Dell Technologies Inc. DELL used its second-quarter fiscal 2027 earnings call to stress that infrastructure demand is broadening beyond AI servers, even as constrained component supply limits near-term shipments.
Executives raised the full-year outlook, defended the durability of traditional server and storage growth and pointed to operating leverage as a key earnings driver.
DELL Raises Outlook as Second-Half Demand Holds
Chief financial officer David Kennedy said Dell now expects fiscal 2027 revenues of $192 billion at the midpoint, up $25 billion from its prior outlook. Non-GAAP EPS is projected at $25.50.
For the third quarter, Kennedy guided to $49 billion of revenues and $6.50 of non-GAAP EPS. He expects $19 billion of AI server revenues, roughly 145% ISG growth and about 15% CSG growth.
Dell reported non-GAAP EPS of $7.04, which topped the Zacks Consensus Estimate of $4.97. Second-quarter revenues of $46.97 billion exceeded the $45.34 billion consensus mark.
Dell Says AI Demand Is Broadening
Vice chairman and chief operating officer Jeff Clarke said AI server orders reached $60.9 billion, revenues were $16.4 billion, and ending backlog rose to $95 billion. The five-quarter pipeline also grew sequentially.
A Bernstein analyst asked whether enterprise demand was gaining share within the AI mix. Clarke said more than 6,500 customers now buy Dell AI Factory, with 3,300 added in the past three quarters.
Clarke said enterprise customer counts, repeat buyers, revenues and pipeline all increased, while Dell continued winning with sovereign and Neocloud customers. Enterprise engagements also tend to pull through more storage and networking.
DELL Ties Server Growth to Modernization
An Evercore ISI analyst questioned whether traditional server growth reflected pricing and prebuys more than underlying demand. Clarke said the 122% growth was driven primarily by Dell's historical enterprise customers and demand exceeded supply.
Clarke tied demand to data center modernization, security requirements and an aging installed base. He said 1.2 million assets remain on 14th-generation or older servers, supporting a continuing refresh cycle.
Kennedy said second-half guidance assumes traditional servers keep growing at a triple-digit rate. Clarke acknowledged inflation is contributing as configurations carry more cores, memory and storage, but said underlying technology demand remains significant.
Dell Sees Storage as a Margin Lever
Clarke said storage revenues grew 26% as Dell IP products gained mix and profitability improved. He cited six consecutive quarters in which Dell IP storage demand grew above the market.
A UBS analyst asked how much ISG margin improvement came from next-generation servers versus scale. Kennedy said scale was the largest factor, contributing just more than 400 basis points to ISG's second-quarter margin performance.
Clarke identified Dell IP storage as the biggest portfolio contributor after operating leverage. Kennedy said the full-year outlook includes more than $2.5 billion of incremental storage revenues year over year.
DELL Works Around Broad Component Constraints
A Citi analyst pressed on supply availability. Clarke said DRAM and NAND remain the largest constraints, with additional shortages across CPUs, disk drives, optical components, substrates and other semiconductor inputs.
Clarke said Dell redirected available components toward infrastructure earlier in the year as it saw signs of a softer second-half PC market. The $25 billion revenue guide increase reflects that supply optimization and demand shaping.
A BofA Securities analyst asked whether higher prices were deferring purchases. Clarke said larger enterprises are investing ahead of plan and often want product sooner, while public-sector and smaller customers remain more tied to fixed budgets.
Dell Keeps Operating Leverage in Focus
Kennedy said modernization of Dell's operating model is allowing revenues to scale faster than spending. Full-year operating expenses are expected to be about 8% of revenues, which management called the lowest rate in the company's 42-year history.
Clarke closed with confidence in a stronger second half while emphasizing execution, supply discipline and portfolio breadth. His message kept AI growth, traditional infrastructure refreshes and storage mix at the center of Dell's operating model.
DELL's Zacks Signals Favor Growth and Momentum
DELL currently sports a Zacks Rank #1 (Strong Buy). Its Growth, Momentum and VGM Scores of B are favorable under the Style Scores framework, while its Value Score of D is weaker. You can see the complete list of today’s Zacks #1 Rank stocks here.
The framework gives the strongest support to Zacks Rank #1 and #2 (Buy) stocks paired with A or B Style Scores. Still, the Zacks Rank can change as earnings estimates are revised following the just-reported results.
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