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Can Strong Demand for AI-Optimized Servers Drive DELL's Q1 Earnings?
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Key Takeaways
DELL expects Q1 FY27 ISG and CSG combined revenues up 53% at midpoint, led by ISG 100% growth.
DELL cites $13B AI server revenue, 4,000 AI clients and a record $43B AI backlog exiting FY26.
DELL says CSG up 2% but faces higher component costs, pricing pressure and tough PC competition.
Dell Technologies’ (DELL - Free Report) first-quarter fiscal 2027 results, scheduled to be released on May 28, are expected to have benefited from the robust demand for AI-optimized servers, driven by ongoing digital transformation and heightened interest in generative AI applications.
For the fiscal first quarter, Dell Technologies anticipates 53% growth at the midpoint for the combined Infrastructure Solutions Group (ISG) and Client Solutions Group (CSG). While ISG is expected to grow more than 100%, supported by $13 billion of AI server revenue, CSG is expected to be up roughly 2%.
The Zacks Consensus Estimate for CSG revenues is currently pegged at $12.91 billion, suggesting 3.2% growth from the figure reported in the year-ago quarter. The consensus mark for ISG revenues is currently pegged at $22.38 billion, indicating 117% growth from the figure reported in the year-ago quarter.
DELL has an impressive earnings surprise history. Dell Technologies’ earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters, the average surprise being 1.22%.
Click here to know how DELL’s overall first-quarter fiscal 2027 results are likely to be.
DELL’s AI Push Aids ISG Business
Dell Technologies guided ISG revenue growth of more than 100% in the fiscal first quarter, supported by approximately $13 billion in AI server revenue alone, reflecting continued hyperscaler, enterprise, sovereign, and neocloud deployments. DELL is expected to have benefited from an expanding clientele that surpassed 4,000 with growth across neoclouds, sovereigns and enterprise customers in the fourth quarter of fiscal 2026.
Dell Technologies exited fiscal 2026 with a record $43 billion AI backlog and highlighted that demand continues to outpace supply, giving the company strong near-term revenue visibility. Importantly, management emphasized that enterprise AI adoption is accelerating, with the enterprise portion of the five-quarter AI pipeline growing the fastest, indicating broader diversification beyond large cloud customers.
The AI-driven expansion is further strengthening ISG’s profitability despite component inflation and supply constraints. DELL reported record ISG operating income of $2.9 billion in the fourth quarter of fiscal 2026, with operating margins improving sequentially to 14.8%, supported by scale benefits and a stronger storage mix. Management reiterated confidence in maintaining AI server profitability within its mid-single-digit operating margin framework. Dell’s long-standing supplier relationships, supply chain execution, and pricing discipline are enabling it to navigate elevated memory costs more effectively than peers, while continued AI adoption across enterprises and sovereign customers should sustain robust ISG momentum in the to-be-reported quarter.
DELL’s CSG Business Suffers From Stiff Competition
Dell Technologies expects the CSG business to deliver modest growth in the first quarter of fiscal 2027, with revenues expected to grow roughly 2% year over year. The company indicated that commercial demand trends remain healthy, supported by continued enterprise refresh activity and share gains, particularly in large enterprise accounts and the lower end of the commercial market.
However, DELL has stated that the CSG environment remains more challenging than ISG due to elevated memory and component costs, competitive pricing dynamics, and higher channel inventory levels across the PC industry. The company is suffering from stiff competition from the likes of Apple (AAPL - Free Report) , HP (HPQ - Free Report) and Lenovo (LNVGY - Free Report) in the PC market.
The PC segment climbed up 4% in the first quarter of calendar 2026, according to Gartner, while per IDC the growth was far more modest at 2.5%. In terms of shipments, Apple outperformed Dell Technologies’ and Lenovo’s growth of 9.5% and 7.6%, respectively, per the latest Gartner data. HP’s shipment declined 4.9%. According to IDC’s list, ASUS shipment growth was 17.1%, trailed by Apple’s 9.1%, Lenovo’s 8.6% and Dell Technologies’ 7.7% growth. HP’s shipment declined 4.9%.
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Can Strong Demand for AI-Optimized Servers Drive DELL's Q1 Earnings?
Key Takeaways
Dell Technologies’ (DELL - Free Report) first-quarter fiscal 2027 results, scheduled to be released on May 28, are expected to have benefited from the robust demand for AI-optimized servers, driven by ongoing digital transformation and heightened interest in generative AI applications.
For the fiscal first quarter, Dell Technologies anticipates 53% growth at the midpoint for the combined Infrastructure Solutions Group (ISG) and Client Solutions Group (CSG). While ISG is expected to grow more than 100%, supported by $13 billion of AI server revenue, CSG is expected to be up roughly 2%.
The Zacks Consensus Estimate for CSG revenues is currently pegged at $12.91 billion, suggesting 3.2% growth from the figure reported in the year-ago quarter. The consensus mark for ISG revenues is currently pegged at $22.38 billion, indicating 117% growth from the figure reported in the year-ago quarter.
DELL has an impressive earnings surprise history. Dell Technologies’ earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters, the average surprise being 1.22%.
Dell Technologies Inc. Revenue (TTM)
Dell Technologies Inc. revenue-ttm | Dell Technologies Inc. Quote
Click here to know how DELL’s overall first-quarter fiscal 2027 results are likely to be.
DELL’s AI Push Aids ISG Business
Dell Technologies guided ISG revenue growth of more than 100% in the fiscal first quarter, supported by approximately $13 billion in AI server revenue alone, reflecting continued hyperscaler, enterprise, sovereign, and neocloud deployments. DELL is expected to have benefited from an expanding clientele that surpassed 4,000 with growth across neoclouds, sovereigns and enterprise customers in the fourth quarter of fiscal 2026.
Dell Technologies exited fiscal 2026 with a record $43 billion AI backlog and highlighted that demand continues to outpace supply, giving the company strong near-term revenue visibility. Importantly, management emphasized that enterprise AI adoption is accelerating, with the enterprise portion of the five-quarter AI pipeline growing the fastest, indicating broader diversification beyond large cloud customers.
The AI-driven expansion is further strengthening ISG’s profitability despite component inflation and supply constraints. DELL reported record ISG operating income of $2.9 billion in the fourth quarter of fiscal 2026, with operating margins improving sequentially to 14.8%, supported by scale benefits and a stronger storage mix. Management reiterated confidence in maintaining AI server profitability within its mid-single-digit operating margin framework. Dell’s long-standing supplier relationships, supply chain execution, and pricing discipline are enabling it to navigate elevated memory costs more effectively than peers, while continued AI adoption across enterprises and sovereign customers should sustain robust ISG momentum in the to-be-reported quarter.
DELL’s CSG Business Suffers From Stiff Competition
Dell Technologies expects the CSG business to deliver modest growth in the first quarter of fiscal 2027, with revenues expected to grow roughly 2% year over year. The company indicated that commercial demand trends remain healthy, supported by continued enterprise refresh activity and share gains, particularly in large enterprise accounts and the lower end of the commercial market.
However, DELL has stated that the CSG environment remains more challenging than ISG due to elevated memory and component costs, competitive pricing dynamics, and higher channel inventory levels across the PC industry. The company is suffering from stiff competition from the likes of Apple (AAPL - Free Report) , HP (HPQ - Free Report) and Lenovo (LNVGY - Free Report) in the PC market.
The PC segment climbed up 4% in the first quarter of calendar 2026, according to Gartner, while per IDC the growth was far more modest at 2.5%. In terms of shipments, Apple outperformed Dell Technologies’ and Lenovo’s growth of 9.5% and 7.6%, respectively, per the latest Gartner data. HP’s shipment declined 4.9%. According to IDC’s list, ASUS shipment growth was 17.1%, trailed by Apple’s 9.1%, Lenovo’s 8.6% and Dell Technologies’ 7.7% growth. HP’s shipment declined 4.9%.
Zacks Rank
Dell Technologies currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.