DELL: AI Surges, Legacy Biz Heats Up; Firing on All Cylinders!

DELL released its FY2027 Q1 results (quarter ended Apr 2026) after hours on May 29 Beijing time. The print came post the US close.

1. Core results:$Dell Tech(DELL.US) revenue was $43.8bn, up 87% YoY, well ahead of the Street at $39.0bn. QoQ revenue rose by $10.5bn, driven mainly by AI server shipments.

GPM was 17.8%, down 240bps QoQ, better than the 16% consensus. The decline reflected higher storage costs and mix shift toward lower-margin hardware, which together compressed margins.

2. ISG (Infrastructure Solutions): revenue was $29.0bn, up $9.4bn QoQ, smashing consensus at $24.9bn. The QoQ delta came from AI server growth and a rebound in traditional servers.

① AI servers: AI server revenue was approx. $16.1bn, above the raised buyside est. of $15.6bn.

New AI orders reached $24.4bn this quarter, and AI backlog ended at $51.3bn. Dolphin Research estimates next-quarter AI server revenue at $15.5bn+, pointing to a clear supply-constrained setup.

② Other: beyond AI servers, legacy businesses also rebounded. Traditional server-related revenue was approx. $8.5bn, up 92% YoY and far above the Street at $5.0bn, the main source of the upside surprise. Storage delivered roughly $4.3bn of revenue, up 8% YoY.

3. CSG (Client Solutions): revenue was $14.6bn, up 17% YoY and ahead of the Street at $13.9bn. By mix, commercial customers contributed $13.0bn, up 18% YoY, while consumer revenue was $1.6bn, up 9% YoY.

4. Next-quarter guide: FY2027 Q2 revenue guided to $44–45bn, above the Street at $37.6bn. GAAP EPS guided to $4.5, also ahead of the Street at $3.0.

Dolphin Research view: across-the-board beat, AI and traditional servers both take off

DELL delivered a broad beat with QoQ revenue up $10.5bn, and growth continued to accelerate. The quarter was led by ISG shipments, especially servers.

AI revenue reached $16.1bn, up $7.2bn QoQ and above the raised Street mark at $15.6bn. New AI orders were $24.4bn, beating the $10–15bn range, and AI backlog reached $51.3bn, laying the groundwork for sustained high growth.

Heading into the print, AI server expectations had already been raised. The biggest surprise came from traditional servers: legacy server revenue hit $8.5bn, up 92% YoY vs. $5.0bn expected, the key driver of the beat. Consensus had looked for a steady uptick, but demand appears to be inflecting sharply.

The recent share rally has been powered by rising AI server expectations. The transition from GB200 to GB300 should lift ASPs. With both volume and price tailwinds, plus a rebound in traditional servers, the high-growth AI profile has pushed valuation beyond its historical upper band.

Management raised full-year guidance, now calling for FY revenue of $165–169bn, up $27bn from the prior $138–142bn. The quarter alone exceeded the old quarterly guide by roughly $10bn. Dolphin Research views the full-year outlook as conservative and sees room for further raises.

Outside the print, investors are focused on the following:

a) Storage remains tight: the main impact is on PCs, where the cost-to-price-to-demand pass-through has weighed on end demand and slowed market growth to 4% this quarter.

Separately, rising storage prices are pressuring hardware margins across PCs and servers. GPM fell to 17.8% this quarter, partly due to higher storage costs, yet still beat the 16% consensus and showcased solid cost control.

b) AI servers: with legacy businesses under pressure, AI progress is the key swing factor.

Hyperscalers have lifted capex outlooks. Dolphin Research estimates the four core cloud vendors (Google, Meta, Microsoft, Amazon) could spend $700bn+ in 2026, implying ~80% YoY growth.

Against that backdrop, the market was hesitant when AI server revenue stayed below $10bn. This quarter’s $16.1bn, up $7.2bn QoQ, delivered tangible high growth. It reflects robust demand and higher ASPs as deployments move from GB200 to GB300.

Dell has deep collaboration with Nvidia, offering Blackwell and Vera Rubin options, and participating in the next-gen Feynman platform. Especially for Tier-2 CSPs (Neocloud) and public-sector/enterprise clients, who typically do not buy from ODMs due to integration needs, they prefer OEMs that deliver full-stack solutions.

Dell provides full-stack services spanning desktop AI workstations (GB10/GB300 DGX), rack servers, storage, networking, software orchestration (OpenManage), and services (installation, tuning, 24/7 support). Its end-to-end offering positions Dell to win more orders in Tier-2 CSP and public-sector markets.

DELL’s market cap is $204.7bn, implying ~16x on FY2027 post-tax core earnings (assumes 60% revenue growth, 17% GPM, 17% tax rate). Historically, the multiple has ranged 8–20x, and after major estimate revisions the current PE sits slightly above the midpoint.

Following the rally, AI acceleration is being priced in. Top-tier houses now model $65bn of AI revenue, +163% YoY, implying expectations for another guidance raise post-print.

Management lifted the full-year AI guide to $60bn (from $50bn), but Dolphin Research sees this as conservative. First, H1 AI revenue should reach $31.6bn, and with Rubin ramping in H2, revenue should not be lower. Second, AI backlog already exceeds $50bn and is still growing alongside revenue, indicating supply remains the binding constraint.

Overall, AI is accelerating, traditional servers are clearly rebounding, PCs and margins are better than expected, and operating trends are broadly improving. Guidance could be raised again. With AI tailwinds and high growth, a legacy valuation lens no longer applies, and the multiple could break above its historical ceiling.

Below are Dolphin Research’s detailed notes on DELL (DELL.N):

I. DELL overall results

1.1 Revenue

In FY2027 Q1 (26Q1), DELL delivered revenue of $43.8bn, +87% YoY, above the Street at $39.0bn. QoQ revenue rose by $10.5bn on ISG strength, with AI revenue up $7.2bn QoQ and traditional servers up $2.7bn QoQ.

1.2 Gross profit

In FY2027 Q1 (26Q1), DELL posted GP of $7.8bn, +35.6% YoY.

GPM was 17.8%, down 240bps QoQ, better than the 16% consensus.

Main drivers: (1) higher storage prices weighed on GPM; (2) mix shift toward lower-margin ISG diluted overall margins.

1.3 Opex

FY2027 Q1 (26Q1) opex was $4.1bn, +9% YoY. Operating leverage lowered the opex ratio to 9.4%.

Breakdown: 1) R&D was $980mn, +22% YoY, with spend growth accelerating. 2) SG&A was $3.1bn, +6% YoY.

1.4 Net profit

FY2027 Q1 (26Q1) core operating profit was $3.66bn, +214% YoY, with a core margin of 8.3%. Profit growth was driven primarily by the surge in revenue.

II. Core segments: AI accelerates, legacy rebounds

By segment, ISG continued to scale on AI server strength, reaching 66% of total this quarter.

Per prior guidance, FY2026–FY2030 ISG CAGR (11–14%) should outpace CSG (2–3%), lifting ISG mix further.

ISG is the company’s most important segment. Detail as follows:

2.1 ISG (Infrastructure Solutions)

In FY2027 Q1 (26Q1), ISG revenue was $29.0bn, +181% YoY, well above the Street at $24.9bn.

Details: ① AI servers delivered approx. $16.1bn, up $7.2bn QoQ, the bulk of ISG growth; ② traditional servers and related lines were $8.5bn, +92% YoY; ③ storage was $4.3bn, +8% YoY.

ISG growth was powered by both AI and traditional servers. Legacy servers inflected sharply this quarter, while AI now accounts for over half of ISG.

Beyond in-quarter AI revenue, management disclosed leading indicators on AI orders and backlog. New AI orders were $24.4bn, above the $10–15bn range, and AI backlog reached $51.3bn, underwriting continued high growth in FY2027.

On supply, Dell has a deep partnership with Nvidia, offering Blackwell and Vera Rubin options and participating in the next-gen Feynman platform. As deployments move GB200 → GB300 → Rubin, AI server ASPs should keep rising.

On the customer side, Tier-2 CSPs (Neocloud) and public/enterprise clients typically do not buy directly from ODMs due to integration needs. They prefer OEMs with complete solutions. Dell’s end-to-end stack makes it a preferred choice for these customers, creating more order opportunities.

Although management raised the full-year AI guide to $60bn (from $50bn), Dolphin Research still sees it as conservative. H1 alone should reach $31.6bn, and with Rubin upgrades, H2 should grow further. With $50bn+ of backlog in hand, another guide hike is likely.

2.2 CSG (Client Solutions)

In FY2027 Q1 (26Q1), CSG revenue was $14.6bn, +17% YoY, beating the Street at $13.9bn.

By customer type, commercial revenue was $13.0bn, +18% YoY, while consumer revenue was $1.6bn, +9% YoY.

Global PC shipments were 65.6mn units in 1Q26, +4% YoY with growth slowing. DELL shipped 10.3mn units, +7% YoY, outpacing the market and lifting share to 15.7%.

While overall PC demand remains soft, Dell’s skew to commercial customers limits exposure to consumer weakness, with commercial PCs still up 18% this quarter.

With storage costs rising, Dell implemented uniform price increases on PCs early this year. Pricing helped pass through part of the cost pressure, yet shipments still grew YoY, underscoring brand strength and execution.

Net-net, storage tightness will continue to weigh on overall PC demand, but given Dell’s customer mix and execution, CSG should remain on a gradual upward track.

Related Dolphin Research coverage on DELL (DELL.N):

Earnings calls

Feb 27, 2026 Trans: Dell (Trans): AI orders exclude Rubin, legacy can stay positive

Feb 27, 2026 First Take: DELL: Can doubling AI mute 'storage tightness' worries?

Nov 26, 2025 Trans: Dell (Trans): Value lies in integrated L11+ solutions

Nov 26, 2025 First Take: DELL: Storage hikes pinch, AI guide supports

Aug 29, 2025 Trans: Dell (Trans): AI servers ship roughly evenly H1 vs. H2

Aug 29, 2025 First Take: DELL: Are 'frenzied' AI orders a flash in the pan?

Deep dives:

Jul 11, 2025 Deep Dive: Two AI buffs: Is spring coming back for Dell?

Jul 9, 2025 Deep Dive: Dell: Riding the AI wave, a comeback for a legacy name?

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