DELL Q2 Earnings Beat Estimates, Strong AI Demand Aids Revenue Growth

Dell Technologies DELL reported second-quarter fiscal 2027 non-GAAP earnings of $7.04 per share, beating the Zacks Consensus Estimate by 41.65%. The company reported earnings of $2.32 per share in the year-ago quarter.

Revenues surged 58% to $46.97 billion and beat the consensus mark by 8.57%. Broad-based infrastructure demand drove the quarterly results, while AI server orders reached a record $60.9 billion.

DELL’s ISG Growth Accelerates Across the Portfolio

Infrastructure Solutions Group (ISG) revenues jumped 89% year over year to a record $31.78 billion. AI-optimized server revenues doubled to $16.4 billion, while traditional servers and networking revenues surged 122% year over year to $10.53 billion. Dell exited the quarter with $95 billion of AI backlog, while its opportunity pipeline remained multiples of backlog.

Storage revenues increased 26% year over year to $4.85 billion as Dell IP demand grew above the market for a sixth consecutive quarter. 

ISG operating income jumped 225% year over year to $4.78 billion, with operating margin expanding 620 basis points (bps) on a year-over-year basis to 15%. Dell also said its AI customer base surpassed 6,500 across neocloud, sovereign and enterprise customers.

Dell’s Server Refresh Opportunity Supports Demand

Dell said traditional server demand reflects data-center modernization, security and resiliency requirements, and rising CPU needs tied to AI and agentic workloads. The company still has roughly 1.2 million installed assets running 14th-generation or older servers, leaving a sizable refresh opportunity as customers upgrade infrastructure.

Dell also highlighted significant consolidation benefits from newer systems. Seventeenth-generation servers can replace five to seven legacy servers, while 18th-generation systems can replace up to 13. The newer platforms also offer higher processing density and better power efficiency, supporting modernization even as industry supply remains constrained.

Dell’s CSG Posts Broad-Based Revenue Growth

Client Solutions Group (CSG) revenues increased 20% year over year to $15.03 billion. Commercial revenues rose 22% year over year to $13.19 billion, marking the eighth straight quarter of growth, while consumer revenues advanced 7% to $1.84 billion. Demand grew across all regions and verticals, led by large-enterprise PC refresh activity.

CSG operating income increased 42% year over year to $1.14 billion. The operating margin improved 120 bps to 7.6%, supported by pricing discipline and greater scale. 

Dell said it will continue balancing demand with product availability as it pursues profitable share gains in the client business.

DELL Expands Profitability Through Scale and Mix

Non-GAAP gross margin rose 78% year over year to $9.93 billion, while the gross margin improved to 21.1% from 18.7%. 

Non-GAAP operating expenses increased 22% year over year to $4 billion but fell to 8.5% of revenues from 11% a year earlier, reflecting meaningful operating leverage.

That expense leverage helped non-GAAP operating income surge 160% year over year to $5.93 billion. The operating margin expanded to 12.6% from 7.7%, aided by higher revenue scale, pricing discipline and improved storage profitability. 

Management tied part of the storage improvement to a higher mix of Dell IP products and better rates across solutions.

DELL Delivers Strong Cash Flow and Capital Returns

As of July 31, 2026, DELL has $14.248 billion in cash and investments and a core leverage ratio of 0.8 times. The company reported $14.062 billion in cash and investments as of May 1.

Cash flow from operations totaled $2.23 billion in the reported quarter, while adjusted free cash flow reached $8.15 billion. 

Dell returned a record $4.3 billion to shareholders through share repurchases and dividends, underscoring the cash generation from higher profitability and revenue scale. Dell repurchased 9.5 million shares at an average price of $401 per share and paid a quarterly dividend of about 63 cents per share.

Dell Raises Fiscal 2027 Revenue and Earnings Outlook

For the third quarter of fiscal 2027, Dell expects revenues of $49 billion, plus or minus $500 million, and non-GAAP earnings of $6.50 per share, plus or minus 10 cents. 

DELL expects ISG revenues to grow roughly 145%, supported by about $19 billion in AI server revenues, while CSG revenues are expected to rise roughly 15%.

For fiscal 2027, Dell raised its revenue outlook by $25 billion to $192 billion, plus or minus $2 billion, and lifted non-GAAP earnings guidance to $25.50 per share, plus or minus 25 cents. 

AI server revenues are now expected to reach $74 billion, or roughly three times the prior-year level, with traditional server growth forecast at just over 100%.

Zacks Rank & Other Stocks to Consider

Dell Technologies sports a Zacks Rank #1 (Strong Buy) at present.

Some other top-ranked stocks in the broader Zacks Computer and Technology sector are Silicon Motion Technology SIMO, Sandisk SNDK and Teradyne TER. Each of the three stocks sports a Zacks Rank #1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Long term earnings growth rate for Silicon Motion Technology, Sandisk and Teradyne are pegged at 46.48%, 48.16% and 54.38%, respectively.

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