Dell’s Record AI-Driven Revenue Fuels Raised Full-Year Outlook and Segment Leadership
Record Third-Quarter Performance Anchored by AI Demand
At 11:46 AM, Dell Technologies (NYSE: DELL) announced standout third-quarter fiscal 2026 results, reporting record revenue and profitability while elevating its full-year guidance. The driving force: explosive demand for AI server solutions, resulting in the highest-ever third-quarter revenue at $27.0 billion (up 11% year-over-year) and net income of $1.55 billion, marking a 32% surge. Diluted earnings per share (EPS) jumped 39% to $2.28, while non-GAAP diluted EPS set a new Q3 record at $2.59 (up 17%).
AI Segment Leads, Infrastructure Group Sets New Highs
Infrastructure Solutions Group (ISG) was the clear growth engine, posting $14.1 billion in revenue (up 24%) and a 16% jump in operating income. Servers and networking revenue climbed 37%, reaching $10.13 billion, while storage declined marginally by 1%. ISG now contributes 70% of segment operating income. Notably, AI server orders hit $12.3 billion for the quarter, contributing to $30 billion in year-to-date orders, underlining Dell’s role in large-scale, high-performance deployments across enterprise and neocloud clients.
| Segment | Q3 FY26 Revenue ($B) | Year-over-Year Growth | Operating Income ($M) | % of Segment Income |
|---|---|---|---|---|
| ISG (Servers & Networking) | 14.11 | +24% | 1,743 | 70% |
| CSG (Commercial/Consumer) | 12.48 | +3% | 748 | 30% |
Full-Year Guidance Rises on AI Momentum and Profitability Gains
Reflecting continued AI tailwinds, Dell raised its full-year FY26 revenue guidance to a range of $111.2 to $112.2 billion, up 17% year-over-year at the midpoint ($111.7B). AI server shipment guidance soared to roughly $25 billion (a 150% increase). For the fourth quarter alone, revenue is expected between $31.0 and $32.0 billion, and non-GAAP EPS is projected at $3.50 (up 31%).
| FY26 Guidance | Prior | Current | Year-over-Year Growth |
|---|---|---|---|
| Revenue ($B) | - | 111.7 (midpoint) | +17% |
| AI Server Shipments ($B) | 10.0 (est. prior year) | 25.0 | +150% |
| GAAP EPS | - | 8.38 | +31% |
| Non-GAAP EPS | - | 9.92 | +22% |
Segment Analysis: Commercial Edges Higher, Consumer Dips
The Client Solutions Group (CSG) achieved $12.48 billion in revenue (up 3%), with Commercial sales up 5% to $10.62 billion and Consumer down 7%. CSG operating income held steady at $748 million. The broader product/services mix remains weighted towards enterprise, leveraging both infrastructure and client solutions.
Cash Flow and Capital Return Strengthen Balance Sheet
Dell generated $1.2 billion in operating cash flow this quarter. Notably, adjusted free cash flow soared 133% to $1.67 billion year-over-year. Year-to-date capital returns reached $5.3 billion, driven by $1.6 billion in third-quarter share repurchases and dividends.
| Key Cash Metrics | Q3 FY26 | Q3 FY25 | % Change |
|---|---|---|---|
| Operating Cash Flow ($B) | 1.17 | 1.55 | -25% |
| Adjusted Free Cash Flow ($B) | 1.67 | 0.72 | +133% |
| Capital Return YTD ($B) | 5.3 | n/a | - |
Strategic Outlook: Positioned for Continued Leadership
Dell’s management emphasized accelerating AI momentum and a robust five-quarter pipeline that “is multiples of our $18.4 billion backlog,” spanning neocloud, sovereign, and enterprise customers. Leadership cited Dell’s ability to rapidly deploy custom high-performance clusters as a unique competitive advantage. As the company prepares for a major year in FY26, new CFO David Kennedy is at the helm, guiding the capital allocation and operational strategy.
Takeaway: AI Demand, Margin Expansion, and Strategic Clarity
Dell’s results and outlook send a clear signal: AI adoption is fundamentally transforming its financial profile and market opportunity. As the company continues to invest in high-value infrastructure and client solutions while returning significant capital to shareholders, investors may want to watch Dell’s next moves closely—particularly as it aims to further outpace both AI and infrastructure growth expectations in a competitive technology landscape.
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