Dell Reports Strong AI Server Orders, On Track to Hit $15 Billion Revenue Target for Fiscal 2026

In February, Dell announced its ambitious plan to sell and deliver $15 billion worth of AI servers in fiscal 2026, which ends in early November. The first quarter of fiscal 2026, ending in May, saw slower-than-expected sales, but the company managed to book $12.1 billion in new AI system orders, bringing its total AI systems order backlog to $14.4 billion. Despite the initial sluggishness, Dell delivered $1.8 billion in AI systems in Q1 F2026. This performance suggests that meeting the $15 billion annual target is highly likely, provided GPU allocations remain sufficient. Notable among Dell's customers is Elon Musk’s xAI Grok, which sourced half of the first phase of its "Colossus" AI supercomputer, consisting of 100,000 GPUs, from Dell. During the May quarter, Dell's overall product sales reached $19.6 billion, marking a 9.1% increase. Services sales, however, fell by 5.5% to $5.78 billion. The Client Solutions Group (CSG), responsible for Dell’s PC business, reported sales of $12.51 billion, a 4.5% uptick, but operating income dropped by 10.8% to $653 million. This decline underscores the importance of Dell's partnerships with parts suppliers like Intel, AMD, Nvidia, and memory and flash manufacturers, which help offset the volatility in PC profits. The Infrastructure Solutions Group (ISG), comprising servers, networking, and storage, saw a significant boost with sales increasing by 11.8% to $10.32 billion. Within ISG, the Servers & Networking division led the charge with $6.32 billion in sales, a 15.6% jump, while the Storage division matched this growth rate. This positive trend helped Dell counterbalance the lower operating margins from AI supercomputers, which are complex and resource-intensive systems. Dell's AI server sales in Q1 F2026 amounted to about $1.81 billion, equaling its AI server revenue for the entire fiscal 2024. However, AI server revenues peaked two quarters ago with the strong performance of "Hopper" and the ramp-up of "Blackwell" GPU systems. Many customers deferred purchases, waiting for the more powerful Blackwell B300 GPUs, which offer 50% more processing capability and HBM memory compared to the previous B200 models. As a result, traditional server sales to enterprises, governments, and other institutions temporarily filled the gap. Looking ahead, Dell forecasts a significant surge in AI system sales in Q2 F2026, projecting $7 billion in revenues. This would represent a 2.3X increase from Q1 and nearly triple the sales of traditional servers, which are expected to fall by 13.1% to just under $4 billion. The Server & Networking division is anticipated to grow by 43.4% to around $11 billion, setting a new high. If the Storage division grows modestly by about 5%, ISG could see sales of approximately $15.16 billion in the quarter. For the full fiscal year, Dell expects to generate between $101 billion and $105 billion in revenue, a growth of 8%. According to our projections, the CSG will bring in around $52.3 billion, edging out the ISG, which is forecasted to generate $50.8 billion. By Q4, for the first time in its history, Dell’s systems business is expected to surpass its PC business. Given the midpoint revenue forecast of $29 billion for the company, PCs are projected to contribute approximately $13.8 billion, while storage will bring in $4.16 billion. While Dell aims to become the leading OEM system business in fiscal 2026, it faces stiff competition from Nvidia, whose datacenter segment is expected to be about 3.5 times larger and more profitable. The table below provides a rough estimate of the number of GPU nodes and individual GPUs required to achieve Dell’s projected AI server sales, highlighting the substantial impact of each GPU sale on overall revenue. Despite the promising growth in AI server sales, the market remains volatile, driven by a small number of highly demanding customers. While widespread adoption of AI technology is anticipated, the profitability of AI supercomputers remains a concern due to their complexity and the high cost of GPUs. Industry insiders praise Dell’s strategic foresight in positioning itself for the AI boom, noting that the company’s deep supply chain relationships and broad customer base are crucial advantages. However, they caution that maintaining healthy profit margins will be challenging, especially as the market for traditional servers softens and demand for AI systems fluctuates. Nvidia’s dominance in the datacenter market and its superior profit margins serve as a benchmark for Dell to strive toward, but the company must navigate the complexities of AI hardware sales effectively to sustain its growth. Company Profile: Dell Technologies is a global leader in technology solutions, with a strong focus on data center infrastructure and PC products. The company's Infrastructure Solutions Group (ISG) plays a critical role in providing essential server, networking, and storage solutions, while the Client Solutions Group (CSG) drives the PC market. Dell’s recent emphasis on AI servers reflects its commitment to capturing emerging opportunities in the tech landscape.