Overview
Since the Report + 19.3%
Revenue grew 58.0% year over year, EPS beat the estimate by 43.0%; the stock rose 8.0% in its first reaction.
- RevenueQ2
- $47.0B
- ▲ 58% YoY · Beat Estimate by 4.6%
- EPSAdjusted
- $7.04
- Est. $4.91 · Beat by 43%
Verdict
BUYDell had an extraordinary quarter on AI-server demand: revenue rose 58% year over year to a record $47.0 billion, and adjusted earnings of $7.04 per share beat estimates by 43%. The quarter closed with a record $95 billion AI order backlog; gross margin expanded instead of compressing, and the full-year revenue outlook rose to $192 billion from $167 billion. After a macro-driven 6.8% drop during the regular session, the stock jumped about 8% after hours on the results.
Close on Report DaySep 1
$425.00▲ 8.0%Report-Day Move
- Market Cap(Today)
- ≈ $322 B
- 1Y Return(At Report)
- + 232%
- P/E(At Today's Price · $18.38 · Trailing 12M)
- 27.6
- PEG(Company Guidance FY2027)
- 0.19
- Net Margin(Trailing 12M)
- 7.5%
Earnings Summary
In 30 Seconds- Revenue rose 58% year over year to $47.0B; adjusted EPS of $7.04 beat estimates by 43%.
- AI orders hit a record $60.9B with a $95B backlog; full-year revenue guidance was raised to $192B.
- The stock fell 6.8% intraday on macro pressure, then jumped about 8% after hours on the margin surprise.
The Numbers
Infrastructure (ISG) Revenue
$31.8B
▲ 89% YoY · Record
AI Orders
$60.9B
Backlog $95B · Record
Gross Margin
21.1%
▲ ~2.8 Pt · ISG Mix
Client (CSG) Revenue
$15.0B
▲ 20% YoY · PC Recovery
Quarterly Revenue ($ Billion)
29.80
Q2 26 · $29.8 B
27.00
Q3 26 · $27.0 B · QoQ − 9.4%
33.40
Q4 26 · $33.4 B · QoQ + 23.7%
43.80
Q1 27 · $43.8 B · QoQ + 31.1%
46.97
Q2 27 · $47.0 B · QoQ + 7.2% · YoY + 57.6%
~49.0
Q3 27E · ~49.0 · QoQ + 4.3% · YoY + 81.5%
- Q2 26
- Q3 26
- Q4 26
- Q1 27
- Q2 27
- Q3 27E
Q3 FY27 Company Guidance
- Revenue (Q3 FY27)49 billion
Point Estimate · ▲ ~81% YoYStrong Growth · 81% YoY ▲
- Adjusted EPS (Q3 FY27)6.5 $
▲ ~151% YoYStrong Growth · 151% YoY ▲
- Revenue (Full Year FY27)192 billion
Prior Target 167 · ▲ 69% YoY$25B Upward Revision ▲
- Adjusted EPS (Full Year FY27)25.5 $
Prior Target 17.90 · FY2026 10.30Upward Revision ▲ · ~148% Growth
- AI Server Revenue (FY27)74 billion
Full-Year Target~200% Growth ▲
Segment and KPI Data
Revenue by Segment
- AI-Optimized Servers$16.4 BShare 35.0%▲ 100.0% YoY
- Commercial Client$13.2 BShare 28.2%▲ 22.0% YoY
- Traditional Servers and Networking$10.5 BShare 22.5%▲ 122.0% YoY
- Storage$4.85 BShare 10.4%▲ 26.0% YoY
- Consumer$1.84 BShare 3.9%▲ 7.0% YoY
Key Metrics
AI Orders
$60.9 B
Press Release
AI Backlog
$95.0 B
Press Release
Operating Cash Flow
$2.23 B
▼ 13.0% YoYPress Release
Share Repurchases
$3.80 B
Press Release
Shares are computed over the segment total: $46.8 B. Source: Press Release.
Metrics come only from the company's own filings; each one names the document it was taken from.
“In Q2 we booked a record $60.9 billion in AI orders and recognized $16.4 billion in AI server revenue, exiting the quarter with a record $95 billion of AI backlog. Our pipeline continued to grow sequentially and remains multiples of our backlog even after converting $131.7 billion into orders over the past 12 months. With accelerating demand, a growing pipeline and differentiated capabilities, we are well positioned to capture the opportunity ahead.”
- Record AI Order Backlog
- Pipeline Multiples of Backlog
- Accelerating Demand
Summary and Review
Summary
In the quarter ended August 1, Dell reported $47.0 billion in revenue, up 58% year over year and 4.6% above the $44.9 billion expected. Adjusted earnings were $7.04 per share, 43% above the $4.91 estimate and up 203%. The engine was the Infrastructure Solutions Group (ISG). Its revenue rose 89% to a record $31.8 billion, including $16.4 billion from AI-optimized servers. AI orders hit a record $60.9 billion, and the quarter ended with a record $95 billion backlog.
Heading into the print, the biggest worry was that lower-margin AI servers would erode profitability. The quarter reversed that fear. Gross margin expanded roughly 2.8 points year over year to 21.1%. Gross profit dollars grew 78% to $9.9 billion. That surprise turned a modest 4.6% revenue beat into a 43% earnings beat. The stock fell 6.8% in the regular session to close at $425, mostly on macro factors (bond yields and inflation fears). It then jumped about 8–9% after hours.
The company raised its full-year outlook. The FY2027 revenue target went from $167 billion to $192 billion, and adjusted EPS from $17.90 to $25.50. Jeff Clarke said the pipeline runs at multiples of the backlog. This is a near-flawless quarter; we rate it very strong. Operating cash flow, however, was a modest $2.2 billion. Watch three things: demand concentration among a few large AI customers, the working-capital intensity of the ramp, and whether this growth rate can last.
Full Review
AI servers blew growth wide open.
The Infrastructure Solutions Group sits at the center of the quarter. ISG revenue rose 89% to a record $31.8 billion. Within it, AI-optimized servers reached $16.4 billion, doubling year over year. Traditional servers and networking grew 122%, and storage rose 26%. Total revenue climbed 58% to $47.0 billion. But the real story is on the order side: the company booked a record $60.9 billion in AI orders during the quarter and exited with a record $95 billion backlog. Jeff Clarke said the pipeline still runs at multiples of the backlog even after converting $131.7 billion into orders over the past 12 months. In short, demand is growing faster than Dell can currently convert into revenue.
Expansion, not the feared margin compression.
Going into the print, investors' biggest concern was that AI servers carry lower margins than the traditional business and that the mix shift would erode profitability. The result was the opposite. Gross margin rate rose to 21.1%, and gross profit dollars grew 78% to $9.9 billion. The company attributed that to an improved ISG margin rate and a higher ISG mix. Against roughly 18.3% a year earlier, that is about a 2.8-point expansion. This margin surprise is the main reason a modest 4.6% revenue beat produced a 43% earnings beat; operating leverage worked hard. With the stock up roughly 232% over the past year, the expectations bar was high, but the numbers cleared it comfortably. The very line investors feared most surprised to the upside, which explains the after-hours jump.
Full-year guidance was raised dramatically.
The company lifted not just the past but the future. The FY2027 revenue target was raised from $167 billion to $192 billion — a $25 billion increase at once — implying roughly 69% year-over-year growth. Adjusted EPS guidance went from $17.90 to $25.50, about a 148% jump versus the $10.30 posted in FY2026. AI-optimized server revenue is expected to roughly triple to $74 billion for the full year. For the third quarter, the company guides $49.0 billion in revenue and $6.50 in adjusted EPS. A business both beating the quarter by this much and raising its full-year outlook this much is a strong signal that demand is real and visible.
The Client (PC) segment recovered too.
The story is not only AI servers. The Client Solutions Group (CSG) — Dell's laptop and desktop PC business — grew 20% to $15.0 billion. That points to a meaningful recovery in a long-soft PC market, likely helped by a corporate refresh cycle and interest in AI PCs. Having two engines running at once reduces Dell's dependence on a single product category and balances its revenue base. Still, the scale gap is clear: the quarter's real driver remains infrastructure and AI servers, with PCs in a solid supporting role. For comparison, ISG revenue in the same quarter was $31.8 billion, up 89%.
Risks cluster around concentration and cash.
A few points shouldn't be overlooked. First, concentration: a large share of AI server demand may come from a limited number of big customers (hyperscale cloud providers and large AI firms). A change in their spending plans could quickly affect growth. Second, cash: operating cash flow was a modest $2.2 billion for the quarter relative to revenue, as the fast ramp ties up meaningful working capital in inventory and receivables. On a basis that adjusts for financing items, the company reported $8.1 billion in free cash flow. Third, sustainability: rates like +58% revenue and +203% earnings come off a low base and will normalize. Finally, AI servers are structurally lower-margin than storage; the mix worked in Dell's favor this quarter, but that may not last. Next quarter, watch two lines: whether the $49.0 billion revenue guide holds, and how fast the $95 billion backlog converts into revenue.
Looking Ahead
Strengths and Risks
6 Strengths · 6 RisksStrengths
6- Revenue rose 58% to a record $47.0BISG grew 89% to $31.8B.
- Adjusted EPS of $7.04 beat estimates by 43% and rose 203% year over year.
- Gross margin expanded roughly 2.8 points to 21.1% — the margin-compression fear reversed.
- A record $60.9B in AI ordersThe end-of-quarter backlog hit a record $95B.
- Full-year guidance was sharply raisedRevenue to $192B and adjusted EPS to $25.50.
- The Client (CSG) segment also grew 20%Strength is not limited to AI.
Risks
6- AI server demand may be concentrated among a few large customers, carrying concentration risk.
- The fast server ramp is working-capital intensiveOperating cash flow was a relatively limited $2.2B.
- AI servers are structurally lower-margin than storageThe mix could weigh on margins longer term.
- Growth rates like +58% revenue and +203% earnings come off a low base and will normalize over time.
- The stock is up roughly 232% over the past yearThe expectations bar and volatility are high.
- Converting the $95B backlog into revenue on time and profitably carries supply and execution risk.
What to Watch
3- Q3 FY2027 results are due around November 2026.
- The FY2027 AI-server revenue target is set at $74B for the full year.
- The pace at which the $95B order backlog converts into revenue will be watched closely.
Upcoming Earnings
To Understand This