser extent, CSG product net revenue. The increase in ISG product net revenue was primarily driven by growth in our AI-optimized servers offerings and, to a lesser extent, our traditional servers and networking offerings and our storage offerings. The increase in CSG product net revenue was primarily attributable to growth in our commercial offerings.

•Services Net Revenue — Services net revenue includes revenue from our services offerings and support services related to hardware products and software licenses. During both the second quarter and first quartersix months of Fiscal 2027, services net revenue decreasedremained 1%flat due toas a decline in Corporate and other services net revenue, whichrevenue was driven by a decrease in VMware Resale revenue. The decline was largely offset by an increase in ISG services net revenue, which was driven by higher AI-optimized servers offerings and support and maintenance associated with products sold in prior periods.revenue.

From a geographical perspective, net revenue increased in the Americas, the Europe, Middle East and Africa region (“EMEA”), and the Asia-Pacific and Japan region (“APJ”) during the second quarter and first quartersix months of Fiscal 2027, most notably within the Americas.

During the firstsecond quarter of Fiscal 2027, gross margin and non-GAAP gross margin increased 58%80% to $7.8$9.8 billion and 57%78% to $7.9$9.9 billion, respectively,respectively. During the first six months of Fiscal 2027, gross margin and non-GAAP gross margin increased 70% to $17.6 billion and 68% to $17.9 billion, respectively. The increases in gross margin and non-GAAP gross margin were primarily due to an increase in ISG gross margin and, to a lesser extent, CSG gross margin. The increase in ISG gross margin was driven by growth in our servers and networking offerings and, to a lesser extent, our storage offerings. The increase in CSG gross margin was primarily driven by growth in our commercial offerings.

During the firstsecond quarter of Fiscal 2027, product gross margin percentage and non-GAAP productgross margin percentage increased 260 basis points to 20.9% and 240 basis points to 21.1%, respectively, driven by disciplined pricing. During the first six months of Fiscal 2027, gross margin percentage and non-GAAP gross margin percentage decreased 10 basis points to 19.4% and 30 basis points to 13.8% and 60 basis points to 13.9%,19.7%, respectively, primarily due to a shift in mix towards our AI-optimized servers offerings.offerings, the effect of which was largely offset by disciplined pricing.

•ServicesProduct Gross Margin — During the firstsecond quarter of Fiscal 2027, servicesproduct gross margin and non-GAAP servicesproduct gross margin increased 3%146% to $2.5$7.1 billion and 5%143% to $2.6$7.2 billion, respectively. During the first six months of Fiscal 2027, product gross margin and non-GAAP product gross margin increased 130% to $12.4 billion and 127% to $12.5 billion, respectively. The increases were attributable to an increase in ISG servicesproduct gross margin,margin whichand, to a lesser extent, CSG product gross margin. The increase in ISG product gross margin was primarily driven by higher support and maintenance associated with products soldgrowth in prior periods and increased demand for our servers and networking offerings and, to a lesser extent, our storage offerings. The increase in CSG gross margin was primarily attributable to growth in our commercial offerings.

During the firstsecond quarter of Fiscal 2027, services gross margin percentage and non-GAAP services gross margin percentage increased 160240 basis points to 44.1%46.2% and 260210 basis points to 46.0%,47.0%, respectively. During the first six months of Fiscal 2027, services gross margin percentage and non-GAAP services gross margin percentage increased 210 basis points to 45.2% and 240 basis points to 46.5%, respectively, primarily driven by a shift in mix, as we no longer act as a distributor of standalone VMware offerings.

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 second quarter and first quartersix months of Fiscal 2027 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.

During the second quarter and first quartersix months of Fiscal 2027, total operating expenses increased 9%21% and 15%, respectively, due to an increase in research and development (“R&D”) expenses and selling, general, and administrative (“SG&A”) expenses.

•Selling, General, and Administrative — During the second quarter and first quartersix months of Fiscal 2027, SG&A expenses increased 6%,15% and 11%, respectively, principally due to an increase in employee compensation and benefits expense related primarily to an increase in variable compensation.

•Research and Development — During the second quarter and first quartersix months of Fiscal 2027, non-GAAP operatingR&D expenses increased 9%,41% and 31%, respectively, principally due to an increase in employee compensation and benefits expense related primarily to an increase in variable compensation.

During the firstsecond quarter of Fiscal 2027, operating income and non-GAAP operating income increased by 214%204% to $3.7$5.4 billion and 154%160% to $4.2$5.9 billion, respectively. During the first six months of Fiscal 2027, operating income and non-GAAP operating income increased by 208% to $9.0 billion and 157% to $10.2 billion, respectively. The increases were primarily attributable to an increase in ISG operating income and, to a lesser extent, CSG operating income. The increase in ISG operating income was driven by our servers and networking offerings and, to a lesser extent, our storage offerings. The increase in CSG operating income was driven primarily by our commercial offerings.

During the second quarter and first quartersix months of Fiscal 2027, operating income as a percentage of net revenue increased 550 basis points to 11.5% and 450 basis points to 10.0%, respectively. During the second quarter and first six months of Fiscal 2027, non-GAAP operating income as a percentage of net revenue increased 330490 basis points to 8.3%12.6% and 260380 basis points to 9.7%,11.2%, respectively. Operating income and non-GAAP operating income as a percentage of net revenue benefited from the favorable impact of a decline in operating expense rate as a result of substantial net revenue growth. TheDuring favorablethe impactsecond quarter of Fiscal 2027, operating expenseincome and non-GAAP operating income rate wasalso partiallybenefited offsetfrom byan a declineincrease in gross margin rate duedriven toby adisciplined shift in mix towards our AI-optimized servers offerings.pricing.

During the second quarter and first quartersix months of Fiscal 2027, the change in interest and other, net wasdecreased by 24% to $254 million of expense and 109% to $38 million of income, respectively. The favorable changes were primarily dueattributable to gains recognized within our strategic investments portfolio, partially offset by the gain on the sale of Secureworks recognized during the first quarter of Fiscal 2026.portfolio.

For the firstsecond quarter of Fiscal 2027 and Fiscal 2026, our effective income tax rates were 12.9%19.5% on pre-tax income of $5.1 billion and 10.9%,19.2% respectively.on The changes in our effectivepre-tax income taxof rates$1.4 forbillion, Fiscal 2027 as compared to Fiscal 2026 were primarily attributable to discrete tax items.respectively. For the first quartersix months of Fiscal 2027 and Fiscal 2026, weour recordedeffective discreteincome tax benefitsrates were 16.6% on pre-tax income of $0.2$9.1 billion and $0.115.6% on pre-tax income of $2.5 billion, respectively, related to stock-based compensation.respectively.

During the firstsecond quarter of Fiscal 2027, net income and non-GAAP net income increased 194%255% to $3.2$4.1 billion and 189% to $4.6 billion, respectively. During the first six months of Fiscal 2027, net income and non-GAAP net income increased 256% to $7.6 billion and 191% to $7.8 billion, respectively. The increases in net income and non-GAAP net income for both periods were primarily due to an increase in operating income, partially offset by higher income tax expense.

Net Revenue — During the second quarter and first quartersix months of Fiscal 2027, ISG net revenue increased 181%,89% and 124%, respectively, driven by strength in our AI-optimized servers offerings and, to a lesser extent, our traditional servers and networking offerings and our storage offerings.

AI-optimized servers net revenue increased 757%100% and 222% during the second quarter and first quartersix months of Fiscal 2027, respectively, primarily driven by an increase in units sold as a result of significant increased demand for our AI-optimized servers offerings, and, to a lesser extent, an increase in the average selling prices of these offerings. The increase in average selling prices was driven by richer configurations and, to a lesser extent, disciplined pricing.

In addition to unit demand growth that exceeded supply, traditionalTraditional servers and networking net revenue increased 92%122% and 108% during the second quarter and first quartersix months of Fiscal 2027, respectively, primarily duedriven toby an increase in the average selling price of these offerings, driven by disciplined pricing as we navigated the macroeconomic environment and, to a lesser extent, richer configurations.

During the second quarter and first quartersix months of Fiscal 2027, storage net revenue increased 8%26% and 17%, respectively, primarily due to growth in demand for our Dell-IP storage offerings.offerings and disciplined pricing.

From a geographical perspective, ISG net revenue increased in the Americas, EMEA, and APJ during the second quarter and first quartersix months of Fiscal 2027, most notably within the Americas.

Operating Income — During the firstsecond quarter of Fiscal 2027, ISG operating income as a percentage of net revenue increased 80620 basis points to 10.5%,15.0% due to a decline in operating expense rate thatand outpacedan the declineincrease in gross margin rate. Operating expense rate declined primarily due to substantial ISG net revenue growth. GrossThe increase in gross margin rate decreasedwas primarily asdriven theby resultdisciplined of a shift in mix towards our AI-optimized servers offerings.pricing.

Net Revenue — During the second quarter and first quartersix months of Fiscal 2027, CSG net revenue increased 17%,20% and 19%, respectively, primarily driven by strength in our commercial offerings and, to a lesser extent, our consumer offerings.

During the second quarter and first quartersix months of Fiscal 2027, commercial net revenue increased 18%22% and 20%, respectively, primarily due to an increase in the average selling prices of our commercial offeringsofferings. andDuring anthe second quarter of Fiscal 2027, the increase was partially offset by a decrease in units sold.

Consumer net revenue increased 9%7% and 8% during the second quarter and first quartersix months of Fiscal 20272027, respectively, due to an increase in the average selling prices of our consumer offerings, partially offset by a decline in units sold.

The increase in the average selling prices of our CSG offerings was primarily attributable to disciplined pricing as we navigated the macroeconomic environment.pricing.

From a geographical perspective, CSG net revenue increased in the Americas, EMEA, APJ, and the AmericasAPJ during the second quarter and first quartersix months of Fiscal 2027, most notably in EMEA.the Americas.

Operating Income — During the second quarter and first quartersix months of Fiscal 2027, CSG operating income as a percentage of net revenue increased 280120 basis points to 8.0%.7.6% Theand increase200 inbasis operating income rate during the first quarter of Fiscal 2027 was duepoints to 7.8%, respectively, driven by an increase in gross margin rate primarily driven by disciplined pricing as we navigated the macroeconomic environment and, to a lesser extent, a decline in operating expense rate. The increase in gross margin rate was primarily driven by disciplined pricing. The decline in operating expense rate was primarily due to CSG net revenue growth.

We sell products and services directly to customers and through a variety of sales channels, including retail distribution. Our accounts receivable, net was $25.9$22.9 billion and $17.6 billion as of MayJuly 1,31, 2026 and January 30, 2026, respectively. The increase in accounts receivable, net was primarily driven by an increase in net revenue largely due to our AI-optimized servers offerings. 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, as well as specific identifiable customer accounts considered at risk or uncollectible. As of bothJuly May 1,31, 2026 and January 30, 2026, the allowance for expected credit losses was $56 million and $77 million.million, respectively. Based on our assessment, we believe that we are adequately reserved for expected credit losses.

We offer or arrange a portfolio of payment and consumption solutions and services for our customers globally, including as-a-Service,as-a-service, subscription, utility, leases, and loans, designed to match customers' consumption and financing preferences. We believe these options provide operational and financial flexibility and strengthen our customer relationships. To support financing solutions and services as part of the portfolio, DFS originates, collects, and services customer receivables primarily related to the purchase of our product and services solutions. New financing originations were $2.8$7.5 billion and $1.6$2.4 billion for the firstsecond quarter of Fiscal 2027 and Fiscal 2026, respectively, and $10.3 billion and $4.0 billion for the first six months of Fiscal 2027 and Fiscal 2026, respectively. The increase in our new financing originations was primarily attributable to increased demand for our ISG offerings.

As of MayJuly 1,31, 2026 and January 30, 2026, our financing receivables, net were $14.0$20.4 billion and $14.3 billion, respectively. The increase in financing receivables, net was primarily attributable to increased demand for our ISG offerings. We maintain an allowance to cover expected financing receivables credit losses and evaluate credit loss expectations based on our total portfolio. The principal charge-off rate for our financing receivables portfolio was 0.3%0.5% and 0.1% for both the firstsecond quarter of Fiscal 2027 and Fiscal 2026.2026, respectively, and 0.4% and 0.2% for the first six months of Fiscal 2027 and Fiscal 2026, respectively. The credit quality of our financing receivables remains strong due to the mix of high-quality commercial accounts in our portfolio. 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 that includes active management of credit lines and collection activities. We also sell select 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 Mayboth 1,July 31, 2026 and January 30, 2026, the residual interest recorded as part of financing receivables was $196$0.2 million and $198 million, respectively.billion. 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 second quarter and first quartersix months of Fiscal 2027 and Fiscal 2026.

As of MayJuly 1,31, 2026 and January 30, 2026, equipment under operating leases, net was $2.7$3.2 billion and $2.5 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 second quarter and first quartersix months of Fiscal 2027 and Fiscal 2026.