Written by: Rita

Dell's AI server orders were $24 billion last quarter, $60.9 billion this quarter, with backlogged orders at $95 billion. The revenue guidance for AI servers has been raised from $60 billion to $74 billion. On September 1, Goldman Sachs released a quick review report on Dell's F2Q27 performance, noting earnings per share of $7.04, which is 42% above Goldman Sachs' expectations, 43% above market consensus, and 44% above the company's guidance upper limit. Dell significantly raised its full-year revenue guidance from $165 billion to $169 billion to $192 billion, and its full-year non-GAAP earnings per share guidance from $17.90 to $25.50.

ISG revenue was $31.782 billion, a year-on-year increase of 89%, far exceeding the guidance of 75% growth. ISG profit margin was 15.0%, well above Goldman Sachs' expected 11.7%. CSG revenue was $15.034 billion, with a profit margin of 7.6%, also higher than the expected 6.0%. Total revenue was $46.971 billion, a year-on-year increase of 58%, approximately 5% above Goldman Sachs' expectations. Non-GAAP earnings per share were $7.04, a year-on-year increase of 204%.

AI Server Orders Surge to $60.9 Billion

AI server orders reached $60.9 billion in F2Q27, a 154% increase from the previous quarter's $24 billion. Backlogged orders were $95 billion, with the order-to-shipment ratio exceeding 1. The full-year revenue guidance for AI servers has been raised from $60 billion to $74 billion.

Dell's ISG segment reported total revenue of $31.782 billion, a year-on-year increase of 89%. Revenue from AI-optimized servers was $16.4 billion, traditional servers and networking revenue was $10.531 billion, and storage revenue was $4.85 billion. All three segments exceeded Goldman Sachs' expectations. This order scale reflects the ongoing strong demand for GPU servers from hyperscale vendors and emerging AI data centers. As a leading server supplier, Dell directly benefits from the wave of AI infrastructure investment. Revenue from traditional servers and networking also exceeded expectations, indicating a concurrent recovery in enterprise IT spending.

Profit Margin Expansion Exceeds Expectations

ISG profit margin was 15.0%, far exceeding Goldman Sachs' expectations of 11.7%, and showing significant improvement quarter-on-quarter. Goldman Sachs believes that the scaling effect and product mix optimization in AI servers jointly drove profit margin expansion. The increased revenue share from AI servers and the simultaneous growth of high-margin storage and networking businesses collectively raised the overall profit margin level.

CSG profit margin was 7.6%, also higher than Goldman Sachs' expectation of 6.0%. Commercial PC revenue was $13.192 billion, consumer PC revenue was $1.842 billion, with stable demand. Cost control and pricing power supported profit margin performance. Overall operating profit margin was 12.6%, an increase of about 300 basis points from the previous quarter. Operating profit was $5.929 billion, exceeding Goldman Sachs' expectation by 37%.

Full-Year Guidance Significantly Raised to $192 Billion

Dell raised its F2027 full-year revenue guidance to $192 billion, from a previous estimate of $165 billion to $169 billion, reflecting a revision of approximately $25 billion. Of this, AI server revenue contributed about $14 billion in incremental revenue. The full-year non-GAAP earnings per share guidance was raised to $25.50, from a previous range of $17.65 to $18.15, an increase of about $7.60.

The F3Q27 guidance is also strong. Revenue guidance is set at $49 billion, with market consensus at $41.369 billion, exceeding by 18%. Non-GAAP earnings per share guidance is $6.50, with market consensus at $4.47, exceeding by 45%. GAAP earnings per share guidance is $6.10, with market consensus at $4.22, exceeding by 44%.

Call Focuses on Three Main Areas

Goldman Sachs will focus on three questions during the call.

The sustainability of AI server orders, as the market is concerned whether the $60.9 billion indicates a peak in demand or if there is still upward potential. The visibility of AI server demand and the order conversion rate provided by Dell's management will offer key insights.

The factors driving the outperformance in profit margins, with ISG profit margin at 15.0% and CSG profit margin at 7.6% significantly exceeding expectations, the market hopes to clarify whether this results from scaling effects, product mix improvements, or enhanced pricing power. The sustainability of each factor will influence the assessment of the full-year profit margin trend.

The demand outlook for traditional servers and enterprise storage in the second half of the year, with traditional servers and networking revenue at $10.531 billion and storage revenue at $4.85 billion, both exceeding expectations. Whether enterprise IT spending can continue to recover in the second half will determine the growth resilience of Dell's non-AI business.

Valuation and Risks

Goldman Sachs maintains a buy rating with a 12-month target price of $510, based on 22 times forward earnings per share. The current stock price is $456, implying about a 12% upside potential.

Downside risks include weak demand in the PC market, enterprise IT spending falling short of expectations, macroeconomic weaknesses suppressing consumer demand, competitive pressures from discounting, and structural declines in AI server demand. Goldman Sachs believes that the strong performance of AI server orders provides Dell with a clear upward path, but the market's examination of AI investment returns is tightening, which may affect the further expansion of Dell's valuation multiples.

Disclaimer

This article is a compilation and interpretation by Chao Xiang Research of a third-party brokerage research report (Goldman Sachs, September 1, 2026), combined with publicly available market information. The ratings, target prices, earnings forecasts, and related judgments cited in this article are solely the views of the analysts from the brokerage firm and do not represent the views of Chao Xiang Research, nor do they constitute any investment advice.

The market is risky, and decisions need to be made independently. This article should not be used as a basis for buying or selling any securities.