Dell Technologies
DELL · NYSEIT Hardware · AI Servers & PCs
Since the Report + 20.6%
Close on Report DaySep 1
$425.00▲ 8.0%Report-Day Move
- Market Cap(Today)
- ≈ $332 B
- 1Y Return(At Report)
- + 232%
- P/E($18.38 · Trailing 12M)
- 27.9
- PEG(company guidance FY2027)
- 0.19
- Net Margin(Trailing 12M)
- 7.5%
Dell had an extraordinary quarter on AI-server demand: revenue rose 58% year over year to a record $47.0 billion, adjusted earnings of $7.04 per share beat estimates by 43%, and the quarter closed with a record $95 billion AI order backlog. Rather than the feared margin compression, gross margin expanded, and the company lifted its full-year revenue outlook to $192 billion from $167 billion. After a macro-driven 6.8% drop during the regular session, the stock jumped about 8% after hours on the results.
Revenue (Q2)
$47.0B
▲ 58% YoY · Beat Estimate by 4.6%
Adjusted EPS
$7.04
Est. $4.91 · Beat by 43%
Infrastructure (ISG) Revenue
$31.8B
▲ 89% YoY · Record
AI Orders
$60.9B
Backlog $95B · Record
Gross Margin
21.1%
▲ ~2.8 Pt · ISG Mix
Client (CSG) Revenue
$15.0B
▲ 20% YoY · PC Recovery
Quarterly Revenue ($ Billion)
29.80
27.00
33.40
43.80
46.97
~49.0
- Q2 26
- Q3 26
- Q4 26
- Q1 27
- Q2 27
- Q3 27E
- Annual Revenue Growth
- ▲ 58%
- AI Server Share
- 35%$16.4B · ▲ 100%
- Storage Revenue
- ▲ 26%$4.9B · Relative Laggard
Q3 FY27 Company Guidance
- Revenue (Q3 FY27)49 billion
Point Estimate · ▲ ~81% YoYStrong Growth ▲
- Adjusted EPS (Q3 FY27)6.5 $
▲ ~151% YoYStrong Growth ▲
- Revenue (Full Year FY27)192 billion
Prior Target 167 · ▲ 69% YoY$25B Upward Revision ▲
- Adjusted EPS (Full Year FY27)25.5 $
Prior Target 17.90 · FY2026 10.30Upward Revision ▲ · ~148% Growth
- AI Server Revenue (FY27)74 billion
Full-Year Target~200% Growth ▲
- AI Order Backlog
- $95BRecord · Quarter-End
- FY2027 Revenue Revision
- +$25B167 → 192B
- Free Cash Flow
- $8.1BOperating Cash Flow $2.2B
“In Q2 we booked a record $60.9 billion in AI orders and recognized $16.4 billion in AI server revenue, exiting the quarter with a record $95 billion of AI backlog. Our pipeline continued to grow sequentially and remains multiples of our backlog even after converting $131.7 billion into orders over the past 12 months. With accelerating demand, a growing pipeline and differentiated capabilities, we are well positioned to capture the opportunity ahead.”
- Record AI order backlog
- Pipeline multiples of backlog
- Accelerating demand
Summary
In its second fiscal quarter ended August 1, Dell Technologies reported $47.0 billion in revenue, up 58% from a year earlier and 4.6% above the $44.9 billion Wall Street expected. Adjusted earnings came in at $7.04 per share, beating the $4.91 estimate by an extraordinary 43%, with adjusted earnings up 203% year over year. The engine was the Infrastructure Solutions Group (ISG): its revenue rose 89% to a record $31.8 billion, of which $16.4 billion came from AI-optimized servers. The Client Solutions Group (CSG) also grew 20% to $15.0 billion, reflecting a recovery on the PC side. The company booked a record $60.9 billion in AI orders during the quarter and exited with a record $95 billion backlog.
Heading into the print, the biggest worry was that AI servers carry lower margins and that the mix shift would erode profitability; the quarter reversed that fear. Gross margin expanded roughly 2.8 points year over year to 21.1%, and gross profit dollars grew 78% to $9.9 billion, driven by an improved ISG margin rate and a higher ISG mix. That margin surprise is the main reason a modest 4.6% revenue beat translated into a 43% earnings beat. The stock had fallen 6.8% during the regular session to close at $425, largely on macro factors (bond yields and inflation fears); it then jumped about 8–9% after hours on the results. With the stock up roughly 232% over the past year, the expectations bar was high, but the numbers cleared it comfortably.
On guidance, the company sharply raised its full-year outlook: the FY2027 revenue target went from $167 billion to $192 billion, and adjusted EPS from $17.90 to $25.50. AI-optimized server revenue is expected to roughly triple to $74 billion for the full year. Jeff Clarke said the pipeline still runs at multiples of the backlog even after converting $131.7 billion into orders over the past 12 months. As a business, this is a near-flawless quarter. The real things to watch are the concentration of demand among a few large AI customers, the working-capital intensity of the server ramp, and the sustainability of this growth rate; even so, we view the quarter as very strong.
The profitability improvement came not just from volume but from mix: even though AI servers were feared to be low-margin, the rising ISG share of the total and the higher segment margin rate lifted gross margin. On the other hand, the bill for that growth shows up in cash: operating cash flow was a modest $2.2 billion for the quarter relative to revenue, as the fast server ramp ties up working capital in inventory and receivables. On a basis that adjusts for financing items, the company reported $8.1 billion in free cash flow.
Full Review
ClaudeAI servers blew growth wide open.
The Infrastructure Solutions Group sits at the center of the quarter. ISG revenue rose 89% to a record $31.8 billion; within it, AI-optimized servers reached $16.4 billion (doubling year over year), traditional servers and networking grew 122%, and storage rose 26%. Total revenue climbed 58% to $47.0 billion. But the real story is on the order side: the company booked a record $60.9 billion in AI orders during the quarter and exited with a record $95 billion backlog. Jeff Clarke said the pipeline still runs at multiples of the backlog even after converting $131.7 billion into orders over the past 12 months. In short, demand is growing faster than Dell can currently convert into revenue.
Expansion, not the feared margin compression.
Going into the print, investors' biggest concern was that AI servers carry lower margins than the traditional business and that the mix shift would erode profitability. The result was the opposite. Gross margin rate rose to 21.1% and gross profit dollars grew 78% to $9.9 billion, which the company attributed to an improved ISG margin rate and a higher ISG mix. Against roughly 18.3% a year earlier, that is about a 2.8-point expansion. This margin surprise is the main reason a modest 4.6% revenue beat produced a 43% earnings beat; operating leverage worked hard. The very line investors feared most coming in surprised to the upside, which explains the after-hours jump.
Full-year guidance was raised dramatically.
The company lifted not just the past but the future. The FY2027 revenue target was raised from $167 billion to $192 billion — a $25 billion increase at once — implying roughly 69% year-over-year growth. Adjusted EPS guidance went from $17.90 to $25.50, about a 148% jump versus the $10.30 posted in FY2026. AI-optimized server revenue is expected to roughly triple to $74 billion for the full year. For the third quarter, the company guides $49.0 billion in revenue and $6.50 in adjusted EPS. A business both beating the quarter by this much and raising its full-year outlook this much is a strong signal that demand is real and visible.
The Client (PC) segment recovered too.
The story is not only AI servers. The Client Solutions Group (CSG) — Dell's laptop and desktop PC business — grew 20% to $15.0 billion. That points to a meaningful recovery in a long-soft PC market, likely helped by a corporate refresh cycle and interest in AI PCs. Having two engines running at once reduces Dell's dependence on a single product category and balances its revenue base. Still, the scale gap is clear: the quarter's real driver remains infrastructure and AI servers, with PCs in a solid supporting role.
Risks cluster around concentration and cash.
Strong as the quarter is, a few points shouldn't be overlooked. First, concentration: a large share of AI server demand may come from a limited number of big customers (hyperscale cloud providers and large AI firms), and a change in their spending plans could quickly affect growth. Second, cash: operating cash flow was a modest $2.2 billion for the quarter relative to revenue, as the fast ramp ties up meaningful working capital in inventory and receivables. Third, sustainability: rates like +58% revenue and +203% earnings are extraordinary and come off a low base, and will normalize over time. Finally, AI servers are structurally lower-margin than storage; the mix worked in Dell's favor this quarter, but that may not always be the case.
Strengths
6- Revenue rose 58% to a record $47.0B; ISG grew 89% to $31.8B.
- Adjusted EPS of $7.04 beat estimates by 43% and rose 203% year over year.
- Gross margin expanded roughly 2.8 points to 21.1% — the margin-compression fear reversed.
- A record $60.9B in AI orders; the end-of-quarter backlog hit a record $95B.
- Full-year guidance was sharply raised: revenue to $192B and adjusted EPS to $25.50.
- The Client (CSG) segment also grew 20%; strength is not limited to AI.
Risks
6- AI server demand may be concentrated among a few large customers, carrying concentration risk.
- The fast server ramp is working-capital intensive; operating cash flow was a relatively limited $2.2B.
- AI servers are structurally lower-margin than storage; the mix could weigh on margins longer term.
- Growth rates like +58% revenue and +203% earnings come off a low base and will normalize over time.
- The stock is up roughly 232% over the past year; the expectations bar and volatility are high.
- Converting the $95B backlog into revenue on time and profitably carries supply and execution risk.
What to Watch
3- Q3 FY2027 results are due around November 2026.
- The FY2027 AI-server revenue target is set at $74B for the full year.
- The pace at which the $95B order backlog converts into revenue will be watched closely.
Upcoming Earnings
To Understand This