Will Dell's ISG Segment Benefit From Cloud Infrastructure Expansion?

Dell Technologies DELL is expanding its cloud services through its infrastructure solutions and rich partner base that provides essential hardware and services that support cloud environments. Through its APEX platform, the company provides multi-cloud solutions and advanced AI infrastructure, which have become key highlights of its offerings.

Building on the strength of these offerings, in the first quarter of fiscal 2026, Infrastructure Solutions Group (ISG) revenues, which include its cloud offerings, increased 12% year over year to $10.31 billion. The upside can be attributed to servers and networking revenues of $6.32 billion, which grew 16% year over year, with demand strength across AI and traditional servers. 

This momentum is further bolstered by Dell’s expanding portfolio of solutions. In March 2025, Dell partnered with Singapore’s Institute of Technical Education to launch a hybrid cloud VDI Centre powered by Dell VxRail, aimed at closing the AI skills gap and enhancing digital learning through accessible, flexible, and scalable infrastructure.

Dell’s AI prospects remain strong, with AI expanding from major cloud service providers to large-scale enterprise deployments and edge computing with PCs.  The company is benefiting from the strong demand for AI servers, which are driven by ongoing digital transformation and heightened interest in generative AI applications. Its PowerEdge XE9680L AI-optimized server is very much in demand. Strong enterprise demand for AI-optimized servers is aiding Dell.

DELL Faces Stiff Competition

Dell is facing stiff competition in the growing cloud market against the likes of Microsoft MSFT and Alphabet GOOGL.

Microsoft is benefiting from strong demand for cloud and AI offerings. Microsoft Cloud revenues reached $42.4 billion, growing 21% year over year and 22% in constant currency in the third quarter of fiscal 2025. 

Azure, in particular, had strong demand, especially for AI services, which contributed significantly to the cloud’s performance. In the reported quarter, Azure and other cloud services revenues grew 33% (up 35% in cc), including 16 points from AI services.

Alphabet is riding on strong cloud growth. Google Cloud is benefiting from accelerated growth across AI infrastructure, enterprise AI platform Vertex and strong adoption of Generative AI solutions. In first-quarter 2025, Alphabet’s Google Cloud revenues increased 28.1% year over year to $12.26 billion. Google’s growing investments in infrastructure, security, data management, analytics and AI are positive.

DELL’s Share Price Performance, Valuation and Estimates

DELL’s shares have gained 4.9% year to date, outperforming the broader Zacks Computer & Technology sector’s return of 3.7%.

DELL Stock Performance

DELL stock is trading at a premium, with a forward 12-month Price/Sales of 0.77X compared with the Computer & Technology sector’s 6.45X. DELL has a Value Score of B.

Price/Sales (F12M)

The Zacks Consensus Estimate for second-quarter fiscal 2026 earnings is pegged at $2.26 per share, which has increased 7.1% in the past 30 days. This indicates a year-over-year increase of 19.58%.

Dell Technologies Inc. Price and Consensus

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

The consensus mark for 2025 earnings is pegged at $9.43 per share, which increased 2.6% in the past 30 days. This suggests 15.85% year-over-year growth.

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

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

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