Q2 FY2027
Filed Sep 1, 2026Record $47.0 billion revenue rose 58% year over year, driven by ISG growth and record $16.4 billion AI-Optimized Servers revenue; Dell raised FY27 revenue guidance to $192.0 billion.
Revenue, operating income, net income and diluted EPS all increased sharply year over year, ISG operating income more than tripled, and Dell raised its FY27 revenue, AI-Optimized Servers revenue, GAAP EPS and non-GAAP EPS outlooks.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| Total net revenueGAAP | $ 46,971 million | – | 58% |
| Products net revenueGAAP | $ 41,112 million | – | 72% |
| Services net revenueGAAP | $ 5,859 million | – | —% |
| Total cost of revenueGAAP | $ 37,141 million | – | 53% |
| Gross marginGAAP | $ 9,830 million | – | 80% |
| Gross margin as a percentage of total net revenueGAAP | 20.9 % | – | – |
| Selling, general, and administrative expenseGAAP | $ 3,336 million | – | 15% |
| Research and development expenseGAAP | $ 1,109 million | – | 41% |
| Total operating expensesGAAP | $ 4,445 million | – | 21% |
| Operating incomeGAAP | $ 5,385 million | – | 204% |
| Operating income as a percentage of total net revenueGAAP | 11.5 % | – | – |
| Interest and other, netGAAP | $ (254) million | – | 24% |
| Income before income taxesGAAP | $ 5,131 million | – | 256% |
| Income tax expenseGAAP | $ 998 million | – | 262% |
| Income tax rateGAAP | 19.5 % | – | – |
| Net incomeGAAP | $ 4,133 million | – | 255% |
| Net income as a percentage of total net revenueGAAP | 8.8 % | – | – |
| Earnings per share — basicGAAP | $ 6.41 | – | 273% |
| Earnings per share — dilutedGAAP | $ 6.34 | – | 273% |
| Weighted average shares — dilutedGAAP | 652 million | – | (5)% |
| Non-GAAP gross marginnon-GAAP | $ 9,929 million | – | 78% |
| Non-GAAP gross margin as a percentage of net revenuenon-GAAP | 21.1 % | – | – |
| Non-GAAP operating expensesnon-GAAP | $ 4,000 million | – | 22% |
| Non-GAAP operating incomenon-GAAP | $ 5,929 million | – | 160% |
| Non-GAAP operating income as a percentage of net revenuenon-GAAP | 12.6 % | – | – |
| Non-GAAP net incomenon-GAAP | $ 4,591 million | – | 189% |
| Non-GAAP diluted earnings per sharenon-GAAP | $ 7.04 | – | 203% |
| Cash flow from operationsGAAP | $ 2,225 million | – | (13)% |
| Free cash flownon-GAAP | $ 986 million | – | (47)% |
| Adjusted free cash flownon-GAAP | $ 8,149 million | – | 224% |
| Capital expenditures and capitalized software development costsother | $ (1,239) million | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Infrastructure Solutions Group (ISG)AI-Optimized Servers, Traditional Servers and Networking, and Storage revenue increased year over year; ISG operating income was $ 4,781 million, up 225% year over year, and represented 15.0 % of ISG net revenue. | $ 31,782 million | – | 89% |
| AI-Optimized ServersDell booked a record $60.9 billion in AI server orders and exited the quarter with a record $95 billion backlog. | $ 16,401 million | – | 100% |
| Traditional Servers and NetworkingRecord revenue. | $ 10,531 million | – | 122% |
| StorageRecord second-quarter revenue. | $ 4,850 million | – | 26% |
| Client Solutions Group (CSG)Commercial and Consumer revenue increased year over year; CSG operating income was $ 1,142 million, up 42% year over year, and represented 7.6 % of CSG net revenue. | $ 15,034 million | – | 20% |
| CommercialRecord Commercial Client revenue. | $ 13,192 million | – | 22% |
| ConsumerConsumer revenue increased year over year. | $ 1,842 million | – | 7% |
Q3FY27 and FY27 outlook
- RevenueQ3FY27: $ 49.0 billion; FY27 updated: $ 192.0 billion
- NoteQ3FY27 GAAP diluted EPS: $ 6.10, 168 % Y/Y
- NoteQ3FY27 non-GAAP diluted EPS: $ 6.50, 151 % Y/Y
- NoteFY27 AI-Optimized Servers revenue updated: $ 74.0 billion, 200 % Y/Y
- NoteFY27 GAAP diluted EPS updated: $ 24.37, 181 % Y/Y
- NoteFY27 non-GAAP diluted EPS updated: $ 25.50, 148 % Y/Y
- NoteFY27 previous revenue guidance: $ 167.0 billion
- NoteFY27 previous AI-Optimized Servers revenue guidance: $ 60.0 billion
- NoteFY27 previous GAAP diluted EPS guidance: $ 17.31
- NoteFY27 previous non-GAAP diluted EPS guidance: $ 17.90
Capital returns
- Dell Technologies returned a record $4.3 billion to shareholders in the second quarter through share repurchases and dividends.
- Repurchases of common stock: $ (3,796) million; prior year: $ (940) million.
- Payments of dividends and dividend equivalents: $ (405) million; prior year: $ (366) million.
- The board declared a quarterly cash dividend of $0.63 per common share on Sept. 1, payable on Oct. 30 to shareholders of record as of Oct. 20.
What drove it
- Record AI server orders of $60.9 billion, record AI-Optimized Servers revenue of $16.4 billion, and a record $95 billion AI server backlog.
- ISG revenue increased 89%, including 122% growth in Traditional Servers and Networking and 26% growth in Storage.
- CSG revenue increased 20%, led by 22% growth in Commercial revenue.
- Products net revenue increased 72%, while Services net revenue was $ 5,859 million compared with $ 5,841 million.
- GAAP gross margin increased to 20.9 % of total net revenue from 18.3 %, while GAAP operating expenses were 9.5 % of total net revenue versus 12.3 %.
Concerns
- Cash flow from operations declined 13% year over year to $ 2,225 million.
- Free cash flow declined 47% year over year to $ 986 million.
- Capital expenditures and capitalized software development costs were $ (1,239) million, compared with $ (675) million in the prior-year quarter.
- Inventories increased to $ 21,290 million at July 31, 2026 from $ 10,437 million at January 30, 2026.
- Short-term debt increased to $ 8,481 million and long-term debt increased to $ 25,985 million at July 31, 2026 from $ 7,990 million and $ 23,513 million, respectively, at January 30, 2026.
What to watch
- Conversion of the record $95 billion AI server backlog into revenue.
- Delivery against Q3FY27 revenue guidance of $ 49.0 billion and GAAP diluted EPS guidance of $ 6.10.
- Progress toward FY27 updated AI-Optimized Servers revenue guidance of $ 74.0 billion.
- Cash flow from operations and free cash flow following their year-over-year declines in the second quarter.
- Inventory, financing receivables, and debt levels reported at July 31, 2026.
Balance sheet and cash flow
- Cash and cash equivalents at July 31, 2026: $ 11,569 million; January 30, 2026: $ 11,528 million.
- Short-term debt at July 31, 2026: $ 8,481 million; January 30, 2026: $ 7,990 million.
- Long-term debt at July 31, 2026: $ 25,985 million; January 30, 2026: $ 23,513 million.
- Inventories at July 31, 2026: $ 21,290 million; January 30, 2026: $ 10,437 million.
- Accounts receivable, net at July 31, 2026: $ 22,918 million; January 30, 2026: $ 17,585 million.
- Short-term financing receivables, net at July 31, 2026: $ 12,805 million; January 30, 2026: $ 8,458 million.
- Cash flow from operations: $ 2,225 million, compared with $ 2,543 million in the prior-year quarter.
- Proceeds from debt: $ 4,386 million; repayments of debt: $ (1,017) million.
- Cash, cash equivalents, and restricted cash at end of the period: $ 11,737 million; prior year: $ 8,291 million.
Analysis
Dell reported record second-quarter revenue of $ 46,971 million, up 58% year over year, with products net revenue up 72% to $ 41,112 million. ISG was the principal growth engine: revenue rose 89% to $ 31,782 million, led by AI-Optimized Servers revenue of $ 16,401 million, up 100%, and Traditional Servers and Networking revenue of $ 10,531 million, up 122%. CSG also expanded, with revenue up 20% to $ 15,034 million, driven by 22% growth in Commercial revenue.
Profit growth outpaced revenue growth. GAAP gross margin increased 80% to $ 9,830 million and reached 20.9 % of total net revenue, compared with 18.3 % in the prior-year quarter. Total operating expenses rose 21% to $ 4,445 million, below revenue growth, lifting GAAP operating income 204% to $ 5,385 million and its margin to 11.5 % from 6.0 %. ISG operating income rose 225% to $ 4,781 million and accounted for 81 % of total reportable segment operating income, compared with 65 % a year earlier.
GAAP net income increased 255% to $ 4,133 million and diluted EPS increased 273% to $ 6.34. Non-GAAP operating income increased 160% to $ 5,929 million, non-GAAP net income increased 189% to $ 4,591 million, and non-GAAP diluted EPS increased 203% to $ 7.04. The company also reported diluted weighted average shares of 652 million, compared with 686 million in the prior-year quarter.
Cash conversion was weaker on the reported GAAP and standard non-GAAP free-cash-flow measures. Cash flow from operations declined 13% to $ 2,225 million, and free cash flow declined 47% to $ 986 million, while capital expenditures and capitalized software development costs were $ (1,239) million. Adjusted free cash flow, which adds back financing receivables and equipment under operating leases, increased 224% to $ 8,149 million. Dell returned a record $4.3 billion to shareholders through repurchases and dividends, including $ (3,796) million of common-stock repurchases and $ (405) million of dividend and dividend-equivalent payments.
Management raised FY27 revenue guidance to $ 192.0 billion from $ 167.0 billion and AI-Optimized Servers revenue guidance to $ 74.0 billion from $ 60.0 billion. It also raised FY27 GAAP diluted EPS guidance to $ 24.37 from $ 17.31 and non-GAAP diluted EPS guidance to $ 25.50 from $ 17.90. Q3FY27 guidance calls for revenue of $ 49.0 billion, GAAP diluted EPS of $ 6.10, and non-GAAP diluted EPS of $ 6.50. The key reported operating datapoints are the $60.9 billion of record AI server orders, the $95 billion record backlog, sustained growth across traditional infrastructure and clients, and the year-over-year declines in operating cash flow and free cash flow.
Management, verbatim
That’s clearest in our AI server business where we booked a record $60.9 billion in orders, recognized a record $16.4 billion in revenue and exited the quarter with a record $95 billion backlog.
Jeff Clarke, vice chairman and chief operating officer, Dell Technologies
We’re seeing broader revenue growth as well, with traditional servers and networking up 122%, storage up 26% and our client solutions up 20% year over year.
Jeff Clarke, vice chairman and chief operating officer, Dell Technologies
With AI momentum accelerating and our opportunity expanding across the portfolio, we’re raising our full-year FY27 revenue outlook by $25 billion to $192 billion, up nearly 70% year over year.
David Kennedy, chief financial officer, Dell Technologies
Not in the filing
stated, not guessed- Prior-quarter comparisons for all reported second-quarter metrics were not provided.
- Q3FY27 gross-margin, operating-expense, and tax-rate guidance were not provided.
- FY27 gross-margin, operating-expense, and tax-rate guidance were not provided.
- A previous-release outlook was not provided; therefore, no actual-versus-prior-guidance comparison is included.
- Total debt was not reported as a single line item.
- Quarterly dividend yield was not provided.
AlphaAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.