What drove Dell's record revenue this quarter?

Growth was driven primarily by Infrastructure Solutions Group, where Servers and Networking revenue rose 69% to $12.9 billion on strong AI server demand. Products revenue overall rose 26%, while Services revenue fell 4%. Client Solutions Group revenue was nearly flat.

Is Dell's AI server business profitable enough to offset margin pressure?

Profit grew more slowly than revenue. ISG operating margin fell to 8.8% from 11.0%, and GAAP gross margin declined to 18.3% from 21.4%, reflecting the lower margins on AI server volume. Absolute ISG operating income still rose 14% to $1.5 billion, so the margin trade-off has so far produced higher dollar profits.

What is the outlook for the rest of fiscal 2026?

Dell raised its FY26 AI server shipment guidance to $20 billion and expects FY26 revenue of $105.0-$109.0 billion, with GAAP diluted EPS of $7.98 and non-GAAP EPS of $9.55 at the midpoints. For Q3 FY26 it expects revenue of $26.5-$27.5 billion and non-GAAP EPS of $2.45 at the midpoint.

How strong is Dell's cash generation and capital return?

Operating cash flow was $2.5 billion in Q2 and $5.3 billion year to date, up 124%. Adjusted free cash flow was $4.75 billion for the first half. Dell returned $1.3 billion to shareholders in the quarter through share repurchases and dividends, and repurchases of $2.9 billion in the first half drove treasury stock up significantly.

Are there balance sheet concerns investors should watch?

Total stockholders' equity is a deficit of $(2.8) billion, down from $(1.4) billion at January 31, 2025, largely because of share repurchases. Accounts payable rose to $27.5 billion from $20.8 billion, and total debt (short-term plus long-term) increased to about $28.7 billion. Growth in payables and debt funds the AI server ramp, so working capital and leverage are key items to monitor.

DELL 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed August 28, 2025. Cited figures are marked; the original filing is the authoritative source.

Dell Technologies reported fiscal Q2 2026 results (quarter ended August 1, 2025) that were strong on the top line and profitability, led by AI server demand.

Record revenue of $29.8 billion^a rose 19% year over year, GAAP operating income rose 27% to $1.8 billion, and GAAP diluted EPS rose 38% to $1.70. Non-GAAP diluted EPS was a record second-quarter $2.32, up 19%. Operating cash flow was $2.5 billion, and the company returned $1.3 billion to shareholders through buybacks and dividends.

The growth was driven by Infrastructure Solutions Group (ISG), where revenue rose 44% to a record $16.8 billion^b. Servers and Networking grew 69% to $12.9 billion, and management said it has shipped $10 billion of AI solutions in the first half of FY26, already exceeding all FY25 shipments. Storage declined 3%.

ISG operating margin compressed to 8.8% from 11.0%, so profit growth lagged revenue growth. Client Solutions Group (CSG) was roughly flat, with revenue up 1% to $12.5 billion^c, Commercial up 2%, and Consumer down 7%. CSG operating income fell 2% and its margin was 6.4%.

Management raised its FY26 AI server shipment guidance to $20 billion and guided FY26 revenue to $105.0^d-$109.0 billion (midpoint $107.0 billion, up 12%). It guided GAAP diluted EPS of $7.98 at the midpoint (up 25%) and non-GAAP EPS of $9.55 (up 17%). For Q3 FY26 it guided revenue of $26.5-$27.5 billion and non-GAAP EPS of $2.45 at the midpoint.

Investors should note that GAAP gross margin fell to 18.3% from 21.4%, and the balance sheet shows a shareholder deficit of $(2.8) billion, driven by heavy buybacks and a rise in accounts payable to $27.5 billion. Working capital and debt also increased.

02—Key points

Key Highlights

Record Q2 FY26 revenue of $29.8B, up 19% YoY; GAAP operating income $1.8B (+27%); GAAP diluted EPS $1.70 (+38%).
Record Q2 non-GAAP diluted EPS of $2.32, up 19%, with non-GAAP operating income of $2.3B (+10%).
ISG revenue rose 44% to a record $16.8B, led by Servers and Networking up 69% to $12.9B; the company has shipped $10B of AI solutions in 1H FY26.
FY26 AI server shipment guidance raised to $20B; FY26 revenue guided to $105.0-$109.0B (midpoint +12%) and FY26 non-GAAP EPS to $9.55 (midpoint +17%).
ISG operating margin compressed to 8.8% from 11.0%, and GAAP gross margin fell to 18.3% from 21.4%, reflecting mix shift toward lower-margin AI servers.
CSG revenue was roughly flat at $12.5B (+1%), with Consumer down 7% and CSG operating income down 2%.
Operating cash flow was $2.5B in Q2 ($5.3B YTD, up 124%); $1.3B returned to shareholders; total stockholders' deficit of $(2.8)B and accounts payable rose to $27.5B.

03—Questions

Frequently Asked Questions

What drove Dell's record revenue this quarter?
Growth was driven primarily by Infrastructure Solutions Group, where Servers and Networking revenue rose 69% to $12.9 billion on strong AI server demand. Products revenue overall rose 26%, while Services revenue fell 4%. Client Solutions Group revenue was nearly flat.
Is Dell's AI server business profitable enough to offset margin pressure?
Profit grew more slowly than revenue. ISG operating margin fell to 8.8% from 11.0%, and GAAP gross margin declined to 18.3% from 21.4%, reflecting the lower margins on AI server volume. Absolute ISG operating income still rose 14% to $1.5 billion, so the margin trade-off has so far produced higher dollar profits.
What is the outlook for the rest of fiscal 2026?
Dell raised its FY26 AI server shipment guidance to $20 billion and expects FY26 revenue of $105.0-$109.0 billion, with GAAP diluted EPS of $7.98 and non-GAAP EPS of $9.55 at the midpoints. For Q3 FY26 it expects revenue of $26.5-$27.5 billion and non-GAAP EPS of $2.45 at the midpoint.
How strong is Dell's cash generation and capital return?
Operating cash flow was $2.5 billion in Q2 and $5.3 billion year to date, up 124%. Adjusted free cash flow was $4.75 billion for the first half. Dell returned $1.3 billion to shareholders in the quarter through share repurchases and dividends, and repurchases of $2.9 billion in the first half drove treasury stock up significantly.
Are there balance sheet concerns investors should watch?
Total stockholders' equity is a deficit of $(2.8) billion, down from $(1.4) billion at January 31, 2025, largely because of share repurchases. Accounts payable rose to $27.5 billion from $20.8 billion, and total debt (short-term plus long-term) increased to about $28.7 billion. Growth in payables and debt funds the AI server ramp, so working capital and leverage are key items to monitor.

04—Continue

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