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DELL
Earnings call · Jul 2026 (Q2 FY27)

Dell Technologies Q2 FY27 earnings call DELL

Sep 1, 2026 Source

Executive summary

Dell Technologies Q2 FY27 — Record Revenue and EPS Driven by AI and Data Center Modernization

Dell Technologies delivered an exceptional quarter, achieving record revenue and EPS, primarily fueled by robust demand for AI servers and ongoing data center modernization. The company's broad portfolio and operational discipline are driving significant operating leverage, with a full-year operating expense rate projected to be the lowest in its history. Management expressed confidence in continued strong performance, raising full-year guidance across all key metrics.

Highlights

6

  • Record revenue of $47 billion, up 58% year-over-year.

  • Record diluted EPS of $7.04, up 203% year-over-year.

  • ISG revenue increased 89% to a record $31.8 billion, with operating income up 225% to $4.8 billion.

  • Record AI orders of $60.9 billion in the quarter, with AI backlog reaching $95 billion.

  • Traditional server revenue up 122%, gaining over 10 points of share in the past two quarters.

  • Storage revenue up 26%, with Dell IP storage demand growing above market for six consecutive quarters.

Concerns

1

  • Supply constraints remain across DRAM, NAND, CPUs, disk drives, and other components, limiting ability to meet full demand.

Guidance & targets

CategoryTargetConfidence
Q3 FY27 Revenue
$49 billion
high materiality
High
Q3 FY27 ISG Revenue Growth
roughly 145%
medium materiality
High
Q3 FY27 AI Server Revenue
$19 billion
high materiality
High
Q3 FY27 CSG Revenue Growth
roughly 15%
medium materiality
High
Q3 FY27 Operating Expenses (sequential)
down low single digits
medium materiality
High
Q3 FY27 Operating Income Growth
roughly 120%
high materiality
High
Q3 FY27 ISG Operating Income Rate
up just over 1 point year-over-year
medium materiality
High
Q3 FY27 CSG Operating Income Rate
roughly 6%
medium materiality
High
Q3 FY27 Diluted Share Count
approximately 651 million shares
low materiality
High
Q3 FY27 Diluted Non-GAAP EPS
$6.50
high materiality
High
Full-year FY27 Revenue
$192 billion
high materiality
High
Full-year FY27 Diluted Non-GAAP EPS
$25.50
high materiality
High
Full-year FY27 ISG Revenue Growth
roughly 120%
high materiality
High
Full-year FY27 AI Server Revenue
$74 billion
high materiality
High
Full-year FY27 Traditional Servers Revenue Growth
just over 100%
medium materiality
High
Full-year FY27 Storage Revenue Growth
mid-teens
medium materiality
High
Full-year FY27 CSG Revenue Growth
mid-teens
medium materiality
High
Full-year FY27 Operating Expense Rate
approximately 8% of revenue
high materiality
High
Full-year FY27 Operating Income Growth
approximately 120%
high materiality
High
Full-year FY27 Operating Income Rate Improvement
over 2 points
medium materiality
High
Full-year FY27 I&O
between $1.4 billion and $1.5 billion
low materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Infrastructure Solutions Group (ISG)
Record revenue and operating income, driven by strong AI server momentum and traditional server/storage demand. Operating income up 225% YoY. Margin rate improved by 620 bps. Demand for Dell IP storage continues to outpace the market.
Operating income rate: 15%AI orders booked: $60.9 billionAI server revenue: $16.4 billionAI backlog: $95 billionAI customer count: >6,500Traditional server and networking revenue: $10.5 billionTraditional server and networking growth: 122%Storage revenue: $4.9 billionStorage growth: 26%Dell IP storage demand growth above market: 6 consecutive quartersPowerStore demand growth: 9 consecutive quarters (double-digit)PowerScale growth: double-digit for 5 consecutive quartersObjectScale growth: double-digit for 4 consecutive quartersData Domain growth: 3 consecutive quartersAll-flash arrays growth: 10 consecutive quarters
$31.8 billion89%—$4.8 billion
Client Solutions Group (CSG)
Strong revenue growth across both commercial and consumer segments. Profitability remained strong due to pricing discipline and scale benefits. CSG is a significant source of cash generation.
Operating income rate: 7.6%Commercial revenue: $13.2 billionCommercial revenue growth: 22% (8th consecutive quarter)Consumer revenue: $1.8 billionConsumer revenue growth: 7% (4th consecutive quarter of demand growth)
$15 billion20%—$1.1 billion

DELL operating KPIs by quarter

DELL operating KPIs stated on its earnings calls, by fiscal quarter
KPI Jan 2025 Q4 FY25 Apr 2025 Q1 FY26 Oct 2025 Q3 FY26 Jan 2026 Q4 FY26 Apr 2026 Q1 FY27This call Jul 2026 Q2 FY27Change vs prior quarter
AI orders demand ISG
$1.7B In Q4, AI orders demand was $1.7 billion with $2.1 billion in shipments, ending the quarter with $4.1 billion in backlog as customers work through technology changes. Source transcript
$12.1B We booked $12.1 billion in orders in the first quarter, surpassing the entirety of shipments in all of FY '25. Source transcript
$12.3B We booked $12.3 billion in orders in the quarter, bringing year-to-date orders to $30 billion, both record figures. Source transcript
$34.1B In Q4, we booked $34.1 billion in AI orders, evidence that demand is accelerating as customers deploy AI at scale. Source transcript
$24.4B In Q1, we booked $24.4 billion in AI orders and recognized $16.1 billion of AI server revenue. Source transcript
$60.9B In Q2, we booked a record $60.9 billion in AI orders and recognized $16.4 billion in AI server revenue. Source transcript
+149.6%
AI shipments ISG
$2.1B In Q4, AI orders demand was $1.7 billion with $2.1 billion in shipments, ending the quarter with $4.1 billion in backlog as customers work through technology changes. Source transcript
$1.8B We shipped $1.8 billion, leaving us with a backlog of $14.4 billion. Source transcript
$5.6B We shipped $5.6 billion in AI servers during the quarter for a total of $15.6 billion year-to-date. Source transcript
$9.5B We shipped $9.5 billion in AI servers in the quarter. Source transcript
——+69.6%
AI backlog ISG
$4.1B In Q4, AI orders demand was $1.7 billion with $2.1 billion in shipments, ending the quarter with $4.1 billion in backlog as customers work through technology changes. Source transcript
$14.4B We shipped $1.8 billion, leaving us with a backlog of $14.4 billion. Source transcript
$18.4B We ended the quarter with a record backlog of $18.4 billion. Source transcript
$43B We exited Q4 with a record $43 billion in AI backlog, and our pipeline continued to grow sequentially even after converting $34.1 billion of orders, a clear sign of sustained momentum. Source transcript
$51.3B We exited the quarter with a record $51.3 billion of AI backlog, and our pipeline continued to grow sequentially and remains multiples of our backlog, even after converting $24.4 billion into orders. Source transcript
$95B We exited the quarter with a record $95 billion of AI backlog, and our pipeline continue to grow sequentially and remains multiples of our backlog even after converting $131.7 billion into orders over the past 12 months. Source transcript
+85.2%
Customers ————
5,000+ Our customer count surpassed 5,000 with growth across neocloud, sovereigns and enterprise customers. Source transcript
6,500+ Demand is broadening across neoclouds, sovereigns and enterprise customers and our customer count has surpassed 6,500. Source transcript
—

Operating figures the company states on every call, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Orderbook & backlog

AI server orders booked $60.9 billion Q2 FY27
AI backlog $95 billion Q2 FY27

record

AI orders booked (past 12 months) $130 billion Q2 FY27
AI orders converted from pipeline (past 12 months) $131.7 billion Q2 FY27

Risks & headwinds

Supply chain constraints current

DRAM, NAND, CPUs, disk drives, leading node components (MOSFETs, Power ICs, microcontrollers, drivers), ABF substrate, T-Glass, optical components

Mitigation:Optimizing available components, building match sets, shaping demand, planning accordingly, and maximizing output from factories.

What to watch in Q3 FY27

ISG Operating Income Rate

Q3 FY27
Current 15%
Target up just over 1 point year-over-year

Why it matters

Indicates continued margin expansion in the core infrastructure business despite the mix impact of AI servers.

We expect ISG operating income rate to be up just over 1 point year-over-year, even as AI server revenue more than triples year-over-year.

Q&A highlights

What is driving the 122% growth in traditional servers and 26% in storage? Is it pricing, prebuys, or real demand? What workloads are these going into, and how durable is this growth?

Traditional server growth is driven by data center modernization, consolidation of aged infrastructure (1.2 million assets 14G or older), and increased security/resiliency needs. New 18G servers offer 12-14:1 consolidation. Storage growth is due to competitive Dell IP products, continuous data growth, and new AI-driven use cases like agentic workloads and KB Cash. Both segments are seeing durable demand, with second-half growth rates expected to maintain first-half levels.

“As much as we've modernized and to give you a sense that it's not an end near or it's a onetime thing, we still have 1.2 million assets that are 14G or older in the installed base.”

asked by Amit Daryanani · answered by Jeffrey Clarke

2 min read 6 chapters

Detailed narrative

AI Momentum and Market Opportunity

Dell continues to see accelerating AI server momentum, booking a record $60.9 billion in AI orders this quarter and recognizing $16.4 billion in AI server revenue. The company exited the quarter with a record $95 billion in AI backlog, with the pipeline growing sequentially and remaining multiples of the backlog. Demand is broadening across neoclouds, sovereigns, and enterprise customers, with the customer count surpassing 6,500, indicating significant enterprise adoption acceleration.

Traditional Server and Storage Strength

Traditional server revenue grew 122%, driven by data center modernization, consolidation of aged infrastructure (1.2 million assets are 14G or older), and increasing security/resiliency requirements. Dell gained over 10 points of traditional server share in the past two quarters. Storage revenue increased 26%, with Dell IP portfolio demand growing above market for six consecutive quarters. This growth is fueled by continuous data expansion, encryption, and protection needs, alongside incremental demand from AI workloads.

Client Solutions Group (CSG) Performance

CSG revenue grew 20%, with commercial revenue up 22% for the eighth consecutive quarter and consumer revenue up 7% for the fourth consecutive quarter of demand growth. Large enterprise customers are refreshing their PC installed base, while more cost-sensitive customers are extending upgrade cycles, expanding the long-term refresh opportunity. CSG profitability remains strong due to price discipline and scale benefits, contributing significantly to cash generation.

Operational Efficiency and Margin Expansion

Dell's multi-year modernization efforts are yielding significant operating leverage, with operating expenses as a percentage of revenue decreasing to 8.5% in Q2, and a full-year guide of approximately 8%, the lowest in the company's 42-year history. Gross margin rate improved to 21.1%, driven by ISG margin rate improvement and a higher mix of ISG revenue. This operational discipline is contributing to strong operating income growth and profitability across segments.

Capital Allocation and Financial Strength

The company generated strong cash flow from operations of $2.2 billion and adjusted free cash flow of $8.1 billion. Dell returned a record $4.3 billion to shareholders this quarter, including repurchasing 9.5 million shares at an average price of $401 per share and paying a dividend of approximately $0.63 per share. The balance sheet remains healthy with $14.2 billion in cash and investments and a core leverage ratio of 0.8x, providing flexibility for investments and shareholder returns.

Supply Chain Dynamics and Constraints

Despite record demand, Dell continues to face supply constraints, particularly for DRAM, NAND, CPUs, and disk drives. Further down the supply chain, products going through leading nodes, MOSFETs, Power ICs, microcontrollers, drivers, ABF substrate, T-Glass, and optical components are also constrained. The company is actively optimizing available components and shaping demand to maximize output, which contributed to the raised full-year guidance.

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