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    DELL
    Earnings call· Apr 2026(Q1 FY27)

    Dell Technologies Q1 FY27 earnings call DELL

    May 28, 2026 Source

    Executive summary

    Dell Technologies Q1 FY27 — Record $43.8B revenue on AI-server surge; FY guide raised ~$27B

    Dell's quarter is a supply-gated melt-up: demand across AI servers, traditional compute, storage and PCs is running well ahead of constrained memory and CPU supply, so the forward thesis now turns on securing components rather than finding customers. Management frames the raised outlook as demand-real but supply-limited, holding pricing/margin discipline even as rising AI mix dilutes blended rates and agentic workloads open a new traditional-server demand pool.

    Highlights

    5

    • Record revenue of $43.8B, up 88% YoY, and record non-GAAP diluted EPS of $4.86, up 214%

    • AI momentum: $24.4B AI orders booked, $16.1B AI server revenue recognized, and a record $51.3B AI backlog exiting the quarter; AI customer count surpassed 5,000 (up over 50% in the last 6 months)

    • ISG revenue a record $29B (+181%) with record ISG operating income of $3.1B (+206%) and margin up 80 bps to 10.5%; traditional server & networking +92% to $8.5B, storage +8% to $4.3B

    • CSG revenue +17% to $14.6B with second consecutive quarter of share gains; commercial +18% to $13B, consumer +9% to $1.6B

    • Record Q1 cash flow from operations of $4.1B; $2.1B returned to shareholders; FY27 revenue and EPS guidance raised by ~$27B and ~$5 respectively

    Concerns

    5

    • Second half is supply- not demand-constrained; memory (DRAM/NAND) is the primary constraint, with CPUs and then hard drives also pressured and leading-edge node lead times of a year

    • Full-year plan implies only ~48% of revenue in H2 vs historical ~52%, a supply-driven cap rather than demand softness

    • AI server profitability runs only at a mid-single-digit operating-income rate, diluting blended gross-margin rate as AI mix rises (GM rate 18.1%)

    • Inflationary environment forcing near-daily repricing; management acknowledged some transactional (consumer/SMB) demand tempered after an early price move

    • OpEx dollars up 9% to $3.7B (variable comp) and guided up high-single digits for the year

    Guidance & targets

    21
    CategoryTargetConfidence
    Q2 total revenue
    $44B-$45B (midpoint $44.5B), up roughly 50%
    high materiality
    High
    Q2 ISG revenue growth
    grow roughly 75%
    high materiality
    High
    Q2 AI server revenue
    $15.5B
    high materiality
    High
    Q2 CSG revenue growth
    up roughly 20%
    medium materiality
    High
    Q2 operating expenses (sequential)
    down low-single digits sequentially
    low materiality
    Medium
    Q2 operating income growth
    grow roughly 80%
    high materiality
    High
    Q2 CSG operating income rate
    moderates to roughly 6%
    medium materiality
    Medium
    Q2 diluted share count
    roughly 652 million shares
    low materiality
    Medium
    Q2 diluted non-GAAP EPS
    $4.80 plus or minus $0.10, up over 100% at midpoint
    high materiality
    High
    Full-year FY27 total revenue
    $165B-$169B (midpoint $167B), up nearly 50%
    high materiality
    High
    Full-year FY27 ISG revenue growth
    grow roughly 80%
    high materiality
    High
    Full-year FY27 AI server revenue
    $60B at midpoint, approximately 2.4x year-over-year
    high materiality
    High
    Full-year FY27 traditional server revenue growth
    grow just over 60%
    high materiality
    Medium
    Full-year FY27 storage revenue growth
    up mid-single digits
    medium materiality
    Medium
    Full-year FY27 CSG revenue growth
    grow low teens
    medium materiality
    Medium
    Full-year FY27 gross margin rate (ex-AI mix)
    higher than 90 days ago and up year-over-year; continued rate expansion through the year
    high materiality
    Medium
    Full-year FY27 operating expense dollars
    up high-single digits; OpEx as % of revenue in single digits
    medium materiality
    Medium
    Full-year FY27 operating income growth
    grow over 55%, improving in dollars and as a % of revenue
    high materiality
    High
    Full-year FY27 I&O (interest & other)
    $1.4B-$1.5B
    low materiality
    Medium
    Full-year FY27 diluted non-GAAP EPS
    $17.90 plus or minus $0.25, up roughly 75% at midpoint
    high materiality
    High
    Year-end AI backlog position
    exit the year with meaningful backlog entering next year
    medium materiality
    Medium

    Segment performance

    5
    SegmentRevenueYoYQoQMargin
    ISG (Infrastructure Solutions Group)
    Record ISG revenue and operating income. Margin expanded 80 bps despite AI server revenue growing nearly 800% YoY, helped by higher Dell IP storage mix and stable traditional-server margins. Segment sub-lines reconcile to the $29B total ($8.5B + $4.3B + $16.1B).
    Traditional server & networking revenue: $8.5B (+92%)Storage revenue: $4.3B (+8%)AI server revenue: $16.1BAI server operating income rate: mid-single-digit (in line with target)Consecutive quarters of double-digit+ revenue growth: 9Consecutive quarters of double-digit+ operating income growth: 8
    		$29B+181%—Operating income $3.1B (+206%); operating margin 10.5%, up 80 bps YoY
    AI servers (within ISG)
    Revenue recognized ($16.1B) is distinct from orders booked ($24.4B) and ending backlog ($51.3B). Demand exceeds supply with memory the primary constraint. Full detail also captured in subsector_kpis and orderbook_backlog.
    AI orders booked: $24.4BAI backlog exiting quarter: $51.3B (record)AI customer count: 5,000+ (up over 50% in 6 months)
    		$16.1B recognizedAI revenue up nearly 9x YoY (~800%)—mid-single-digit operating income rate (target)
    Traditional server & networking (within ISG)
    Demand outpaced supply across every region, led by large enterprises refreshing compute; incremental demand from AI inference/agentic workloads (the 'AI drag').
    Installed base majority on 14th-generation or older servers18G server consolidation ratio: 13:1
    		$8.5B+92%—margins stable despite high inflationary environment
    Storage (within ISG)
    Record Dell IP demand-growth quarter; rising higher-margin Dell IP mix. Growth to become consistent as the Dell IP vs. third-party crossover completes by year-end.
    Dell IP demand growth above market: 5th consecutive quarterPowerStore double-digit demand growth: 8th consecutive quarterPowerScale/ObjectScale (unstructured) growth: 3 consecutive quarters (double-digit last 2)Best-ever demand quarter for unstructured portfolio
    		$4.3B+8%—profitability up on higher Dell IP mix and rate expansion; key driver of ISG profitability
    CSG (Client Solutions Group)
    Broad-based demand led by large enterprises refreshing (Windows 11), double-digit growth across all regions; consumer aided by gaming. Margin lifted by scale, higher peripheral/service attach and improved consumer profitability.
    Commercial revenue: $13B (+18%, 7th consecutive quarter of growth, 9th of demand growth)Consumer revenue: $1.6B (+9%, 3rd consecutive quarter of demand growth)Share gains: 2nd consecutive quarterInstalled base 4 years or older: ~1/3
    		$14.6B+17%—Operating income $1.2B; operating margin 8%

    Operational metrics

    3
    Operating margin (non-GAAP)
    9.7%operating income +154% YoY to $4.2B
    Q1 FY27

    Company-level non-GAAP operating margin; operating income dollar itself is a statement line.

    Operating expense ratio
    8.4% of revenuedown 610 bps YoY
    Q1 FY27

    Meaningful operating leverage from scale and modernization; OpEx dollar itself excluded as a statement line.

    Core leverage ratio
    1.2x
    Q1 FY27

    As management framed leverage; supports continued capital returns.

    Industry KPIs

    11
    MetricValueDetails
    Capital return FCF$2.1B returned to shareholders$B
    Unit shipments ASPUnit growth in consumer and commercial PCs plus content growth (more cores/DRAM/NAND per server) YoY; inflation lifted ASP mainly in high price bands
    Gross margin driversGross margin rate 18.1%; gross margin dollars $7.9B (+57%)%
    Company specific kpisDell Financial Services (DFS) originations growing double digits
    Market share commentaryShare gains across all four businesses — PCs, traditional servers, storage and AI servers
    Services peripheral attachHigher peripheral and service attach in CSG; increasing storage/services attach to AI customers; DFS financing double-digit origination growth
    Long term supply agreementsMultiyear (3-5 year) supply-securing arrangements with large customers
    Component supply constraintsRank order of constraint: DRAM, NAND, CPUs, then hard drives
    Installed base refresh runway~1/3 of CSG PC installed base is 4 years or older; majority of server installed base on 14th-generation or older%
    Ai server orders revenue backlogOrders $24.4B; revenue recognized $16.1B; ending backlog $51.3B (record)$B
    Revenue mix by end market segmentISG $29B (+181%); CSG $14.6B (+17%)$B

    Orderbook & backlog

    2
    AI server backlog$51.3B (record)end of Q1 FY27 (2026-04-30)

    grew sequentially even after converting $24.4B into orders

    Management expects to exit FY27 with meaningful backlog into FY28; forward pipeline over the next 5 quarters is multiples of backlog and growing across neocloud, sovereign and enterprise verticals.

    AI server orders booked$24.4BQ1 FY27

    $16.1B of AI server revenue was recognized (shipped) in the quarter versus $24.4B booked; demand exceeds supply with memory the primary constraint.

    Product announcements

    9
    ProductTypeDetails
    Dell Power Racklaunch
    PowerEdge 18th generation serverslaunch
    PowerStore Elitelaunch
    ObjectScale / PowerFlexexpansion
    Lightning (AI parallel file system)launch
    Dell Pro MAX systems (GB10 / GB300)launch
    NVIDIA Vera Rubin rack-scale platform / Rubin GPU / RTX GPUsroadmap
    Deskside agentic AI solutionslaunch
    Dell AI data platformupdate

    Deals & partnerships

    3
    NVIDIApartnership (AI factory / technology)

    Marked the 2-year anniversary of the Dell AI factory with NVIDIA at GTC and extended accelerated-computing leadership.

    Google Cloud (Google Distributed Cloud)partnership

    Bringing Gemini models on-premises with confidential compute so customers can run AI closer to data while meeting residency, privacy and sovereignty requirements.

    OpenAI, SpaceX AI, ServiceNow, Palantir, Mistral, CrowdStrikeecosystem partnerships

    Named partners expanding the Dell AI factory ecosystem across compute, storage, networking, software and services.

    Risks & headwinds

    5
    Component supply constraints capping H2 shipments (demand exceeds supply)second half of FY27 and beyond

    Memory (DRAM/NAND) primary constraint, then CPUs, then hard drives; leading-edge nodes fully allocated with ~1-year lead times; full-year plan implies only ~48% of revenue in H2 vs historical ~52%

    Mitigation: Supply-chain execution to secure parts, demand shaping, multiyear customer supply arrangements, and pipeline prioritization; expects to exit year with meaningful backlog

    Inflationary cost environment forcing frequent repricingongoing through FY27

    Rising DRAM, NAND, CPU, fuel and raw-material costs; repricing 'every day'

    Mitigation: Pricing/margin discipline established in Q4 and continued in Q1; deal-by-deal pricing on large deals

    AI-server margin dilution to blended rateongoing as AI mix rises (AI revenue ~9x YoY)

    AI server profitability only mid-single-digit operating-income rate; blended gross margin rate 18.1% (up ex-AI mix)

    Mitigation: Higher Dell IP storage mix, attach of services/storage to AI deals, and CSG/traditional-server margin discipline to sustain rates

    Transactional demand sensitivity to price movesQ1 FY27 into Q2

    Unquantified — some tempering of consumer and SMB transactional demand after an earlier-than-optimal Q1 price move

    Mitigation: Finding the optimal pricing balance in transactional segments; CSG operating margin guided to moderate to ~6% in Q2 to balance demand, share and profitability

    Potential demand pull-forward / budget shift from future periodsFY27, with possible impact on FY28 budgets

    Unquantified — customers buying ahead to secure supply amid multiyear (3-5 year) arrangements

    Mitigation: Management maintains prudence given only 90 days into the year; pipelines two quarters out growing above historical norms suggest durable demand

    Q&A highlights

    8

    How much of the beat is pull-forward across servers/PCs, and how did you still raise the second half despite that risk?

    Clarke described a multi-factor demand environment: buy-ahead to secure supply, large aging installed bases (1/3 of PCs 4+ years, many 14G servers), Windows 11 catch-up, edge/infrastructure upgrades, new agentic-AI-driven traditional-server demand, share gains in all four businesses, and customers seeking Dell as a 'calming hand.' Pipelines are the healthiest ever and growing faster than historical rates, giving confidence to raise the guide by $27B.

    “the pipelines have never been healthier. They're actually growing at greater than historical rates, which gave us confidence to raise the guide by $27 billion of revenue for the year.”

    asked by Benjamin Reitzes · answered by Jeffrey Clarke

    3 min read6 chapters

    Detailed Narrative

    01

    Record top and bottom line driven by AI server mix

    Dell delivered record Q1 FY27 revenue of $43.8B (+88%) and record non-GAAP diluted EPS of $4.86 (+214%). Gross margin dollars grew 57% to $7.9B at an 18.1% rate, pressured by AI-server mix (AI revenue up nearly 9x YoY) but up excluding AI mix. Operating income grew 154% to $4.2B (9.7% of revenue) and net income rose 194% to $3.2B. OpEx fell 610 bps to 8.4% of revenue, the lowest in over 20 years, even as OpEx dollars rose 9% to $3.7B on variable comp tied to outperformance.

    02

    AI server order-revenue-backlog progression

    Dell booked $24.4B in AI orders and recognized $16.1B of AI server revenue, exiting with a record $51.3B AI backlog that grew sequentially even after converting $24.4B into orders. The pipeline over the next five quarters is multiples of backlog and growing across neocloud, sovereign and enterprise verticals. AI customer count surpassed 5,000, up over 50% in the last six months. Demand exceeds supply with memory the primary constraint; AI server profitability is in line with the mid-single-digit operating-income-rate target.

    03

    Traditional server strength and the 'AI drag'

    Traditional server & networking revenue rose 92% to $8.5B with demand well ahead of supply across every region, led by large enterprises refreshing compute and expanding capacity. Growth came from absolute unit growth plus rising content per server (more cores, DRAM and NAND) and inflationary pricing. Management highlighted a new 'AI drag': agentic and inference workloads driving incremental traditional-server demand, with the CPU running the 'harness' around each GPU call. The majority of the installed base remains on 14th-generation or older servers, and new 18G servers offer 13:1 consolidation.

    04

    Storage inflection led by Dell IP

    Storage revenue grew 8% to $4.3B on a record Dell IP demand-growth quarter — a fifth consecutive quarter of demand growth above market. PowerStore posted its eighth straight quarter of double-digit demand growth; unstructured (PowerScale, ObjectScale) had its best-ever demand quarter with three consecutive quarters of growth. Rising Dell IP mix, which carries higher margins, was a key driver of overall ISG profitability. Dell is increasingly attaching storage (only Dell IP) to AI customers, aided by new products like PowerStore Elite and the Lightning AI parallel file system.

    05

    CSG share gains and margin step-up

    CSG revenue grew 17% to $14.6B with a second consecutive quarter of share gains. Commercial rose 18% to $13B (seventh straight quarter of growth, ninth of demand growth) with double-digit growth across all regions as large enterprises refresh; roughly one-third of the installed base is four years or older. Consumer rose 9% to $1.6B on gaming strength. CSG operating income was $1.2B (8% of revenue), aided by scale, an earlier price move, higher peripheral/service attach and improved consumer profitability — margins management stressed are not COVID-era anomalies.

    06

    Supply-constrained outlook and demand durability

    Management repeatedly framed the second half as supply- not demand-constrained, with the full-year plan implying only ~48% of revenue in H2 versus a historical ~52%. Constraints rank DRAM/NAND first, then CPUs, then hard drives, with leading-edge nodes fully allocated at year-long lead times. Customers are securing multiyear (3-5 year) supply arrangements amid inflation, and DFS financing is seeing double-digit origination growth. Dell raised FY27 revenue and EPS guidance by ~$27B and ~$5 and expects to exit the year with meaningful backlog.

    AI-generated summary of the company’s earnings call. Not investment advice.