DELL's ISG Sales Gain Momentum: Can Servers Keep Driving Growth?

Dell Technologies DELL is benefiting from strong momentum in its ISG segment, driven by record AI server shipments and robust demand for traditional servers. 

In the second quarter of fiscal 2026, Infrastructure Solutions Group (ISG) revenues increased 44% year over year to $16.80 billion, marking six consecutive quarters of double-digit growth. Servers and networking revenues of 12.94 billion grew 69% year over year, highlighting the strength across both artificial intelligence (AI) and traditional server markets.

Dell Technologies’ leadership in AI-optimized servers is a key driver of growth. The company shipped $8.2 billion in AI servers in the second quarter of fiscal 2026. It raised its full-year AI server shipment guidance from $15 billion to $20 billion, highlighting the sustained demand for AI-driven solutions.

In the fiscal second quarter, Dell Technologies’ AI-optimized server momentum saw an increase of $5.6 billion in orders. The company’s AI backlog of $11.7 billion exiting the second quarter of fiscal 2026 and a growing opportunity pipeline further underscore the sustained demand for its solutions. In the second quarter of fiscal 2026, Dell Technologies became the first in the world to ship Nvidia’s GB300 NVL72 to CoreWeave in July, underscoring its ability to deliver advanced solutions.

An expanding partner base, which includes companies such as Nvidia, AMD, and Meta, further strengthens its ecosystem.

DELL Faces Stiff Competition

DELL is facing stiff competition in the server space against the likes of Hewlett-Packard HPE and Super Micro Computer SMCI.

Hewlett-Packard Enterprise’s server business grew 5.6% in the second quarter of fiscal 2025. Hewlett-Packard Enterprise expects its fiscal third-quarter revenues to rise in mid-teens sequentially and fiscal 2025 server revenues to grow in low double digits, driven by large AI deals and growth in AI systems.

Super Micro Computers is often the first to market with the latest AI servers, including systems built on NVIDIA’s B200 and GB200 platforms, giving it a strong edge. In the fourth quarter of fiscal 2025, Super Micro Computer reported that its server and storage systems generated $5.62 billion in revenues, marking a 26% quarter-over-quarter increase and a 10% rise year over year.

DELL’s Share Price Performance, Valuation, and Estimates

DELL’s shares have gained 5% year to date, underperforming the broader Zacks Computer & Technology sector’s return of 13%. The Computer - Micro Computers industry declined 6.9% in the same time frame.

DELL Stock's Performance

DELL shares are cheap, with a forward 12-month Price/Sales of 0.75X compared with the Computer & Technology sector’s 6.59X. DELL has a Value Score of A.

Price/Sales (F12M)

The consensus mark for fiscal 2026 earnings is pegged at $9.49 per share, which has increased 0.42% in the past 30 days. This suggests 16.58% year-over-year growth.

Dell Technologies Inc. Price and Consensus

Dell Technologies Inc. price-consensus-chart | Dell Technologies Inc. Quote

DELL currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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