tapebrief
DELL · Q2 2026

DELL · Q3 2026 Earnings

Bullish

Dell Technologies

Reported November 25, 2025

30-second summary

Dell booked $12.3B of AI server orders in Q3 FY2026 (a fresh record after Q2's $8.2B) and lifted FY26 revenue guidance by $4.7B to $111.7B (+17% YoY vs. prior +12%), the second consecutive quarter of material raises. AI server shipment guidance moved from $20B to ~$25B (+25%, +150% YoY), and Q4 FY2026 is now guided to $31.5B at the midpoint (+32% YoY) with $9.4B of AI ships called a "record." Q3 FY2026 AI server shipments were $5.6B (disclosed), bringing YTD shipments to $15.6B; the Q4 FY2026 $9.4B guide brings the FY to ~$25B. Storage stayed negative (-1% YoY), but every other watch item from last quarter resolved in management's favor — and the Q1 FY2026 "AI substitutes for non-AI" thesis is now definitively dead.

Headline numbers

EPS

Q3 FY2026

$2.59

Revenue

Q3 FY2026

$27.00B

+11.0% YoY

Gross margin

Q3 FY2026

20.7%

Operating margin

Q3 FY2026

7.8%

Key financials

Q3 FY2026
MetricQ3 FY2026YoYQ2 FY2026QoQ
Revenue$27.00B+11.0%$29.78B-9.3%
EPS$2.59—$2.32+11.6%
Gross margin20.7%—18.3%+240bps
Operating margin7.8%—6.0%+180bps

Guidance

Guidance is issued for both next quarter and the full year. Both may appear below.

Actuals vs prior guidance

MetricPeriodPrior guideActualΔResult
RevenueQ3 FY2026$26.5B–$27.5B (midpoint $27.0B, +11% YoY)$27.0Bat midpoint of prior guide; actual YoY growth +11%Beat
Non-GAAP Diluted EPSQ3 FY2026$2.35–$2.55 (midpoint $2.45, +11% YoY)$2.59+$0.14 above midpoint (+5.7% above guide)Beat

New guidance

MetricPeriodGuideYoY
RevenueQ4 FY2026$31.0B–$32.0B (midpoint $31.5B, +32% YoY)+32% YoY
Non-GAAP Diluted EPSQ4 FY2026$3.40–$3.60 (midpoint $3.50, +31% YoY)+31% YoY
AI server shipmentsQ4 FY2026roughly $9.4 billion—
Operating income growthQ4 FY2026up roughly 21% YoY—

Changes to prior guidance

MetricPeriodPrior guideNew guideΔResult
Revenue
FY2026
$105.0B–$109.0B (midpoint $107.0B, +12% YoY)$111.2B–$112.2B (midpoint $111.7B, +17% YoY)+$4.7B at midpoint (+4.4% raise); YoY growth raised from +12% to +17% (+5 ppts)Raised
Non-GAAP Diluted EPS
FY2026
$9.30–$9.80 (midpoint $9.55, +17% YoY)$9.63–$10.21 (midpoint $9.92, +22% YoY)+$0.37 at midpoint (+3.9% raise); YoY growth raised from +17% to +22% (+5 ppts)Raised
AI server shipments
FY2026
$20 billionroughly $25 billion, up over 150% YoY+$5 billion (+25% raise); YoY growth increased to >150%Raised
GAAP Diluted EPS
FY2026
$7.98 (midpoint, +25% YoY)$8.38 (midpoint, +31% YoY)+$0.40 at midpoint (+5.0% raise); YoY growth raised from +25% to +31% (+6 ppts)Raised

Product revenue

Q3 FY2026
SegmentQ3 FY2026YoY
Infrastructure Solutions Group (ISG)$14.107B+24.0%
Servers and Networking$10.125B+37.0%
Storage$3.982B-1.0%
Client Solutions Group (CSG)$12.478B+3.0%
Commercial Client$10.621B+5.0%
Consumer$1.857B-7.0%

Management tone

Q1 FY2026: "AI orders eclipse FY25 shipments, but reiterate" → Q2 FY2026: "First material raise, map margin recovery" → Q3 FY2026: "Second raise, AI graduates to dominant strategic narrative"

The Q1-Q2-Q3 FY2026 arc on AI has gone from "incremental upside" to "additive growth" to "the dominant operating model." In Q1 FY2026, management would not raise the top line against $12.1B of orders. In Q2 FY2026 they raised by $4B but framed margin recovery as a forward thesis. This quarter, both lines moved again, with the anchor: "AI momentum remains exceptional with record orders, backlog, and a growing diverse customer base." When a hardware vendor uses "exceptional" for the third consecutive quarter and backs it with another $4.7B FY raise, the demand is no longer a question — execution and supply are.

Customer concentration risk, which was the implicit overhang in Q1 FY2026 and the unaddressed question in Q2 FY2026, is now explicitly being de-risked. Management's framing this quarter: "The large-scale customer base continues to broaden, with expansion across NeoClouds or Tier 2 CSPs and Sovereigns." The shift from generic "enterprise pipeline growing" language two quarters ago to a tiered customer-segment taxonomy (NeoCloud / Tier 2 CSP / Sovereign / Enterprise) signals management now has the disclosure framework — and the diversification reality — to address the single biggest bear case on Dell's AI thesis.

Supply-chain language inverted from "headwind to navigate" (Q2 FY2026) to "managed commodity with pricing flexibility" (Q3 FY2026). From the call on memory/DRAM/NAND inflation: "We are well positioned across our commodity basket. Q3 was deflationary, and our outlook for Q4 is largely unchanged from last quarter." Combined with the Chatterjee exchange ("direct model enables faster repricing than competitors; ability to recover >67% of input costs in 90 days in normal times"), management is treating commodity inflation as a pricing-power test it expects to pass — not a margin risk to flag.

Traditional servers reframed across three quarters from "stable profit pool" (Q1 FY2026) to "acknowledged headwind" (Q1 FY2026 close) to "beneficiary of AI-driven modernization wave" (Q3 FY2026). From the call: "Traditional x86 compute demand continues to benefit from workload expansion and AI driving broader IT modernization and consolidation… Overall demand grew double digits, with growth accelerating sequentially in both EMEA and North America." Management even quantified the runway: 70% of install base still on older-generation servers. The narrative inversion is complete.

Storage tone hardened from "stabilizing" (Q2 FY2026) to "high-margin growth engine with sustained momentum" (Q3 FY2026) — even though revenue printed -1%. PowerStore now at seven consecutive quarters of growth (six double-digit); all-flash array double-digit demand for the second straight quarter. The disconnect between revenue (-1%) and demand (positive) frames Q4 FY2026 as a backlog-conversion quarter. Whether the revenue line catches up is the open question.

Recurring themes management leaned on this quarter:

AI infrastructure dominance and accelerating momentumCustomer base diversification and Tier 2/sovereign expansionMargin expansion through AI mix and operational scalingEnd-to-end capability differentiation in AI deploymentTraditional infrastructure sustained by AI-driven modernizationStrong cash generation and above-trend capital returns

Risks management surfaced:

Commodity supply dynamics to navigate in next yearCompetitive environment in consumer and education segmentsPC refresh cycle durability dependencyPotential margin pressure from AI server mix normalizationExecution risk on diversifying large-scale customer base

Q&A highlights

Samik Chatterjee · J.P. Morgan

Seeking clarity on pricing actions by product category and confirmation that mid-teens EPS growth target remains valid despite memory cost headwinds

Management explained unprecedented cost increases across all products (DRAM, NAND, hard drives) and outlined mitigation strategies including configuration adjustments, mix optimization, and pricing flexibility. Confirmed mid-teens EPS growth framework remains starting point for planning, though very early in process.

Cost basis increasing across all product categoriesDirect model enables faster repricing than competitorsMid-teens EPS growth target maintained as planning frameworkQ4 cost outlook largely unchanged

Mark Newman · Bernstein

Impact of NVIDIA vertical integration on Dell's supply chain strategy and details on AI server customer mix composition

Management emphasized Dell's differentiation at rack and solution level, stating value-add remains across technology cycles. Noted significant shift in backlog towards GB300, continued growth in sovereign and enterprise AI opportunities, and confidence in engineering capabilities for power density challenges.

Backlog of $18.4 billion with significant shift to GB300Five-quarter pipeline building across sovereigns and enterprise segmentsDifferentiation at rack level and solution-level persistsEngineering advantage in managing high power density (500kW to megawatt+ range)

Ben Reitzes · Melius Research

Order of magnitude for sequential AI server margin improvement and sustainability into Q4, with visibility on attached products

Management detailed margin recovery to mid-single digits in Q3 (from Q2 impacts of expedites and supply chain reconfiguration). Attributed improvement to shipping GB200/300 early deals, improved product differentiation, and customer mix shift toward broader customer base. Confirmed continuation of mid-single-digit range into Q4.

AI server margins improved to mid-single digits in Q3Q2 included one-time costs: expedites and supply chain reconfigurationGB200/300 differentiation enabling margin expansionBroader customer mix improving margins

Wamsi Mohan · Bank of America

Conviction level on FY27 AI growth given NeoClouds financing challenges; breakdown of cost recovery from pricing versus OPEX reduction

Management detailed AI demand strength across neoclouds, sovereigns, and enterprise, noting $25B FY25 guidance (150% YoY growth) with $30B booked through 9 months and robust 5-quarter pipeline. On cost recovery: stated ability to recover >67% of input costs in 90 days in normal times, but expect better outcomes given extraordinary actions taken and supply scarcity. Emphasized ability to recover via pricing, repricing, reconfiguration, and redirecting demand.

FY25 AI guidance: $25 billion (150% YoY increase)Year-to-date AI orders: $30 billionQ4 shipments expected nearly equal to all prior yearFive-quarter pipeline described as 'multiples' of current backlog

Aaron Rakers · Wells Fargo

Reconciliation of double-digit demand growth vs. non-tracking revenue; baseline expectations for traditional server growth into FY27

Management explained double-digit demand growth built backlog rather than flowed to revenue. Attributed continued opportunity to 70% of install base still on older-generation servers, ongoing modernization/consolidation trends, and rising TRUs and content per server. Indicated momentum continuing into next year with full guidance update coming.

Double-digit demand growth built backlog in Q3North America improved quarter-over-quarter; international markets showed double-digit demand for two consecutive quarters70% of install base still on older-generation serversTRU count, cores, DRAM, and NAND per server increasing

Answers to last quarter's watch list

Does gross margin recover in Q3 FY2026, or does the AI dilution prove structural? Non-GAAP operating margin stepped up to 9.3% in Q3 FY2026 from 7.7% in Q2 FY2026 (+160bps QoQ), and management quantified the AI-server margin recovery to mid-single digits (from low single digits in Q2 FY2026). The Q2 FY2026 expedite/reconfiguration costs were confirmed as one-time and rolled off as expected.
Resolved positively
Does Q3 FY2026 AI server shipments come in at or above $10B? AI server shipments were $5.6B in Q3 FY2026 (disclosed), bringing YTD shipments to $15.6B; the Q4 FY2026 $9.4B guide brings the FY to ~$25B. Below the $10B watch threshold, but disclosed (not implied), with Q4 FY2026 doing the heavy lifting. AI server orders in Q3 FY2026 hit $12.3B (a record), bringing YTD orders to $30B against the now-$25B FY26 ship guide. The bookings line is what blew out, not the ship line.
Continue monitoring
Does storage return to growth in Q3 FY2026 or remain negative? Storage printed -1% YoY, the second consecutive negative quarter. Demand metrics remain positive (PowerStore seven quarters of growth, all-flash double-digit demand for the second straight quarter), but the revenue line hasn't followed.
Resolved negatively
Does ISG operating margin recover toward Q1 FY2026's ~9.4% or stay near Q2 FY2026's 8.8%? ISG operating income rate came in at 12.4% of revenue, up 360 basis points sequentially, with management confirming AI-server margins specifically recovered to mid-single digits.
Resolved positively
Does management quantify enterprise AI revenue (dollars, not customer count)? No discrete enterprise AI dollar disclosure this quarter. Management did introduce a more granular customer-tier framework (NeoCloud / Tier 2 CSP / Sovereign / Enterprise) and confirmed the five-quarter pipeline grew sequentially across all three large-scale categories, but the enterprise-specific dollar number remains undisclosed for the fourth consecutive quarter.
Continue monitoring

What to watch into next quarter

Does Q4 FY2026 AI server shipments hit the $9.4B record guide, or does GB300 ramp timing push slippage into Q1 FY27? A miss against $9.4B would call the $25B FY26 ship target into question and weaken management's "AI momentum accelerating" framing.

Does the FY27 initial revenue guide imply continued mid-teens or better growth? Management told Chatterjee that mid-teens EPS growth is the "starting point" for FY27 planning — anything below this on the Q4 FY2026 print would signal that FY26 was peak AI acceleration.

Does storage finally return to growth in Q4 FY2026, or does the demand-to-revenue gap persist? Management has guided storage to benefit from Q4 FY2026 seasonality and Dell IP mix for two consecutive quarters. A third quarter of negative growth breaks the thesis.

Does management quantify enterprise AI revenue or sovereign AI bookings as discrete dollar disclosures? Four quarters of qualitative-only color on the highest-multiple AI customer cohort is now a pattern. A dollar disclosure on the Q4 FY2026 call would be the single cleanest derisking event.

Does non-GAAP gross margin hold as commodity inflation flows through? The Chatterjee exchange confirmed unprecedented input cost increases across DRAM/NAND/HDD. Even with management's pricing confidence, the Q4 FY2026 margin print is the test of whether the direct model's repricing speed is the moat management claims.

Sources

  1. Dell Technologies Q3 FY2026 earnings press release (Form 8-K Exhibit 99.1), filed November 25, 2025 — https://www.sec.gov/Archives/edgar/data/1571996/000157199625000118/exhibit991earnings8kq3fy26.htm
  2. Dell Technologies Q3 FY2026 earnings conference call commentary (prepared remarks and Q&A), November 25, 2025.

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