Dell (DELL) raises its full-year outlook by $25 billion as AI server backlog nearly doubles to $95 billion
Key points
- AI server orders hit a record $60.9 billion
- AI backlog nearly doubles to $95 billion
- Full-year revenue outlook raised by $25 billion
- Free cash flow fell 47% as inventory doubled
Dell Technologies (DELL) reported second-quarter revenue of $47.0 billion on Tuesday, September 1, up 58% from a year earlier, and raised its full-year revenue forecast to $192.0 billion from $167.0 billion. The company had guided the quarter to between $44 billion and $45 billion in May. Analysts polled by LSEG expected $44.92 billion, according to CNBC.
Non-GAAP earnings came to $7.04 a share, up 203%, against the LSEG estimate of $4.92. GAAP earnings were $6.34 a share, up 273%. Both are records, according to the release Dell furnished to the SEC after the close.
Jeff Clarke, vice chairman and chief operating officer, said in the release: "That's clearest in our AI server business where we booked a record $60.9 billion in orders, recognized a record $16.4 billion in revenue and exited the quarter with a record $95 billion backlog."
Three months ago the same backlog figure was $51.3 billion, a number the company gave on the first-quarter call in May. Dell does not publish a total-company backlog, and the $95 billion counts AI servers only. Our AI backlog tracker carries the figure alongside the other hardware names.
Orders of $60.9 billion against $16.4 billion of recognized revenue means Dell booked about 3.7 times what it shipped in the quarter. In the first-quarter release in May, Clarke put AI orders at $24.4 billion and AI server revenue at $16.1 billion. Revenue recognized on AI servers rose 2% from that quarter, and orders rose 150%.
"Over the past 12 months, we have booked more than $130 billion in AI server orders," Clarke said on the call, according to Reuters. "Demand is broadening across neoclouds, sovereigns, and enterprise customers, and our customer count has surpassed 6,500."
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Who is buying?
Reuters named Nscale and CoreWeave among the AI cloud providers that build clusters on Dell's Nvidia-equipped servers. Two of the quarter's larger deals were disclosed in May. IREN (IREN) agreed to buy about $1.6 billion of air-cooled Blackwell systems from Dell for its Childress, Texas campus, on top of the roughly $5.8 billion Dell order behind its Microsoft contract. Dell Federal Systems also won a five-year, $9.7 billion contract to supply and manage Microsoft software licenses across the U.S. military.
The traditional server line grew 122%, faster than the AI server line's 100%. "We are seeing a growing trend of customers that require meaningful CPU compute capacity to support AI and agentic workflows," Clarke said on the call, per CNBC. "These workloads are creating incremental demand for traditional servers."
How did each segment do?
Infrastructure Solutions Group revenue rose 89% to $31.8 billion, above the $29.61 billion StreetAccount consensus cited by CNBC. Inside it, traditional servers and networking grew 122% to $10.5 billion. Storage rose 26% to $4.9 billion. ISG operating income more than tripled to $4.8 billion.
The segment's operating margin reached 15.0% of revenue, up from 8.8% a year earlier and from 10.5% in the first quarter. That margin figure is the one we flagged going into the week, after Marvell fell 10.3% on Friday for guiding gross margin lower on a heavier custom mix. Company-wide GAAP gross margin came in at 20.9% of revenue, against 17.8% in the first quarter and 18.3% a year ago.
Clarke said on the call that price increases brought on by rising input costs are a factor in the higher revenue guidance, per CNBC. In May he had told analysts: "We are supply constrained in the second half. It is not a demand issue for us." On the same call, chief financial officer David Kennedy said AI server profitability "was in line with our mid single digit operating income rate target."
Client Solutions Group, the PC business, grew 20% to $15.0 billion, just under the $15.08 billion StreetAccount figure. Commercial PCs rose 22% to $13.2 billion and consumer rose 7% to $1.8 billion. CSG operating income rose 42% to $1.1 billion. "One of the things that we did earlier this year is we saw the PC market showing signs of softening in the second half," Clarke said. "We optimized the bits and bytes we have towards the infrastructure business."
| Quarter ended July 31 | Q2 FY27 | Q2 FY26 | Change |
|---|
| Net revenue | $46.97 billion | $29.78 billion | +58% |
| AI-optimized servers | $16.40 billion | $8.21 billion | +100% |
| Traditional servers and networking | $10.53 billion | $4.74 billion | +122% |
| Storage | $4.85 billion | $3.86 billion | +26% |
| Gross margin (GAAP) | 20.9% | 18.3% | +2.6 pts |
| ISG operating margin | 15.0% | 8.8% | +6.2 pts |
| Operating income | $5.39 billion | $1.77 billion | +204% |
| Net income | $4.13 billion | $1.16 billion | +255% |
Why did cash flow fall while profit tripled?
Cash flow from operations fell 13% to $2.2 billion. After $1.2 billion of capital spending, nearly double a year ago, free cash flow was $986 million, down 47%. Dell's adjusted free cash flow of $8.1 billion, up 224%, adds back $6.7 billion tied to the change in financing receivables and $496 million for equipment under operating leases.
Inventories stood at $21.3 billion on July 31, up from $10.4 billion at the end of January and $15.1 billion at the end of the first quarter. Accounts receivable rose to $22.9 billion from $17.6 billion in January, and short-term financing receivables to $12.8 billion from $8.5 billion. Accounts payable rose to $49.7 billion from $33.6 billion over the same period.
| Balance sheet | July 31, 2026 | Jan. 30, 2026 |
|---|
| Inventories | $21.29 billion | $10.44 billion |
| Accounts receivable | $22.92 billion | $17.59 billion |
| Short-term financing receivables | $12.81 billion | $8.46 billion |
| Accounts payable | $49.72 billion | $33.63 billion |
| Cash and equivalents | $11.57 billion | $11.53 billion |
| Shareholders' equity | -$1.43 billion | -$2.47 billion |
Dell spent $3.8 billion on buybacks in the quarter and $405 million on dividends, and raised $4.4 billion of new debt against $1.0 billion repaid. Diluted shares fell 5% from a year ago to 652 million. The company returned a record $4.3 billion to shareholders, and the board declared a $0.63 quarterly dividend payable October 30.
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What is the new guidance?
Dell now expects fiscal 2027 revenue of $192.0 billion, up 69% from fiscal 2026 and $25 billion above the $167.0 billion it guided in May. LSEG consensus stood at $172.67 billion, per CNBC. The AI server forecast rose to $74.0 billion from $60.0 billion. Dell recognized $32.5 billion of AI server revenue in the first half, so the new number implies about $41.5 billion in the second half.
Full-year non-GAAP EPS guidance moved to $25.50 from $17.90, against an LSEG estimate of $18.92. GAAP EPS guidance moved to $24.37 from $17.31.
For the third quarter, Dell guided revenue of $49.0 billion, up 81%, with non-GAAP EPS of $6.50 and GAAP EPS of $6.10. Analysts polled by LSEG had $41.42 billion and $4.49.
| Fiscal 2027 guidance | May | September 1 | LSEG consensus |
|---|
| Revenue | $167.0 billion | $192.0 billion | $172.67 billion |
| AI-optimized server revenue | $60.0 billion | $74.0 billion | n/a |
| Non-GAAP diluted EPS | $17.90 | $25.50 | $18.92 |
| GAAP diluted EPS | $17.31 | $24.37 | n/a |
How did the stock react?
Dell shares closed at $424.36 on Tuesday, down 6.9% in the regular session ahead of the report. The stock traded at $461.87 minutes after the release and was at $452.42 at 7:05 p.m. ET, up 6.6% from the close. Through Tuesday's close the stock had gained 236% in 2026, per CNBC, against 11% for the S&P 500. Dell's stock page carries the chart and the insider and Congress trade history.
Hewlett Packard Enterprise (HPE), which closed down 2.7% at $50.85, traded at $52.48 after hours, up 3.2%. Super Micro Computer (SMCI) was at $37.18 after hours from a $36.72 close.
Michael Dell, the company's founder, chairman and chief executive, posted on X after the release, per CNBC: "There's an old Texas saying I may have just made up," followed by: "If you keep growing EPS 200%+ y/y something good will happen."
Kennedy said in the release: "With AI momentum accelerating and our opportunity expanding across the portfolio, we're raising our full-year FY27 revenue outlook by $25 billion to $192 billion, up nearly 70% year over year."
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