Dell’s AI Server Demand Drives Record Q2 and a Higher FY2027 Outlook

Dell Technologies’ fiscal second-quarter results showed how quickly AI infrastructure demand is reshaping its business. Record orders for AI-optimized servers, many equipped with Nvidia chips, led Dell to increase its FY2027 revenue outlook by $25 billion to $192 billion and lift its AI-server revenue forecast to $74 billion. 111

The headline number was a $95 billion AI-server backlog at the end of the quarter. That is a measure of booked demand—not revenue already recognized—and makes supply availability, customer deployment schedules, and component costs central to Dell’s ability to turn the opportunity into sales. 14

The forecast reset: $192 billion in FY2027 revenue

Dell raised its full-year FY2027 revenue outlook from $167 billion to $192 billion, an increase of nearly 70% year over year at the new midpoint. It also lifted its non-GAAP EPS outlook to $25.50 from $17.90 and increased expected AI-optimized-server revenue to $74 billion from $60 billion. 111

The change reflected a major acceleration in the expected contribution from AI systems. CNBC reported that Dell now expected AI-server revenue to triple for the full fiscal year, versus an expectation six months earlier that it would double. 10

A record quarter led by infrastructure

For the fiscal quarter ended July 31, Dell reported record revenue of $47.0 billion, up 58% from a year earlier. Non-GAAP diluted EPS was $7.04, up 203% year over year and above the $4.92 analyst expectation cited by CNBC. 1011

The Infrastructure Solutions Group (ISG)—Dell’s server, storage, and related infrastructure operation—was the primary growth engine:

• ISG revenue: $31.8 billion, up 89% year over year. 11
• AI-optimized server revenue: $16.4 billion, up 100%. 11
• Traditional servers and networking revenue: $10.5 billion, up 122%. 11
• Storage revenue: $4.9 billion, up 26%. 13

Those figures matter because they show that the expansion was broader than GPU-intensive AI racks. Dell also saw rapid demand for traditional servers and networking, consistent with a wider data-center refresh cycle and infrastructure buildout. 11

Orders outpaced revenue, creating a $95 billion backlog

Dell booked $60.9 billion in AI-server orders during Q2 while recognizing $16.4 billion of AI-server revenue. Its ending AI-server backlog reached $95.0 billion, and AI-server orders over the preceding 12 months totaled $131.7 billion. 14

A backlog of this scale provides unusually strong visibility into potential future revenue, but it is not the same as completed sales. Revenue recognition will depend on Dell’s capacity to source components, assemble and ship systems, and meet customer delivery requirements.

Nvidia chips and the changing AI customer mix

Dell’s AI systems use Nvidia chips. Reuters identified AI cloud providers Nscale and CoreWeave among customers seeking Dell servers to build infrastructure for training and running AI models. 1

The company’s opportunity also appeared to be broadening beyond neocloud providers. Dell said it had more than 6,500 AI customers, while reporting described demand extending to sovereign and enterprise buyers. 116

That customer mix is strategically significant: neocloud operators can place very large infrastructure orders, while enterprise and sovereign deployments could diversify demand across a wider base of buyers. The available reporting supports the direction of this shift, though it does not provide a detailed revenue split by customer type. 1

Why conventional servers were also growing

AI demand did not displace Dell’s conventional server business. Traditional Servers and Networking revenue climbed 122% to $10.5 billion, and Dell said demand continued to outpace supply. 1115

This suggests customers were investing in more than accelerator-heavy AI systems. Data-center modernization, networking requirements, storage, and general-purpose compute are all part of deploying AI workloads at scale. The reported growth in traditional systems is therefore an important complement to the AI-server headline, rather than a separate trend. 1115

Memory shortages, pricing, and margins

The surge came with supply-chain pressure. Reuters reported that a broader memory-chip shortage raised costs, and Dell responded with product price increases, including in PCs, to protect margins. 1

Dell’s second-quarter gross margin was 20.9%, compared with 18.3% a year earlier, according to TradingKey’s results summary. 9 Still, component availability and pricing remain a key risk: strong order demand does not eliminate the possibility that constrained DRAM, NAND, or other components could affect shipments, costs, or the timing of revenue.

The PC business also improved

Dell’s Client Solutions Group, which includes its PC business, grew revenue 20%, led by commercial customers, according to Reuters. Management characterized it as the unit’s fastest revenue growth in five years. 1

The result means Dell’s quarter was not solely a data-center story. However, the scale and growth rate of ISG—$31.8 billion in quarterly revenue, up 89%—made infrastructure the dominant driver of the company’s raised outlook. 11

Market reaction and what to watch next

Dell shares rose after the earnings report. Reuters reported a 7% gain in extended trading and noted that the stock had already more than tripled during the year; CNBC reported a roughly 9% move following the forecast increase. 110

The next test is execution. Investors and customers will be watching whether Dell can convert its $95 billion backlog into delivered systems while managing memory constraints and preserving profitability. The quarter demonstrated exceptional demand for AI infrastructure; the durability of the outlook depends on supply, deployment timing, and continued spending from both large AI cloud providers and a growing enterprise customer base. 114