DELL's ISG Growth Accelerates: Is AI Infrastructure the Catalyst?

Dell Technologies DELL is benefiting from the surging demand for AI infrastructure, which has become a key catalyst for the accelerated growth of its Infrastructure Solutions Group (ISG). In the second quarter of fiscal 2026, ISG achieved record revenues of $16.8 billion, marking a 44% year-over-year increase and six consecutive quarters of double-digit growth. 

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.

The company’s expanding portfolio has been noteworthy. Dell Technologies announced new developments in the Dell AI Factory with NVIDIA. The company introduced enhanced AI infrastructure, data management, software, and managed services to accelerate enterprise AI adoption and growth.

An expanding partner base, which includes companies such as Nvidia, AMD, and Meta, further strengthens its ecosystem. DELL is experiencing strong interest from enterprises in its AI solutions, such as the NVIDIA RTX Pro 6000 AI Factory solutions, which are designed to manage the AI lifecycle at scale.

As AI adoption accelerates across industries, DELL’s leadership in AI hardware and services positions it to capture a significant share of the projected $350 billion AI infrastructure market by 2028.

DELL Faces Stiff Competition

Dell Technologies is facing stiff competition from the likes of Applied Materials APLD and Cisco Systems CSCO, which are also expanding their footprint in the AI infrastructure space.

Applied Materials is benefiting from the increasing demand for AI infrastructure. In the fourth quarter of fiscal 2025, Applied Materials signed transformative 15-year lease agreements with CoreWeave, an AI hyperscaler, to deliver 250 megawatts of critical IT load at its Ellendale, ND campus, now named Polaris Forge 1. This agreement is expected to generate approximately $7 billion in contracted revenues over the lease term.

Cisco Systems has been integrating AI into its product portfolios across networking, security, collaboration and observability. Strong demand for Cisco Systems’ products in developing AI infrastructure has been a game-changer for the company. In fiscal 2025, the company received AI infrastructure orders from web-scale customers in excess of $2 billion.

DELL’s Share Price Performance, Valuation, and Estimates

DELL’s shares have gained 10.1% year to date, underperforming the broader Zacks Computer & Technology sector’s return of 18.8%. However, it has outperformed the Computer - Micro Computers industry, which has declined 6.1% in the same time frame.

DELL Stock's Performance

DELL shares are cheap, with a forward 12-month Price/Sales of 0.77X compared with the Computer & Technology sector’s 6.91X. DELL has a Value Score of A.

Price/Sales (F12M)

The consensus mark for fiscal 2026 earnings is pegged at $9.54 per share, which has increased 0.95% in the past 30 days. This suggests 17.20% 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 #3 (Hold). 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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