Dell Technologies Inc. (DELL) Earnings & Analysis

Latest quarter

Dell reported Q2 FY2027 revenue of $47.0 billion, up 57.7% from Q2 FY2026, and said the result was above the consensus of $45.3 billion. The company reported adjusted EPS, as the consensus counts it, of $7.04, above the consensus of $4.97.

Dell reported diluted EPS of $6.34, up 272.9% year over year. The filing said revenue growth came from ISG and, to a lesser extent, CSG, partly offset by lower Corporate and other revenue; ISG growth was led by AI-optimized servers, with contributions from traditional servers and networking and storage. Dell reported gross margin of 20.9%, up 2.6 percentage points, and operating margin of 11.5%, up 5.5 percentage points. The filing attributed the quarter’s higher gross-margin rate to disciplined pricing and the operating-margin increase to revenue growth, lower operating-expense rate and higher gross margin.

Dell reported free cash flow of $986.0 million, down 47.2% year over year. The company’s Q2 revenue was above its $44.0 billion–$45.0 billion guidance range, while operating-income growth of 203.7% was above its 80.0% guide.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

David Kennedy said ISG generated $31.8 billion of revenue, up 89%, as AI server orders reached $60.9 billion, AI server revenue reached $16.4 billion and ending AI-server backlog reached $95 billion. He said traditional servers and networking generated $10.5 billion of revenue, up 122%, while storage revenue was $4.9 billion, up 26%.

Kennedy said ISG operating margin reached 15%, up 620 basis points, citing revenue growth, storage profitability, pricing discipline and effects of the company’s modernization work. He said some quarter-specific margin benefits would not necessarily continue at the same level, while Dell’s second-half guidance reflected what he called structural improvements in the business. He also said CSG revenue rose 20% to $15 billion and that CSG operating income was $1.1 billion, or 7.6% of revenue.

On supply and investment, Dell’s filing said higher component costs reflected supply constraints and inflation in memory components, while increased purchases of certain components had raised inventory levels, purchase obligations and working-capital needs. The filing said frequent component updates or transitions could create additional demand-and-supply management challenges.

Analysts asked Jeff Clarke about the durability of traditional-server and storage demand. Clarke said traditional-server demand was principally coming from historical enterprise customers and that demand outstripped supply. He attributed demand to data-center modernization, security and resilience requirements, and increasing enterprise AI workloads; he said older infrastructure would need updating but did not quantify the resulting revenue opportunity. Clarke also said Dell’s storage portfolio was seeing demand across customer sizes and said more enterprise customers were buying AI offerings, including repeat buyers.

Kennedy said Dell expected second-half storage growth in the mid-teens and traditional-server growth in the triple digits, adding that pipelines continued to build. He said Dell expected second-half growth rates to maintain the first-half trajectory, while management did not provide a separate numerical outlook for demand beyond the guidance it gave.

Guidance

Dell raised its FY2027 revenue guide to $192.0 billion from $165.0 billion–$169.0 billion. The company raised its FY2027 operating-income-growth expectation to 120.0% from 55.0%, its FY2027 AI-server-revenue expectation to $74.0 billion from $60.0 billion, and its FY2027 ISG-revenue-growth expectation to 120.0% from 80.0%. Dell also expects FY2027 GAAP EPS of $24.37 and non-GAAP EPS of $25.50.