--- title: "Dell's Earnings Surge: Why Traditional Servers Are Seeing an Unexpected Boom?" type: "News" locale: "en" url: "https://longbridge.com/en/news/288083153.md" description: "A Bernstein report points out that Dell's earnings surge and the unexpected boom in traditional servers stem from new demand driven by Agentic AI. These workloads rely on CPUs for task orchestration and significantly increase memory and storage requirements, positioning traditional servers as the foundational computing layer for AI rather than objects of replacement. Current growth is primarily driven by large enterprises updating and expanding their computing environments, and the trend is still in its early stages with sustained potential" datetime: "2026-05-29T14:16:54.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/288083153.md) - [en](https://longbridge.com/en/news/288083153.md) - [zh-HK](https://longbridge.com/zh-HK/news/288083153.md) --- # Dell's Earnings Surge: Why Traditional Servers Are Seeing an Unexpected Boom? The key signal released by Dell’s “strongest ever” earnings report is that the growth engine is no longer just AI servers; traditional servers have once again become a driving factor. In a report on May 29, Bernstein pointed out that traditional servers have become the most surprising variable in Dell’s current growth cycle. The fundamental reason is that **Agentic AI is driving computing demand to spread from AI servers to traditional hardware such as CPUs, memory, and storage, prompting the market to reassess their growth elasticity.** Specifically, Agentic AI workloads rely on CPUs for task orchestration while significantly increasing DRAM and storage demands. This trend has already been implemented in Neo-cloud and large enterprise environments and is spreading to Tier 2 cloud service providers. Management explicitly positions Agentic AI as an incremental market for traditional servers, rather than a replacement for existing stock. From the perspective of demand sources, current growth mainly comes from normal computing environment updates by large enterprises and capacity expansion for growing workloads. **Considering the continued expansion of AI inference and subsequent Agentic applications, this cycle is still in its early stages, and traditional servers have the potential for sustained growth.** ## Broadly Beating Expectations: Server Business Drives Revenue and Profit Dell’s first-quarter financial results broadly exceeded expectations. Revenue reached $43.8 billion, a year-on-year increase of 88%, far higher than the company’s previous guidance range of $34.7 billion to $35.7 billion. Gross margin was 18.1%, higher than the market expectation of 17.3%. Operating profit margin was approximately 9.7%, up 260 basis points year-on-year and down slightly by 90 basis points quarter-on-quarter. The server business remains the largest growth engine. Revenue from the ISG division hit a record $29 billion, a year-on-year increase of 181%, significantly exceeding the market consensus of $22.3 billion. **Among this, traditional server and networking revenue was $8.5 billion, a substantial 92% year-on-year increase, nearly double the expected $5.2 billion; AI server revenue was $16.1 billion, a 757% year-on-year increase, also higher than the expected $13.1 billion.** Bernstein commented that Dell’s revenue, profit margins, and earnings per share this quarter all significantly exceeded company guidance and market expectations, with growth not relying on a single product line but demonstrating broader business momentum. ## Traditional Servers Reignite Growth: Agentic AI Drives CPU Orchestration and Memory Demand The recent explosion in traditional servers is surprising because the market had not previously viewed them as a core variable in Dell’s growth. The company has revised its full-year growth expectation from mid-single digits to slightly above 60%, while first-quarter revenue increased by 92% year-on-year, indicating a clear change in the demand slope. Bernstein stated that **the growth in the traditional server business is attributed to increased unit shipments, higher memory per unit, price increases, and expanded market share. The main demand drivers are large enterprise customers refreshing their computing environments and expanding capacity for workloads, with AI inference also bringing incremental demand.** Agentic AI is the key to understanding this change. These workloads require CPUs for orchestration and are accompanied by more DRAM and storage, making traditional servers the foundational computing layer for new AI workloads. ## AI Server Backlog Hits Record High, Enterprise Customers Become New Growth Pole The AI server business is also showing strong momentum. New orders added this quarter amounted to $24.4 billion, pushing the backlog to $51.3 billion, a historic high, with demand growth continuing to outpace supply release. Against the backdrop of high demand, the customer structure is also changing. Emerging cloud service providers remain the largest source of demand, but sovereign and enterprise customers are rapidly catching up, with the growth rate of enterprise customers surpassing all other customer types. Further observation reveals that **there are significant differences in the customer expansion paths for the two types of servers. Traditional servers are currently mainly driven by enterprise customers and will extend to Tier 2 cloud service providers in the future; whereas AI servers are initially driven by emerging cloud service providers. Although enterprise customers currently account for a smaller proportion, they are expected to become a larger source of demand in the future.** Based on the above demand trends and structural changes, Dell has raised its FY27 AI server revenue forecast by $10 billion to $60 billion, and raised the overall ISG revenue growth expectation from the mid-40% range to approximately 80%. ### Related Stocks - [DELL.US](https://longbridge.com/en/quote/DELL.US.md) - [XLK.US](https://longbridge.com/en/quote/XLK.US.md) - [RSPT.US](https://longbridge.com/en/quote/RSPT.US.md) - [PSI.US](https://longbridge.com/en/quote/PSI.US.md) - [XSD.US](https://longbridge.com/en/quote/XSD.US.md) - [FTXL.US](https://longbridge.com/en/quote/FTXL.US.md) - [PSCT.US](https://longbridge.com/en/quote/PSCT.US.md) - [IDGT.US](https://longbridge.com/en/quote/IDGT.US.md) - [NXTG.US](https://longbridge.com/en/quote/NXTG.US.md) - [IXN.US](https://longbridge.com/en/quote/IXN.US.md) - [DAT.US](https://longbridge.com/en/quote/DAT.US.md) - [SRVR.US](https://longbridge.com/en/quote/SRVR.US.md) - [XDAT.US](https://longbridge.com/en/quote/XDAT.US.md) - [DTCR.US](https://longbridge.com/en/quote/DTCR.US.md) - [DLLL.US](https://longbridge.com/en/quote/DLLL.US.md) - [SOXQ.US](https://longbridge.com/en/quote/SOXQ.US.md) - [SMH.US](https://longbridge.com/en/quote/SMH.US.md) - [XSW.US](https://longbridge.com/en/quote/XSW.US.md) - [SOXX.US](https://longbridge.com/en/quote/SOXX.US.md) - [IGV.US](https://longbridge.com/en/quote/IGV.US.md) - [CLOU.US](https://longbridge.com/en/quote/CLOU.US.md) ## Related News & Research - [Dell Technologies (NYSE:DELL) Releases Q2 2027 Earnings Guidance](https://longbridge.com/en/news/287979306.md) - [Dell Technologies Is About to Report Q1 Earnings. 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