DELL's ISG Sales Gain Momentum: Can Servers Keep Driving Growth?

Core Insights - Dell Technologies (DELL) is experiencing strong growth in its Infrastructure Solutions Group (ISG) segment, driven by record AI server shipments and robust demand for traditional servers [1][2]. Financial Performance - In Q2 of fiscal 2026, ISG revenues increased by 44% year over year to $16.80 billion, marking six consecutive quarters of double-digit growth [2][10]. - Revenues from servers and networking reached $12.94 billion, growing by 69% year over year, indicating strength in both AI and traditional server markets [2][10]. AI Server Growth - Dell shipped $8.2 billion in AI servers during Q2 of fiscal 2026 and raised its full-year AI server shipment guidance from $15 billion to $20 billion, reflecting sustained demand for AI-driven solutions [3][10]. - The company reported an increase of $5.6 billion in AI orders and an AI backlog of $11.7 billion at the end of Q2, highlighting ongoing demand for its solutions [4][10]. Partnerships and Ecosystem - An expanding partner base, including Nvidia, AMD, and Meta, strengthens Dell's ecosystem and growth potential [5]. Competitive Landscape - Dell faces stiff competition in the server market from Hewlett-Packard (HPE) and Super Micro Computer (SMCI) [6]. - HPE's server business grew by 5.6% in Q2 of fiscal 2025, while Super Micro reported $5.62 billion in revenues for its server and storage systems, marking a 26% quarter-over-quarter increase [6][7]. Stock Performance and Valuation - DELL shares have gained 5% year to date, underperforming the broader Zacks Computer & Technology sector's return of 13% [8]. - DELL's forward 12-month Price/Sales ratio is 0.75X, significantly lower than the sector's 6.59X, indicating that DELL shares are relatively cheap [11]. Earnings Estimates - The consensus estimate for fiscal 2026 earnings is $9.49 per share, reflecting a 16.58% year-over-year growth [13].