Dell Technologies (DELL) Q2 FY2026 Earnings Call Transcript

Date: August 28, 2025 | Source: Dell Technologies Investor Relations (corporate transcript) / LSEG

---

Operator: Good afternoon, and welcome to the fiscal year 2026 second quarter financial results conference call for Dell Technologies Inc. I'd like to inform all participants, this call is being recorded at the request of Dell Technologies. This broadcast is a copyright property of Dell Technologies Inc. Any rebroadcast of this information in whole or part without the prior written permission of Dell Technologies is prohibited. [Operator Instructions] I'd like to turn the call over to Paul Frantz, Head of Investor Relations. Mr. Frantz, you may begin.

Paul Frantz (Head of Investor Relations, Dell Technologies): Thanks, everyone, for joining us. With me today are Jeff Clarke, Yvonne McGill, and Tyler Johnson. Our earnings materials are available on our IR website, and I encourage you to review these materials. Also, please take time to review the presentation, which includes additional content to complement our discussion this afternoon. Guidance will be covered on today's call. During this call, unless otherwise indicated, all references to financial measures refer to non-GAAP financial measures, including non-GAAP gross margin, operating expenses, operating income, net income, diluted earnings per share, free cash flow and adjusted free cash flow. A reconciliation of these measures to their most directly comparable GAAP measures can be found in our web deck and our press release. Growth percentages refer to year-over-year change unless otherwise specified. Statements made during this call relate to future results and events and are forward-looking statements based on current expectations. We assume no obligation to update our forward-looking statements. Now I'll turn it over to Jeff.

Jeff Clarke (Vice Chairman and Chief Operating Officer, Dell Technologies): Thanks, Paul, and thanks, everyone, for joining us. Our revenue was a record $29.8 billion, up 19%. Earnings per share increased by 19% to $2.32, marking a Q2 record. We booked $5.6 billion in AI server orders in the second quarter, and shipped a record $8.2 billion, resulting in an ending backlog of $11.7 billion. We had another strong quarter with record revenue. The demand environment remains strong across our portfolio, with the AI opportunity continuing to scale and traditional infrastructure recovering. We remain confident in our ability to drive durable growth and strong shareholder returns. Now let me turn it over to Yvonne to talk about Q2 in more detail.

Yvonne McGill (Chief Financial Officer, Dell Technologies): Thanks, Jeff. In the second quarter, we saw record revenue and also delivered a Q2 EPS record. Total revenue was up 19% to $29.8 billion. We delivered a 10% increase in operating income to $2.3 billion or 7.7% of revenue. Q2 net income was up 13% to $1.6 billion, primarily driven by stronger operating income, and our diluted EPS was up 19% to $2.32, a Q2 record.

ISG revenue was a record $16.8 billion, up 44%. Servers and networking revenue was a record $12.9 billion, up 69%. We had ISG operating income of $1.5 billion, up 14%, a Q2 record, and it has been up double digits for five consecutive quarters. In the quarter we booked $5.6 billion in AI server orders and shipped a record $8.2 billion, ending the quarter with a record backlog of $11.7 billion — rich with all forms of Blackwell. For the full year we are raising our AI server shipment guidance to approximately $20 billion, double what we shipped last year.

We continued to generate strong cash flow and returned capital to shareholders. Through the quarter we returned approximately $1.3 billion through share repurchases and dividends as we continue to execute our disciplined capital allocation framework. In closing, we had very strong results, with record revenue and a Q2 record for EPS. Our raised full-year revenue guidance to approximately $107 billion at the midpoint reflects the strength and momentum we see across the business in the second half.

Questions & Answers

*Note: The following reflects the Q&A themes and management commentary from Dell's Q2 FY2026 earnings call (August 28, 2025), condensed from the corporate transcript. Question labels reflect the analysts who participated on the call.*

Aaron Rakers (Wells Fargo Securities): Yeah, thanks, Jeff. On the AI discussion — the raised guidance implies about $10 billion of AI server revenue for the back half with improved margin rates. Can you speak to what's implied in the guide?

Jeff Clarke (Vice Chairman and COO, Dell Technologies): Sure. Jeff just alluded that we'll do more if we can, but that's what's implied in our guidance, with about $10 billion of revenue with improved margin rates. We continue to see very strong demand for our AI infrastructure across a broadening set of customers, and we're executing well against the supply and delivery requirements.

Wamsi Mohan (BofA Merrill Lynch): Okay, thanks so much, Yvonne. On the storage side — you talked about progress and encouragement around the enterprise business, which delivered its most revenue to enterprise customers in a quarter to date.

Jeff Clarke (Vice Chairman and COO, Dell Technologies): Thanks, Wamsi. Business mix matters. The enterprise business delivered its most revenue in a quarter to date, and the storage portfolio — particularly our Dell IP offerings like PowerStore — continues to see strong demand and improving profitability as we execute on the pivot to Dell IP storage.

Erik Woodring (Morgan Stanley): Thanks, Jeff. And I know you've talked about an attach rate there — can you expand on the AI attach and mix?

Jeff Clarke (Vice Chairman and COO, Dell Technologies): I think – thanks for the question. And Yvonne hit it, but I think it's worth making sure we communicate that business mix matters. As we sell more AI servers, we're increasingly attaching networking, storage and services, which supports both revenue growth and profitability over time.

Vijay Rakesh (Mizuho Securities): Yeah, hi, Jeff, and Yvonne. Jeff, just a quick question on the pipeline and visibility into the second half.

Jeff Clarke (Vice Chairman and COO, Dell Technologies): Sure. The AI backlog stands at $11.7 billion, rich with all forms of Blackwell, and our five-quarter pipeline remains multiples of backlog. We continue to see strong demand signals across neoclouds, tier-two cloud providers, sovereigns and enterprises.

David Vogt (UBS): Thanks guys. Jeff, maybe not to belabor the point, but just for clarification on the guide — what's embedded for AI server revenue and margins in the second half?

Jeff Clarke (Vice Chairman and COO, Dell Technologies): I'll start and then Yvonne can come in and get specific with the details with the guide. We're guiding to roughly $10 billion of AI server revenue in the back half with improved margin rates versus the first half, reflecting the mix and execution improvements we've been driving.

Yvonne McGill (Chief Financial Officer, Dell Technologies): Right. And as we noted, the implied Q3 outlook — the revenue and profit profile we've laid out — reflects the timing of AI server shipments and continued discipline across the P&L.

Amit Daryanani (Evercore ISI): It sort of looks like $4 billion more of revenues and about $100 million, $110 million more of net income — that's what you can see. Can you confirm how that maps to the full-year raise?

Jeff Clarke (Vice Chairman and COO, Dell Technologies): That's our goal. The organization is focused on that. We're focused on it. The full-year revenue raise to approximately $107 billion reflects that incremental profile, with the associated operating income and EPS improvement.

Michael Ng (Goldman Sachs): Thank you, Jeff. On the mix between AI and the rest of the portfolio — you alluded to being encouraged by the broad demand picture.

Jeff Clarke (Vice Chairman and COO, Dell Technologies): Of course. We are trying to do that versus selling more PC, selling more servers, selling more storage, selling more AI — we're running the business across the full portfolio, and the demand environment remains strong across AI, traditional servers, storage and the ongoing PC refresh.

Mehdi Hosseini (Susquehanna): Thanks, Jeff. On the supply chain — could you look forward on your incoming and outgoing supply position given the commodity environment?

Jeff Clarke (Vice Chairman and COO, Dell Technologies): We're managing supply tightly across our commodity basket. Our outlook for the back half is largely consistent with our prior view, and we have strong relationships across our component supply base. We continue to focus on securing supply to meet the demand we see.

Jeff Clarke (Vice Chairman and COO, Dell Technologies): (Closing) Sure. In closing, we delivered a record quarter with strong execution across the business. Our AI momentum is exceptional, with record orders, record shipments and a record backlog, and we're raising our full-year guidance on the strength of that demand. We remain focused on driving shareholder value through strong cash generation and capital returns. Thanks for joining us today.