TLDR
- Dell’s Q3 revenue of $27.01 billion fell short of $27.13 billion estimate, but earnings of $2.59 per share topped expectations
- AI server revenue forecast jumped to $25 billion for fiscal 2026 from previous $20 billion target
- Fourth-quarter revenue guidance of $31.5 billion crushed analyst estimates of $27.59 billion
- Company’s AI server backlog stands at $18.4 billion with new orders totaling $12.3 billion
- Full-year revenue outlook raised to $111.7 billion as Dell names David Kennedy permanent CFO
Dell Technologies delivered a tale of two businesses in its third-quarter report. Traditional PC sales disappointed while AI infrastructure orders exceeded expectations, sending shares up 5% after hours.
The company posted revenue of $27.01 billion, missing the Street’s $27.13 billion target. Earnings came in at $2.59 per share, beating the $2.47 consensus. That’s an improvement from $1.64 per share a year ago.
But investors cared more about what’s coming. Dell’s fourth-quarter revenue forecast of $31.5 billion blew past the $27.59 billion estimate. Fourth-quarter earnings guidance of $3.50 per share also topped the $3.21 consensus.
Record AI Server Pipeline
Dell’s AI infrastructure business is experiencing explosive growth. The company raised its fiscal 2026 AI server revenue target to $25 billion. That represents a 25% increase from the prior $20 billion forecast.
Third-quarter AI server shipments reached $5.6 billion. The backlog now sits at $18.4 billion, fueled by $12.3 billion in new orders during the period.
Dell plans to ship $9.4 billion in AI servers during the current quarter. That figure excludes a recent deal with Iren to provide Nvidia GB300 systems that Microsoft will ultimately use.
Key customers include Elon Musk’s xAI, CoreWeave, the U.S. Department of Energy, and Abu Dhabi-based G42. These enterprises are racing to build out AI capabilities.
Infrastructure Solutions Group generated $14.11 billion in sales, meeting analyst projections. Server and networking revenue surged 37% compared to last year, reaching $10.1 billion.
PC Division Struggles Continue
The Client Solutions Group tells a less exciting story. Revenue of $12.48 billion grew only 3% year-over-year and missed the $12.65 billion forecast.
Commercial PC and laptop sales fell 7% from the prior year. Businesses and consumers see little reason to upgrade their existing equipment. The broader PC market remains sluggish as the pandemic-era buying spree fades into memory.
Margin Pressures Emerge
Memory chip prices are climbing rapidly. DRAM and NAND costs are rising at rates Chief Operating Officer Jeff Clarke called “unprecedented.”
Clarke acknowledged potential pricing impacts on customers but promised Dell would “do everything we can to mitigate that.” The company benefits from high demand that exceeds available supply, giving it room to adjust prices if needed.
Dell named David Kennedy as its permanent CFO. The company also boosted full-year revenue guidance to a range of $111.2 billion to $112.2 billion, up from the previous $105 billion to $109 billion outlook.
Net income reached $1.54 billion or $2.28 per diluted share. Dell returned $1.6 billion to shareholders through dividends and share repurchases during the quarter.
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