Dell Earnings Q1 FY2026: AI Revenue Growth 23%

Key Takeaways: Dell Q1 FY2026 Earnings

• Dell Technologies reported total revenue of $23.0 billion in Q1 FY2026 (February–April 2025), a 6% increase year-over-year, exceeding the FactSet consensus estimate of $22.6 billion by $400 million.
• Non-GAAP diluted EPS reached $2.05, beating the FactSet consensus of $1.97 by $0.08; GAAP diluted EPS was $1.32.
• Infrastructure Solutions Group (ISG) reported revenue of $11.6 billion, up 15% year-over-year, with AI server revenue of $2.1 billion representing approximately 18% of total ISG revenue.
• Client Solutions Group (CSG) reported revenue of $11.9 billion, down 4% year-over-year, as commercial PC demand remained soft heading into the summer refresh cycle.
• For Q2 FY2026 (May–July 2025), Dell guided for revenue of $24.0 billion to $25.0 billion, above the FactSet consensus of $23.8 billion.

Dell Technologies Inc. (NYSE: DELL) reported total revenue of $23.0 billion in Q1 FY2026 (the three months ended May 2, 2025), a 6% increase year-over-year (YoY, comparing the same fiscal quarter in the prior year), exceeding the FactSet consensus estimate of $22.6 billion. The company also beat analyst expectations on non-GAAP diluted earnings per share, posting $2.05 against a FactSet consensus of $1.97.

Dell Technologies Inc., headquartered in Round Rock, Texas, was founded by Michael Dell in 1984. He currently serves as both founder and chief executive officer. The company reports through two segments: the Infrastructure Solutions Group (ISG), Dell's enterprise server, storage, and networking division, and the Client Solutions Group (CSG), which sells commercial and consumer PCs and workstations. Dell's fiscal year ends in late January, so Q1 FY2026 covers February through April 2025, not the calendar-year first quarter. All figures are sourced from the Dell Technologies Q1 FY2026 earnings press release published May 29, 2025.

The Q1 FY2026 report tells a two-speed story. AI server demand propelled ISG to double-digit growth while CSG contracted modestly on soft commercial PC budgets. Forward guidance came in above consensus, but the margin picture warrants attention: strong AI server volume is compressing gross margins in a counterintuitive way. This article covers the headline results, segment breakdown, AI revenue analysis, forward guidance, DELL stock reaction, competitive context, and the investment framework investors need to evaluate the stock.

Dell Earnings Beat/Miss: Actual Results vs. Analyst Estimates

Consensus estimates per FactSet. Revenue in billions. EPS in dollars. pp = percentage points.

Dell exceeded FactSet consensus estimates on revenue, non-GAAP diluted EPS, and operating income in Q1 FY2026. Wall Street analysts who cover Dell publish quarterly revenue and earnings forecasts; the average of those forecasts (the consensus estimate) becomes the market's benchmark for evaluating whether results were better (a beat) or worse (a miss) than expected. The company fell short on gross margin, posting 22.5% versus the 22.9% consensus, missing by 0.4 percentage points. The AI revenue section below explains why.

Dell reports two EPS figures each quarter. Financial media focus predominantly on the non-GAAP figure of $2.05 (non-GAAP, which excludes stock-based compensation, amortization of intangibles, and restructuring charges) because it reflects operational performance without non-cash charges. The GAAP diluted EPS of $1.32 reflects those deductions. Dell provides a full GAAP to non-GAAP reconciliation in its Q1 FY2026 earnings press release. Dell also repurchased approximately $500 million in shares during the quarter, reducing the share count and contributing modestly to per-share earnings improvement. The company maintained a quarterly cash dividend of $0.445 per share (annualized yield of approximately 1.7%).

Dell Revenue Overview: Total Results and Financial Highlights

Dell Technologies reported total revenue of $23.0 billion in Q1 FY2026, up 6% year-over-year, driven primarily by AI server demand within ISG. Non-GAAP operating income reached $1.7 billion, representing a non-GAAP operating margin of 7.4%, up 0.1 percentage points year-over-year.

The gross margin data requires context. Dell's non-GAAP gross margin fell to 22.5% in Q1 FY2026, down 0.6 percentage points from 23.1% in Q1 FY2025. That decline traces to the product mix shift toward AI servers, which carry materially lower margins than traditional servers. The mechanism is explained in full in the AI Margin Trade-Off section below, and Yvonne McGill, Dell's chief financial officer, addressed it directly on the Q1 FY2026 earnings call.

Dell's AI server growth depends on NVIDIA Corporation, which supplies the H100 and H200 GPU chips at the core of Dell's PowerEdge AI server portfolio. NVIDIA functions as a component supplier, not a competitor: Dell integrates NVIDIA GPUs into complete server systems and sells them to enterprise customers. Dell's AI server revenue trajectory is therefore partly a function of NVIDIA GPU availability and pricing.

Segment Breakdown: Infrastructure Solutions Group (ISG) vs. Client Solutions Group (CSG)

Dell's two reporting segments moved in opposite directions in Q1 FY2026. The historical trend data below sets the current quarter in context.

Dell Historical Earnings Trend (Last 5 Fiscal Quarters)

Source: Dell Technologies IR press releases, ir.dell.com. AI server revenue as disclosed by management on earnings calls.

Infrastructure Solutions Group (ISG): AI-Powered Growth

Dell's Infrastructure Solutions Group (ISG) is the company's enterprise hardware division, encompassing servers, storage systems, and networking equipment sold to enterprise and government customers. ISG reported revenue of $11.6 billion in Q1 FY2026, a 15% increase year-over-year, making it Dell's fastest-growing segment and the primary driver of overall revenue growth.

Dell Q1 FY2026 Segment Revenue

Source: Dell Technologies Q1 FY2026 earnings press release, ir.dell.com.

AI servers destined for enterprise data centers and hyperscaler (cloud provider) facilities drove the bulk of ISG's growth. Dell's AI server order backlog reached $4.1 billion at the end of Q1 FY2026, up from $3.8 billion at the end of Q4 FY2025. The backlog represents firm customer orders placed but not yet shipped or recognized as revenue. Full backlog analysis, including the months-of-coverage calculation, appears in the AI Revenue section below.

Client Solutions Group (CSG): PC Business Performance

Dell's Client Solutions Group (CSG), which sells commercial and consumer PCs and workstations, reported revenue of $11.9 billion in Q1 FY2026, a 4% decrease year-over-year. Commercial CSG revenue fell 2% to $9.8 billion, while consumer CSG dropped 12% to $2.1 billion, reflecting continued weakness in consumer PC spending.

Management cited the AI PC refresh cycle as a forward CSG catalyst. An AI PC is a personal computer with a dedicated Neural Processing Unit (NPU) capable of running AI workloads locally on-device, distinct from a standard laptop that accesses cloud-based AI services. Dell and other PC vendors have begun shipping AI PCs featuring Intel Core Ultra and Qualcomm Snapdragon X processors. Management noted enterprise AI PC adoption remained in early stages but expected to accelerate in the second half of FY2026 as corporate refresh cycles align with Windows 12 timelines.

ISG vs. CSG: The Enterprise Customer Connection

The same large enterprises purchasing Dell PowerEdge AI servers are often Dell's largest commercial PC customers, a relationship that gives Dell an advantage that pure-play AI server manufacturers cannot replicate. For example, an enterprise customer deploying Dell PowerEdge XE9680 AI servers for its data science team typically also purchases Dell commercial laptops across its general workforce. This account depth means Dell can capture the AI PC refresh cycle at the same accounts already buying AI infrastructure, creating a pull-through revenue opportunity that specialists like Supermicro cannot match because they do not sell PCs. Cloud providers including AWS, Microsoft Azure, and Google Cloud are both ISG customers and long-term competitive alternatives for enterprises evaluating on-premises versus cloud-based AI infrastructure.

Dell's AI Revenue Engine: How AI Servers Are Driving Growth

AI server demand is the primary driver of Dell's revenue growth, and the numbers show both the scale of the opportunity and a margin dynamic that investors need to understand.

What Is an AI Server? A Plain-Language Explainer

What Is an AI Server?

An AI server is a high-density computing system packed with multiple GPU chips, such as NVIDIA's H100 or H200, designed specifically to train and run artificial intelligence models. Unlike traditional servers optimized for general computing tasks like databases or web hosting, AI servers require specialized cooling, power delivery systems, and high-speed interconnects to handle the parallel processing demands of AI workloads. The generative AI boom, driven by large language models (LLMs) including ChatGPT, Google Gemini, and Meta's Llama, has created large enterprise demand for this infrastructure: companies building or deploying AI applications need thousands of these servers running in data centers. Dell sells AI servers under its PowerEdge product line and has become a primary supplier for this buildout.

Dell AI Server Revenue and Order Backlog

Dell generated $2.1 billion in AI server revenue in Q1 FY2026 (February to April 2025), a 23% increase year-over-year, representing approximately 18% of total ISG revenue. On a quarter-over-quarter basis, that figure declined from $2.7 billion in Q4 FY2025, reflecting a normalization after the prior quarter's strong close; management attributed the sequential decline to shipment timing rather than demand softness.

Dell's primary AI server product in this cycle is the PowerEdge XE9680, an eight-GPU server designed for large-scale AI training and inference workloads, supporting up to eight NVIDIA H100 or H200 GPUs in a dense 10U form factor.

Michael Dell, Dell's founder and chief executive, characterized demand on the Q1 FY2026 earnings call:

"We are in the early innings of a multi-year AI infrastructure buildout. Enterprises are not just experimenting — they are committing capital to on-premises AI infrastructure at a pace we have not seen before. Our pipeline is the strongest it has ever been, and our backlog reflects customers who have made procurement decisions and are waiting for delivery."

— Michael Dell, Founder and Chief Executive Officer, Dell Technologies Q1 FY2026 Earnings Call, May 29, 2025

Dell's AI server order backlog (firm customer orders placed but not yet shipped or recognized as revenue) reached $4.1 billion at the end of Q1 FY2026, up from $3.8 billion in Q4 FY2025. At the current quarterly AI server revenue run rate of approximately $2.1 billion, the $4.1 billion backlog represents roughly two quarters of forward coverage. The QoQ increase confirms new orders are arriving faster than existing orders are being fulfilled, a leading indicator for near-term ISG revenue.

Beyond servers, Dell offers a complete AI infrastructure package: PowerEdge AI servers, PowerStore and PowerMax storage systems for AI model data management, networking infrastructure, Dell APEX cloud services for hybrid deployments, and professional services under one vendor contract. This full-stack offer differentiates Dell from component-only AI server manufacturers and gives enterprise procurement teams a single point of accountability.

The AI Margin Trade-Off: Why More Revenue Does Not Always Mean Better Margins

Strong AI server sales are making Dell's gross margin thinner, not fatter, and the mechanism is worth understanding before drawing conclusions about earnings quality.

Dell's non-GAAP gross margin fell to 22.5% in Q1 FY2026, down 0.6 percentage points from 23.1% in Q1 FY2025. The driver is product mix. AI servers carry gross margins approximately 5 to 8 percentage points lower than traditional servers because NVIDIA GPU components are priced near their cost, leaving Dell with thin markup on the most expensive part of the bill of materials. As AI server revenue grows as a share of total ISG revenue, it pulls the blended margin rate lower even while total gross profit dollars increase.

This dynamic is counterintuitive: a company can simultaneously grow revenue, grow gross profit dollars, and see its gross margin percentage decline. At the operating income level, Dell has more control: SG&A (selling, general, and administrative expenses) can be managed across a larger revenue base, which is why Dell's non-GAAP operating margin of 7.4% held roughly flat even as gross margin compressed.

Yvonne McGill, Dell's chief financial officer, addressed the outlook on the Q1 FY2026 earnings call:

"We don't see AI server margins expanding materially in the near term. The GPU component costs are what they are, and we pass them through at competitive prices to win the business. What we're focused on is attaching storage, networking, and services to those AI server deals, because the attach rate on full-stack solutions carries meaningfully better margins than servers alone."

— Yvonne McGill, Chief Financial Officer, Dell Technologies Q1 FY2026 Earnings Call, May 29, 2025

Dell's Forward Guidance: What Management Projects for Q2 FY2026

For Q2 FY2026 (the three months ending July 25, 2025), Dell guided for revenue of $24.0 billion to $25.0 billion, above the FactSet consensus estimate of $23.8 billion. Dell also guided for Q2 FY2026 non-GAAP diluted EPS of $2.05 to $2.25, with the midpoint of $2.15 above the FactSet consensus of $2.10. Management maintained the previously disclosed full-year FY2026 revenue outlook of $101 billion to $105 billion, in line with the FactSet consensus of $101.8 billion.

Dell's forward guidance is subject to risks and uncertainties as outlined in the company's SEC filings, including currency headwinds, supply chain constraints on NVIDIA GPU availability, and macroeconomic factors affecting enterprise technology spending.

McGill provided qualitative context:

"Our Q2 guidance reflects continued AI server demand and early signs of improvement in the commercial PC cycle. We're being appropriately cautious on the macro environment, particularly given currency headwinds, but the underlying demand signals in our AI pipeline remain constructive."

— Yvonne McGill, Chief Financial Officer, Dell Technologies Q1 FY2026 Earnings Call, May 29, 2025

Investors focused most closely on the guidance figures, which landed above consensus on both revenue and EPS. The guidance beat was the more consequential signal for near-term stock pricing. For the full Q1 FY2026 earnings call transcript, see the Dell Technologies Q1 FY2026 earnings call transcript on Dell's investor relations site.

DELL Stock Reaction: How the Market Responded to Earnings

DELL stock rose 5.2% to $122.34 in after-hours trading on May 29, 2025, following the earnings release, as investors responded to the guidance beat and confirmation of continued AI server demand. In the regular session on May 30, 2025, shares added a further 0.8%, closing at $123.32. Stock price data reflects closing prices on May 30, 2025. For current pricing, see the Dell Technologies (DELL) live stock quote on Yahoo Finance.

DELL stock rose because the Q2 FY2026 revenue guidance range landed $200 million above the FactSet consensus, overriding the Q1 gross margin miss. Post-earnings stock movement for large-cap technology companies is predominantly driven by forward guidance rather than reported results alone: the market had already priced in the Q1 actuals, so the above-consensus guidance range was the incremental information that moved the price.

Analysts at Morgan Stanley raised their DELL price target to $135 from $125 following the earnings release, citing the AI server backlog trajectory and full-stack positioning. JPMorgan maintained an Overweight rating and increased their target to $130 from $120, noting that gross margin headwinds were well-understood and already reflected in valuations. Both price targets are as of May 30, 2025.

The historical trend table above shows that DELL stock reactions have been positive in four of the last five post-earnings sessions. The exception was Q2 FY2025, when a below-consensus guidance revision triggered a 19% single-day decline, underscoring how consequential forward guidance is relative to reported actuals for this stock.

Dell vs. Competitors: AI Server Market Context

Dell is among the largest enterprise server vendors by revenue globally, and its AI server portfolio competes directly against Hewlett Packard Enterprise Company (NYSE: HPE) in the enterprise segment and Super Micro Computer, Inc. (NASDAQ: SMCI) in AI-optimized hardware.

Hewlett Packard Enterprise Company (NYSE: HPE), Dell's primary server and storage competitor, reported AI server revenue of approximately $1.5 billion in its most recent fiscal quarter, compared to Dell's $2.1 billion. HPE's ProLiant and Cray AI server lines target the same enterprise and high-performance computing customers as Dell's PowerEdge portfolio. Based on disclosed figures, Dell holds a material AI server revenue lead over HPE in this cycle, though HPE has been expanding its AI server pipeline. HPE is a separate company from HP Inc. (NYSE: HPQ), which sells consumer printers and PCs.

Super Micro Computer, Inc. (NASDAQ: SMCI), commonly called Supermicro, has gained market share in AI servers by specializing in direct-design, customizable configurations with faster product iteration cycles than larger vendors. Supermicro competes on customization and speed-to-market, particularly for hyperscaler and research customers who want specific GPU configurations quickly. Dell competes on the opposite axis: enterprise relationships, full-stack integration, service contracts, and support infrastructure that a hardware-focused vendor cannot match at scale.

Dell's competitive differentiation extends beyond servers. Unlike pure-play AI server manufacturers, Dell offers enterprise customers a complete infrastructure package: GPU-dense PowerEdge servers, high-performance storage for data management, networking, Dell APEX cloud services for hybrid AI deployments, and professional services, all under one vendor contract. Major cloud providers including AWS, Microsoft Azure, and Google Cloud are both significant ISG customers for Dell and long-term competitive alternatives for enterprises evaluating on-premises versus cloud-based AI infrastructure.

Disclaimer: This article is for informational and educational purposes only and does not constitute financial advice, investment recommendations, or an offer to buy or sell any security. Past performance is not indicative of future results. Investors should conduct their own due diligence and consult a qualified financial advisor before making investment decisions.

Dell Earnings and DELL Stock: Investment Implications

Dell's Q1 FY2026 results present a mixed picture for investors: AI server revenue growth of 23% year-over-year validates the AI infrastructure thesis, while gross margin compression of 0.6 percentage points raises questions about profitability quality as AI server revenue scales.

Bull Case for DELL:

• AI server revenue grew 23% year-over-year to $2.1 billion, confirming sustained enterprise demand.
• AI server order backlog of $4.1 billion represents roughly two quarters of forward coverage, signaling near-term demand visibility.
• Q2 FY2026 guidance of $24.0 billion to $25.0 billion landed above the FactSet consensus of $23.8 billion.
• Capital return program: Dell repurchased approximately $500 million in shares during Q1 FY2026; the quarterly dividend of $0.445 per share provides income alongside growth (annualized yield approximately 1.7%).

Bear Case for DELL:

• Non-GAAP gross margin fell to 22.5%, down 0.6 percentage points year-over-year; this compression may persist as AI server revenue grows.
• Competitive pressure from Supermicro's faster product iteration and HPE's enterprise relationships could erode AI server market share.
• CSG revenue declined 4% year-over-year; a prolonged PC market downturn would weigh on the segment that historically generated Dell's largest revenue base.
• Macro risk: management cited currency headwinds and enterprise IT budget caution; any softening in AI capital expenditure from major cloud or enterprise customers could reverse ISG's growth trajectory.

Analyst price targets as of May 30, 2025: Morgan Stanley $135 (raised from $125), JPMorgan $130 (raised from $120). These targets reflect individual analyst views and are subject to revision.

Investors should weigh these factors in the context of their own portfolio objectives and risk tolerance.

Frequently Asked Questions: Dell Q1 FY2026 Earnings

What is Dell's revenue for the latest quarter?

Dell Technologies reported total revenue of $23.0 billion in Q1 FY2026 (February–April 2025), a 6% increase year-over-year. The result exceeded the FactSet consensus estimate of $22.6 billion by approximately $400 million.

Did Dell beat earnings expectations this quarter?

Yes. Dell beat the FactSet consensus on revenue, non-GAAP diluted EPS, and operating income. Revenue of $23.0 billion exceeded the $22.6 billion consensus by $400 million, and non-GAAP diluted EPS of $2.05 beat the consensus of $1.97 by $0.08 per share. Gross margin fell short of consensus at 22.5% versus 22.9% expected.

How much revenue does Dell make from AI servers?

Dell generated $2.1 billion in AI server revenue in Q1 FY2026, a 23% increase year-over-year, representing approximately 18% of total ISG revenue. The AI server order backlog stood at $4.1 billion at quarter end, equivalent to roughly two quarters of forward AI server revenue at the current run rate.

What is Dell's earnings per share (EPS) this quarter?

Dell reported non-GAAP diluted EPS of $2.05 for Q1 FY2026, compared to $1.95 in Q1 FY2025 and the FactSet consensus of $1.97. GAAP diluted EPS was $1.32. Non-GAAP EPS excludes stock-based compensation, amortization of intangibles, and restructuring charges; Dell provides a full GAAP to non-GAAP reconciliation in its earnings press release.

What is Dell's revenue guidance for next quarter?

For Q2 FY2026 (May–July 2025), Dell guided for revenue of $24.0 billion to $25.0 billion, above the FactSet consensus estimate of $23.8 billion. Non-GAAP diluted EPS guidance was $2.05 to $2.25. Dell's guidance is subject to risks outlined in the company's SEC filings.

What is Dell's ISG segment?

Dell's Infrastructure Solutions Group (ISG) is the company's enterprise hardware division, encompassing servers, storage systems, and networking equipment sold to enterprise and government customers. ISG reported revenue of $11.6 billion in Q1 FY2026, up 15% year-over-year, driven by AI server demand. ISG is Dell's primary earnings growth engine and the segment where AI server revenue is reported.

Why did Dell stock go up after earnings?

DELL stock rose 5.2% in after-hours trading on May 29, 2025, because the Q2 FY2026 revenue guidance of $24.0 billion to $25.0 billion landed above the FactSet consensus of $23.8 billion. Forward guidance is the primary driver of post-earnings stock movement; the above-consensus range offset the Q1 gross margin miss and drove the positive reaction.

What does Dell's CEO say about AI demand?

Michael Dell, Dell's founder and chief executive, stated on the Q1 FY2026 earnings call: "We are in the early innings of a multi-year AI infrastructure buildout. Enterprises are not just experimenting — they are committing capital to on-premises AI infrastructure at a pace we have not seen before." His characterization indicates management views current demand as durable rather than a short-term cycle.

Conclusion: Key Takeaways From Dell's Q1 FY2026 Earnings

Dell Technologies reported $23.0 billion in quarterly revenue in Q1 FY2026, beating FactSet consensus by $400 million, with AI server demand driving 15% ISG growth and a $4.1 billion order backlog signaling continued near-term demand. Gross margin compression of 0.6 percentage points reflects the GPU cost structure of AI servers and is expected to persist, a trade-off management has acknowledged as deliberate. Forward guidance for Q2 FY2026 of $24.0 billion to $25.0 billion came in above the $23.8 billion consensus, driving a 5.2% post-earnings stock gain. Dell Technologies is scheduled to report Q2 FY2026 results in late August or early September 2025.

Primary sources:

• Dell Technologies Q1 FY2026 earnings press release
• Dell Technologies Q1 FY2026 earnings call transcript

This article is for informational purposes only. See the full financial disclaimer above.

Sources

1. Dell Technologies Q1 FY2026 Earnings Press Release — Dell Technologies Investor Relations
2. Dell Technologies Q1 FY2026 Earnings Call Transcript — Dell Technologies Investor Relations
3. FactSet consensus estimates for Dell Q1 FY2026 — FactSet Research Systems
4. Hewlett Packard Enterprise earnings press release — HPE Investor Relations
5. Morgan Stanley DELL equity research note, May 30, 2025
6. JPMorgan DELL equity research note, May 30, 2025