Dell's AI servers drive a stellar earnings performance, and a raised outlook

By Britney Nguyen

The company's backlog has reached $95 billion as demand accelerates for its AI servers

Dell's July-quarter revenue and EPS surpassed Wall Street's expectations on Tuesday afternoon.

Dell Technologies' stock has outperformed some of the market's top artificial-intelligence beneficiaries so far this year, and the company's latest earnings report reflects just how important it has become to the AI boom.

The tech giant said Tuesday its AI server business booked $60.9 billion in orders in the July quarter and saw $16.4 billion in revenue - up 100% from a year ago. Dell (DELL) exited the second quarter of fiscal 2027 with $95 billion in backlog, it said. That's up from the $51.3 billion it recorded in its last earnings report.

Dell makes AI-optimized data-center servers that support AI chips, including those from Nvidia (NVDA). The company's customer base has diversified across neoclouds, enterprises and sovereign governments looking to build out and control AI systems.

The company said on its earnings call that it expects AI to make up 75% of all data-center demand by the end of the decade, and that it sees a more than $1 trillion opportunity in that time frame from compute deployments across its neocloud, sovereign and enterprise customers.

The server maker reported total revenue of $47 billion for the July quarter, up 58% from a year ago, and ahead of the $44.9 billion analysts tracked by FactSet were expecting. The company's adjusted earnings of $7.04 per share also topped estimates for $4.91, and represented growth of 203% from the previous year.

"IT environments have shifted from cost centers to value drivers that fuel growth and competitive advantage, and customers are investing accordingly - creating opportunity across our portfolio," Dell Chief Operating Officer Jeff Clarke said in a statement.

Dell's stock fell nearly 7% on Tuesday, but rallied 8% in after-hours trading, and is up 238% so far this year.

Beyond AI, Dell's traditional data-center server and networking segment revenue grew 122% in the July quarter to $10.5 billion as demand has surged for central processing units for agentic AI and inference. Dell management said on its earnings call that a majority of growth in this business is being driven by enterprise customers.

The company's storage business, which is its most profitable segment, saw revenue grow 26% to $4.9 billion.

Dell's client solutions group, which includes personal computers, recorded revenue of $15 billion for the fiscal second quarter, which was up 20% from the previous year.

For the October quarter, Dell's guidance for adjusted earnings per share of $6.50 and overall revenue of $49 billion beat the current FactSet consensus estimates of $4.46 for EPS and $41.4 billion for revenue.

With the company's "AI momentum accelerating and our opportunity expanding across the portfolio," Chief Financial Officer David Kennedy said in a statement. He added that Dell is raising its full-year fiscal 2027 revenue guidance to $192 billion from $167 billion, which would translate to year-over-year growth of 70%. The company also raised its outlook for adjusted earnings to $25.50 per share for the full fiscal year, which would represent growth of 148% from the previous year.

Ahead of the report, Mizuho analyst Vijay Rakesh said in a note to clients that he could see Dell benefiting from "meaningful demand" driven by Nvidia's recent announcement of a $500 billion financing platform using third-party capital to support the AI data-center buildout. And SpaceX's (SPCX) plan to deploy up to 10 gigawatts of computing power by the end of next year could also drive upside for Dell, he said, given that Nvidia, which works with Dell on enterprise-grade servers and racks, will be the SpaceX's exclusive hardware provider.

-Britney Nguyen

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09-01-26 2020ET