TLDR
- DELL Q2 revenue surges 19% to $29.8B, fueled by AI server boom despite dip.
- AI servers power record $16.8B ISG revenue; stock slips after strong Q2.
- DELL lifts FY26 outlook as AI shipments hit $10B, offsetting weak storage.
- Client sales are mixed: enterprise PCs are stable and consumer demand is still lagging.
- After-hours drop masks solid growth, with DELL eyeing $20B AI server sales.
DELL Technologies(DELL) shares surged to $140 on August 28 but closed at $134.05, marking a 1.17% gain. However, the stock dropped 5.18% in after-hours trading, settling at $127.10 after the company released its Q2 fiscal 2026 earnings.
Despite the pullback, DELL posted strong results driven by record revenue, robust profitability, and continued momentum in AI server shipments.
AI Servers Fuel Record Growth in Infrastructure Business
DELL recorded $29.8 billion in Q2 revenue, reflecting a 19% increase year over year, backed by solid infrastructure demand. Its Infrastructure Solutions Group (ISG) achieved a record $16.8 billion in revenue, up 44% compared to the same quarter last year. Servers and Networking revenue soared 69% to $12.9 billion, reflecting a sharp uptick in demand for AI infrastructure.
The company’s storage segment declined 3% year over year to $3.9 billion, despite overall strength in ISG. Operating income for the segment reached $1.5 billion, an increase of 14% year over year, supporting overall margin improvement. DELL also noted $10 billion in AI solution shipments for the first half of fiscal 2026, surpassing all shipments for the previous year.
DELL raised its full-year AI server shipment guidance to $20 billion, reinforcing its focus on data center growth and expanding market share. The AI momentum continues to be a key driver for server performance, positioning the company well in the high-performance computing segment. This shift helped offset weaker performance in other areas like consumer storage.
Client Segment Shows Mixed Results Amid Weak Consumer Sales
DELL’s Client Solutions Group (CSG) delivered $12.5 billion in revenue, marking a modest 1% year-over-year increase. Commercial Client revenue rose 2% to $10.8 billion, but consumer revenue slipped 7% to $1.7 billion due to soft retail demand. Operating income declined 2% to $803 million as pricing pressure and weaker consumer mix weighed on profitability.
The segment’s performance indicates stability in enterprise PC demand, though household sales showed continued weakness. Higher input costs and changing customer patterns affected margins, even as commercial refresh cycles remained active. DELL emphasized resilience in the business segment, while acknowledging softness in the consumer channel.
Despite slower growth here, the company maintained its commitment to cost discipline and operational efficiency. As AI and hybrid work trends persist, DELL aims to recalibrate its offerings to meet evolving user needs. Ongoing innovation in commercial devices may offer margin relief in coming quarters.
Guidance Raised for FY26 Despite After-Hours Dip
DELL projected FY26 revenue between $105 billion and $109 billion, with the midpoint of $107 billion reflecting a 12% increase year over year. It expects GAAP diluted EPS of $7.98 and non-GAAP EPS of $9.55 at the midpoint, showing double-digit growth. For Q3 FY26, revenue is expected to be between $26.5 billion and $27.5 billion, which is an 11% increase year over year at the midpoint.
EPS guidance for Q3 stands at $2.07 GAAP and $2.45 non-GAAP, indicating continued earnings growth amid evolving market conditions. These projections suggest confidence in sustained AI infrastructure demand, despite short-term volatility in the stock. DELL also returned $1.3 billion to shareholders via dividends and share repurchases in Q2.
With strong cash flow of $2.5 billion from operations, DELL continues to prioritize shareholder returns and strategic reinvestments. Market response to the report was initially positive, though after-hours weakness followed high expectations. Still, the fundamentals remain solid as DELL capitalizes on long-term AI and infrastructure trends.
