Analyst(s): Olivier Blanchard, Daniel Newman
Publication Date: June 3, 2025
Dell’s latest earnings highlight continued strength in AI-driven infrastructure, with momentum accelerating across its server portfolio and AI backlog. While infrastructure performance stood out, client device profitability remains pressured amid soft consumer demand.
What is Covered in this Article:
- Dell’s Q1 FY 2026 financial results
- Record AI server orders and $14.4 billion AI infrastructure backlog
- Growth in Dell’s AI pipeline and five-quarter opportunity expansion
- Launch of next-gen Blackwell-based servers and AI-optimised platforms
- Commercial PC growth momentum and continued consumer drag
- Updated FY 2026 guidance and Dell’s positioning in enterprise-scale AI infrastructure
The News: Dell Technologies (NYSE: DELL) announced its Q1 FY 2026 financial results, reporting revenue of $23.4 billion (+1% above consensus estimates), up 5% year-on-year (YoY). Revenue in the Infrastructure Solutions Group (ISG) reached $10.3 billion, up 12% YoY, while the Client Solutions Group (CSG) posted revenue of $12.5 billion, a 5% YoY increase. Non-GAAP operating income rose 10% YoY to $1.7 billion (-8.2% below consensus estimates), with a non-GAAP operating margin of 7.1%, up from 6.8% in Q1 FY 2025. Non-GAAP net income increased 13% YoY to $1.1 billion. At the same time, non-GAAP diluted earnings per share (EPS) reached $1.55, reflecting a 17% YoY rise, and were below street estimates by 8.3%.
“We achieved first-quarter record servers and networking revenue of $6.3 billion, and we’re experiencing unprecedented demand for our AI-optimized servers,” said Jeff Clarke, vice chairman and COO of Dell Technologies. “We generated $12.1 billion in AI orders this quarter alone, surpassing the entirety of shipments in all of FY 2025 and leaving us with $14.4 billion in backlog.”
Dell Q1 FY 2026: Robust AI Server Sales, Guidance Lift Despite EPS Miss
Analyst Take: Dell’s Q1 FY 2026 results highlight its growing differentiation in the AI infrastructure market, backed by strength across its Infrastructure Solutions Group (ISG) and rising enterprise momentum. The company booked a record $12.1 billion in AI server orders, exceeding all shipments from FY 2025, and ended the quarter with $14.4 billion in backlog. While the company made solid commercial gains, softness in the consumer PC segment continues to weigh on margins. Dell raised its full-year EPS outlook, likely fueled by strong operational cash flow and an accelerating AI pipeline conversion. The company’s strategic investments in next-gen architecture set a strong foundation for the remainder of FY 2026.
AI Momentum Translates to Backlog and Pipeline Strength
Dell’s Q1 FY 2026 results show that AI infrastructure remains its defining growth vector. The $12.1 billion in AI orders secured during the quarter not only surpassed its entire FY 2025 shipment volume but also led to a $14.4 billion backlog, up ~$3 billion sequentially. This surge was driven by expanding enterprise adoption across financial services, manufacturing, media, and education sectors.
COO Jeff Clarke highlighted that Dell’s five-quarter pipeline continued to grow even after converting a record amount into orders – an important signal that demand is not just strong but also accelerating. The pipeline now includes a mix of Hopper and Blackwell architectures across ARM and x86 platforms, as well as Sovereign AI deals (including the US Department of Energy’s NURSE-10 supercomputer project). Dell’s ability to ship $1.8 billion worth of AI servers in Q1 – and guide to $7 billion in Q2 – shows increasing delivery velocity and consistent execution at scale. This combination of growing demand, successful conversion, and pipeline expansion firmly reinforces Dell’s position as a leader in enterprise-scale AI infrastructure.
Strategic Platform Launches Drive Infrastructure Differentiation
Dell has moved aggressively to expand its AI infrastructure portfolio across both hardware and software layers. Recent launches include the XE9780L and XE9712 Blackwell-supported servers – air and liquid-cooled platforms with up to 256 GPUs per rack – as well as the PowerCool rear-door heat exchanger, which reduces energy costs by up to 60%. The growth potential here is strong, and we will be focusing more on this side of Dell’s business over the next few months.
On the storage side, PowerStore extended its growth streak to five consecutive quarters, thanks partly to a 5:1 data reduction guarantee and embedded AI-driven security features. Dell also introduced the AI Data Platform featuring Project Lightning (co-engineered with Nvidia) to accelerate data movement across cache-intensive workloads. These innovations and strategic collaborations like Google’s Gemini on-prem and Cohere’s Agentic deployment play well into Dell’s plan to lead the industry in turnkey AI factory deployments across the enterprise and sovereign domains.
Client Solutions Group Gains in Commercial Amid Consumer Drag
CSG revenue rose 5% YoY, led by 9% YoY growth in commercial PCs. (Support for the latter came from small, medium, and large enterprises.) Dell noted that commercial demand was strongest in North America and EMEA, each growing double digits. Part of the driver is the end of Windows 10 support, slated for October of this year, and part is excitement around the notion that AI PCs will help businesses future-proof for AI, even as productivity-optimizing on-device agentic solutions have, at least thus far, failed to enter the market, let alone at scale. Businesses at least have bought into the pitch and are clearly moving forward with their transition to Windows 11 AI-enabled PCs.
The commercial segment also benefited from ASP stabilization due to higher configuration AI devices, even though the overall CSG margin fell to 5.2% – the low end of Dell’s target range of between 5%-7%.
The consumer PC segment is a different story, however, with revenue falling 19% YoY, even with aggressive pricing. Reasons for softness in demand for PCs in the consumer segment are a combination of macroeconomic uncertainty, the deprioritization of PC refreshes against other (more pressing) major purchases, and a general failure of the PC industry to articulate an exciting enough AI PC story to consumers. Unlike commercial segment messaging, which has focused on the Windows refresh and “future-proofing the organization for AI,” the value of AI PCs hasn’t really materialized: Without clear, useful, remarkable or cool on-device-AI enabled experiences to complement new PC hardware, there is simply no compelling reason for consumers to rush to replace their current PCs with AI PCs. Most consumers can still enjoy cloud-based AI experiences with their existing devices. PC OEMs need to press their ISV partners to fill the value gap, and fast, to help turn this around.
Adding to this problem is the marketing challenge posed by Copilot+ PCs: Despite their impressive specs and battery life, Copilot+ PCs have generally failed to deliver remarkable Copilot AI experiences or shift users towards Microsoft Copilot, making the branding and value proposition for the category difficult to articulate. Copilot+ pricing has also failed to find a sweet spot in the market, particularly against aggressive MacBook pricing. Again, for consumers, experiences matter more than “future-proofing,” and the absence of identifiable, useful, fun, or cool on-device AI experiences is predictably not fueling demand.
Broadly, CSG is expected to remain structurally resilient due to enterprise demand, but ongoing weakness in consumer PCs will likely cap near-term margin expansion until the broader PC refresh cycle gains firmer footing. More compelling on-device AI experiences, alongside AI features that complement existing cloud-based AI experiences, may hold the key to that turnaround.
Guidance and Final Thoughts
Dell reiterated its full-year revenue guidance of $101-105 billion but raised its FY 2026 non-GAAP EPS target to $9.40, up from the prior $9.30 guide. The company also guided to Q2 revenue of $28.5-29.5 billion and EPS of $2.25, both above consensus estimates. Management acknowledged some macro-related uncertainty and seasonal variability, particularly in traditional servers and storage, but maintained its view of high-teens ISG growth driven by $15+ billion in AI server shipments. Despite lower margin expectations in CSG, Dell expects operating income to grow 9% for the year. With record AI server orders, a growing pipeline, and strong delivery execution, Dell is emerging as one of the most credible beneficiaries of enterprise-scale AI infrastructure spend. The Street’s bullish sentiment is firmly grounded in this momentum.
Read the complete press release on the Dell Technologies website.
Disclosure: Futurum is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of Futurum as a whole.
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Author Information
Research Director Olivier Blanchard covers edge semiconductors and intelligent AI-capable devices for Futurum. In addition to having co-authored several books about digital transformation and AI with Futurum Group CEO Daniel Newman, Blanchard brings considerable experience demystifying new and emerging technologies, advising clients on how best to future-proof their organizations, and helping maximize the positive impacts of technology disruption while mitigating their potentially negative effects. Follow his extended analysis on X and LinkedIn.
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
