Dell Technologies Q1 Earnings Call Highlights

Key Points

• Dell reported record Q1 results, with revenue up 88% year over year to $43.8 billion and non-GAAP EPS jumping 214% to $4.86, driven by broad-based demand across AI servers, traditional infrastructure and PCs.
• AI server demand remains the key growth engine, with $24.4 billion in AI orders, $16.1 billion in AI server revenue and a record $51.3 billion AI backlog. Dell said demand is still outpacing supply, with memory and other components the main constraint.
• Management raised full-year guidance to $165 billion-$169 billion in revenue and about $17.90 in non-GAAP EPS, reflecting accelerating demand across AI, traditional compute, storage and commercial PCs despite ongoing supply shortages.

Dell Technologies NYSE: DELL reported what executives described as a record fiscal 2027 first quarter, driven by surging demand for AI servers, traditional servers, storage and commercial PCs, while warning that component supply remains the main constraint on further growth.

Jeff Clarke said revenue rose 88% year over year to $43.8 billion, while diluted non-GAAP earnings per share increased 214% to $4.86. He said demand was stronger than the company anticipated “across all lines of businesses and geographies,” as customers moved to secure supply for a broad range of IT needs.

David Kennedy said gross margin dollars grew 57% to $7.9 billion, while gross margin rate was 18.1%, primarily reflecting a mix shift toward AI servers. Operating income rose 154% to $4.2 billion, or 9.7% of revenue, and net income increased 194% to $3.2 billion.

AI Server Demand Drives Record Backlog

Clarke said AI demand remained “exceptionally strong” and broad-based. Dell booked $24.4 billion in AI orders during the quarter, recognized $16.1 billion of AI server revenue and ended the quarter with a record $51.3 billion of AI backlog.

He said Dell’s AI customer count surpassed 5,000, with growth across neocloud, sovereign and enterprise customers. The company’s AI pipeline continued to grow sequentially and remains “multiples” of backlog, even after the quarter’s order conversion, Clarke said.

Demand continues to exceed supply, with memory the primary constraint, Clarke said. In response to an analyst question, he added that the issue in the second half is “not a demand issue” but a supply issue. Kennedy said the company expects to exit the year with meaningful backlog.

Clarke also highlighted recent AI infrastructure announcements, including developments tied to the Dell AI Factory with NVIDIA, expanded rack-scale offerings, desk-side AI systems and new storage and data management capabilities. He said Dell is working with partners including NVIDIA, Google Cloud, OpenAI, xAI, ServiceNow, Palantir, Mistral and CrowdStrike.

Infrastructure Solutions Group Revenue Nearly Triples

Dell’s Infrastructure Solutions Group, or ISG, posted record revenue of $29 billion, up 181%, Kennedy said. ISG operating income rose 206% to a record $3.1 billion, with operating margin at 10.5%, up 80 basis points even as AI servers grew nearly 800% year over year.

Traditional server and networking revenue was $8.5 billion, up 92%. Clarke said demand remained well ahead of supply, with strength in every region. He said large enterprise customers are refreshing compute environments, expanding capacity and seeking higher-density infrastructure to manage spending and data center space.

Clarke also said AI inference and agentic AI workloads are creating incremental demand for traditional compute. In the question-and-answer session, he said CPUs are increasingly needed to support AI agents as they manage input/output, memory and sequential work around GPU calls.

Storage revenue rose 8% to $4.3 billion. Clarke said Dell’s intellectual property storage portfolio delivered a record demand growth quarter and its fifth consecutive quarter of demand growth above market. PowerStore posted its eighth consecutive quarter of double-digit demand growth, while PowerScale and ObjectScale showed strength in unstructured storage.

Commercial PCs Lead CSG Growth

The Client Solutions Group, or CSG, reported revenue of $14.6 billion, up 17%, Kennedy said. Commercial revenue rose 18% to $13 billion, marking the seventh consecutive quarter of growth, while consumer revenue increased 9% to $1.6 billion.

Clarke said large enterprise customers continued to refresh PCs, with double-digit growth across all regions. He said roughly one-third of the installed PC base consists of devices four years or older, supporting continued refresh demand. Consumer demand was helped by strength in gaming.

CSG operating income was $1.2 billion, or 8% of revenue. Clarke said the segment benefited from higher scale, pricing discipline, improved attach rates for peripherals and services, and stronger profitability in consumer products. He said Dell had moved pricing earlier in the quarter, though he acknowledged that the company may have moved “a little too early” in some transactional areas such as consumer and small and medium business.

Cash Flow and Capital Returns

Kennedy said Dell generated a first-quarter record $4.1 billion in cash flow from operations, driven by sequential revenue growth and higher profitability. The company ended the quarter with $14.1 billion in cash and investments, up $800 million sequentially, and a core leverage ratio of 1.2 times.

Dell returned $2.1 billion to shareholders during the quarter, including the repurchase of 11 million shares at an average price of $147 per share and a dividend of approximately $0.63 per share.

Guidance Raised as Supply Constraints Persist

For the second quarter, Kennedy said Dell expects revenue of $44 billion to $45 billion, up roughly 50% at the midpoint. ISG is expected to grow roughly 75%, supported by $15.5 billion in AI server revenue, while CSG is expected to rise roughly 20%. Diluted non-GAAP EPS is expected to be $4.80, plus or minus $0.10.

For the full fiscal year, Dell now expects revenue of $165 billion to $169 billion, up nearly 50% at the midpoint. The outlook includes approximately $60 billion of AI server revenue at the midpoint, traditional server growth of just over 60%, storage growth in the mid-single digits and low-teens CSG growth. Diluted non-GAAP EPS is expected to be $17.90, plus or minus $0.25.

Clarke said Dell raised its fiscal 2027 revenue and EPS guidance by approximately $27 billion and $5, respectively. He said pipelines indicate demand is “not slowing but accelerating” across AI, traditional compute, storage and PCs.

Executives repeatedly cited supply constraints, particularly DRAM, NAND, CPUs and hard drives. Clarke said Dell is operating in an inflationary environment and is repricing frequently. He said some customers may wait out price increases, while others are accelerating purchases to secure supply over multiple years.

“Every bit and byte matters,” Clarke said, adding that the company is working with partners to increase supply as customer demand continues to outpace availability.

About Dell Technologies NYSE: DELL

Dell Technologies Inc is a multinational technology company that designs, manufactures and sells a broad range of information technology products, solutions and services. Its offerings span client computing devices (consumer and commercial laptops and desktops), enterprise infrastructure (servers, storage systems and networking equipment), software and cloud infrastructure, and a variety of professional services such as IT consulting, deployment, managed services and financing solutions. The company serves organizations of all sizes as well as individual consumers, with products and services aimed at enabling digital transformation and modern IT environments.

Founded by Michael Dell in 1984, the company grew from a direct-to-consumer PC business into a diversified IT provider through organic expansion and strategic acquisitions.

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