Dell Sees AI Demand as Key to Breaking Out of Revenue Stagnation

Dell's half-year results show growth of 69% in AI and high-volume computing server demand, driving a 47% increase in revenue for the segment. This segment now accounts for over a third of Dell's consolidated revenue and is its only growth driver. Operating profit has increased by a quarter, but the group's cash flows have been impacted by large investments in working capital. The investor consensus values Dell at multiples that are within the norm, reflecting uncertainty about the sustainability of the momentum.

Dell Technologies reported its Q2 earnings for fiscal year 2026, with revenue increasing by 19% year-over-year (YoY) to $29.8 billion, exceeding analyst estimates [1]. The company's earnings per share (EPS) also rose to $2.32, surpassing the Street's consensus estimate of $2.30. However, Dell's shares fell more than 5% in extended trading after the company provided third-quarter EPS guidance below Wall Street's expectations.

Key highlights from the earnings report include:

- Revenue Growth: Dell's revenue grew by 19% YoY, driven primarily by a 69% increase in Servers and Networking revenue to $12.9 billion [1].
- AI Server Demand: The company shipped $10 billion in AI servers in the first half of FY2026, doubling its previous annual targets. Dell raised its full-year AI server shipment guidance to $20 billion [2].
- Operating Cash Flow: Dell generated $2.5 billion in operating cash flow in Q2 and returned $1.3 billion to shareholders through buybacks and dividends [2].
- Storage Revenue: Despite a 3% decline to $3.86 billion, storage revenue still contributed significantly to overall revenue [1].
- Consumer Segment: Consumer revenue declined by 7%, although profitability improved due to better product positioning [3].

The company's guidance for third-quarter earnings per share of $2.45 fell short of the LSEG estimate of $2.55, despite revenue guidance of $27 billion in third-quarter revenue topping estimates of $26.1 billion. Dell attributed the lower EPS guidance to seasonality, particularly in its storage business.

Despite the short-term stock drop, Dell's strategic focus on AI infrastructure positions it as a critical player in the next phase of enterprise computing. The company's ability to deliver scalable, enterprise-grade AI solutions will likely cement its role in the AI infrastructure ecosystem.

References:
[1] https://www.cnbc.com/2025/08/28/dell-earnings-report-q2-2026.html
[2] https://www.ainvest.com/news/dell-technologies-q2-earnings-outperformance-ai-driven-growth-strategic-positioning-ai-infrastructure-long-term-investor-2508/
[3] https://www.gurufocus.com/news/3086792/dell-technologies-inc-dell-q2-2026-earnings-call-highlights-record-revenue-and-ai-server-surge