DELL's ISG Revenue Rises: Is Solid AI Server Demand the Catalyst?

Dell Technologies DELL is benefiting from strong demand for AI servers, which has contributed to the rise in its Infrastructure Solutions Group (ISG) revenue. In the third quarter of fiscal 2026, ISG revenues grew 24% year over year to $14.10 billion, marking seven consecutive quarters of double-digit growth. This performance underscores the pivotal role of AI server demand in driving the company’s success in the ISG segment.

In the third quarter of fiscal 2026, Dell Technologies booked $12.3 billion in AI server orders, bringing year-to-date orders to $30 billion. The company shipped $5.6 billion worth of AI servers in the fiscal third quarter. Dell Technologies ended its fiscal third quarter with a record backlog of $18.4 billion in AI server orders, highlighting the sustained demand for its AI solutions. The demand for AI servers is driven by a diverse and expanding customer base, including Neoclouds, Tier 2 cloud service providers, Sovereigns, and Enterprises.

DELL's strategic focus on AI servers has also positively impacted ISG margins. In the third quarter of fiscal 2026, ISG’s operating income reached a record $1.7 billion, up 16% year over year, with an operating income rate of 12.4% of revenue.

Dell Technologies’ focus on AI infrastructure has positioned it as a leader in the market. The company expects to ship approximately $9.4 billion worth of AI servers in the fiscal fourth quarter of 2026. Its AI server shipments are expected to reach $25 billion for fiscal 2026, representing a remarkable 150% year-over-year growth.

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 is benefiting from robust demand for its AI-optimized servers, resulting in significant revenue growth in its server segment. In the third quarter of fiscal 2025, Hewlett Packard Enterprise’s server segment sales increased 16% year over year and rose 21% sequentially to $4.94 billion. This growth was driven by strong demand for both traditional servers and AI systems.

Super Micro Computer 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. This early availability gives Super Micro Computer a significant edge in a fast-moving AI market. The company is also ready to support the next generation of platforms like NVIDIA B300 and AMD MI350.

DELL’s Share Price Performance, Valuation, and Estimates

Dell Technologies shares have gained 15.7% year to date, underperforming the broader Zacks Computer & Technology sector’s return of 26.5%. The Computer - Micro Computers industry increased 10.8% in the same time frame.

DELL Stock Performance

DELL shares are cheap, with a forward 12-month Price/Sales of 0.77X compared with the Computer & Technology sector’s 6.69X. DELL has a Value Score of A.

Price/Sales (F12M)

The Zacks Consensus Estimate for fiscal 2026 earnings is pegged at $9.55 per share, which has increased by a penny in the past 30 days. This suggests 17.32% year-over-year growth.

Dell Technologies Inc. Price and Consensus

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

Dell Technologies 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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