Analyst(s): Olivier Blanchard, Daniel Newman
Publication Date: September 2, 2025
Dell’s latest earnings highlight strong momentum in its ISG, with AI-driven demand fueling server and networking strength, while CSG remains soft ahead of the expected PC refresh cycle.
What is Covered in this Article:
- Dell’s Q2 FY 2026 financial results
- Record ISG revenue driven by AI server demand
- Expanding enterprise adoption and growing AI backlog
- CSG stability with commercial growth and consumer weakness
- Margin pressures from AI server mix and supply chain costs
- FY 2026 guidance raised on revenue and EPS outlook
The News: Dell Technologies (NYSE: DELL) reported its Q2 FY 2026 financial results with revenue of $29.8 billion, up 19% year-over-year (YoY) and above consensus estimates of $29.2 billion. The Infrastructure Solutions Group (ISG) delivered record revenue of $16.8 billion, up 44% YoY, with servers and networking revenue of $12.9 billion, up 69% YoY. Storage revenue declined 3% YoY to $3.9 billion. The Client Solutions Group (CSG) reported revenue of $12.5 billion, up 1% YoY, with commercial revenue of $10.8 billion (+2% YoY) and consumer revenue of $1.7 billion (-7% YoY). Gross margin came in at 18.7% (Q2 FY 2025: 22%), below analyst expectations of 19.6%. Non-GAAP operating income rose 10% YoY to $2.3 billion (in line with consensus estimates), and the corresponding margin stood at 7.7% (Q2 FY 2025: 8.3%). Non-GAAP diluted EPS reached $2.32, up 19% YoY and ahead of consensus of $2.30.
“We’ve now shipped $10 billion of AI solutions in the H1 FY 2026, surpassing all shipments in FY 2025,” said Chief Operating Officer Jeff Clarke, who added that Dell expects to ship $20 billion in servers by year-end.
Dell Q2 FY 2026 Results Show 19% Revenue Jump, AI Server Shipments Surge
Analyst Take: Dell’s Q2 FY 2026 results help highlight the degree to which AI momentum is already reshaping the company’s business profile. Record ISG revenue in particular reflected the impact of unprecedented AI server demand, even with margin pressures. CSG’s modest gains reflect, at least in part, softer demand for new PCs in the consumer segment than we see in the enterprise. Additionally, a growing AI backlog and strong full-year guidance bring more color to Dell’s well-calibrated position in the AI infrastructure cycle.
AI Shipments Drive Record ISG Growth
ISG revenue rose an impressive 44% YoY to $16.8 billion, propelled by servers and networking revenue of $12.9 billion (up 69% YoY).
Dell shipped $8.2 billion of AI servers during the quarter, bringing first-half AI shipments to $10 billion – already surpassing FY 2025 totals. The AI backlog ended at $11.7 billion, reflecting sustained demand across the company’s customer ecosystem.
One word of caution, however: ISG margins came under some pressure (operating margin landed at 8.8%, compared to Q2 FY 2025, which delivered 11%). Management attributed this to aggressive early Blackwell deployments and one-time supply chain expenses, which weighed on profitability. Nonetheless, Dell’s execution in delivering NVIDIA GB300 NVL72 systems to CoreWeave and the expanding enterprise buyer base highlights its speed-to-market differentiation, and our perspective is that achieving scale and momentum early should offset short-term and even recurring cycles of seasonal margin erosion.
CSG Stability Amid Consumer Weakness
CSG revenue only grew 1% YoY to $12.5 billion. While commercial revenue was up 2%, consumer revenue was down 7% for the quarter.
On the commercial front, nothing to be too concerned about: +3% would have been better, but +2% still lands inside the 2-3% target range we anticipated for YoY segment performance. We note that it benefited from double-digit demand growth in EMEA, with good SMB momentum. However, North America and Asia Pacific & Japan (APJ) delivered more modest gains.
The consumer market looks a bit more problematic: PC demand remained muted even as Windows 10 end-of-life approaches (generally more of a business concern, particularly in the enterprise, than a consumer segment demand driver). We attribute softness to a confluence of friction points, particularly in the US market: Economic and financial uncertainty may be causing big purchase hesitation among consumers; inflation pressures and tariff impacts also seem to be having a cooling effect on purchases; and lastly, AI PCs have, thus far, failed to make a solid case for consumers to upgrade their PCs, as most popular AI applications remain browser/cloud-based, and don’t require local AI-accelerated processing to access. In the case of Dell specifically, we also suspect that the company’s nomenclature and branding refresh earlier in the calendar year may have caused short-term confusion, particularly among consumers. This friction point will dissipate, however, as consumers learn how to confidently shop for Dell PCs again, under the new nomenclature model.
Additionally, management emphasized the importance of Dell’s PC business as a customer acquisition channel, with new product launches aimed at capturing entry-level commercial demand. The PC refresh cycle is underway, though its benefits are likely to materialize gradually over the coming quarters, driven by the Windows 10 end-of-life on October 14, 2025.
Margin Pressures Cloud AI Upside
Gross margin narrowed to 18.7% (compared to Q2 FY 2025, which was 22%), missing consensus of 19.6% and reflecting the higher mix of AI servers.
While AI revenue is accretive in absolute dollars, aggressive pricing and supply chain costs in Q2 diluted margin rates. Management pointed to one-time supply chain expenses and competitive early Blackwell deals as temporary factors that pressured margins. However, value engineering, scaling, and an improved enterprise mix are expected to restore AI server profitability in the second half of the fiscal year. Storage margins also remain a lever, with Dell’s IP-driven portfolio across PowerMax, PowerStore, and PowerScale positioned to outgrow the broader market.
Guidance and Final Thoughts
Dell raised its FY 2026 revenue outlook to $105 billion—$109 billion (from the prior $101 billion—$105 billion estimate), with non-GAAP EPS of $9.3 – $9.8 (prior: $9.15 – $9.65), up 17% YoY at the midpoint.
For Q3, the company guided revenue to $26.5–27.5 billion (+11% YoY at the midpoint), with non-GAAP EPS of $2.45 at the midpoint, up by 11%.
Management expects ISG to grow in the low-20% range in Q3, with CSG up mid-single digits, supported by seasonal storage strength. Operating expenses are projected to decline in the low single digits, contributing to ~7% operating income growth in Q3.
Beyond that, Dell remains focused on converting its $17.7 billion AI order pipeline into shipments, with confidence in exceeding its $20 billion AI server shipment target for FY 2026.
While margin pressures warrant attention, Dell’s execution in AI infrastructure and diversification into enterprise AI factories reinforce its leadership in the AI hardware cycle.
See the complete press release on Dell’s Q2 FY 2026 financial results 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.
Other insights from Futurum:
Dell Q1 FY 2026: Robust AI Server Sales, Guidance Lift Despite EPS Miss
Dell Launches Early AI Infrastructure Offering for Enterprise Demand
Dell’s Pro Max Plus Laptop Broadens Local AI Development Opportunity
Author Information
Olivier Blanchard is Research Director, Intelligent Devices. He 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.
